Hunt v. Fisher , 29 F. 801 ( 1887 )

Hammond, J.

But for Bondurant v. Watson, 108 U. S. 281, 287, I should have remanded this case; as to retain it would seem a violation of section 720 of the Revised Statutes, which prohibits the courts of the United States from staying proceedings in the state courts. It has seemed to me that the reason of that statute, the mischief sought to be prevented by it, and its prohibition, apply as well to a final decree staying a state comí proceeding as to that stay which comes of a preliminary injunction,.and that it operates, necessarily, to exclude from the broad language of the act of March 8, 1875, (18 St. 471, 472; Rev. St. [2d Ed.] § 738,) all cases sought to be removed which have ior their object any stay of the proceedings in a state court. Otherwise the federal courts acquire, by removal, a power heretofore denied to them, for substantial reasons, which ail commend, and without any directly manifesied intention of congress to repeal the prohibition. Yet the case first cited, and Smith v. Schwed, 6 Fed. Rep. 455, confine the statutory prohibition wholly to preliminary injunctions; so that, while wo cannot stay the state court’s proceedings in the beginning of a case, we may at the end of it,—a distinction certainly not indicated by section 720 of the Revised Statutes, and, possibly, not contemplated by the removal act of 1875. This is now referred to because the plaintiff, who brought this case hero from the slate court, insists that we cannot sit as a supervising court to review the proceedings of the chancery court of Davidson comity, through which, by a sale, ho acquired his title; yet this title ho seeks to protect by asking us to enjoin the further proceedings of the chancery court of Decatur county, wherein the defendants have procured a decree of sale. Undoubtedly it would have been better for all parties to have remained in the state court. By the consolidation of this case witii that the defendants had brought through the administrator of ’Walker, or by the concurrent hearings of the two cases, this controversy might have been settled. But, separated, as they have now been, by the plaintiff’s removal of this case, that method of bringing the parties together was not available; and the defendants thereupon objected here that they should not be enjoined from proceeding in the state court, unless they were given an opportunity here to make defense, and, by cross-bill, to seek the relief, by foreclosure sale, that they were there attempting to procure. But the difficulty was that the plaintiff had not made them parties to his bill, and on their motion he was required to amend and bring them in. Of that order he now complains, and asks to be allo.wed to dismiss the amendment.

But, aside from the prohibition of the statute already referred to, there can he no doubt of our jurisdiction, or that of any court of equity, to grant the relief prayed, either by the bill or cross-bill. It is a controversy over the title to the property, and the fact that either side claims through judicial proceedings is immaterial. Mr. Justice Bradley shows this conclusively when he says:

“In such cases the court does not act as a court of review, nor does it inquire into irregularities or errors of proceeding in another court; but it will scrutinize the conduct of the parties, and, if it finds that they have- been guilty of fraud in obtaining a judgment or decree, it will deprive them of the benefit of it, and of any inequitable advantage which they have derived, under it.” Johnson v. Waters, 111 U. S. 640, 669, 4 Sup. Ct. Rep. 619; Barrow v. Hunton, 99 U. S. 80, 83.

