Lamb v. Ewing

SHIRAS, District Judge, (after stating the facts.) The objections taken to the jurisdiction of the circuit court are based upon the fact that the plaintiff and defendants below are all citizens of the state of Nebraska, and the amount in controversy is less than $2,000. If this proceeding was an independent action, unconnected with any other case in the circuit court, and in which, therefore, the jurisdiction of the court would depend upon the diverse citizenship of the parties to the petition and the amount thereby put in controversy, the lack of jurisdiction of the circuit court would be made clearly apparent. The facts shown in the record, however, prove beyond question that this proceeding is one ancillary to the original action of Charles W. Seymore and William W. Wardell v. William P. Young, and the jurisdiction of the court over that case, which is unquestioned, supports the jurisdiction over the proceedings subsequently brought upon the bond given under the circumstances hereinbefore stated. — 273 — The rule is well settled that where a court rightfully takes jurisdiction over the parties and the subject-matter of a controversy it has the right not only to render judgment in the first instance, but also to secure to the prevailing party the fruits of such judgment, and the original jurisdiction is a continuing one for that purpose; and as corollaries io the genera! rule it ⅛ also equally well settled that, where third parties have rights in or claims to property taken into, Hie possession of the court under process issued against the original parties, such third parties may intervene in the proceedings for the: protection of their rights; and, further, that where the process of tide court is wrongfully and illegally used to the injury of a third party, the latter may appeal to the court for proper redress. If the federal courts were deprived of the power to protect third parties against injuries resulting from the enforcement of process issuing from such courts by reason of the citizenship of the injured party, or because the amount of the injury was less than $2,000, it would work great hardship upon the individual citizen, and be a most serioius blot upon the system of federal jurisprudence. The power of ihe courts of the United States in these particulars is as ample as that of the courts of the states, and the technical question of jurisdiction is solved by the ruling that in all ancillary or auxiliary proceedings for the enforcement of judgments rendered, and ⅛ proceedings for the protection of the rights of third parties, the jurisdiction is supported by that of the original action or suit. Minnesota Co. v. St. Paul Co., 2 Wall. 609; Wiswall v. Sampson, 14 How. 52; Freeman v. Howe, 24 How. 450; Gumbel v. Pitkin, 124 U. S. 146, 8 Sup. Ct. Rep. 379; Krippendorf v. Hyde, 110 U. S. 276, 4 Sup. Ct. Sep. 27; Fuel Co. v. Brock, 139 U. S. 216, 11 Sup. Ct. Rep. 523. The next question presented by the errors assigned is that arising on the plea of the statute of limitations, the contention of the plaintiffs in error being that the right to sue upon the bond accrued as soon as it was executed, for the reason that it has been decided that the judgment upon which the land was sold was void, and not merely voidable. The purpose of the bond was to secure the repayment into court of the money received from the sale of the realty in case it should be determined by the supreme court that the sale could not stand. If the question of the validity of the sale had never been carried in any mode to the supreme court, and Ewing’s claim to the land had never been questioned, certainly no ground for demanding the repayment of the money into court would then have existed, and it corté inly would not have boon in accordance with justice for1 the court to compel the repayment of the money into court, so long as Ewing’s title to the land remained undisputed. So long, also, as the question of the validity of the sale of the realty to Ewing was in fact pending before the supreme court, no action could have been mainiained on the bond, because, according to its terras, the court had no right to demand repayment unless the order of confirmation of the sale of the realty should be reversed by the supreme court It w as not, therefore, until lhat court decided the question, of the invalidity of the sale of the realty that any right of action accrued on the bond given to secure the repayment into court of the money — 274 — derived from tbe sale of tbe realty, and, as tbe petition against plaintiffs in error was filed and service tbereon was bad witbin tbe statutory period, dating from tbe rendition of tbe judgment of tbe supreme court, wbicb settled tbe invalidity of tbe sale of tbe realty, it follows that tbe plea of tbe statute cannot be sustained. A further defense is based upon tbe claim tbat tbe bond itself is void, and tbat its execution and delivery created no obligation against the