Nos. 2755-2757 | 9th Cir. | Mar 29, 1916
The Equitable Trust Company of New York, as trustee, instituted foreclosure proceedings in the District Court in the Northern District of California to foreclose the first mortgage of the Western Pacific Railway Company, bearing date September 1, 1903, but acknowledged and delivered June 23, 1905. Tlie trust company, as trustee, plaintiff in the court below, and appellant here, also asked that a receiver be appointed pendente lite. Jurisdiction was based upon diversity of citizenship.
The complaint sets forth that the entire amount of bonds secured by the mortgage sought to be foreclosed, $50,000,000, had been duly issued and were then outstanding, and the only default alleged was in the payment of one semiannual installment of interest which matured March 1, 1915, amounting to $1,250,000. The prayer, so far as it related to the appointment of a receiver, was substantially that a receiver be appointed to take possession of and to operate the properties of the Western Pacific Railway Company which are subject to the lien of the first mortgage, and to collect and receive the earnings, revenues, rents, issues, profits, and other income thereof, and to apply the net income thereof to the benefit of holders of bonds secured by such first mortgage as provided by the terms thereof, and with such other power and authority and with limitations of power and authority as to the court should seem proper.
The complaint was filed on the 2d of March, 1915. On that day
On October 25, 1915, Central Trust Company of New York, which had become a party to the suit by intervention, filed its answer and cross-bill. Thereafter a stipulation was made by Central Trust Company consenting to a decree of foreclosure and sale, so that it is not very important to state the contents of the cross-bill, other than that it alleged that Central Trust Company is the trustee under the second mortgage of the Western Pacific Railway Company, this second mortgage covering all the properties of the Western Pacific Company, but is subject and subordinate to the first mortgage; that under the second mortgage there are outstanding bonds, aggregating in par value $25,000,000, which bear interest at 5 per cent, per annum; and that under the terms of the second mortgage, and because of the order appointing receivers of the property of the Western Pacific Railway Company, the Central Trust Company became entitled to foreclose and collect the entire amount secured by its mortgage.
The Equitable Trust Company, as trustee, on November 1, 1915, answered the cross-bill of Central Trust Company, admitting the material averments of the cross-bill; and on November 22, 1915, the Western Pacific Company filed its answer to the cross-bill, admitting all the allegations thereof.
On January .13, 1916, the Equitable Trust Company filed its supplemental and second amended bill. The substance of the averments of this supplemental bill is that since the amended bill had been filed the defendant railway company had defaulted in the payment of a second installment of interest, $1,250,000, due September 1, 1915, that the trustee under the mortgage had declared the principal of the $50,-000,000 outstanding bonds to be due, and that that principal and interest were due and in default. It was alleged, too, that the Boca & Eoyalton Railroad, Mercantile Trust Company of San Erancisco, as trustee under its first mortgage, and Chester L. Hovey, as receiver of the property of the Boca & Loyalton Company, claimed an interest in some 3% miles of track of the Western Pacific Railway, and that such interest was subsequent to and inferior to the first mortgage of the Western Pacific.
(a) Stipulation between the Equitable Trust Company, as trustee, and the Western Pacific Company and Central Trust Company, waiving the right to take testimony, admitting the truth of the facts set forth in the amended bill and in the supplemental bill, and as recited in a form for foreclosure decree and sale attached to the stipulation, and consenting to the entry of such decree forthwith, or at the time of any such early hearing as the court should assign.
(b) Stipulation between the Equitable Trust Company, as trustee, and Boca & Loyalton Railroad Company, Mercantile* Trust Company of San Francisco, as trustee, and Chester L. Hovey, as receiver, that a decree of foreclosure and sale might: be entered forthwith, provided that it should contain a provision that such sale should be made subject to all then existing rights of such defendants to a trackage right over the 3% miles of track heretofore alluded to.
(c) Stipulations by the Southern Pacific Company and Utah Fuel Company, claimants against the Western Pacific Company, who had presented their claims as preferred claims, and whose claims had not been paid, consenting to the entry of a decree of sale in accordance with the prayer of the amended bill and the supplemental and amended bill, and consenting to the setting of the cause for hearing.
