48 Wis. 115 | Wis. | 1880
Lead Opinion
The following opinion was filed September 2, 1879.
On the part of the plaintiff’s counsel it is contended, that as the trustee, Mead, was not made a party to the
1. That the judgment in the creditor’s suit is void, not only as to Chai’les D. Mead, but as to Ann M. 0. Smith and A. Hyatt Smith, the cestui que trust and the grantor of the trust estate, because the trustee was not a party to that action.
2. That if the judgment is not void as to the cestui que trust and the grantor of the trust estate, it can have no further effect than to transfer to the purchaser under the sale in that action the rights of the cestui que trust, Ann M. 0. Smith, and any rights which A. Hyatt Smith had in the equity of redemption.
, 3. That although the plaintiff purchased the real estate in question qpenciente lite, he is not chargeable with notice of the rights of the plaintiffs in the creditor’s action, for the reason that his grantor, the trustee, was not a party thereto, and did not claim to hold by purchase from any party thereto subsequent to the commencement thereof.
4. That in consequence thereof, admitting that the defendant has acquired the rights of the cestui que trust, Ann M. 0. Smith, such right can only attach to the property in the hands of the trustee at the date of the entry of the judgment, or at the time of actual notice thereof given to such trustee.
5. -That the sale to the plaintiff having been made long before the entry of the judgment in the creditor’s suit, his title thereby became perfect, and was entirely unaffected by the entry of judgment and sale thereafter made; and
6. That the judgment in the foreclosure action was an absolute bar against the plaintiffs in the creditor’s suit alleging that the mortgage given by Smith to Mead was fraudulent and void as to them; and by it they are estopped from claiming
On the part of .the counsel for the defendant it is claimed:
1. That as the trustee had no beneficial interest in the trust estate, the circuit court of the United States had the power, in an action against the grantor of the trust estate and the cestui que trust, to declare such trust fraudulent and void, not only against the grantor- of the trust estate and the cestui que trust, but also against the trustee.
2. That if the judgment in the circuit court did not and could not diyest the trustee of any title or interest he had in the trust estate, yet it had the power to divest all the beneficial interest the cestui que trust and the grantor of the trust had therein, and that.the purchaser under the judgment in that action acquired all the right, estate and interest both of Ann M. 0. Smith and A. Hyatt Smith in and to the real .estate in controversy, and the trustee must, after such sale under that judgment, hold the same for the benefit of such purchaser.
3. That the plaintiff, having purchased pendiente lite, took the estate subject to the rights of defendant.
4. That the plaintiffs in the action in the circuit court are not bound by the judgment in the foreclosure action instituted by the trustee, and the judgment and sale therein: first, because, although made defendants therein, they were not bound to litigate the question in that action whether the mortgage was fraudulent and void as to them;' that such litigation is a litigation of a question of title adverse and paramount to the title claimed under the mortgage, and is not properly triable therein; and second, because, having already commenced an action in the circuit court of the United States against the real parties in interest, for the express purpose of litigating the question as to the fraudulent character of the mortgage sought to be foreclosed in the action in the circuit court for Rock county, they had the right to have that question
In order to fully comprehend the effect which must be given to the two judgments above mentioned, it will be necessary to state briefly the nature of the trust deed under which it is claimed the lands were held by Mead, the trustee therein named, as well as the alleged nature of the alleged indebtedness to secure the payment of which A. ITyatt Smith gave the mortgage to such trustee.
The trust deed under which it is claimed that Mead held the mortgage, and acquired the legal title to the lands therein described by the foreclosure thereof, was apparently executed the 26th day of January, 1841, by A. Hyatt Smith, as party of the first part, Ann M. 0. Smith, party of the second part, and Charles 33. Mead, party of the third part. It recites at length an ante-nuptial contract between A. Hyatt Smith and Ann Margaret C. Kelly, which states that the parties were about to contract marriage; that Ann M. C. Kelly was the owner of considerable personal and real estate, and that A. Hyatt Smith contracts and agrees with her that notwithstanding their marriage she shall have the entire control of her separate property, not subject to the debts of said Smith, nor in‘any way subject to his control, and that he’will, after their marriage, execute and deliver all instruments in writing necessary to carry into full effect the true intent and spirit of such agreement. This ante-nuptial contract bears date April 3, 1838. After reciting this contract, in pursuance thereof Smith and wife sell, assign, transfer and set over to the party of the third part, Charles D. Mead, all the personal property, choses in action, etc., which the said party of the second part, Ann M. 0. Smith, had at the time of her marriage, or was
The deed then goes on to grant to said Mead, as trustee, all the real estate which Ann M. 0. Smith had at the time of her marriage, and at the time of the making of such deed, in trust to hold the same and pay the rents, issues and profits thereof to the party of the second part during the joint lives of the parties of the first and second parts, or to such person or persons as she may in writing appoint, for her sole and separate use, and upon the further trust to convey the said real estate, and any and every part thereof, to such person or
The mortgage from A. Hyatt Smith to Mead is simply a mortgage to Mead as trustee of the separate estate of Ann M. 0. Smith, and does not state upon what, if any, trust the mortgage is to be held; but it is alleged that the indebtedness which the mortgage secured was an indebtedness from Smith to Mead as trustee of the separate estate of Ann M. 0. Smith.