parties signing tbe same. Tbe contention of plaintiffs in error is that when an execution issues upon a judgment at law, and tbe officer, by an execution sale of real estate, collects a sum of money to be applied in satisfaction, in whole or in part, of tbe judgment, tbe court has not tbe power to require of tbe judgment creditor, as a condition of tbe payment of tbe money to him, tbe execution of a bond for tbe return of tbe money in case tbe judgment is reversed or is held void. Counsel for plaintiffs in error cite a number of authorities wbicb sustain tbe proposition tbat at execution sales of realty tbe rule caveat emptor applies, and tbat in case of a failure of title tbe purchaser cannot look to the judgment creditor for reimbursement. These are cases wherein tbe judgment debtor bad no interest in tbe property levied on, and therefore, in fact, tbe purchaser took nothing by bis purchase. In tbe case now before us, tbe realty levied on and sold.was in fact tbe property of tbe judgment debtor, Lamaster; and, if tbe judgment upon wbicb tbe process issued bad not been wholly void, tbe purchaser would have acquired title. Tbe rule of caveat emptor, invoked by plaintiffs in error, is not applicable to a case like that now under consideration. It is well settled tbat if a judgment upon wbicb an execution has issued and has been returned satisfied is subsequently reversed, tbe plaintiff therein will be compelled to account for the property or money wbicb be may have received by reason of tbe judgment which is reversed. In such cases, there is not a failure of tbe title of tbe judgment debtor to tbe property levied on, but a failure in tbe right of tbe judgment creditor to demand anything by reason of bis judgment, either by way of future satisfaction thereof or by way of retaining any money or property wbicb be may have obtained in tím past. Tbe right to restitution in case of a reversal of tbe judgment cannot be gainsaid, tbe only question being as to tbe mode applicable to the facts of tbe particular case. Bank of U. S. v. Bank of Washington, 6 Pet. 8; Fuel Co. v. Brock, 139 U. S. 216, 11 Sup. Ct. Rep. 528. If tbe money paid through tbe marshal into tbe registry of tbe court by tbe defendant in error was still in tbe registry, could there be any possible question of tbe duty of tbe court in tbe premises? Tbe plaintiffs in error certainly could not claim it as judgment creditors, for their judgment is reversed, and adjudged to be wholly void. Lamaster could not claim it, for be never bad any interest in it or right to it, nor does it represent bis property. Clearly tbe only one to whom it could be rightfully paid would be tbe defendant in error, Ewing; and certainly, under tbe supposed circumstances, tbe court, upon motion or petition of Ewing, would order tbe money to be paid to him. It is said by tbe supreme court in — 275 — Fuel Co. v. Brock, supra, that “the power is inherent in every court, whilst the subject of controversy is in its custody, and the parties are before it, to undo what it had no authority to do originally, and in which it therefore acted erroneously, and to restore, as far as possible, the parties to their former position. Jurisdiction to correct what; had been wrongfully done must remain with the court so long as the parties and the case are properly before it, either in the first instance or when remanded to it by an appellate tribunal.” Therefore, when the supreme court held that the circuit court had no jurisdiction to extend the judgment in the case of Charles W. Seymore and William W. Wardell v. William P. Young against Lamaster, nor to issue execution against his property, it became the duty of the circuit court to restore the parties, if possible, to their former position, and undo all that had been wrongfully done in the attempted enforcement of the void judgment. If the circuit court had exacted from the judgment creditors a bond which bound them in terms to return the money collected on their judgment in case the title of Lamaster failed to the land sold to Ewing, then the authorities cited on behalf of plain tiffs in error would be applicable, because then the question would be whether the judgment creditors could be compelled to return the money paid by the purchaser; and, if no such obligation would rest upon the judgment creditors in the absence of a bond to that effect, it may be that the exaction of a bond would be held to be nugatory, and the bond itself to he void. We, however, are not called upon to determine this question, as it is not presented by the record now before us. In the present case the judgment to satisfy which tire money was paid into court, and by the court to the judgment creditors, has been held to be wholly void. It thus appears that they have received, by means of the process of the court, issued without authority, a sum of money to which they are not entitled. It is their duty to make restitution of the money thus wrongfully