SHEFFIELD & B. COAL, IRON & RAILWAY CO. et al. v. NEWMAN, 77 F. 787

PARLANGE, District Judge (concurring). The questions of pleading and practice raised by the demurrer do not appear to me to be tenable. The object of the supplemental bill was to show that liens which, while they existed, were obstacles in the way of Newman’s full satisfaction, had been removed since the filing of the original bill. Story, Eq. Pl. § 346; Beach, Eq. Prac. § 499. Chancellor Walworth, in Candler v.

Pettit, 1 Paige, 168, uses (lie following language: “If the complainant had no ground for the proceeding originally, ho should file a new bill, showing a case which will then entitle him to equitable relief. But. if his original bill was sufficient to entitle him to one kind of relief, and facts subsequently occur which entitle him io other and more extensive relief, he may have such relief by selling out such new matter in the form of a supplemental bill.” Furthermore, it has been held that the granting of leave to file a supplemental bill, or to make any amendment, is discretionary with the trial court.

Beach, Eq. Prac. § 503. See, also, Marco v. Hicklin, 15 U. S. App. 55, 6 C. C. A. 10, and 56 Fed. 549. The necessary parties, so far as the record shows, have all been impleaded. The demurrer does not name the parties which the defendants claim should have been joined. The fifty-second and fifty-third equity rules require that the fact that: parties in interest: are not before the court be set up by plea or answer.

If the defect of parties appears on the face of the bill, objection may be raised by demurrer; but, if the defect is not apparent, a defendant must: set up the defect by plea or answer, pointing out: and naming the persons who ought to be made parties, and giving the reasons therefor. Carey v. Brown, 92 U. S. 171; Greenleaf v. Queen, 1 Pet. 138; Segee v. Thomas, 3 Blatchf. 11, Fed. Cas. No. 12,633; Florence Sewing Mach. Co. v. Singer Manuf’g Co., 8 Blatchf. 113, Fed. Cas. No. 4.884; U. S. v. Gillespie, 6 Fed. 803.

In my opinion, there can be no room for doubt that the original decree of foreclosure and the subsequent confirmation of the sale imposed on the purchasers, Neely and Hill, the obligation to satisfy the mechanic’s lien and the certificates. The decree distinctly provided that the property be sold “subject to all outstanding contractors’, mechanics’, vendors’, or other liens,” prior in rank to the mortgages, “and expressly subject to the receiver’s certificates authorized to be issued by Jacob G.

Chamberlain,’ receiver, to an amount not exceeding $150,000.” The decree further provided that: “The purchasers of said property shall lake the same upon the express condition Hurt be or they will pay off and satisfy any and all claims now pending and undetermined in this court prior to the appointment of the receiver herein, and during the receivership; and also upon the express condition that said purchaser or purchasers will pay off, discharge, and satisfy all debts, claims, or demands, of whatever nature, which have been or may be hereafter incurred by said Jacob,G.

Chamberlain, receiver, which have not been or may not hereafter be paid by said Jacob G.

Chamberlain.” The order of confirmation provided that; “Said purchasers take said property, and that it be recited in said deeds' that they so take said property, subject to, and that said purchasers or their assigns assume and pay off, any and all debts, claims, and demands, of whatever nature, now ponding and undetermined in this court, which have been or may be allowed and adjudged by this court as prior in rank to any right secured by either of said mortgages.” There are authorities which hold that when a purchaser takes property burdened with an incumbrance, retaining out of the purchase price the amount necessary to remove the incumbrance, he will be held to have assumed the incumbrance.

Boone, Mortg. § 125; Jewett v. Draper, 6 Allen, 434; Comstock v. Hitt, 37 Ill. 542; Thayer v. Torrey, 37 N. J. Law, 339. And some authorities hold that when a purchaser takes title subject to a mortgage, but without an assumption of the debt, the law will consider that he has deducted the amount of the mortgage from the price, as a trust fund remaining in his hands. See Bunch v. Grave, 12 N. E. 514, 111 Ind. 351.

Hut the instant case is not a case of implied assumption; this is a case in which an express and unambiguous condition of the sale was that the purchasers should assume, pay off, and satisfy all prior incumbrances and claims. Appellants’ counsel urge that, as the decree provided for the sale of the property in two lots or parcels, it would be unjust to hold the two purchasers severally liable for the whole indebtedness.

