FLETCHER v. ANN ARBOR R. CO. et al., 116 F. 479

WANTY, District Judge, after making the foregoing statement, delivered the opinion of the court. It does not appear by the bill of complaint that the Farmers’ Uoan & Trust Company, the grantee in the mortgage deed of the Toledo, Ann Arbor & North Michigan Railway Company, and the Central Trust Company, the grantee in the mortgage deeds of the constituent companies, had any

part in the fraud, and there are no allegations in the bill in this case showing that they in any way neglected the duties imposed upon them. The mortgages given by the Toledo, Ann Arbor & North Michigan Railway Company and its constituent companies to the Farmers’ Roan & Trust Company and the Central Trust Company, as trustees for the bondholders, made those trust companies the parties through which all of the bondholders were required to act.

All the rights the bondholders had in the mortgages or the property represented by them they obtained through the trust companies, and they had no other interest except that which the trust companies represented for their benefit. The trustees were necessary parties to the foreclosure suit, and so long as they acted in good faith all of the bondholders for whom they acted must be bound by what was done, either for their benefit or detriment, in that proceeding.

The Farmers’ Roan & Trust Company began that suit, and carried it to a conclusion, selling the property at a price fixed by the court, which sale was, in the regular course of the proceedings, confirmed, and the proceeds were distributed. There is no allegation in the bill that the trustees, did not act in good faith or were negligent in protecting the rights of the beneficiaries on whose behalf the present bill was filed. In the absence of such allegations this complainant has no right to file a bill to set aside the proceedings in which it was represented by its trustees.

If the sale which is sought to be set aside bound the trustees, it must necessarily, in the absence of fraud or bad faith on the part of the trustees, bind this complainant. If there was fraud, the trustees should have opposed the confirmation of the sale, and, not having opposed it, this complainant, as well as the trustees, were bound by it. In Richter v. Jerome, 123 U. S. 233, 246, 8 Sup. Ct. 106, 31 R. Ed. 132, Mr.

Justice Waite, for the supreme court, said: “All the rights the bondholders have or ever had in the mortgage, legal or equitable, they got through the trust company, to .which the conveyance was made for their security. As bondholders claiming under the mortgage, they can have no interest in the security except that which the trustee holds and represents. If the trustee acts in good faith, whatever binds it in any legal proceedings it begins and carries on to enforce the trust, to which they are not actual parties, binds them. Kerrison v. Stewart, 93 U. S. 155, 160, 23 L. Ed. 843; Corcoran v. Canal Co., 94 U.

S. 741, 745, 24 L. Ed. 190; Shaw v. Railroad Co., 100 U. S. 605, 611, 25 L. Ed. 757. Whatever forecloses the trustee, in the absence of fraud or bad faith forecloses them.” It was said in Kerrison v. Stewart, 93 U. S. 160, 23 L. Ed. 843, above cited, that “the trustee is in court for and on behalf of the beneficiaries; and they, though not parties, are bound by the judgment, unless it is impeached for fraud or collusion between him and the adverse party.” See, also, Kent v. Iron Co., 144 U. S. 75, 90, 12 Sup. Ct. 650, 36 L. Ed. 352.

In the absence of allegations of neglect, collusion, or fraud on the part of the trustees in the mortgages, this bill could not be sustained, and the decree dismissing it on demurrer was correct. An amended bill was presented after the demurrer was sustained, but it contained no allegations of fraud, collusion, or neglect on the part of the trustees, and therefore the refusal of the court to allow it to be filed was proper.

As this defect appeared in each of the amended bills presented to the court below, and was fatal to the complainant’s case, it is unnecessary to discuss the allegations of fraud or the other questions presented by counsel. The decree below is affirmed.