Davis v. Mercantile Trust Co.

152 U.S. 590 (1894)

DAVIS
v.
MERCANTILE TRUST COMPANY.

No. 320.

Supreme Court of United States.

Argued March 22, 26, 1894. Decided April 9, 1894. APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF OHIO.

Mr. Walter S. Logan, (with whom was Mr. Charles M. Demond on the brief), for appellant.

Mr. Thomas Thacher for appellee.

MR. JUSTICE BREWER, after stating the case, delivered the opinion of the court.

As a preliminary matter the standing of the appellant in this court is challenged. In the court below he was not a party to the record, either plaintiff or defendant; was never substituted for either; filed no bill, cross-bill, or answer; but was simply permitted to intervene, with liberty to be heard upon any and all proceedings for the protection of his interests as bondholder and stockholder. Assuming, under the authority of Williams v. Morgan, 111 U.S. 684, 698, that this gave him a right of appeal from any decision of the Circuit Court affecting his interests, it did not change the ordinary rules respecting appeals, one of which is that all the parties to the record, who appear to have any interest in the order or ruling challenged, must be given an opportunity to be heard on such appeal. The rule and the reasons therefor are fully stated in Masterson v. Herndon, 10 Wall. 416, and restated in Hardee v. Wilson, 146 U.S. 179, 181, and need not, therefore, be again repeated. See also Inglehart v. Stansbury, 151 U.S. 68.

In this case the appellant has taken two appeals, one from the decree and the other from the order confirming the sale. These appeals being taken separately, each must stand or fall on its own merits. Noticing first the appeal from the order of confirmation, it will be seen that the sale confirmed was of the mortgaged property to Robinson and Post for the sum of $505,000, of which sum $50,000 had been paid in cash by the purchasers, and the balance secured by a deposit of $1,069,000, first mortgage bonds of the Kanawha and Ohio Railway Company, the bonds in suit. Who is more vitally interested in the question whether such sale and confirmation shall stand than these purchasers? If the sale be set aside, they lose the purchased premises and all the profit which might result from their purchase, and assume all the risks and delay in recovering that which they have paid into court. In Kneeland v. American Loan Co., 136 U.S. 89, 95, this court said that, "supported by sound reasons, are the following propositions: First, a party bidding at a foreclosure sale makes himself thereby a party to the proceedings, and subject to the jurisdiction of the court for all orders necessary to compel the perfecting of his purchase; and with a right to be heard on all questions thereafter arising, affecting his bid, which are not foreclosed by the terms of the decree of sale, or are expressly reserved to him by such decree."

Again, not only is the purchaser interested, but also the mortgagor. He may be satisfied with the sale which was made, may believe that at no other sale would it be possible to realize so much in satisfaction of his indebtedness. At any rate, the setting aside of one sale and the ordering of another may affect prejudicially or beneficially his interests, and because of that he has a right to be heard upon the question of setting it aside. Now, the only party respondent to this appeal is the trustee. It is the only party named as obligee in the cost bond. The citation in terms runs to it only, and there is no pretence that the mortgagor or the other defendants, or the purchasers at the sale, have ever been brought into this court to respond to this appeal. Manifestly, it would be the grossest injustice to attempt to determine the question of the validity of this sale in the absence of these so vitally interested parties.

Neither does the appeal from the decree stand in any better condition. In a decree for the foreclosure of a mortgage the two parties principally and primarily interested are the mortgagee and the mortgagor. No third party should be permitted to disturb such a decree unless and until both mortgagee and mortgagor are given an opportunity to be heard. The mortgagor may be unwilling that the decree should be set aside notwithstanding irregularities in prior proceedings, for fear that on a subsequent hearing a larger sum may be decreed against him. It is not necessary in any given case to determine that his interests would or would not be promoted by the setting aside of the decree; it is enough that in that matter he has a direct interest, and because of this interest common justice requires that no change shall be made in the terms of that decree, nor shall it be set aside, without giving him a chance to be heard in its defence. Ordinarily it may be presumed that all the parties to the record are interested, and so it is often said that all such parties must be joined as appellants or appellees, plaintiffs in error or defendants in error; but it is unnecessary to rest this case upon the mere fact that the mortgagor in this case was a party to the record — the only defendant in the first instance. It was not only such a party, but is also one directly and vitally interested in the question whether the decree of foreclosure and sale shall stand, and yet it is not before us. The trustee is the only obligee named in the appeal bond, and while the citation on its face runs to all the parties to the record, it was not served on the mortgagor, the Kanawha and Ohio Railway Company, and that company has never been brought into this court, and never entered an appearance here. This is fatal to the appeal. The appellant seems to have assumed that he was authorized to represent the corporation mortgagor and all the stockholders, but this is obviously a mistake. He was not by order of court substituted for the defendant mortgagor, nor was he allowed to represent the mortgagor or to carry on its defence. The only authority given to him was to intervene for the protection of his personal interests as bondholder and stockholder. The corporation mortgagor still represented all the other stockholders, as did the trustee all the other bondholders; and while the appellant appears to have had a considerable interest, both as stockholder and bondholder, it was only a minor fraction. Out of 1160 bonds 1069 (all but 91) were tendered by the purchasers upon application for confirmation of sale, and while he claims to be the owner of $1,500,000 of the stock, it appears that the total amount thereof was $12,200,000; so that in fact he was the owner of less than one-eleventh of the bonds and one-eighth of the stock. No authority from these other bondholders or stockholders to him to act for them is shown, so that neither in fact nor in law was he representing the corporation mortgagor in this litigation; and as that mortgagor was interested in and affected by the decree of foreclosure and sale, it should have been made a party to this appeal and brought into this court, and because of the failure so to do, the appeal cannot be maintained.

For the reasons above given both appeals are

Dismissed.

MR. JUSTICE JACKSON did not hear the argument or take any part in the decision of this case.