Richter v. Jerome

Mr. Chief Justice Waite, after stating the case, delivered the- opinion of the court. We are unable to find any authority for granting the relief which is sought in this case. The bill was not filed to set aside the decree in the suit'brought by the Union Trust Company to foreclose its mortgage. On the contrary, the complainant asks in express terms to have the benefit of that decree, so that, as we suppose, he may keep the money he has got as his share of the proceeds of the sale under it. Neither is it sought to hold the Onion Trust Company accountable for its alleged misconduct and breach of faith in' the proceedings for the fore *246 closure of the mortgage. Nor is the suit brought to obtain a specific performance of the contract between Anthony and the Averys, Wild, and Conant, nor to-recover back the money paid by the canal company on that contract over and above what was necessary to pay for the lands which had been patented to Anthony,' and which were actually sold under the Union Trust Company decree for the benefit of the complainant and the other bondholders. But it is, if we understand it correctly, a suit to charge the wagon-road lands, now in the hands of the legal representatives of Ayer, with a trust in favor of bondholders as security for the amount due them respectively, subject only to a lien for the moneys actually advanced to enable Anthony to complete his contract for building the road and thus become entitled to patents. There can be no doubt but the mortgage by the canal company conveyed to the Union Trust Company, as trustee for the bondholders, all the interest in the lands which was conveyed to the canal company by the warranty deed of Perez J. Avery, Wild, and Conant; but that was no more than the interests which those grantors acquired by the contract with Anthony. As their deed was with covenants of warranty, any title which they afterwards acquired under the Anthony contract would enure to the benefit of the bondholders through the Trust Company as their trustee holding for their benefit, and as their representative. 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; Corcoran v. Chesapeake, &c., Canal Co., 94 U.S. 741, 745; Shaw v. Railroad Co., 100 U.S. 605, 611. Whatever forecloses the trustee, in the absence of fraud or bad faith, forecloses them. This is the undoubted rule. *247 ' Here the Trust Company began its suit for the foreclosure of its mortgage, and has sold under the decree in that suit all the interests, legal and equitable, which it held in the land as trustee for the bondholders, and distributed the proceeds, the' complainant receiving his share without complaint and .without objection. All the rights which the Trust Company, as trustee, had in the lands at the time of the mortgage passed to the purchaser at the sale. That sale, 'it is conceded, binds the Trust Company as trustee and therefore it binds the complainant as a bondholder. If the decree or the sale under it was in fraud of the rights of the bondholders, their remedy is by a direct proceeding to set aside the sale or the decree, and to proceed anew with another foreclosure of the mortgage, and not to undertake to reforeclose what had been fully foreclosed before under a decree which remains in forcé. But it is said that the original foreclosure was of no effect, because neither Anthony nor Ayer was a party to the suit, and the rights of the Trust Company and its beneficiaries under the mortgage were neither set forth with certainty in the bill nor found in the decree. No relief was sought either against Anthony or Ayer. The sole purpose of the bill was to sell the interest of the mortgagee in the lands, whatever that interest might be. To a suit for that purpose neither Anthony nor Ayer was a necessary party,- because it was not important to them who held the fights that were to be sold, and such a sale would not affect them. The canal company, or its assignees in bankruptcy, were parties to the suit, and instead of objecting, as they might, to a sale of the property without a more specific adjudication as to what was to be sold, consented to it. The bondholders were represented in the suit by their trustee, and are bound by the decree so long as it stands unreversed, and is not set aside or vacated. The argument of counsel for the appellants seems to proceed on the ground that there are two equities growing out of the mortgage to the Trust Company, which may be dealt with in two separate suits as they are separate and distinct in their character. One he calls the mortgagor’s equity, consisting of the rights of the canal company in the lands growing out of *248 the contract by Anthony for their sale to the Averys, Wild, and Conant.' This equity, if we understand counsel correctly, it is conceded was sold under the proceeding's for foreclosure, and now belongs to the purchaser. The other he denominates the “ bondholders’ equity,” and it arises out of the purchase by Ayer from Anthony of his rights under the contract with the State of Michigan for building the wagon road when he (Ayer) had knowledge of the former contract under which the canal company could have perfected its title to the unpatented lands included in the mortgage if he had not interfered. Under this equity counsel say they now seek to recover for the bondholders “ only the profits which Ayer made by stepping into Anthony’s shoes in the premises.” We are unable to see how these two equities, if thex'e ax’e two, can be separated in the way contemplated. They both grow out of the canal company’s rights under the contract between Aixthony, axid the Averys, Wild, and Conant. If the canal company could not recover froxn. Ayer, neither the bondholders nor their trustee in the mortgage can.. The title upon which their right of recovery rests, if such a right ever existed at all, was in the Trust Company, as the ’ trustee of their security, at the time the original foreclosure was had, and it was part of the mortgagor’s equity which was sold. It was then what this bill seeks to make it now, part of the security of the bondholders under the Trust Company mortgage, and being such it passed with the rest to the purchaser at that sale. Something is also said in the argument about the equitable claims of the bondholders upon Ayer as the successor of Anthony, growing out of the false representations made to them as to the title of the lands covered by the mortgage when they paid the money and took their bonds; but all such claims come from the' mortgage, as to which, in all proceedings for foreclosure, they are represented by their trustee when its interests are not in conflict with theirs. All the equities now asserted were proper subjects for adjudication in the former suit if they existed. They formed pax’t and parcel of the security which was then enforced, and, not being excepted from the sale, passed by it. *249 This makes it unnecessary to consider whether there was such fraud on the part of Anthony as to charge the lands in the hands of Ayer, even if the Trust Company were now proceeding against him under the mortgage. The decree is Affirmed.