But the difficulty of giving that full relief which, in cases as’complicated as this has been, a court of equity desires to grant, could only be overcome by the order that was made, that the parties in interest who had been left out of the bill should he brought into it. Although the administrator of Walker was a party defendant to plaintiff’s bill, and it was he that was injured by it, yet the real actors were the creditors who were seeking to realize their debts by enforcing the security Walker had provided for them. These the plaintiff left out, and now insists that this administrator must stand for Walker, and in his shoes, so far as necessary to enable plaintiff to estop him, in that capacity, from prosecuting his suit in behalf of the estate of Walker, but that he does not represent the creditors, and cannot set up their rights under the contract. For this very reason they should have been made parties to this bill, particularly as they were parties to the proceedings sought to be enjoined, —if not technically such-, substantially so, by the filing and prosecution of their claims in that suit. The notion that Walker’s administrator can be brought into this bill to represent Walker himself, but may be left out as a representative of the creditors, and that, the creditors themselves being also left out, the plaintiff has the advantage of excluding all consideration of their rights until they take some independent proceeding, is wholly untenable. The truth is, these new defendants should have been made parties to the Baxter bill, filed in Davidson county, under which plaintiff claims title, either as defendants or as plaintiffs, in whose behalf as well as his own Baxter should have proceeded, and the failure to make them such is the very foundation of their right to complain against him. Whatever else may be said of the contract by Walker, of April 6, 1874, as between him and his creditors, it was an assignment for their benefit. One of them, ignoring the others, in a county distant from that in which the land lay, and from his residence, finding other parties to the contract there, filed a bill against Walker, his lately divorced wife, and her new husband, to foreclose the security for his own benefit alone. She was not a trustee for the creditors in any sense that she represented them as a party to the suit, but was a purchaser from and a guarantor to Walker, the debtor. Walker did not represent those creditors in any sense whatever. The hill was not filed in behalf of the plaintiff creditor, and others who might come in, nor did it give any excuse for not making them parlies,—such as that they were too numerous, or wore unknown after diligent inquiry to discover them, or wore non-residents, or the like. This was clearly a violation of that procedure which governs a court of equity in such cases, and enabled that creditor to. do what is here insisted upon shall be continued, namely, exclude the other beneficiarios, and take the property. The other creditors should have been made parties. Jones, Morig. § 1394 et seq.; Id. 1398; 1 Darnell, Ch. Pr. (1st Ed.) 329; Id. (5th Ed.) 190 et seq.

Tt is true, the holders of the legal title being before the court, the irregularity was such that, possibly, if a purchaser had bought at an adequate price, and paid his money into court, his title would not have been disturbed, but the discarded beneficiaries would have been left to follow the proceeds, as in Re Howard, 9 Wall. 175, and William v. Gibbes, 17 How. 239; amt consult Myers v. Fenn, 5 Wall. 205, and 2 Daniell, Ch. Pr. (5th Ed.) 1205.

But in this case it is urged that the creditors should be loft to assert their rights against the purchaser by some independent proceeding, while he, in the manner already suggested, shall he allowed, to restrain the administrator on the ground that, Walker having boon a party, the administrator cannot ho allowed to sock another sale. In addition to what has been already said on that subject, it may be remarked that the administrator, under the Tennessee system, or creditors, may proceed to enforce such securities, and the administrator possesses a dual capacity of representation,'—one for the debtor, and the other for the creditor. If ho be estopped in one, it does not necessarily follow that he is estopped in the other, and certainly not that the creditors are estopped in a case like tliis, where they have a specific lien to sue in their own behalf; and, as already shown, it is a proper practice to compel a plaintiff to bring in proper parties.

But hero there was another abundant reason. The plaintiff is a nonresident of Tennessee, where this land lies, and, if he wore the only necessary party, there might be difficulty in filing a bill against him in this slate, and hence the land could bo reached only by the roundabout way of a bill against him in Ohio to compel him to convey it, or share it with the other beneficiarios. Ho, when lie comes hero to file his hill, it is eminently proper that the other parties in interest should ho allowed to come in, and make themselves parlies, and that he should not be allowed to exclude them by the simple process of leaving them out, in continuation of the policy of exclusion inaugurated when the bill under which ho claims title was filed.

The result is that the motion of the plaintiff to be allowed to dismiss his amended bill, and to vacate the order compelling him to file it, should be denied. A plaintiff has not always the privilege of dismissing his bill at pleasure. Stevens v. Railroads, 4 Fed. Rep. 97.

The decision of this question,upon the foregoing reasons, almost disposes of the-plaintiff’s case. That he is not entitled to restrain the other creditors, who had an equal right with the plaintiff in the suit through which he acquired his title, from proceeding to realize their share of the security in the same way that that plaintiff'realized his share, is too plain for any argument. They, not being parties to the decree of sale under which he bought, are not bound by it; and why, then, should they be enjoined from acquiring any title they may in hostility to the plaintiffs? The only possible ground on which the plaintiff could appeal to a court of equity is that, after a purchase of the legal title,—if he can be said to have acquired that title on the facts of this case relating to the circumstance -that this was partnership land, into the complications of which we need not go,—he should have been made a party to the proceedings of the chancery court of Decatur county, in which the decree of sale he seeks to enjoin was had. But one branch of that proceeding was commenced before the bill under which he claims was filed, and the other— the insolvent proceeding—before he purchased, and he it was who bought pendente lite as to both those proceedings. Besides, the other creditors had a right to proceed, treating his title as a nullity, until they, or the purchaser under their sale, should acquire whatever title they might, and try conclusions with him in an action of ejectment.