The answer to this plea is that the decree provided, in the interest of the purchasers, that they should assume and pay the certificates ratably as each parcel of property had benefited from the certificates, and Neely, Hill and Cole have, in a manner which was doubtless satisfactory to themselves.' satisfied the claims of Gordon, Strobel & Laureau and the Woodson certificates. If one of the purchasers should be made to pay more than his proportion of the indebtedness, he would have his recourse against the others.

Appellants’ counsel have strenuously pressed the claim that the sale to satisfy the Woodson certificates, and the subsequent sale to satisfy the mechanic’s lien, freed the property from incumbrances, qnd that, at the time appellee instituted his suit, he had no lien.

Even if the effect of the sale under the superior mechanic’s lien was to wipe out the lien of the certificates, so that a stranger would have taken the property free from the latter lien, still'Neely and his associates cannot be allowed, as against appellee, to derive advantage from their neglect to perform the obligation to pay all claims, which they had assumed when they purchased under the decree of foreclosure. Their legal duty was to pay the certificates. Their failure to comply with the express condition of their purchase was the cause, of the subsequent sales.

Under such circumstances, equity considers the reacquisition by them as an equitable redemption, for the benefit of the holders of outstanding claims. “Equity looks upon that as done which ought to have been done.” Justice Story, in his work on Equity Jurisprudence (section 63g), said that the true meaning of the maxim just quoted is that: “Equity will treat the subject-matter, as to collateral consequences and incidents, in the same manner as if the iinal acts, contemplated by the parties, had been executed exactly as they ought to have, been, not as the parties might have executed them. * * * All agreements are considered as performed which are made for a valuable consideration, in favor of persons entitled to insist upon their performance.

They are-to be considered as done at the time when, according to the tenor thereof, they ought to have been performed. They are also deemed to have the same consequences attached to them; so that one party, or his privies, shall not derive benefit by his laches or neglect; and the other party, for whose profit the contract was designed, or his privies, shall not suffer thereby.” Justice Story also said (Eq.

Jur. § 410): “It it wholly immaterial of what nature the equity is, whether it is a lien or an Incumbrance or a trust or other claim; for a bona fide purchase of an estate, for a valuable consideration, purges away tlie equity from the estate, in tlie hands of all persons who may derive title under it, with the exception of the original party whose conscience stands bound by the violation of his trust and meditated fraud. But, if the estate becomes revested in him, the original equity will reattach to it in his hands.” Insurance Co. v. Eldredge, 102 U. S. 545; Noonan v. Lee, 2 Black, 506; Kilpatrick v.

Haley, 13 C. C. A. 480, 66 Fed. 133; Cooley, Tax’n (2d Ed.) p. 500 et seq.; Blake v. Howe, 15 Am. Dec. 681, and note; 1 Jones, Mortg. § 680; Lamborn v. County Com’rs, 97 U, S. 181; Pom. Eq. Jur. § 754; Clark v. McNeal, 114 N. Y. 287, 21. N. E. 405. Doubtless, the general rule is that payment of a mortgage by one who assumed it, by whatever means or in whatever form the payment is made, operates as a discharge, Thompson v. Heywood, 129 Mass. 401; McCabe v. Swap, 14 Allen, 188; Putnam v. Collamore, 120 Mass. 454; Birke v. Abbott (Ind. Sup.) 1 N. E. 485.

Appellants’ contention, with regard to that part of the property which was sold to satisfy the Woodson certificates, raises a question which must be decided from a standpoint somewhat different. To the proceedings which resulted in that decree, the appellee was not made a party. ’Che decree only provided for the payment of a part of the certificates, the contest as to the validity of which had been previously allowed in the original cause.

The appellants urge that, although appellee was not an actual party, he was a privy, because the proceedings on the Woodson certificates were a continuation of an issue in the original cause. This contention is without force. The “case” to be made under the reservation as to the Woodson certificates was a case to be litigated between the parties in interest, viz. the future purchasers (who were unknown at the time the reservation was made) and the holders of the Woodson certificates. The future purchasers were the only parties in interest authorized to resist payment of those certificates.

