Kneeland v. American Loan Trust Co Same v. Ballou

• Decision Date: 19 May 1890
• Citation: 136 U.S. 89,10 S.Ct. 950,34 L.Ed. 379
• Parties: KNEELAND v. AMERICAN LOAN & TRUST CO. et al. SAME v. BALLOU
• Court: U.S. Supreme Court

136 U.S. 89

10 S.Ct. 950

34 L.Ed. 379

KNEELAND v. AMERICAN LOAN & TRUST CO. et al.

SAME

v. BALLOU.

May 19, 1890.

Robt. G. Ingersoll, Clarence Brown, and John M. Butler, for appellant.

James L. High, Henry D. Hyde, and Bluford Willson, for appellees.

BREWER, J.

These cases were argued and are considered together; the questions involved being similar, an growing out of the same foreclosure suits. In a general way, it may be stated that they arise between a purchaser at foreclosure sales of certain railroad property, and intervening creditors. The initial question is as to the right of appellant, the purchaser, to his appeal. peal. It is urged that a purchaser at a sale under a decree has no right to appeal from its terms. He takes under it. His purchase is a voluntary act, and, coming in voluntarily to take under a decree, he may not challenge that under which he takes. The contention of appellant is that his attitude is not thus limited; that his appeal is not from the decree of sale under which he purchased, but from orders made thereafter respecting his bid, the modes of payment thereof, and the debts to which it should be applied,—matters in which he was interested, and in respect to which, by the terms of the decree of sale, he was given a right of appeal; and that such right springs not alone from the grant of the right of appeal, but also from his relations to the matters determined and adjudged in these subsequent proceedings, and by the final decree. For a correct solution of this question, a statement more in detail of the facts is essential.

Decrees of foreclosure, (for there were separate divisions, the Toledo and the St. Louis divisions,) separate suits, and several mortgages, were entered on the 12th day of November, 1885. It is sufficient, however, to notice the proceedings in one; for there was no substantial difference between the cases. It contained these provisions: 'The complainants herein, and the purchaser or purchasers at the foreclosure sale under this decree, reserve the right to appeal from any orders and final decrees made by the court directing and decreeing the payment of claims and debts found and determined and adjudged and decreed to be due and payable as court receiver's indebtedness, and to be prior and superior in equity to the lien of said first deed of trust and mortgage herein, and hereby foreciosed, if they shall be so advised.' 'In making payment of any surplus of said purchase money left after full payment of the court and receiver's indebtedness, the purchaser or purchasers shall be allowed to pay said surplus in the bonds and coupons to which the same may be applicable, as hereinabove provided; each such coupon and bond being received by the master for such sum as the holder thereof is entitled to receive under the distribution herein provided, and according to the priorities herein adjudged.' So that by the decree the bidders at the sale were notified in advance of their right to be heard, both in the trial and appellate courts, upon the question of what amounts should be paid to intervening creditors, and what in the bonds secured by the mortgages. Common experience is that interventing claims have to be paid in cash, while the mortgage bonds of a defaulting and insolvent corporation are generally purchasable much below par. In this case the enormous disproportion between the amount of outstanding bonds and the value of the property suggests that those bonds must have been purchasable at a very low price, and therefore that the question of the amount of intervening claims finally to be charged upon the property was a matter affecting materially the interests of the purchaser and the right to be heard upon it,—one which would largely determine the amount of his bid. Further, on February 23, 1886, when the master had reported upon the intervening claims, the appellant, among others, filed exceptions to that report, in the following words: 'Come now James M. Quigley, Charles T. Harbeck, John McNab, Halsey J. Boardman, and Warren D. Hobb, complainants in said causes, and committees representing bondholders holding bonds secured by mortgages on said railroad and property in said causes involved, and the Central Trust Company, trustee in the mortgages in said causes foreclosed, and Sylvester H. Kneeland, purchaser of said railroad and property sold at foreclosue sale under decrees rendered and entered in said above-entitled causes, and owner of and trustee for a vast majority of said mortgage bonds, and now except to each and every of the master's findings and report herein; and said complainants and said purchaser, for their exceptions, assign the following causes.' And in the final decree thereon the exception and allowance of appeal are stated as follows: 'To this decree the said Sylvester H. Kneeland, as purchaser and trustee representing the first mortgage bondholders on said entire line of railroad, concerning both divisions from Toledo, Ohio, to East St. Louis, Ill., now excepts, and prays an appeal to the supreme court of the United States, which is granted, to operate as a supersedeas, on giving bond in the sum of two hundred thousand dollars, which is now filed, with the American Surety Company of New York as surety, and the same is approved by the court; the court, however, reserving the right to resume possession of the property on the terms mentioned in the order confirming the sale and approving the deed.'

