Cross v. Allen

• Decision Date: 16 November 1891
• Parties: CROSS et al. v. ALLEN et al
• Court: U.S. Supreme Court

141 U.S. 528

12 S.Ct. 67

35 L.Ed. 843

CROSS et al. v. ALLEN et al.

November 16, 1891.

John H. Mitchell, for appellants.

George H. Williams and C. E. S. Wood, for appellees.

MR. JUSTICE LAMAR delivered the opinion of the court.

This was a suit in equity to foreclose two mortgages of real estate in Oregon. The case is this: On the 1st of November, 1871, Thomas Cross, of Salem, Or., gave his note to the firm of Allen & Lewis, of Portland, in that state, for $30,000, payable in three years, with interest at 10 per cent. per annum from date; and to secure its payment he and his wife, Pluma F. Cross, on the same day executed a mortgage in favor of that firm upon 15 parcels of agricultural land in that state, numbered respectively from 'one' to 'fifteen,' and containing over 3,000 acres. Parcels '14' and '15,' containing about 211 acres, were the separate property of Pluma F. Cross, while the remainder of the property belonged to Thomas Cross. On January 23, 1872, they gave another mortgage to the same firm upon the same property embraced in the preceding mortgage, and certain town lots in Salem, to secure the payment of another note, of even date therewith, given by said Thomas Cross to said firm, for $10,000, due in one year, and bearing 12 per cent. interest from date. On the 16th of September, 1872, before either note became due, Pluma F. Cross died, but there was never any administration of her estate. Nothing was paid on either of the notes when they became due, but on the 22d of January, 1876, Thomas Cross conveyed the premises embraced in the mortgages to C. H. Lewis, of Portland, one of the members of the firm to which the mortgages were given. This conveyance, though absolute in form, was, in fact, and was intended to be, upon the following trusts: (1) That the grantee should, at the cost and expense of the lands, keep them in cultivation, or lease or let them, or any part of them; (2) that he should sell, and dispose of the crops, collect the rents, and, after deducting all necessary and proper charges and expenses connected therewith and incident thereto, apply the net proceeds thereof upon the mortgage debts; and (3) that he might, with the consent of said Thomas Cross, sell any portion or portions of said premises, either at public or private sale, and apply the net proceeds of such sales towards the satisfaction of the mortgage debts. During the year 1876, Lewis, with the assent of Thomas Cross, had a large portion of the lands surveyed and divided into 40-acre tracts, and between October 14th and November 15th of that year, in pursuance of the trust contained in the deed to him, he sold at private and public sale over 800 acres thereof for $8,593.18, which was $268.16 more than their appraised value, the net proceeds of which sum, amounting to nearly $7,000, after payment of certain items owing by Cross, were credited upon the aforesaid indebtedness, and the firm afterwards executed a release to Cross, discharging the lands thus sold from the lien of the mortgages. On the 5th of February, 1884, Thomas Cross died; and on the 8th of July following the claim on the notes and mortgages was presented to the administrators of his estate, and was rejected by them. Soon afterwards the notes and mortgages were assigned by the firm to L. H. Allen, one of the members thereof, a resident of San Francisco, Cal., who, on the 6th of August, 1884, brought this suit to foreclose the mortgages and establish and enforce their lien on all the property embraced in them. A number of persons, including the present appellants, E. C. Cross and Frank R. Cross, (who are the children of Thomas Cross, by his wife, Pluma F. Cross,) were made parties defendant to the bill. Frank R. Cross, being a minor, defended by his guardian ad litem, E. C. Cross. The other defendants were the heirs at law of Thomas Cross, deceased the administrators of his estate, and said C. H. Lewis. Upon the filing of the bill, it appearing that the mortgaged property would be insufficient to pay the indebtedness, a receiver was appointed to collect the rents and manage the property generally, pending the foreclosure proceedings. On the 21st of January, 1885, an order was entered in the court below that the bill be taken as confessed by all of the defendants except Edwin C. Cross and Frank R. Cross; and they, on the 10th of March following, filed their joint and several answer to the bill.