Perhaps another contention of the plaintiff should be noticed here, if only to announce a conclusion of the court already intimated at the argument; that is, that these creditors do not show that they were ever “elected” by Mrs. Walker, and, not having done so, are entitled to no share in the security, and should, for that reason, be enjoined. This is a misconception of the instrument, we think. It was not the intention to be gathered from the deed that only such creditors as she might choose should be paid. It was not a power conferred on her for that purpose, but simply a privilege, given as a protection against paying more than $15,000, if there should be a larger amount due, or, in other words, that, having paid creditors to the extent of $15,000, she should not be compelled to pay any others; and, in that sense, she would have “elected” to pay those who had received pajunent from her, and the fact of payment would be conclusive of the right to receive under this stipulation. It was a convenient way of protecting her against larger payments; but, evidently, the parties contemplated that not so much was really due, and provision is made that the balance of the $15,000 should go to Walker himself. Therefore no creditor could be excluded under this stipulation, unless it could be shown that tine $15,000 had been exhausted, which would be the same thing as showing that she-had “elected” the creditors she would pay. Nothing like that is shown here, but, on the contrary, the inference is that it has not been exhausted by any payments made by her. In this view that stipulation does not aid the plaintiff.

Wo como next to the question of inadequacy of price, and about that a statement of facts leaves but little else necessary to be said. That property, worth then and now many thousands of dollars, should be sold for §100, seems impossible, but moro impossible is it that a court of equity should establish the title on the facts of this case. Clark v. Trust Co., 100 U. S. 149, 152; Eyre v. Potter, 15 How. 42, 60; Erwin v. Parham, 12 How. 197, (L. C. Pnb. Co. Ed. and note;) 2 Abb. Nat. Dig. (Ed. 1885,) 592, § 14, and casos cited.

Young had become bankrupt in March. In May, Walker filed his bill in Decatur county, where the land was situated, for the execution of the contract. In Juno there was a bankruptcy composition, and in August a deed by Young and wife to trustees in pursuance of its terms. In September, the bill under which plaintiff claims was filed, under the circumstances already stated, in Davidson county. "Walker, who was only interested as a creditor for his annuity, and any share of the $15,-000 not exhausted in paying debts, and who already had a bill of his own pending in Decatur comity, filed an answer in October. Thou followed the efforts of the trustees under the bankruptcy composition to extricate the property by a mortgage, and a continuance of business with the furnace, which proved futile and disastrous. Meantime, Walker had died insolvent, and, as the proof shows, was never at any time able to protect the property or his interests, either in his own behalf, or in that of those creditors who had been ignored by the bill under which plaintiff claims. Young and wife were not able to protect it or the creditors. The bankruptcy trustees bad only further involved it. Fisher, the administrator of Walker, as the proof shows, was an ignorant man, and did not comprehend the scire facias served upon him, and neglected it. But, suppose he had comprehended it, what could lie have done? The estate was insolvent, and he had no funds, either to carry on the litigation or to purchase at the sale. So, when the sale look place in November, none of the joint beneficiaries were in a position to protect llieir interests at the sale by forcing a larger price, and making the property sell for enough to pay ail the debts secured, nor were they in such a relation to the ease as to be bound to do that, and to be precluded, if the property did not bring enough, as of their own fault. The circumstances were calculated to deter bidders, and depreciate the property. Leaving others interested out of the bill was in itself sufficient to secure a small price for the property, and drag it down at the sale. Again, Baxter’s bill was constructed on the erroneous theory that no creditor, not “elected” by Mrs. Walker, [Young], could share in the $15,-000. But this did not apply to "Walker himself, whose interest in that question might be identical with Baxter’s, since he would get the surplus. Nobody was made a party to contest that theory, and it could not bo settled by Unit bill. Hence, any person contemplating to become purchaser, being well advised, would conclude that the bill, in the absence of all proper parties, was so ill framed as to render the title doubtful, and litis would invite inadequacy. An advantage of a small price, gained under such circumstances, cannot bo maintained under any rule upon that subject known to the books.