Counsel for the Equitable Trust Company, as trustee, moved the court for a decree of foreclosure and sale in the form submitted, or that, if such motion be denied, the cause be set for hearing, and for the entry of such decree at such early day as the court should assign. No party to the cause objected, hut the receivers protested. The court allowed them to offer evidence, and over the objection of plaintiff’s counsel continued the hearing until March 16, 1916.
With these motions counsel for the trustee submitted two affidavits—one made by the solicitor for the trustee, setting up the consent of all parties that a decree of foreclosure and sale should be entered forthwith, and that all creditors whose claims had been presented and allowed had been paid in full, and another made by counsel for the reorganization committee of holders of first mortgage bonds of the Western Pacific Company, setting up that on May 1, 1915, a bondholders’ protective agreement had been framed; that on December 15, 1915, the holders of more than $37,000,000 of such bonds had deposited them under the agreement, and on that date a plan and agreement for reorganization had been framed under which the holders of more than $43,000,000 of bonds had deposited them; that in order to procure the underwriting required by such plan and agreement for the sale of $20,000,000 principal amount of bonds to be issued there
Certain other matters may here be stated:
On May 18, 1915, the receivers petitioned the court for six months’ time within which to investigate and report to the court concerning matters and things in connection with certain contracts, including what is designated as “Contract B,” and that pending examination of such contracts they might be effective without prejudice. The court ordered that a hearing upon the petition be had upon June 14, 1915.
Contract B was made on June 23, 1905, the same day upon which the first mortgage of the Western Pacific Company was executed. The parties to it were the Denver & Rio Grande Railroad Company (called the Denver Company) and the Rio Grande Western Company (called the Western Company), as parties of the first part, Western Pacific Railway Company (called the Pacific Company) as party of the second part, and Bowling Green Trust Company, as trustee under the first mortgage of the Western Pacific Railway Company (called the trustee), as party of the third part. The Equitable Trust Company of New York is successor to Bowling Green Trust Company as trustee under the first mortgage of the Western Pacific Railwa3^ Company, and the Denver & Rio Grande Railroad Company and the Rio Grande Western Railway Company are now consolidated into the Denver & Rio Grande Railroad Company.
Contract B recites: That the Denver Company operates a railway line from Denver, Colo., westerly to Grand Junction, Colo., at which point it connects with a railway operated by the Western Company from Grand Junction, Colo., westerly via Salt Lake City, Utah, to Ogden, Utah, connecting at Salt Lake City with the railway of the Pacific Company; that the Pacific Company has partially constructed, and is constructing the remainder of, a railway from San Francisco easterly to Salt Lake City, at which point the portion already constructed connects with .the railway of the Western Company; that the Denver Company owns substantially all the stock of the
Without reciting the many provisions in detail, among other covenants material to the present controversy, we give the substance of these:
The payments made to the trustee as provided in a later paragraph shall be credited as payments of the purchase price of promissory notes of the Pacific Company, to be purchased by the Denver and Western Company.
The Denver and Western Companies covenanted that they would semiannually pay unto the trustee out of the purchase price of the notes such amount as, together with the amount actually appropriated by the Pacific Company out of its earnings and other income and by
The parties of the first part were to pay to the trustee under the first mortgage of the Pacific Company amounts required to be paid by them pursuant to the provisions of certain sections of the contract to supply, with the amounts paid by the Pacific Company, sufficient to pay the semiannual interest on the first mortgage bonds of the Pacific Company as sqch interest might fall due, and such additional amount as, with the amount already paid to the trustee hy the Pacific Company for that purpose, would make up the full amount of payment for the sinking fund in accordance with the first mortgage requirements; and it was covenanted that all amounts payable to the trustee under the agreement to cover interest should constitute a trust fund for the payment of interest due, or thereafter to become due, upon the Pacific Company’s first mortgage bonds, and should be by the trustee made available for the payment of interest upon said bonds as they should mature and payment be demanded. It was agreed that neither the Pacific Company nor any one claiming under them, save such persons as may be entitled to< receive the interest on the first mortgage bonds, should be entitled to or possess any interest in, lien upon, or claim upon said fund or any part thereof.