The defenses set up in this answer were substantially: (1) Laches on the part of complainant, and staleness of his claim; (2) the sale of certain portions of the mortgaged prop- erty by Lewis, aforesaid, was for a grossly inadequate sum, whereby the heirs of Pluma F. Cross suffered loss and damage; (3) the arrangements between Thomas Cross and his transferee, Lewis, were equivalent to a variation of the terms of the mortgage contracts, and amounted to an extension of time to Thomas Cross, the original debtor, whereby the mortgages, as respects the property of Pluma F. Cross, became ineffective, she being in law a mere surety for her husband; (4) the transfer of the claims in suit to the complainant, L. H. Allen, was not made in good faith, but solely for the purpose of giving jurisdiction to the federal court, he being a citizen of California, while the other member of the firm was a citizen of Oregon, and most of the defendants also were citizens of the latter state; and (5) the mortgages, as respects the property of Pluma F. Cross, were absolutely void, because, under the constitution and laws of Oregon at the date of those contracts, a married woman had no authority whatever to bind her separate property for the payment of the debts of her husband. There was a demurrer to those portions of the answer referring to the inadequacy of consideration arising from the sales made by Lewis of the property mortgaged, on the ground of impertinence; but it was overruled, with leave to complainant to amend his bill, (23 Fed. Rep. 573,) which he did, setting out in detail a description of each tract of land sold by Lewis, together with the price paid for each, and the names of the respective purchasers, and alleging that the price paid in each instance was equal to the value of the property sold. By stipulation it was agreed that the original answer should stand as the answer to the amended bill; and, after replication filed, the case went to trial on the pleadings and certain stipulations as to the most material facts; but one witness, Mr. Lewis, being examined. His testimony was taken only upon the question of the bona fides of the transfer by the firm of Allen & Lewis to Allen, the complainant, and went to sustain that transaction, although he admitted that one of the purposes of that transfer was to make a case for the jurisdiction of the federal courts. The trial resulted in a decree of foreclosure against the property of Pluma F. Cross, the circuit court finding in favor of the complainant on every material issue in the case. 28 Fed. Rep. 17. Afterwards a motion for rehearing was made and argued, mainly upon the question whether there had, in law, been an extension of time to the principal debtor, Thomas Cross, whereby the surety became discharged. The motion was overruled, the court below adhering to its original decision and decree. 28 Fed. Rep. 346. The case was then appealed to this court. Since the appeal here was filed the complainant has died, and his administrator is now representing his estate.

There are ten assignments of error, which, as applied to the facts of the case, involve five different questions for consideration, viz.: (1) The bona fides of the assignment and transfer of the notes and mortgages by the firm to Mr. Allen, the complainant, and therein the jurisdiction of the court below; (2) the negotiability of the notes by the law-merchant; (3) laches on the part of the complainant, and staleness of his claim, and the statute of limitations of the state of Oregon with relation to such matter; (4) whether the conveyance to Lewis of all the lands embraced in the mortgages and the subsequent transactions in relation thereto amounted to an extension of time to Thomas Cross, the principal debtor, and a substantial change in the contract of indebtedness between him and the creditors, whereby the surety became released; and (5) whether, in any event, under the constitution and laws of Oregon in force when the mortgages were made, a married woman could bind her separate property for the payment of her husband's debts.

With reference to the first question, as above classified, we deem it sufficient to say that, upon the evidence of Mr. Lewis himself, (which was all the evidence in the case,) the court below was correct in finding that the sale and transfer of the notes to the complainant, Allen, was a bona fide transaction. He testified, in substance, that his pecuniary interest in the claim against Thomas Cross ceased at the time the transfer was made, at the same time stating the comsideration for the transfer. He also stated that one of the purposes of the transfer of the notes and mortgages was to make a case that could be tried in the federal court; and it is upon this feature of his testimony that the argument is based that the transfer was not bona fide, and that the court below did not have jurisdiction of the case. We cannot coincide with that view. The transfer of the notes and mortgages having been made for a valuable consideration, and, the pecuniary interest of the transferrer in the subject-matter of the transfer having thereby terminated, it makes no difference that by such transaction the transferee acquired the advantage of suing in the federal court. This suit, so far as the record shows, is for the sole and exclusive benefit of the complainant, Allen. Lewis has no interest in the result of it. The jurisdictional statute of March 3, 1875, (18 St. 470,) warranted the circuit court in entertaining jurisdiction of the case. There is...