We come now to the consideration of the effect which must be given to the two judgments under which the parties claim the real estate. We will first consider what title, if any, passed to the defendant by virtue of his purchase at the salé made in pursuance of the judgment of the circuit court of the United States. The plaintiff claims that no title of any kind, either legal or equitable, passed by such sale. The only reason alleged is, that Charles D. Mead, in whom it is claimed the legal title to the real estate sold was vested at the time of such sale, was not a party to such action, and therefore no
The fact that the legal title to real estate is vested in a trustee, is certainly no reason why the creditors of the cestui que trust should not be permitted to proceed, in the absence of the trustee, to subject the interest of such cestui que trust to the payment of their debts, if they do not attack the validity of the trust itself, especially when the trustee has in fact no beneficial interest in the trust estate; and there does not appear to be any very serious objection to proceeding without the trustee, when the alleged interest of the grantor of the trust property and of the cestui que trust are sought to be subjected to the payment of the debts of the grantor of the
There are but two apparent reasons why, in such case, the trustee holding the legal title should be a party to the proceeding: first, that, as the parties plaintiff insist that such legal title is held for their benefit, he ought to be present so that the court could make an end of litigation by compelling the trustee to convey to the plaintiff, or divest his legal title by a judicial sale under the judgment; and second, that he ought to be made a party so as to enable him to protect the rights of his cestui que trust. The second reason can have but little weight when the cesfoti que trust is of full age, and is a party.
In the decision of this case we do not deem it necessary to determine whether the legal estate ever passed, in fact, to the trustee, and shall, for the purposes of the decision, admit that the legal estate passed to the trustee by virtue of the sale under the foreclosure judgment, and that, as between himself and A. M. 0. Smith, he held the same subject to the trust declared in the deed of trust above referred to. By an examination of the provisions of such trust deed, it will be seen that the trustee had really no beneficial interest in the. trust estate, but held the same absolutely subject to the will of the cestui que trust. The whole beneficial estate was in her, and at her death, unless disposed of during her life-time by appointment or will, as provided for in the deed, it went absolutely to her heirs. Ve do not, however, hold that it was a mere naked trust, so that, under the provisions of section 2075, E, S. 1878, the legal estate vested in the cestxui qxie trust. Wq think the case of Goodrich v. Milwaukee, 24 Wis., 42, very clearly shows that the trust in this case was an active trust, and valid under subdivision 5 of section 2081, E. S. 1878.
After giving the case as' full consideration as is consistent with our other duties, we have concluded:
2. That it had jurisdiction over A. Ilyatt Smith, the grantor of the trust estate, and Ann M. C. Smith, the person for whose sole benefit the trust was created.
3. That-the court had the power to determine the question whether the trust estate was conveyed in fraud of the creditors of the grantor, Smith.
4. That, the coxtrt having adjudged that the trust was void as to the creditors of Smith, and that the real estate was subject to the payment of the demands of such creditors, it had the power to direct the sale of the same for the payment of such debts; and that, by virtue of the sale under the decree of said court, the purchaser took all the rights, interest and estate which A. ITyatt Smith and Ann M. 0. Smith had in said real estate at the time of the execution of the mortgage by Smith to the trustee, Mead, and they are barred of all claim to such estate or any interest therein.
5. That, the foreclosure action having been commenced after the action was commenced in the circuit court of the United States, the judgment and proceedings therein did not bar the plaintiffs in that action from alleging the fraudulent nature of the mortgage to the trustee.
6. That, as the trustee was not a party to the action in the circuit court of the United States, he had the right to foreclose the mortgage; and that, by virtue of such foreclosure and sale, the legal title became vested in him.
7. That there is no evidence in the case showing that the plaintiff is a Iona fide purchaser of the legal estate from the trustee, without notice of the rights of the defendant, so as to relieve the estate in his hands from the equitable rights of the defendant therein.
The absence of proper parties to an equitable action is not a jurisdictional defect which renders the proceedings and judg
This, we think, is fully established by the authorities cited by the very able counsel for the respondent, whose industry in the collection of the precedents on this point' renders it unnecessary for the court to do more than refer to the authorities collected.
In the case of The Supervisors v. Mineral Point Railroad Co., 24 Wis., 93, 131, this court fully recognized the right of the court to proceed with a litigation and adjudicate upon the rights of the parties before the court to either real or personal property, in the absence of a party or parties holding the legal title to such property in trust for the parties so litigating, and the propriety of its doing so. Chief Justice Dmm, .in delivering the opinion in that case, says:
“'But, because a party not served with process, and not before the court, may collaterally dispute the decree and deny its validity, it does not, we think, follow that other parties who were served, and over whose persons the court in fact acquired jurisdiction, may do the same thing; nor do we know of a decided case where such a doctrine has been held.