But let us look a moment somewhat further, at the attitude of Walker, and of his administrator. Why was he a party defendant to that Davidson county bill at all, and what relief could be had upon its allegations as against him, and as to which he or his administrator is now estopped by the res adjudicata? The legal title was not in him, nor any title. He was a. creditor for his annuity, postponed to all other creditors, and had a lien, for the enforcement of which he had the same right to pursue the land by his bill in the county where the land was that the plaintiff in the Davidson county bill had to pursue it there, where the Youngs resided . Being made a party defendant did not affect that right or his bill. If the Davidson county creditor could go alone, so could he, and neither could affect the other creditors or represent them. As the debtor, he was a proper party, no doubt, on the defendants’ side of the case, but as a creditor he belonged to the plaintiff’s side; but he was not bound to assume that relation in that suit, having a bill already pending in Decatur county, filed before this Davidson county bill was filed. If the first bill filed obtained the jurisdiction, the Davidson county plaintiff should have gone there, rather than bring Walker to his forum. As a debtor, the decree against him could be only for the debt, and to that extent would be bound, and not further. Indeed, the prayer of the bill seeks no other relief against him, nor is there in it any allegation or statement to bind 'him as a creditor to take his share of the lien under that proceeding; nor does the decree of June 22, 1880, give any relief against him, and there is nothing in it to preclude him from following any remedy he may have against -the land to enforce his lien. He was enjoined, along with the Youngs and the bankruptcy trustees, from disposing of the one-third interest, but, as far as I can see, there was not in the bill, or the proceedings, anything to bind him in his capacity as a creditor for his annuity. So far as I can see, he might have let the bill, go by default, without the least injury to his rights, except to preclude him from denying the Baxter debt asa proper charge against him, and as entitled to share in the security he had provided for it and the other debts. Baxter did not recognize him as a creditor, did not invite him to share in the proceeds as such, nor sue in his behalf, any more than he did in that of other creditors. He did not attack his claims under the contract, nor suggest anything against his right to a share of the common security, nor ask any decree against him in that regard; and yet now the plaintiff, claiming through Baxter and a sale under his bill, asks that Walker, or his representative, be excluded from all share in the security, as if there was something within the scope of his bill to preclude him from doing so, on the principle of res adjudicata. But there is not. Why, therefore, should he be enjoined, then or now, from prosecuting his Decatur county bill to secure his annuity, or the balance of the $15,-000, after the payment of his individual debts? There is absolutely not the slightest reason arising out of the Baxter bill, on any principle of estoppel or res adjudicata.

When, therefore, Walker’s relation to the plaintiff in this case, in his capacity of purchaser of the one-third interest, comes to be examined, his administrator stands just as any other creditor would, having a lien under the contract, and just as the other defendants here do. The notion that there is anything in the bill of Baxter, Rec’v’r, v. Young and others, or the proceedings subsequent to the bill, to hind him to the purchase any further than the other beneficiarios are bound, is wholly illusory, and grows out of the bare fact that he was a defendant to that bill. But being a defendant did not bind him to anything except the relief sought and decreed against him, and there is nothing decreed against him asa creditor and co-beneficiary. I thought at the hearing, and so intimated, that he, at least, could not pursue the lien in liis favor, as against the plaintiff here, the purchaser. But it only requires the inspection of the record carefully to see that he is bound no further than I have indicated, namely, as a debtor, and that, as a creditor, ho was not bound to take his share of th(' security in that case, lie was not asked to do so, and his right to take elsewhere was not denied. Prior to that bill he had filed his own, and this did not interfere with him. If the purchaser, as before stated, liad given a fair and adequate price, lie might have had the equity of saying to Walker and the other beneficiaries that they must pursue the fund paid into court, or the creditors who had unduly appropriated a too largo share of it, for a refunding of their share; but, having paid only §100, lie is precluded from that equity, and, as against Walker or the other eo-benoficiaries, ho can now lake nothing by his purchase because of an inadequacy, under circumstances which avoid the sale, as giving an undue advantage. By the complications growing out of the facts already stated, and the bankruptcy proceedings and sale in that court, to say nothing of the agreement among the creditors interested in the Baxter hill to bid jointly for the property, it was sold under such adverse circumstances that it is not. wonderful that it brought only 8100. But no court can sustain the plaintiff’s title, either as against the other secured creditors or Walker.