The Denver and the Western Companies waived any right to demand the delivery of the-promissory notes to be purchased before or coincidently with'the payment by them, with the purchase price of any such notes as provided for, and agreed that they will promptly pay the purchase price of all notes that they are obliged to take, although the Pacific Company may not have taken steps necessary to deliver such promissory notes; but neither the Denver nor the Western Company, by reason of making such payments prior to the receipt of the notes, should be prejudiced in the right to receive or enforce the delivery by the Pacific Company of such notes.
The Pacific Company covenanted that it would construct its railway as contemplated and arrange with respect to traffic as provided, and make trackage agreements and operating rules, all as provided for; that it would malee the promissory notes provided for, be sold to the Denver Company; that the Pacific Company shall apply all its gross earnings and income to the payment of its operating expenses, its taxes, and to protect unimpaired the lien of its first mortgage, the interest on its bonds, its annual contribution to the sinking fund pro¡vided by its first mortgage, and any other charge or expense which it may_ be necessary for it to pay in order to assure the continued and efficient operation of its property and to protect the priority of its first mortgage.
The Pacific Company further covenanted that it would pay at cer
Article VI of contract B was a mutual agreement by and between the parties to the instrument, each severally agreeing with each and all of the others. Included in such covenants were these:
The trustee shall give notification in the amount of moneys held by it for the purpose of paying interest under the terms of the first mortgage bonds at prescribed times, and the amount applicable as provided in the contract shall he equal to the difference between the amount so required, less the amount so held by the trustee, as shall on the date of the notice actually have been paid by the Pacific Company to its fiscal agent for the purpose of making such payment of interest, and the trustee shall at a certain time notify the parties of the amount held by it to be paid to the sinking fund payment as required by the terms of the mortgage, and the amount of moneys to be paid by the Pacific Company, applicable to the making of the sinking fund payment as required in the agreement, shall be the difference between the amount so required and the amount so held by the trustee. It was provided that failure on the part of the Pacific Company to perform the covenants of the agreements shall not excuse the Denver and! Western Companies from fulfilling their obligations; but if they should fail the Pacific Company may resort to suit for specific performance or action for damages as may be appropriate, but nothing shall he taken to authorize any action which may impair in any manner the lien or security of the first mortgage of the Pacific Company or preventing or interfering with the exercise of any of the remedies thereby granted to the trustee, and time is of the essence in all the covenants to be performed by the Pacific Company with relation to payments.
It is expressly covenanted that the agreement should be in force and binding upon all parties until all of the $50,000,000 first mortgage bonds- shall be fully paid, principal and interest, as provided in the first mortgage of the Pacific Company, and that the agreement—
*582 “shall run. with the railways of the said several railway companies, parties hereto, into whosoever hands the same may come; and this agreement and the provisions thereof shall be so construed that any person or persons, corporation or corporations, which may at any time acquire in any manner any of the said several railways of the parties hereto shall be held and be deemed to have expressly agreed by virtue of the act or acts, deed or deeds, or other instrument or transaction, * * * to observe and perform all of the terms required by this agreement to be performed or to be observed by the party hereto from whom, immediately or indirectly, the said person or persons, corporation or corporations, may have acquired the'said railways or railway, and the said person or persons, corporation or corporations, * * * shall be held to be bound by an express, contract with the parties hereto and by and upon an express trust to perform and observe as aforesaid all the terms hereof, including all acts and things that may be necessary to preserve in full force the several obligations and agreements herein established or contained for the full term hereof.”
The obligations and provisions of the contract are also expressly-deemed to be a part of the consideration of any contract or contracts by which any person may acquire or undertake to acquire - the said several railways or any of them. Each of the railway companies covenants with all the other parties that, if at any time during the continuance of the agreement it shall in any way transfer its property or rights and franchises to any of the premises affected by the mortgage, any instrument shall contain a covenant that it is made subject to all the ¡provisions of contract B, and that the grantee or transferee, and any person claiming under such grantee or transferee, shall, by the acceptance of such instrument and the acceptance of such grant or conveyance, become bound to perform and observe all of the terms required by the contract to be performed and observed by the party making such grant or conveyance, including all acts and things which may be necessary to-preserve in full force the several obligations and agreements established and contained in the contract.