The suit was not brought on behalf of any other certificate holders. The proceedings against the purchasers alone amounted, therefore, to an original suit. It has been held that, “where a bill does not relate to some matter already litigated in the same court by the same persons, it is an original bill, and not ancillary to the original suit.” Christmas v. Russell, 14 Wall. 69; also, Smith v. Woolfolk, 115 U. S. 143, 5 Sup. Ct. 1177; Carey v. Railway Co., 161 U. S. 131, 16 Sup. Ct. 537. In the Pacific Railway Case, 111 U. S. 505, 4 Sup.

Ct. 583, which was a suit by a stockholder to set aside a decree of foreclosure, it was said that such a suit is, in the chancery sense, an independent action, and is treated as a continuation of the original cause for the purpose of jurisdiction only. In Ray v.

Norseworthy, 23 Wall. 128, the court said: “No man is io be condemned without an opportunity to be heard, nor is there any well-considered case which gives support to the proposition that a judgment, order, sentence, or decree disposing oí property subject to conflicting claims will affect the rights of any one not a party to the proceedings.” Also, Dupasseur v. Rochereau, 21 Wall. 130; Howard v. Railroad Co., 101 U. S. 837.

Newman, as a holder of certificates secured concurrently with the Woodson certificates by a common lien, was an indispensable party to the suit by the Anniston Loan & Trust Company, if it was sought by that proceeding to bind him. Doe v. McLoskey, 1 Ala. 708; Boykin v. Rain, 28 Ala. 341, 342; Railroad Co. v. Orr, 18 Wall. 471; Pugh v. Mining Co., 112 U. S. 238, 5 Sup. Ct. 131; Ackerson v. Railroad Co., 28 N. J. Eq. 542; Byers v. Brannon (Tex. Sup.) 19 S. W. 1091; Johnson v. Powers, 139 U. S. 156, 11 Sup. Ct. 525; Bedon v. Davie, 144 U. S. 142, 12 Sup. Ct. 665; Litchfield v. Groodnow’s Adm’r, 123 U. S. 549, 8 Sup.

Ct. 210; Jackson v. Ludeling, 21 Wall. 616; Railway Co. v. Parker, 143 U. S. 58, 12 Sup. Ct. 364, 369. In Pugh v. Mining Co., supra, the court said: “It requires no authority to show that the sale of the mortgaged property upon a judgment recovered upon' part of the notes secured by the mortgage does not preclude the holder of the other notes secured by the same mortgage.” As to the holders of the outstanding notes, the mortgage is as though it had not been foreclosed. . Collins v. Riggs, 14 Wall. 491. I do not understand that appellants’ counsel seriously dispute this general principle.

They seem to endeavor to show that the agreement which appellee entered into virtually made him a party to the proceedings instituted by the Anniston Loan & Trust Company; that the agreement constituted an assent to the sale; and that appellee’s lien was therebv extinguished as to the property and transferred to the proceeds of the sale. In my judgment, the contention is untenable. The agreement expressly stipulated that Newman should have the right to claim the amount due him as a pro rata upon the property, by suit and foreclosure, as if the agreement had not been entered into.

The agreement expressly stated that the sale should not in any manner prejudice Newman’s rights. It need hardly be said that Newman’s motive was to protect, not to destroy, his rights. The agreement was a lawful one. The object in view and the purpose in making the agreement are obvious. Passing upon the matter in the light of the circumstances existing at the time the agreement was entered into, it is impossible to put upon it the construction contended for by appellants’ counsel. That construction would go cóunter to all the settled rules for the

interpretation of contracts, and would have to proceed upon the theory that Newman willingly assisted in the destruction of his rights. The property was acquired by the Anniston Loan & Trust Company, subject to the agreement with Newman. When Newman filed his bill, the Anniston Loan & Trust Company owned the property. Neely and his associates bought pendente lite, subject to the same equity pleadable agaiDst the Anniston Loan & Trust Company. The decree and amendments to pleadings in the cause were binding on Neely and his associates. Tilton v. Cofield, 93 U. S. 163; Mellen v. Iron Works, 131 U. S. 352, 9 Sup.

Ct. 781; Bank v. Sherman, 101 U. S. 403; Norris v. Ile, 152 Ill. 190, 38 N. E. 762; Benn. Lis. Pend. 233. For the foregoing reasons, I concur in the decree of the court affirming the decree of the circuit court.