West v. Central Union Trust Co.

KING, Circuit Judge, This is an attack made by the trustee in bankruptcy of the Appalachian Corporation, a bankrupt, against. the Central Union Trust Company of New York, successor to the Central Trust Compapy of New York, as trustee of a deed of trust made by said Appalachian Corporation to said Central Trust Company of New York on January 1, 1917. The attack on the mortgage is upon the manner of its execution. On July 1, 1922, the Central Union Trust Company, formerly said Central Trust Company, filed a bill against said Appalachian Corporation in the United States District Court for the Northern District of Georgia for the foreclosure of said mortgage and for receivership. Said, bill prayed, among other things, that said mortgage may be decreed to be a valid lien upon the estate, rights, property, privileges, and franchises described therein or covered thereby. On the same day, to wit, July 1, 1922, Appalachian Corporation filed its answer, in which it admitted the due execution and the delivery of the mortgage referred to in the original petition in said case and aE the allegations of said petition. On August 4, 1922, a decree of foreclosure was rendered by said court, in which it was recited that the Appalachian Corporation filed its answer, in which it admitted the due execution and delivery of the. mortgage referred to, and that the Appalachian Corporation offered no objection to the entry of a final decree of foreclosure. The indebtedness under said mortgage was decreed, and the said Union Central Trust Company of New York as trustee was decreed to be entitled to foreclose its mortgage and to seE said mortgaged property for its debt, unless the defendant should pay the amount of the entire bonded indebtedness on or before August 21, 1922. On the 25th day of April, 1924, the Appalachian Corporation was duly adjudged a bankrupt in the United States District Court for the Northern District of Georgia, Eastern Division, and on the 6th day of May, 1924, H. S. West was selected by the creditors and duly appointed trustee of said bankrupt. He now files his petition, attacking said mortgage as inferior to the lien which he holds as a judgment creditor of defendant by virtue of said appointment, upon the ground that said mortgage was not properly executed. The issues necessarily adjudged in said foreclosure proceedings and admitted by the pleadings therein as to the due execution and delivery of said mortgage bound the defendant and all persons, subsequent purchasers ox* judgment creditors, claiming under him. It is therefore not open to the trustee to now raise any question to such conclusion and judgment of the decree of foreclosure rendered nearly two years pri [587] or to the institution of said bankruptcy. As was said by the Supreme Court of Georgia, speaking of the right of a subsequent purchaser to attack a decree of foreclosure rendered by the United States Circuit Court: “He [the mortgagor] was before the court, with full opportunity to question the jurisdiction, or make any other defense that he thought proper to present. The decree went against him, and by him all who hold, or may hold, under him thereafter were represented. In him they fell. He, their head, was condemned, and they, in him, were condemned also. He was the Adam of their race. They are lost.” Gunn v. Wades, 62 Ga. 21, 22. To the same effect, Burks v. Yorkshire Guarantee & Securities Corp., 108 Ga. 783, 33 S. E. 711. The same rule also prevails in the courts of the United States. Eyster v. Gaff et al., 91 U. S. 521, 23 L. Ed. 403; Hollins v. Brierfield Coal & Iron Co., 150 U. S. 371, 386, 14 S. Ct. 127, 37 L. Ed. 1113. For this, if for no other reasons, we think that the decision of the court below was correct, in repelling the attack of the trustee on this mortgage, and the judgment is affirmed.