“ The force or efficacy of a decree, as between the farties before the court, does not depend upon the fact that there may be other persons, proper or necessary parties, who are not*136 before it. The absence of such persons is not a defect involving the jurisdiction or power of the court over the parties who are present, or over the subject matter of the suit so far as those parties may be concerned. The court may, nevertheless, proceed to a decree, and such decree, though rendered in violation of the rules and practice of equity in such cases, is not void as between the parties to it. It is irregular, but not void. It binds the parties to it until set aside or reversed in some direct proceeding for that purpose. And the reason of this is obvious. Jurisdiction exists wherever there is a suit, the subject matter of which is cognizable in a court of chancery, and parties are before the court whose rights in relation to such subject matter the court may adjudicate; and the effect of such adjudication between the parties, until reversed or set aside, does not depend upon the fact that the power of the court may have been erroneously exercised in making it. If there be necessary parties wanting, whose absence may render the adjudication fruitless or ineffectual, because the rights of such parties cannot be determined, that may be good cause for arresting the proceedings or dismissing the suit, but it does not deprive the court of power to proceed. Each case must still be determined, to a considerable extent, upon its own peculiar facts and circumstances; the object of all rules upon the subject being in accordance with the cherished principle in equity, that the adjudication may be as complete and conclusive as possible. If, in a doubtful case, the court should err in this respect, it would be a most extraordinary conclusion that it had lost all jurisdiction, and its decree was of no effect. And, if it would not be so in a doubtful case, then it can make no difference with the application of the principle that the question presented was a plains one and easy to be decided. The jurisdiction of the. coiort cannot be determined by the magnitude of the error. Again, there is a class of cases in which the bringing in of additional parties may be said to rest, in a great measure, in the sound discre*137 tion of tire court. Should the court abuse its discretion and commit great error in such case, would that oust the jurisdiction? "We say, clearly not. . . . The rule to be gathered from all the authorities may, in few words, be stated to be, that in no case does the jurisdiction of the court over the subject matter and parties properly before it depend, nor can it be made to depend, on the absence of other parties, however the right of such other parties may be complicated by the decree, or however necessary it may be that they should be brought in, in order that a complete and final determination of the controversy may be had.”
In the case of Day v. Wetherby, 29 Wis., 363-370, this court approves of the opinion in the 24 Wis., above cited, and expressly declares that where the trustee holds the legal title in trust solely for the'benefit of third persons, who have the sole equitable interest, in an action to have such property so held in trust applied to a different purpose than that expressed in the trust, such third persons are the real parties in interest, and necessary parties to the action.
The case of Boon's Heirs v. Chiles, 8 Peters, 532, and 10 Peters, 177, was a case very much in point, and shows conclusively that a court of equity will adjudicate upon the equitable interests of parties claiming title to real estate, in the absence of the person holding the legal title. In that case, one William Hay, in whom the legal title to the real estate was vested, made, in substance, a contract to sell the same to one George Boon. George Boon sold his interest in the contract of purchase to one Thomas Boon. Thomas Boon made a conditional sale to one Hezekiah Boon, which it was conceded by the parties was void. Chiles claimed as purchaser from Hezekiah Boon, and claimed to be a purchaser in good faith. The action was commenced by Thomas Boon against Chiles, and after Thomas Boon’s death the action was continued in the name of his heirs. The object of the action was to compel Chiles to release to the plaintiffs all the pre
In Edmeston v. Lyde, 1 Paige, 637, which was a creditor’s hill to reach the equitable assets in the hands of the judgment debtor, the answer of the judgment debtor showed that he was insolvent, and that certain real estate which he had owned had been sold under execution upon other judgments, and bid in by one Buckner for his benefit, subject to the lien of such sums as he should from time to time advance for him; and that he had advanced upon the security of such real estate, for him, the sum of $1,400. The judgment debtor held the written acknowledgment of Buckner that he held the property in trust for him as above stated. The question was, whether Buckner was a necessary party to the action, without whose presence the court could not proceed with the case. Chancellor "Wal'woetii, who delivered the opinion, says: “Neither was Buckner a necessary party. When the property has been fraudulently assigned by the debtor, so that he has no legal or equitable rights as against the assignee, it will be necessary to make the assignee a party to enable the court to reach the property in his hands. A decree against the fraudulent assignor would not, in that case, give any right to the property in the hands of the assignee. But when the debtor still retains the legal or equitable interest in the property, such interest may be conveyed to the complainant or transferred to a receiver, under the decree or order of this court, who can call upon the debtor or trustee of the defendant in the same manner as the defendant himself might have done previous to the filing of the bill. As there is no allegation of fraud as to Buckner, if he was made a defendant he would be entitled to the advances which he has made, together with his costs. If all the right of the defendants is' sold under a decree in this suit, the purchaser will be entitled to an assignment of the land from Buckner, on paying the amount due. And if he should unreasonably refuse to permit the purchaser to redeem,
In McNab v. Young, 81 Ill., 11, H. had given his notes to T. for a large sum of money, and executed a trust deed to M., to secure the payment of such notes, and afterwards a part of the sum due thereon had been paid, and an action was commenced in the circuit court of the United States for the state of Illinois, praying that the deed of trust might be declared a mortgage, for the benefit of the eestui gue trusí, and Y., TI. and the judgment creditors of H. were made parties, but the trustee, who was a nonresident, was not made a party. A judgment was obtained in favor of the plaintiff, and the real estate described in the trust deed was sold to pay the amount found due to the complainant. In the case of McJYab v. Young, supra, the plaintiff claimed under IT., and the defendants under the sale on said judgment in the circuit court of the United States. The plaintiff ‘ in the last case claimed, as the plaintiff does in this, that the proceedings in the circuit court of the United States were void because the trustee, M., was not a party to such action; but the court held otherwise. The late learned Justice Bueese, who delivered the opinion, says: “ M. was not a necessary party to the proceeding, being a mere naked trustee, with no real interest in the subject of the controversy. Had the purposes of the trust been accomplished, IT. would, without action on his part, have been vested with the legal title, on which he could have maintained ejectment.”