I need not say that the fact that the plaintiff has become the assignee of all the debts sued for in the Baxter hill does not strengthen his position on this question of inadequacy. Ho cannot tack the relation of creditor to that of purchaser, for obvious reasons, and thereby bettor his title. The parties secured by the contract had the right to have the property sold under such propitious circumstances as would bring the most money, anil the plaintiff here, not having advanced his bid or given a fair price, cannot have the property. The utmost equity he can claim is to come in as a secured creditor along with the rest, take his place in the line of rank to which he belongs, under the contract of April 6, 1874, and receive his share of the proceeds of a fair foreclosure side. As a purchaser at the bankruptcy sale, ho represents Young and wife its to this one-third, as well as the other two-thirds there purchased; and, if there should remain a surplus after paying all the claims secured by the contract to be foreclosed, the plaintiff would be entitled to that.

Again, it may be worth nothing that the suggestion of insolvency of Walker’s estate was made January 1,1880, and before the decree on the Baxter bill, and (if it wore necessary to strengthen the position of the defendants') operated, possibly, as a statutory injunction, under our insolvent laws, against any further procedure with the Baxter bill except by leave of the insolvency court. But I do not deem it necessary to go into that.

Having reached this conclusion, the next matter to be determined is the nature of the decree to be rendered. My own judgment was and is that, strictly and technically, the decree should be simply to dissolve the plaintiff’s injunction, and on the cross-bill restrain him from claiming the benefit of any title he here sets up to the property in controversy, as against any of the defendants, thus allowing them, to proceed with their decree in the Decatur county chancery court, and leaving the plaintiff to protect himself as best he may, by application to that court, where the first bill was filed, to execute the contract. This seems to me the better course, because of those considerations growing out of the possession by the state courts of the jurisdiction which has been impeded by this bill, and that resulting comity which I so like to preserve and observe in all cases. But the parties on both sides are averse to this, and anxious to close the litigation here and now, in a court where, for the first time, all those interested in the property are met upon equal terms as to their opportunities to present their respective claims. Yielding to this desire, I am willing to go further than indicated, and, upon the cross-bill, to execute the contract as it has been suggested the rights of the parties require.

At first I thought that perhaps the partnership creditors claiming here should be postponed until the others had been satisfied, on the ground that they do not show why they have not been otherwise paid out of the partnership assets; but I can see, from the record, that there is a strong presumption that those assets have been applied to other partnership debts, or wasted without fault of those" here presenting their claims. This was originally partnership property, and, by the contract, partnership creditors stand first, and the individual creditors next, and then Walker for his surplus of the $15,000, if any, and the annuity unpaid up to his death. The claims represented by the plaintiff will taire their place in either class to which they belong. The plaintiff will be declared the trustee of the legal title for the benefit of all concerned, under the decree of this court, and, unless he choose to pay the amounts due, and the costs properly chargeable, within 90 days from the date of the decree, the property involved will be sold by John B. Clough, as special commissioner, upon such terms as to the time and place and mode of payment as the parties may agree upon in the decree to be entered, or to be hereafter fixed by the court. And, if the parties cannot agree as to the amounts to be so paid by the plaintiff, and to be fixed by the decree, there may be a reference to said commissioner to report instanter, from the proof, the said amounts, and the costs properly chargeable, including the costs of this case, so that the decree may definitely ascertain the said amounts. And he will likewise report the order of priority. .So ordered.