Among the mutual covenants i's a provision that in the event of default by the Pacific Company under its first mortgage the trustee shall forthwith become vested with the right, upon written request of the holders of two-thirds in amount of outstanding bonds secured by the mortgage, to terminate the agreement; “but such termination of this agreement shall not be deemed to and shall not release, nor shall anything else done hereunder release, the rights of the trustee or of the holders of the first mortgage bonds of the Pacific Company to tire benefits of the agreements of the railway companies, parties of the first part, to make the payments” provided for in paragraphs 4 and 5 of article IT.
The concluding clauses of the contract are that “the pledge to the trustee of all the rights, benefits, and advantages to which the Pacific Company may be entitled hereunder contained in said first mortgage of the Pacific Company is hereby assented to, ratified, and confirmed,” and it was expressly agreed that the interést of each and all the parties to contract B-should be subject and subordinate in any and every respect to the first mortgage of the Pacific Company.
The mortgage made by the Western Pacific Company transferred and assigned to the trustee as security all the property of the West
“Except only tlie right ol’ the trustee and of the holders of the bonds secured hereby under said agreement between the Denver & Rio Grande Railroad Company, the Rio Grande Western Railway Company, Western Pacific Company, and'Bowling Green Trust Company to require said two first-named companies and each of them to make any payment or payments of money to the trustee, and to recover damages, from said companies or either of them in default of any such payment or payments, which said rights and all rights secured by said agreement necessary for the enjoyment and enforcement of such rights shall remain in and survive to the trustee for the benefit of the holders of the bonds secured hereby, after and despite any and every sale made by virtue of this indenture, whether under the power of sale hereby granted and conferred or pursuant to judicial proceedings.”
Among the provisions of the mortgage with respect to delivery upon completion of any sale to the trustee of all agreements held by the trustee and sold to the purchaser under proper assignments, we find this language:
“Provided, however, that so long as the Denver & Rio Grande Railroad Company and the Rio Grande Western Railway Company, or either of them, shall, by the terms of their said agreement with the railway company and the trustee, be under obligation to make any payment or payments to the trustee either for the purpose of providing funds wherewith to make payments of interest upon the bonds secured hereby or wherewith to make any payment into the sinking fund hereby provided for, the trustee shall not deliver said last mentioned agreement to any such purchaser or purchasers, all hough such purchaser or purchasers may have succeeded to any or all the interests and rights of the railway company thereunder.”
And, further, that:
“After any sale or sales, whether under the power of sale hereby granted or pursuant to judicial proceedings, any and all moneys that may be received by the trustee under the provisions of said agreement between the Denver & Rio Grande Railroad Company, the Rio Grande Western Railway Company, Western Pacific Railway Company, and Bowling Green Trust Company, intended to provide the trustee with moneys wherewith to pay interest upon the bonds secured hereby, shall forthwith be applied by the trustee to the payment pro rata of the interest upon such of the bonds secured hereby as shall then remain unpaid in whole or In part, whether or not the same shall have been reduced to judgment; and any and all moneys that may be received by the trustee after any such sale or sales, under the provisions of said agreement intended to provide the trustee with moneys wherewith to make payments into the sinking fund hereby established, shall forthwith be applied by the trustee to the payment pro rata of the amounts remaining due for principal and interest upon the bonds secured hereby and then unpaid in whole or in part.”