The right of a court of equity to proceed against the parties before it, in the absence of another party holding a mere legal title to the property in dispute, in trust for the benefit of the parties before the court, as determined by these cases, is
“ The conveyance out of the way [meaning the conveyance to the trustees], Bigelow’s [the judgment debtor’s] interest in the premises in question was an equitable interest, derived under his contract' of purchase with Marcy and Clark [the persons of whom he purchased the lands]. This equitable interest was reached by the creditor’s bill of Watson and Watson against Bigelow, and was transferred to the receiver in that action by the assignment of Bigelow, and sold and conveyed by the receiver to Harris; and, Harris having thus acquired all the interest of Bigelow under the contract, he has a right to call upon Marcy and Clark to convey to him the legal title. The heirs of Mrs. Bigelow cannot now. gainsay this right, having, by allowing the bill in this suit to be taken as confessed against them, admitted that Bigelow caused the conveyance to the trustees for the benefit of Mrs. Bigelow to be made with intent to defraud his creditors. By considering the conveyance in trust for Mrs. Bigelow as fraudulent and void, it may be objected that Mrs. Bigelow and the trustees ought to have been made parties to the creditor’s bill, to enable the court to reach the interest of Bigelow in the land in*143 question. But I cannot see why the decree in the creditor’s suit, the assignment to the receiver, and the sale to Harris, were not as effectual in passing to the latter the interest of Bigelow, under his contract of purchase, as a sale by a judgment creditor of a fraudulent grantor, under a judgment and execution at law, is to pass the title to the purchaser of the land fraudulently conveyed.
“ I cannot perceive how it is necessary to make Mrs. Bige-low a party to a creditor’s suit, to enable the court to reach the interest of Bigelow in-the land in question. She was undoubtedly a necessary party to enable the court to reach her interest, if she had any. "Why cannot Harris file his complaint against Marcy and Clark, and the heirs-at-law of Mrs. Bigelow, and compel the former to convey to him the legal title, and the latter to deliver up the possession? I see no objection to such a proceeding. The heirs-at-law may, perhaps, in the suit against them by Harris, be entitled to controvert the allegation that the' conveyance in trust for Mrs. Bigelow was fraudulent, or the allegation that a trust resulted to Bigelow in favor of his creditors, unless they are estopped from doing so by suffering the bill in the present suit to be taken as confessed against them. But whatever may be the result in regard to the right and interest of Harris under the receiver’s deed, to be deduced from the assumption that the conveyance in trust for Mrs. Bigelow was fraudulent and void as against creditors, I have no doubt, upon the ground that a trust resulted to Bigelow in favor of his creditors, which must be assumed from the decision in Guthrie v. Gardner, 19 Wend., 414, and which is alleged by the plaintiff in his bill, and cannot, therefore, be denied by him, whether that trust was a mere equitable interest in Bigelow for the benefit of his creditors, or was turned into a legal estate for the benefit of such creditors, that Harris is entitled under his deed from the receiver, either in law or equity, to the premises in question.”
In Holland v. Baker, 3 Hare, 68, the learned vice-chancellor says: “Trustees are not themselves owners of the property; they are in a sense agents for the owners in executing the trusts, but they are not constituted agents for the purpose of defending the owners against the adverse claims of third parties in this eoixrt. It is the duty of the trustees in such a situation to object that the owners of the estate are not before the court; and I think it is the right of the trustee in that case to insist that the onus of resisting adverse claims shall be thrown upon the eestui qu,e trusts, and not on themselves. I have said that it is the duty of the trustees to require that all their eesMi que trusts should be before the court. If the court is to dispense with the presence of any number of them in order to avoid the inconvenience of bringing so large a body of creditors before the court, it seems of necessity to follow that the trustees of the property upon which the court is to act should be parties to that record, that they at least might be able to inform the court whether it is sufficiently framed with reference to the interest of the whole of the eestui que tnists, by the selection of those who, in the existing state of things, are in a position adequately to represent the interest of the body.”
There are some things said in the above case which may seem to be in conflict with the decision in the case of Kerrison v. Stewart, 93 U. S., 155, in which it is held that where trustees have, by virtue of the powers conferred upon them, the right to act on behalf of the cestui que trusts, and to bind them by their acts, whether done with or without their assent, such eestui que trusts are not necessary parties to an action affecting the trust property, and are bound by a judgment rendered in an action against the trustees alone; but when the facts of the two cases are considered, they do not necessarily conflict.
This rule is recognized and adopted as a rule of conrt in equity cases in the courts of the United States (see Equity Rules 47 and 48, U. S. Cir. Ct.), and is authorized and confirmed by the statutes of the United States. Section 737, E. S. U. S.