received by them. The terms of the bond, read in the light of its attending circumstances, do not impose upon the principals in the bond any duty or obligation greater than that which would exist against them in the absence of the bond. In fact, when the judgment creditors, S. W. Little and D. B. Alexander, received from the registry of the court the money collected on the judgment extended against La-master, the law imposed upon them the duty and implied obligation to repay the money in case the judgment in their favor should prove to ho invalid and void. Tnese parties were nonresidents of the state of Nebraska» It was known to the circuit court, and then appeared upon its records, that the validity of the judgment against Lamaster was denied, and steps were being taken to carry the question to the supreme court. When, under these circumstances, the court was asked to pay out the money in its hands, it was at onee apparent that by so doing the court, in the event the judgment was held void, would he deprived of the power to cause restitution to be made to the proper parties, because both the fund and the parties might he beyond its control. To avoid this, the court required the parties to execute the bond in question, whereby thev — 276 — became bound to repay tbe money in case tbe judgment against Lamaster should be beld to be void, and tbus tbe court continued its power to compel restitution to be made in case tbe right thereto should arise. We find nothing in the action of the circuit court in this particular which was illegal in itself, or which imposed upon the judgment creditors burdens of such a nature as to render the bond of no effect. As a further and final defense it is claimed by plaintiffs in error that the condition of the bond has not been broken; that, as sureties, they are entitled to stand upon the very letter of the obligation signed by them, and cannot be called upon for the repayment into court of the purchase money, unless it is shown that the order of confirmation of the sale of the realty to Ewing has been reversed by the supreme court, which it is claimed has not been done. It is a settled rule that the liability of a surety is not, by implication or by a strained construction of the terms of the contract of suretyship, to be extended unfairly. The surety has the right to stand upon the terms of the contract entered into by him. In determining, however, the true intent and meaning of the contract of suretyship, the same general rules of construction are applicable that obtain in construing other written instruments. As is said in Brandt, Sur. § 80: “The rules for construing the contract of a surety or a guarantor should by no means be confounded with the rule that sureties and guarantors are favorites of the law, and have a right to stand upon the strict terms of their obligar tions. There is no legal prohibition against entering into a contract of surety-ship or guaranty. For any contract which it is legal to make it is legal that a surety or guarantor shall become responsible. In the construction of the contract of a surety or guarantor, as well as of every other contract, the true question is, what was the intention of the parties, as disclosed by the instrument, read in the light of the surrounding circumstances? The contract of the surety or guarantor being just as legal as that of the principal, there is no good reason for holding that, in arriving at the intention of the parties, one set of rules shall govern when the principal and another when the surety or' guarantor is concerned.” In Benjamin v. Hillard, 28 How. 149, 164, it is said: “The general rule is to attribute to the obligation of the surety the same extent as that of the principal. Unless from the terms of the contract an intention appears to reduce his liability within more narrow bounds, a restriction will not be imposed by construction contrary to the nature of the engagement. If the terms of his engagement are general and unrestricted, and embrace the entire subject, (omnem causam,) Ms liability will be measured by that of the principal, and embrace the same accessories and consequences, (connexoram et dependentium.) It will be presumed that he had in view the guaranty of the obligations his principal had assumed.” In Read v. Bowman, 2 Wall. 591, 603, the rule is stated a-? follows; “Defendants are right in supposing that a surety may stand upon the very terms of Ms contract; that he will be discharged if any alteration is made in Ms agreement without Ms knowledge or consent, wMch prejudices Mm, or wMch amounts to the substitution of a new agreement for the one he executed. But sureties are.as much bound by the true intent and meaning of their contracts wMch they voluntarily subscribe as principals. They are bound in the manner, to the extent, and under the circumstances as they existed when the contract was executed.” — 277 — What, llien, is the construction to be placed on the