On March 26, 1915, the Equitable Trust Company of New York, as trustee, began suit in the United States Dislrict Court for the Southern District of New York against the Western Pacific Railway Company by filing an ancillary bill to the original bill filed here in California in the. District Court, The District Court in New York appointed the same receivers of the properties of the Western Pacific
On the 27th of May, the Equitable Trust Company, as trustee, also filed in the District Court of New York what it denominated its ancillary dependent action in equity against the Denver & Rio Grande Railroad Company, Western Pacific Railway Company, and certain other fictitiously named defendants. This bill sets forth the agreement of the Denver .Company as contained in contract B, the default of the Western Pacific and the Denver Company with respect to interest payment upon the first mortgage bonds of the Pacific Company, due March 1, 1915, and the default of both companies in payments under the sinking fund requirements under the first mortgage; that it was agreed that the obligations under contract B should run with the respective railroads; that suits in foreclosure of the Western Pacific Company’s first mortgage have been commenced in California, and that jurisdiction has been had by ancillary suits in Utah and New York; that the principal of the first mortgage bonds would soon be declared to be due; that a sale of the mortgaged properties would be nad at an early day; that in all probability such sale would realize an amount less than the amount of bonds secured by the mortgage, principal and interest; that the Western Pacific Company was insolvent; and that recourse must therefore be had to the Denver Company for the payment of the debt. Apparently the theory of the bill was that the amount of the liability under contract B of the Denver Company to the trustee was perhaps 'only the amount of the difference between the earnings of the Western Pacific and the amount required for interest and sinking fund. At all events, plaintiff in its bill asked for the true meaning of the contract in respect to the sinking fund payments.
An account of earnings of the Western Pacific Company from the time of the creation of the first mortgage until the time of such accounting is asked for, and adjudication is prayed that the amount required to be paid or to be secured to be paid by the Denver Company in fulfillment of its obligations under the contract be had. The prayer ■asked for a construction and effect of contract B with respect to the provision that the agreement “shall run with the railways of the several companies named therein,” and that the provision be enforced as against the new Denver Company, in accordance with the meaning as decreed by the court. The further prayer was as follows:
“That in respect to the amount found, upon the accounting and adjudication hereinbefore prayed for, to be due from the old Denver Company either under the said contract B or under the said guaranties, the court decree and direct the payment thereof by the new Denver Company by a short day to be named by the court; that upon the failure of the,new Denver Company to make such payment accordingly, the amount thereof be by the decree of this honorable court charged upon the property of the new Denver Company, and that all and singular the property and effects of the new Denver Company be sequestered in aid of the said decree and in order to the enforcement and satisfaction thereof; that, in the same event, a receiver or receivers be appointed by the court to take possession of the railways and other property and franchises of the defendant the new Denver Company, and the earnings, income, and proceeds thereof, with power to operate the said property, and with all such powers and authority as may be required to preserve the same until the sale thereof, as the same may be decreed and ordered by this honorable*585 court, and to secure the earnings of such railroad property and franchises to the use of your orator and of the holders of said first mortgage 5 per cent, thirty-year gold bonds of the Western Pacific Company.”
On June 4, 1915, the receivers petitioned the District Court in California for instructiqns in respect to contract B. On June 9, 1915, hearing upon this petition was had, and on June 10th the court of its own motion directed that the Equitable Trust Company, as trustee, show cause why the dependent suit in New York should not be dismissed or its prosecution stayed by the trustee until the further order of the court. And the court restrained the trust company, trustee, from taking any further step of any nature in the New York suit until the return day of the order made here in California. On June 28, 1915, argument was had before the District Court in California, the receivers appearing by their counsel and the trust company appearing by its solicitor. On February 21, 1916, the court enjoined the Equitable Trust Company from further -proceeding with its dependent suit in New York, and from bringing any further action or proceeding involving contract B, and from taking any steps which might impair the obligation of any of the provisions of contract B without first obtaining leave of the court in California, and ordered that the Denver & .'Rio Grande Railroad Company and the Missouri Pacific Railroad Company be made parties to the suit, and be compelled respectively to interplead, and to set up any rights which they or either of them might have in the suit.
The Equitable Trust Company has appealed to this court from the injunctive part of the order of the District Court just referred to, and it also applies for a writ of prohibition to prevent the District Court from compelling the Denver & Rio Grande Railroad Company and the Missouri Pacific Railroad Company to interplead in the foreclosure suit.
Writ of mandamus is also asked directing the District Court to grant the motion of the plaintiff made when the stipulations heretofore referred to were filed to enter foreclosure decree. To this petition answer is filed.