Having come to the conclusion that the circuit court of the United States had jurisdiction to proceed in the action in the absence of the trustee, it follows logically that the court had the power to determine whether the trust created by Smith in favor of his wife was created in fraud of his creditors; and the judgment of that court declaring that such trust was created in fraud of such creditors, bars Smith and his wife, and all parties claiming under them subsequent to the commencement of the action, as against the purchaser under the judgment in such action, from setting up any rights under or by
In the creditor’s action, the plaintiffs and the defendant A. M. C. Smith both claimed under the grantor of the trust, A. Hyatt Smith. At the time of the commencement of that action, the legal title to the real estate in controversy was in A. Hyatt Smith, the mortgage to the trustee not having'at that time been foreclosed. A. M. 0. Smith being a party to
■ It is claimed by the learned counsel for the appellant, that, notwithstanding it may be held that the title of the trustee is void as to the respondent, yet the appellant’s title should be sustained on the ground that he is a purchaser in good faith from the trustee, without notice of the claim of the respondent or those under whom he claims.. It is urged that at the time of the purchase by the appellant from the trustee, such trustee had apparently the legal title to the lands in question, so far as such title was disclosed by the records in the county where the* lands were situated. The appellant’s deed from the trustee was made February 28, 1873. The judgment under which the respondent claims was not entered until July, 1874, and the sale at which he purchased was made in 1875. The creditor’s action under which such sale was made was commenced, however, in June,1' 1858, and was pending and
1. Because he must be held to be a purchaser pendente lite, and therefore took his title subject to the judgment of the court in the creditor’s action, and is bound by such judgment to the same extent as the parties to the action. If the trustee had had the power under the trust deed to sell and convey the trust property, as he might in his discretion see fit, without consulting with or procuring the consent of his cestui que trust, it might be insisted with much force that a purchaser from such trustee would not be bound to examine or ascertain whether the interest of the cestioi que trust was in litigation or not, so long as the trustee was not a party to such litigation. In such case, so long as the parties were contesting only as to the rights and interests of the cestui que trust, persons dealing with the trustee might take it for granted that all parties interested in the trust estate were satisfied to let the trustee exercise his discretion in the disposition of the trust property, relying upon his good faith to act for the interest of all parties concerned. In such case, a sale made by the trustee in good faith to a purchaser in good faith would undoubtedly pass the title to the purchaser discharged of the trust, and the consideration paid would be held, by the trustee subject to the rights of the parties claiming the proceeds of the trust estate. But in the case at bar, the trustee had no power under his deed of trust to sell the property to any person or persons except as directed in writing by the cestui que trust, and all parties deal-' ing with him were, therefore, bound to take notice of that fact. The power to' sell wag, in fact, reserved by the trust deed to
• 2. But, independent of the fact that he purchased the property 'pendente lite, and was therefore, bound by the judgment in the creditor’s action, there is no evidence in this case that the appellant purchased for a valuable consideration, in good faith and without notice in fact of the rights and claims of the creditors of Smith. As the evidence in the record shows that respondent has the title to the lands in controversy except as against a purchaser in good faith for a valuable consideration and without notice of his rights, the appellant, in order to defeat this title of the respondent, was bound to establish by proof on his part that he was such purchaser, before he could ask the court to adjudge that the respondent should release his claim to him. French v. Loyal Co., 5 Leigh, 640; Jerrard v. Saunders, 2 Ves. Jr., 456; Wallwyn v. Lee, 9 Ves. Jr., 31-2; Boon v. Chiles, 10 Peters, 211; Simson v. Hart, 14 Johns., 63, 74; Anderson v. Roberts, 18 Johns., 516.
It is clear, therefore, that the. respondent has shown in himself such a title and interest in the lands in dispute as must defeat the appellant’s claim to the relief asked for in this action, unless he is barred from setting' up such claim as against the appellant, by reason of the proceedings' and judgment in ’the action commenced by the trustee in the circuit court for
It is argued by the learned counsel for the appellant, that, as the plaintiffs in the creditor’s suit, under whom the respondent claims title, were made parties defendant to such foreclosure action, and suffered the bill to be taken as confessed against them, they are-now barred from alleging that such mortgage was fraudulent and void as to them and that their rights as judgment creditors of the mortgagor are paramount to the claim of the mortgagee.
In answer to this claim on the part of the appellant, it is insisted that there are two reasons why such judgment does •not bar the respondent and those under whom he claims: first, that the claims of the judgment creditors were prior and paramount to the claim of the mortgagee, and that, therefore, the foreclosure of the mortgage does not cut off or bar their rights — that they were not compelled to litigate their rights in such foreclosure action, and such rights are not affected by the foreclosure; second, that the creditors, having first commenced their action in the United States circuit court to enforce their claims against the property of their judgment debtor, had the right to have their claims adjudicated in that action in that court, and the commencement of the foreclosure action subsequently thereto, and making them defendants therein, could not deprive them of that right.
Whether the question of the priority of the right of the judgment creditors, as against the mortgagee, could have been litigated in the foreclosure action, may be a question of some doubt. There would seem to be no impropriety in allowing a subsequent judgment creditor, when made a defendant in a foreclosure action, to defend the action by showing that the mortgage was fraudulent and void as to him, and that, although his judgment lien is subsequent in time to that of the mortgage, yet it is in fact prior and paramount to the lien of the mortg’ag'e. Such a defense would not be a counterclaim.
If the judgment creditors had desired to litigate their rights in the foreclosure action, for the purpose of having their judgment paid out of the proceeds of the sale before applying the same to the payment of the mortgage debt, and for that purpose it was necessary that the cestui qxoe trust should be a party to such action, it is probable that upon their application she would have been made a party so as to enable them to litigate their claim in that action.
There are precedents for this practice, and we see no serious objection thereto. Horn v. Volcano Water Co., 13 Cal., 62; Coster v. Brown, 23 Cal., 142; Lord v. Morris, 18 Cal., 482; 2 Jones on Mortgages, § 1441; Union Bank v. Bell, 14 Ohio St., 200; Dawson v. Danbury Bank, 15 Mich., 489.