It appears also that in the early part of these foreclosure proceedings a committee, consisting of James M. Quigley and others, was appointed to represent the bondholders, with authority to employ agents, etc. This committee, by leave of the court, was made co-complainant. It is stated by counsel, though that fact does not appear in the record, that a contract between this committee and Mr. Kneeland, with reference to a purchase in the interest and for the benefit of the bondholders, was presented to the court at the time of signing the decree of sale, and that it was upon that that the provision reserving an appeal to the purchaser was inserted. While no such agreement is found in the record, and therefore cannot be a subject of consideration, yet obviously the language in the decree of foreclosure, as well as that of confirmation, suggests that something of the kind must have been presented to the attention of the court. Upon these facts, can the appellant's right to an appeal be sustained?

It was adjudged in Blossom v. Railroad Co., 1 Wall. 655, that a bidder at a marshal's sale makes himself thereby so far a party to the proceedings that, for some purposes, he has a right of appeal. It was said by Mr. Justice MILLER, in the opinion of the court, that 'it is certainly true that he cannot appeal from the original decree of foreclosure, nor from any other order or decree of the court made prior to his bid. It, however, seems to be well settled that, after a decree adjudicating certain rights between the parties to a suit, other persons having no previous interest in the litigation may become connected with the case, in the course of the subsequent proceedings, in such a manner as to subject them to the jurisdiction of the court, and render them liable to its orders, and that they may in like manner acquire rights in regard to the subject matter of the litigation which the court is bound to protect.' 'A purchaser or bidder at a master's sale in chancery subjects himself quoad hoc to the jurisdiction of the court, and can be compelled to perform his agreement specifically. It would seem that he must acquire a corresponding right to appear and claim at the hands of the court such relief as the rules of equity proceedings entitle him to.' It follows from this decision that his right of appeal must extend to all matters adjudicated after his bid which affect the terms of that bid or the burdens which he assumes therby and which are not withdrawn from his challenge by the terms of the decree under which he purchases. If by the decree the sale is to be made subject to certain conditions, the purchaser acquires no right to be heard as to those conditions either in the trial or appellate courts. Such was the ruling in Swann v. Wright's Ex'r, 110 U. S. 590, 4 Sup. Ct. Rep. 235, in which it was adjudged that, where a decree directed that a sale should be made subject to liens established or t be established, on references previously had or then pending before a master, a purchaser at such sale would not be heard, either in the trial or appellate court, to dispute the validity of the liens thus established. This ruling was placed distinctly on the ground that by the very terms of the decree the purchaser was to take the chances of the allowance of all the claims then pending, and therefore their validity and extent was a matter simply between the claimants and the parties to the mortgage; but the contingency now presented was foreshadowed in the opinion, for it says: 'If the court had in the decree of sale reserved to the purchaser, although not a party to the proceedings, the right to appear and contest any alleged liens then under examination, and therefore not established by the court, an entirely different question would have been presented. But no such reservation was made; and the purchaser was required, without qualification, to take the property, upon confirmation of the sale, subject to the liens already established, or which might on pending references be established, as prior and superior to the liens of the first mortgage bondholders.' The right of purchasers at a foreclosure sale to be heard on the question of compensation to trustees and others, both in the trial and appellate courts, was affirmed in Williams v. Morgan, 111 U. S. 684, 4 Sup. Ct. Rep. 638, when, as in that case, by the terms of the decree, the amount of such compensation placed an additional burden upon the purchasers. The case of Swann v. Wright's Ex'r, supra, was referred...