There are also before us petitions to intervene in opposition to the issuance of the writs of mandate and prohibition as asked for. They set up that the Savings Bank & Trust Company of San Francisco owns 125 and represents the holders of 575 additional first mortgage bonds of the Western Pacific; that on March 13, 1916, it filed petition in the United States District Court of California for leave to intervene in the suit there pending between the Equitable Trust Company, trustee, and the Western Pacific, in which the order of injunction heretofore referred to was made; that the District Court ordered the petition to- be heard on March 20th, a date, subsequent to the hearings before this court.
The petitioners’ position is, substantially, as follows: As minority bondholders they are not satisfied with the plan of reorganization. They say contract B creates an equitable lien on the Denver Railway as of the date of that contract, June 23, 1905, and that such lien is ahead of certain outstanding refunding bonds (over $33,000,000 in
The complaint in intervention enters upon some history of the bond issue of the Denver Company, and of the sales of the first and refunding bonds of that company through the medium of certain bankers in New York, and alleges that the Denver Company made a trust deed to secure its first and refunding bonds, and that such deed of trust referred to contract B, thus giving the parties notice; that in 1912, •the Denver Company made another deed of trust and another mortgage to secure its adjustment bonds, ámounting to $10,000,000; that the adjustment and refunding bonds issued by the Denver Company were negotiated through certain bankers named; that the same bankers who negotiated these bonds initiated the reorganization scheme of the Western Pacific and the Denver & Rio Grande; that the nonpayment by the Denver Company to the Western Pacific of the interest due by the Western Pacific in March, 1915, and the consequent default, and the filing of the foreclosure suit with the application for the appointment of a receiver immediately followed; that the bondholders’ protective committee is the same as the reorganization committee; and that in the plan to create a holding committee the members of the reorganization committee will be on the board of directors of the operating corporation of the plan.
It is alleged that the bankers interested in the reorganization scheme caused the institution of the present suit, and the institution of the suit in the United States District Court in New York; that in the New York suit the Bankers’ Trust Company, trustee under the mortgage securing the first and refunding bonds of the Denver Company, and the New York Trust Company, trustee under the mortgage securing the adjustment bonds of the Denver Company, were not made parties; that in the New York suit the Equitable Trust Company, trustee, did
The prayer of the interveners is that the true meaning of contract ,B in respect to the obligations of the Denver Company to the Western Pacific and to the trustee and to all holders of first mortgage bonds be declared; that the court order the Bankers’ Trust Company, and the New York Trust Company, and the trustees under the bond and mortgage of the Denver Company, to be brought in as parties, and the rights of interveners and of holders of first mortgage bonds of the Western Pacific, and of the trustee under contract B, and of the Western Pacific and the Denver under contract B, be determined, and that a lien be adjudged upon the railroad and property of the Denver Company as of June 23, 1905, and be held superior to any mortgage or lien of the Denver Company and the Bankers’ Trust Company, as trustee, in refunding bonds of the Denver Company; and that it be declared a lien ahead of the adjustment bonds of the Denver Company,
Contract B is, in its obligations upon the Denver Company, so explicitly kept alive for the benefit of the bondholders that provisions safeguarding and making certain the money payments are reiterated and the agreement shall (unless abrogated as therein expressly provided) “endure until all the first mortgage bonds of the Pacific Company shall be paid, and shall run with the railways of the said railway companies, parties to it, into whosever hands they may come.”
Whether the covenants are strictly of suretyship, as distinguished from guaranty, are questions not appropriate for decision now. It is enough to say that, whether one or the other in the strictest sense, the trustee has a right to sue the Denver Company for a breach of its covenants for the payment of interest and monies due, and may properly exercise such right in its own name for the benefit of the first mortgage bondholders. The mortgage itself, specially referring to contract B in clear words, says that in case of default in payment of interest there is the right in the trustee to “sell at public auction all and singular the * * * obligations, contracts, agreements, and interests of every description” held by the trustee, or subject to the indenture, excepting only the 'right of the trustee and of the holders of the bonds secured by the mortgage under contract B, requiring the Denver Company to pay moneys to the trustee and to recover damages from tire Denver Company upon default of such payments. This right and all rights secured by contract B necessary for the enjoyment and enforcement of such rights shall remain in and survive to the trustee for the benefit of the bondholders despite sale. When this undertaking by the Denver Company to pay the debt of the Western Pacific if it has not been paid by that company was unperformed, the trustee became a real party in interest, having full right to proceed by suit to protect the mortgage bondholders.