Whether the judgment creditor must avail himself of this right to litigate the question of the validity of the mortgage in the foreclosure action, or be barred from setting up' such invalidity in another action, may admit of grave doubt. It may be urged with great plausibility, that unless the complaint in the foreclosure action contains other allegations than the general one that the claim of the judgment creditors is subsequent and subject to the claims of the mortgagee, if such creditors suffer judgment to be taken by default, such judgment has no other effect than to bar such defendants from the right of redemption as subsequent judgment creditors, and does not bar them from alleging and showing that the mortgage is in fact fraudulent and void as to them. But as we prefer to place the right of the judgment creditors in this case
The creditors, before any action was commenced by the
“The district court has ‘exclusive jurisdiction of all suits and proceedings, in bankruptcy.’ But the suit pending before the court of common pleas was not a suit or proceeding in bankruptcy, and, although the plea of bankruptcy was interposed by the defendants, the court was as competent to entertain and judge of that plea as of any other. It had full and complete jurisdiction over the parties and the subject matter of the suit; and its jurisdiction had attached more than a month before any act of bankruptcy was committed. It was an independent tribunal, not deriving its authority from the same sovereign, and, as regards the district court, a foreign forum in every way its equal. The district court had no supervisory power over it. . . . It is a doctrine of law too long*155 established to require a citation of authorities, that, where a court has jurisdiction, it has a right to decide every question which occurs in the cause, and whether its decision he correct or otherwise, its judgment, till reversed, is regarded as binding in every other court; and the right of the plaintiff to prosecute his suit in it having once attached, that right cannot he arrested or taken awa/y hy proceedings in another court. These rules have their foundation, not merely in comity, but on necessity. Eor if one may enjoin, the other may retort by injunction, and thus the parties be without remedy; being liable to a process for contempt in one, if they dare to proceed in the other. ... It follows, therefore, that the district court had no supervisory power over the state court, either by injunction or the more summary method pursued in this case, unless it has been conferred by the bankrupt act. . . . Instead of drawing the decision rnf the case into the district court, the act sends the assignee in bankruptcy to the state court, where the suit is pending, and. admits its power to decide the cause. . . . An attempt to enforce the decreo set forth in the rejoinder would probably have met with resistance, and resulted- in a collision of jurisdictions much to be deprecated.”
The rule laid down in this case has been followed in very many cases in the courts of the United States, as well as in the state courts. Wallace v. McConnell, 13 Peters, 146; Campbell v. Emerson, 2 McLean, 30; Smith v. M’Iver, 9 Wheat., 532, 535; Gaylord v. R. R. Co., 6 Bissell, 286, 290, 293; Union Trust Co. v. R. R. Co., id., 197; Williams v. Benedict, 8 How., 107; Wiswall v. Sampson, 14 How., 52; Peale v. Phipps, id., 368; Pulliam v. Osborne, 17 How., 471, 475-6; Orton v. Smith, 18 How., 263; Hagan v. Lucas, 10 Peters, 400; Taylor v. Carryl, 20 How., 583; Freeman v. Howe, 24 How., 450; Taylor v. The Royal Saxon, 1 Wall. Jr., C. C. R., 311; Withers v. Denmead, 22 Md., 135, 145; Brown v. Wallace, 4 G. & J., 497; Brooks v. Delaplaine, 1 Md. Ch.
These authorities are a complete answer to the claim that the respondent, and those under whom he claims, are barred from disputing the validity of the mortgage by reason of the proceedings and judgment in the action to foreclose the same by the trustee. The plaintiffs in the creditor’s action did not appear in the foreclosure action; the process was not personally served upon any of them; they waived nothing, therefore, by coming into that court and submitting their rights to its judgment; and it does not appear from the evidence that they
Suppose, in this case, the creditors had appeared in the foreclosure action, and had set up as an answer these proceedings in the circuit court of the United States, and asked the court to render a judgment in such foreclosure action saving the right to them to contest the validity of the mortgage as to them in the action then pending in the United States circuit court, and the circuit court of Kock county had refused to render a judgment according to such request, and had rendered a judgment such as was rendered in such foreclosure action, and this court should be of the opinion that such judgment would, in the absence of the fact that a former suit was pending involving the validity of the mortgage as to such creditors, be conclusive upon them that it was not fraudulent and void:- then we would have the case of two judgments in two courts, both having jurisdiction of the subject matter, and both deciding the same questions in issue, and deciding them adversely to each other. In such case, according to all the decisions above cited, the maxim, -Qui prior est tempore, potior est jure, must govern, and the" judgment in the action first commenced mnst prevail. Any other rule would lead to collisions between courts, -which would be likely to defeat the
The claim on the part of the learned counsel for the appellant, that the reservation of the rights of the trustee in the judgment in the creditor’s action rendered such judgment a mere nullity so far as the trust estate was concerned, cannot be sustained. We think it very clear that such reservation was intended to protect, and only protected, such rights as the trustee had, if any, in the property, which he did not hold for the benefit of the cestui que trust. Any other construction of the judgment would render it a mere piece of waste paper. Under the reservation in such judgment, any interest or title Mead had in the premises, which was not.held by him in trust for the parties to that action, was not and could not be affected thereby, and he and his grantees would not be barred by such judgment from setting up such title against the purchasers under such judgment; but such judgment was an effectual bar against Mead’s right to hold such property for the mere use and benefit of the cestui que trust. As to her the court had the right to adjudge, and did adjudge, that she could take nothing as against the creditors under such deed to Mead. After such judgment Mead could no longer hold the property for the cestui que trust. JTe could not hold it in his own right, and he must therefore hold it for the benefit of those persons to whom it was adjudged to belong, unless he could show that he held it by some other title than that given to him by his trust deed.