terms of the bond executed by plaintiffs in error, reading the same in the light thrown thereon by the circumstances existing when the bond was executed, and which in fact called it into existence. A fund was under the control of the court, realized from the sale of certain realty under process issued by the court. The validity of the sale was contested. The circuit court had sustained the sale, but the parties proposed to carry the question to the suj>reme court for final adjudication. If the circuit court had retained the money realized from the sale until the validity of the sale had been finally settled, it would then have been within the power of the court, and it clearly would have been its duty, to cause the money in the registry to be paid to the party entitled thereto. Instead, however, of retaining the money in the registry of the court, it was ordered that any claimant thereof might receive the share to which he was apparently entitled by giving a bond to the court, with sureties, conditioned to repay the sum by him received in case the order of confirmation should be reversed by the supreme court. It is entirely clear that the bond was intended to take the place of the money, and that it was the purpose thereof to enable the court to compel the repayment into court of the sum paid out in case the supreme court should reverse the decision of the circuit court upon the question of the validity of the sale. It is said in argument that the condition of the bond has not been broken, because the invalidity of the sale of the realty has not been adjudged in a direct appeal from the order of confirmation. This is not the requirement of the bond in express terms. The order of the court, which is recited in the bond, is to the effect that the bond shall be “conditioned for the repayment into court of tne purchase money in case the order of confirmation in this case is reversed by the supreme court of the United States.” 2fo particular mode of carrying the question of the confirmation of the sale before the supreme court is named, nor was it a matter which was within the control of any of the parties to the bond. The mere method adopted was therefore wholly immaterial, so long as it compassed the purpose of submitting for decision to the supreme court the question upon which the duty of repayment of the money depended. If the money was still in the registry of the circuit court, could it be successfully contended that it was not the duty of that court to order the repayment thereof to the defendant in error simply because the invalidity of the sale had been adjudged in the ejectment suit, and not in a direct appeal from the order of confirmation? This would certainly be sticking in the bark. By the decision of the supreme court, in the ejectment proceedings based upon the supposed title created by the sale in question it was judicially and finally determined that the entire proceedings against lamas ter in the circuit court, including the sale of his property, were wholly void for want of jurisdiction. The issuance of the execution, the levy thereof, and the sale of the property and the order confirming the sale, were all held to be void acts; not voidable, but wholly void. Under such circumstances, it is useless to argue that to create a duty — 278 — to repay the money according to the terms of the bond it was necessary to enter a formal order reversing the confirmation of the sale. The decision and judgment of the supreme court in the ejectment suit had set aside and reversed the sale and the ordér confirming it by holding the same to be wholly void, and thereupon it became the duty of the circuit court to undo as far as possible all the wrong that had resulted from its mistaken action. It likewise became the duty of the principals in the bond to repay into court the sum of money which had been wrongfully paid them. The terms of the bond, fairly construed, bound them for this repayment. The obligation they had assumed in giving the bond was that, if the supreme court should reverse the confirmation of the sale of Lamaster’s property, they would repay the money realized from such sale. The order of confirmation was most effectually reversed by the ruling of the supreme court that the whole proceeding against Lamaster was void and of no effect, and the obligation of the principals in the bond to repay into court the money wrongfully paid them became fixed according to the terms of the bond; and when the court called upon them for repayment of the amount by them received, as was done by the order entered December 2¾ 1890, and the principals in the bond failed to make such payment, then the condition of the bond was broken, and a right of action existed against the sureties for such default on part of their principals. We have thus considered the substantial points made on behalf of the plaintiffs in error, and, finding them without merit, the judgment of the circuit court is affirmed.