“Jurisdiction may be defined to be the right to adjudicate concerning the subject-matter in the given case. To constitute this, there are three essentials: First, the court must have cognizance of the class of cases to which the one to he adjudged belongs; second, the proper parties must be present; and, third, the point decided must be, in substance and effect, within the issue. That a court cannot go out of its appointed sphere, and that its action is void with respect to persons who are strangers to its proceedings, are propositions established by a multitude of authorities. A defect in a judgment arising from the fact that the matter decided was not embraced within the issue has not, it would seem, received much judicial consideration. And yet r cannot doubt that, upon general principles, such a defect must avoid a judgment. It is impossible to concede that, becáhse A. and B. are parties to a suit, a court can decide any matter in which they are interested, whether such matter be involved in the pending litigation or not. Persons, by becoming suitors, do not place themselves, for all purposes, under the control of the court, and it is only over these particular interests which they choose to*592 draw in question .that a power of judicial decisions arises. If, in the ordinary foreclosure case, a man and his wife being parties, the Court of Chancery should decree a divorce between them, it would require no argument to convince every one that such decree, so far as it attempted to affect the matrimonial relation, was void; and yet the only infirmity in such a decree would be found, upon analysis, to arise from the circumstances that the point decided was not within the substance of the pending litigation.”
The record shows that neither plaintiff nor defendant invoked the jurisdiction of the court as against the Denver Company, and that no question was before the court for adjudication except the right of the trustee to foreclose the mortgage of the Western Pacific.
“Necessary parties are those who have an interest in the controversy, but whose interests are separable from those of the parties before the court, and will not be directly affected by a decree which does complete and full justice between them. Such persons must be made parties, if practicable, in obedience to the general rule which requires all persons to be made parties who are interested in the controversy, in order that there may be an end of litigation; but the rule in the federal courts is that if they are beyond the jurisdiction of the court, or if making them parties would oust the jurisdiction of the court, the case may proceed to a final decree between the parties before the court leaving the rights of the absent parties untouched, to be determined in any competent forum. * * * Indispensable parties are those who- not only have an interest in the subject-matter of the controversy, but an interest of sucb a nature that a final decree cannot be made without either affecting their interests or leaving the controversy in such a condition that its final determination, may he wholly inconsistent with equity and good conscience.”
“ * * * Any person may at any time be made a party if his presence is necessary or proper to a complete determination of the cause.”
Having shown that the Denver was not a necessary or proper party to the cause before the court, the rule is inapplicable. Vaughan v. Black et al., 63 Mich. 215" court="Mich." date_filed="1886-10-14" href="https://app.midpage.ai/document/vaughan-v-black-7932770?utm_source=webapp" opinion_id="7932770">63 Mich. 215, 29 N. W. 523; Winsor v. Ludington, 77 Mich. 215" court="Mich." date_filed="1889-11-01" href="https://app.midpage.ai/document/winsor-v-ludington-7934307?utm_source=webapp" opinion_id="7934307">77 Mich. 215, 43 N. W. 867.
Summarizing the principal points we conclude:
The receivers not being necessary parties to this appeal, the motion to dismiss the appeal must be denied. .
The trustee, Equitable Trust Company, had a right to proceed to foreclosure as it prayed against the Western Pacific.
The Denver Company was not a necessary or proper party to such foreclosure proceedings, and the Denver Company not being within the jurisdiction of the court, and the court having no- custody of its property, no order could be made compelling it to interplead in the foreclosure suit.
The trustee had a right to begin action against the Denver Company in New York to enforce any rights accruing under contract B to the bondholders, and the District Court in California had no power to interfere with the trustee in proceeding with such action.
The order appealed from is reversed.
Petitioner’s application for writ of prohibition is granted.
The application for writ of mandamus is denied.