The view we have taken of this case renders it unnecessary to discuss very many of the questions which were raised upon the argument, and discussed with great ability by the learned counsel for the respective parties.
Having come to the conclusion that the judgment of the United States circuit' court, and the sale thereunder, divested Smith, the mortgagor and grantor of the trust estate, as well as Ann M. 0. Smith, the cestui que trust, of all interest in the
By the Court. — Judgment affirmed.
Rehearing
A motion by the appellant for a rehearing was denied, and the following opinion filed, February 3, 1880.
The learned counsel for the appellant moves for a rehearing in this case, mainly upon the ground that this court erred in not reversing that part of the judgment of the circuit court which-adjudges “that the plaintiff was not the owner of the land under the mill-race; nor of the roadway along the race; nor of the dam mentioned in the complaint; nor of that portion of lot 2 in block forty (40), and of lot 25 mentioned in said judgment, on which the dam rests and abuts.”
It is insisted by appellant’s counsel that this finding is inconsistent with another finding of the circuit court, to wit: “ That the plaintiff was the owner and in possession of the undivided three-fourths of said lot 25, and of lot 2, block 40, except the parts of the same on which the dam now rests and abuts.”
He argues that the two findings cannot stand together, for the reason that the same evidence which shows that the plaintiff is the owner of the three-fourths of lot 25, and lot 2,
So far as the plaintiff shows any title to lot 25, such title is founded upon a tax deed issued by the city of Janesville, by which the city conveyed said lot 25 to one Marrietta F. Ford, bearing date July 31, 1865, and recorded in the office of the register of deeds for Rock county, on the third day of March, 1870.
It will be found by an examination of the findings of the learned circuit judge, that as to those lots and parts of lots, the title to which he found to be in the plaintiff, he also found that the plaintiff was in the actual possession thereof at the time this action was commenced; and as to those parts of such lots, the title to which he found was not in the plaintiff, he found that the plaintiff was not in the actual possession thereof at that time. After a careful consideration of the evidence upon this latter question, we think the circuit judge was clearly j ustified in finding a want of actual possession of that part of lot 25 and lot 2, block 40, upon which the dam rested. Without examining the mass of testimony in the case, it will be sufficient, perhaps, to show that the learned circuit judge was justified in finding that the plaintiff was not in the actual possession of the dam and the land under the same, before and at the time of the commencement of this action, to refer to the bill filed by Mead as trustee of A. M. 0. Smith, in 1874, signed by the counsel for the present plaintiff and the husband of the cesfui que, i/rust of Mead, in which it is alleged that said Mead, as to the undivided three-fourths thereof, had enjoyed the quiet and peaceable possession of said lands, dam and water-power for ten years and upwards, and that the said A. M. O. Smith was the owner and in possession of the remaining undivided one-fourth part, and had been for the same length of time.
The evidence in the case clearly shows that neither the grantee in said tax deed nor the plaintiff under her had any
' These decisions were all made under theE. S. of 1849, ch. 16, sec. 123. But it will be seen that section 21, subch. YII of ch. 474, P. & L. Laws of 1866, being the city charter of Janesville, is the same as section 123, ch. 16, E. S. 1849, limiting the period to one year instead of three, and adding the word “ assessments ” after the word “taxes.” This latter section having been passed after repeated decisions of this court holding that it was, in the language of the court in the case of Falk-ner v. Dorman, “ a two-edged sword, cutting both ways, and operated in favor of the possessor, to bar the title of whichever party was under the necessity of resorting to legal proceedings to obtain actual possession within the three years next after recording the tax deed,” mus.t receive the same interpretation given to said section 123, ch. 16, E. S. 1849. If, therefore, any person remained in the actual possession of the land deeded by the city of Janesville for taxes, for more than one year after the recording of the tax deed, other than the grantee in such deed, or some one claiming under him, the
Nor do we think that under this rule the circuit judge was necessarily inconsistent in his findings. If the proof showed that the plaintiff took actual possession of that part of lot 25 not covered by the dam, within one year after the recording of his deed, then, as to that part of the lot, his title became perfect. If the grantee in a tax deed covering eighty acres gets peaceable possession of forty acres thereof within the time limited, and holds such possession until after the expiration of such time, there does not appear to be any good reason why his title to such forty acres should not be considered perfected, although the other forty acres may have been occupied by another party, adversely to his title, during the whole period of such limitation. In such case the result must be that the title is perfected in the tax-title grantee, as to the one forty acres, and avoided as to the other. So in the case at bar. If that part of lot 25 upon which the dam did not rest, was taken possession of within the year after the recording of his tax deed by the plaintiff, as to, that part his title is perfect; and if that part of the lot covered by the dam was not taken possession of, and was in fact in the possession of others holding adversely to his tax title, and remained so until the expiration of the year, then as-to that part of the lot the tax-claimant’s title failed. Wilson v. Henry, 35 Wis., 241; Pepper v. O'Dowd, 39 Wis., 538; Coleman v. Eldred, 44 Wis., 210.
Without disóussing the question whether lot 25 necessarily extended to the center of the river, and therefore the half of the dam was situated thereon, we are of the opinion that the plaintiff, by virtue of his tax deed, established no title to that part of the lot upon which the dam rested, though the lqt did extend to the center of the river.
