Hubinger v. Central Trust Co. of New York

THAYER, Circuit Judge, after stating the case as above, delivered the opinion of the court. The case having been tried before the circuit court without the intervention of a jury, and the facts having been found specially, the only question open for consideration in this court is whether the. facts as found by the trial judge are adequate to sustain the judgment. The findings of the trial judge, as a matter of course, cannot be reviewed. The judgment is challenged by counsel for the plaintiff in error, as we understand, on two principal grounds: [790] First, because tbe Trust Company, as it is said, bad no sucb title to the mortgaged property which was bought by the defendant Hubinger at the foreclosure sale as will enable it to maintain an action at law against the purchaser for the wrongful disposition or destruction £f the property, or for his refusal to surrender it to the Trust Company upon demand; and, second, because the superior court of the city of Keokuk, in which the suit was brought, has, as it is claimed, exclusive jurisdiction of the controversy, and all matters connected therewith or incidental thereto. Concerning the first of these contentions, it may be said that, while it is true that the Trust Company was not the absolute owner of the property in controversy, nevertheless the legal title was vested in it for the benefit and security of the mortgage bondholders, and we perceive no reason why it is not entitled to sue at law and recover the value thereof, from one who has wrongfully dealt with and dissipated it, so that it cannot be restored to the proper custody. The authorities are quite numerous that a mortgagee may maintain what would at one time have been termed “an action on the case” for an injury wrongfully done to the mortgaged property, whether it be realty or personalty, whereby its value is impaired and the security of the mortgagee lessened, provided that,' as a result of the wrongful act, the mortgagee sustains an actual loss. The recovery in such cases is commensurate with the loss. Yates v. Joyce, 11 Johns. 136, 140; Van Pelt v. McGaw, 4 N. Y. 110; Edler v. Hasche, 67 Wis. 653, 31 N. W. 57; Sperry v. Ethridge, 70 Iowa, 27, 30 N. W. 4; Gooding v. Shea, 103 Mass. 360; Allison v. McCune, 15 Ohio, 729; Mitchell v. Mining Co. (Cal.) 17 Pac. 246-257; Heath v. Haile (S. C.) 24 S. E. 300. The special finding shows that the mortgaged property had been dissipated by the wrongful acts of the defendant, and that he refused to restore it, and could not in fact restore it in its entirety, when, upon the reversal of the order confirming the foreclosure sale, it became his duty to restore it to the Trust Company. Inasmuch as the mortgagor company seems to have been utterly insolvent at that time, the mortgagee’s security became impaired to the full extent of the value of the mortgaged property when it was purchased by the defendant, and we know of no reason why the defendant may not be compelled to respond for its value in an action at law. We are also of opinion that the second ground on which the judgment below is contested is equally untenable. If the case at bar were one in which the Trust Company was seeking to recover the mortgaged property or any specific part thereof, or to enforce a lien against the same, it may be conceded that the action could not be maintained because of the pendency of the foreclosure suit in the state court. By the commencement of that suit, the court in which the bill was filed acquired an exclusive jurisdiction over the mortgaged property, and any attempt to enforce a claim against the property itself, or any specific part thereof, must be made in the state court. Merritt v. Barge Co., 49 U. S. App. 85-93, 24 C. C. A. 530, and 79 Fed. 228; Gates v. Bucki, 12 U. S. App. 69, 4 C. C. A. 116, and 53 Fed. 961; Zimmerman v. Sorelle, 49 U. S. App. [791] 387, 25 C. C. A. 518, and 80 Fed. 417. As lias already appeared, however, the case at bar is not one in which the Trust Company sought to recover (.lie property, but it is essentially an action at law to recover damages for its waste and destruction. It is a suit strictly in personam, which contemplates no interference with the mortgaged property, and requires no reference thereto, further than to ascertain its value at a certain date, and what has since been done with it. The bringing of this suit by the Trust Company upon the theory that the mortgaged property had been destroyed by the wrongful conduct of the defendant, and was no longer available as a security, was a practical abandonment by the mortgagees of all claim to the property, and an election on their ptart to take a money judgment for its value. It is probably true that the state court would have bad adequate power, by orders made in the foreclosure suit at the instance of the Trust Company, to have compelled Hubinger to account for its value; but we "think that it was under no obligation to seek for such relief in that suit, but was entitled, upon the facts found by the trial court, to sue at law for the damages which it had sustained. Buck v. Colbath, 3 Wall. 334; 8 Stanton v. Embrey, 93 U. S. 548; Garabaldi v. Wright, 52 Ark. 416, 12 S. W. 875. It was suggested on the. oral argument, and some stress seems to be laid on the point in the brief, that the defendant below was not obliged to restore the property which he purchased at the foreclosure sale because of a provision found in the Iowa Code (McClain’s Ann. Code, § 4429) to the effect that “property acquired by a purchaser in good faith, under a judgment subsequently reversed, shall not be affected by such reversal.” It is obvious, however, that Hubinger is not within the protection of this provision of the Code, as the trial court very properly held (87 Fed. 3-8), because the judgment under which he purchased was not reversed, but remains undisturbed- to this day. The only proceeding which was challenged by the appeal to the supreme court was the order confirming the sale, and the defendant below was a litigant before the supreme court, endeavoring to maintain that the order was not erroneous. We fully agree with the trial court that the defendant was not a purchaser under “a judgment subsequently reversed,” and for that reason was not protected by the aforesaid provision of the Code, and that he was bound to restore the mortgaged property when the order approving the sale was reversed. Some other points are discussed in the brief of counsel for the plaintiff in error, but they are not of sufficient moment to deserve special notice. The judgment below was for the right party, and it is hereby affirmed.