For the same reasons above stated, the tax deed of the lands under the raceway conveyed no title to the grantee named therein. They were all recorded more than one year previous
Without determining the point, we think it probable that the learned circuit judge was right in holding that the lands under the raceway constructed for the benefit of all the owners of lots along which it ran, could not be assessed and taxed separately from the lots it was intended to benefit and did in fact benefit. The. case of Spensley v. Valentine, 34 Wis., 154, goes very far in support of the opinion of the circuit judge. The race and roadway having been constructed for the sole purpose of accommodating the lots abutting thereon, it is probable that all those who purchased the adjoining lots with the right to draw water from such race, would take title to the lands under the race and roadway opposite their respective lots. See Pettibone v. Hamilton, 40 Wis., 402. It is, however, unnecessary to decide that question in this case. It is sufficient, to defeat the plaintiff’s title under his tax deed, that the possession of the same remained in persons holding hos•tile to his tax title claim for more than one year after the same were recorded.
The plaintiff showed title to the undivided three-fourths of lot two (2), block forty (40). This lot lies on the east side of the river, and at the east end of the dam. The court below, without questioning the theory of the law in this state, that a lot bounded by a navigable stream takes to the center or thread of the river opjDOsite, and that a conveyance of such lot by the owner thereof, in the absence of evidence showing that the contrary was intended, will carry the title to the center of such stream, held that the plaintiff, under his title to lot 2, of said block, did not take any part of the dam or the lands under the same.
The original owners of lot 2, block 40, having title to the center of the river opposite thereto, it was competent for them
We are inclined to hold that the evidence justifies this finding. It appears that the owners of lot 2, block 40, and .the lands adjoining the river on the west side thereof, where the dam is now situated, obtained from the state a right to construct a dam across the river at that point for hydraulic purposes, and to sell and lease the right to use the water from such dam. Without this grant from the state, the owners of said lands, though owning the soil under the river, had no power to construct a dam thereon.
Acting under this authority from the state, a dam was built across the river as early as 1846, and has been maintained there from that time to the present. The owners of the dam, previous to the date of the conveyance of said lot 2 under which the present plaintiff claims, had sold and leased the
This seems to have been the view taken of it by the owners of the dam, as the evidence clearly shows that they have gone on selling and leasing the right to use the water from the dam long after the title to this lot 2, block 40, had passed from their ownership. And it would seem from the evidence that this must have been done with the knowledge and acquiescence of the plaintiff after he acquired the title to the lot under
It seems clear to us that, when the original owners had conveyed all the water afforded by the dam, and had relieved themselves from maintaining the same by covenants requiring the grantees to maintain it, such grantees would own the same as tenants in common, each owning such proportion as his quantity of water bore to the whole quantity afforded by the dam. Certainly, after such conveyances, the owners of the water would have the power to remove the old dam if they saw fit, and construct a new and better one for their use. The right granted to the original owners to build and maintain a dam across the river at that place would have passed from the original owners to their grantees. And under such grant from the state no further right would remain in them to build or maintain a dam at that place. If the dam itself and the perpetual right to maintain the same passed to the grantee of the original owners, then it seems to us that the original owners’ title to the land under the dam would pass also, under the well established rule of law that a deed conveying a house, unless it be clearly made to appear- that it was intended that the house should be removed by the grantee, would convey the lands upon which the house was situated. Angell on Water-Courses, §§ 155, 155 a, 156, 157, 157 a; 3 Washburn on Real Property, 389 and side p. 623, and cases cited; Blain v. Chambers, 1 S. & R., 169; Bacon v. Bowdoin, 22 Pick., 401; Whitney v. Olney, 3 Mason, 280; Forbush v. Lombard, 13 Met., 109; Morton v. Moore, 15 Gray, 573; Owen v. Field, 102 Mass., 102; Hapgood v. Brown, 102 Mass., 453; Prescott v. White, 21 Pick., 341; Moulton v. Trafton, 64 Me., 222.
We do not know, from the evidence in this case, that the owners of the dam have granted* or leased all the water which the dam affords, and we take it for granted that they have not. We have stated what we think would be the condition
We think the grants of water from the dam, with covenants compelling the grantees to maintain the same, without granting in terms any interest in the lots at'the end of the dam, is strong evidence showing the intention of the owners to separate the ownership of the dam itself, and the power created thereby, from the mere ownership of the lots at the ends thereof; and this is strengthened by other acts of the owners of lot 2, indicating such intention. In the several conveyances of said lot it is evident, from the value placed thereon, that there was no intention of vesting in the grantees of such lot any title or interest in the dam or water-power. While the dam and water-power is valued by the original owners at several hundred thousand dollars, this lot is valued, at the very highest, at $4,000 or $5,000, and was in fact bargained away by. Coulton, under whom the present plaintiff claims, in 1861, for less than $400. It would seem that Coulton, when he owned it in 1861, could not have considered that, as a part of it, he owned half of the dam and water-power. Without reviewing in detail the evidence tending to establish the fact that the title to the east half of the dam and the bed of the stream under the same did not pass to the grantee of lot 2, block 40, wre think the evidence very clearly shows that it was not the intention of the original grantors that such title should pass by such deed, and that the grantee of such original owners, and his grantees, understood, when such conveyances were made to them, that there was no such intention. The building of t'm dam under the authority of the state and selling the right to use the water therefrom, with covenants on the part of the
We do not find anything in the argument of the learned counsel for the appellant on his motion for a rehearing, which shakes our confidence in the correctness of our former opinion upon the main question in the case, .and shall not, therefore, attempt any further argument in its support.
By the Court. —The motion for a rehearing is denied, with $25 costs.