Mathis v. Hemingway

Decision Date06 March 1928
Docket NumberNo. 7713.,7713.
Citation24 F.2d 951
PartiesMATHIS et al. v. HEMINGWAY.
CourtU.S. Court of Appeals — Eighth Circuit

COPYRIGHT MATERIAL OMITTED

Ross Mathis, of Cotton Plant, Ark., and W. G. Dinning, of Helena, Ark., for appellants.

H. M. Trieber and P. A. Lasley, both of Little Rock, Ark., for appellee.

Before KENYON and BOOTH, Circuit Judges, and MUNGER, District Judge.

MUNGER, District Judge (after stating the facts as above).

The appellee asks to have the appeal dismissed because Dale Welsh, as trustee in bankruptcy of John L. Turner, was a party defendant, and alleges that he has a substantial interest in the decree appealed from, and has not been joined in the appellate proceedings, nor has there been a summons and severance as to him. The only pleading presented by Dale Welsh as such trustee was a motion to dismiss the complaint, because Moorhead Wright, as the original trustee in the first and second trust deeds, was not made a party to the suit. At the time of the first decree, and until the sale of this 40 acres occurred, Mr. Welsh, as trustee in bankruptcy of one of the mortgagors who signed the first, second, and third trust deeds, had a limited and contingent interest in this 40 acres, a right of redemption from the incumbrances upon it, or to receive any sum for which it might be sold above the amount of the incumbrances. The effect of the sale for a sum very much less than the amount due under either the second or third trust deeds was to extinguish any further interest of Mr. Welsh as such trustee in bankruptcy, in the issues which the court had reserved for consideration. The proceeds of the sale would belong in their entirety to the holder of either the second or third trust deeds, and in no event would Mr. Welsh, as such trustee in bankruptcy be entitled to receive any of the proceeds. He therefore had no such interest as made him a necessary party to an appeal from a decree distributing the proceeds of the sale. Galveston H. & N. Ry. Co. v. House (C. C. A.) 102 F. 112, 114.

Without stopping to consider the effect of the decree of July 13, 1926, as a final judgment entered by consent of the parties, in a suit where there was proper diversity of citizenship, upon the rights of the appellants to have interposed objections at the time of the distribution of the proceeds of the sale of the 40 acres, on the grounds that the plaintiff had no capacity to sue, that the trustee named in that deed was an indispensable party plaintiff and that the beneficiary in the first trust deed was an indispensable party plaintiff, there is no merit otherwise in the contentions. Appellants have cited decisions of the Supreme Court of Arkansas in support of these claims, but the jurisdiction and remedies in equity in the United States courts are prescribed by the Constitution and laws of the United States and are not limited by state statutes or decisions. Boyle v. Zacharie, 6 Pet. 648, 658, 8 L. Ed. 532; Dodge v. Tulleys, 144 U. S. 451, 457, 12 S. Ct. 728, 36 L. Ed. 501; Burrill v. Locomobile Co., 258 U. S. 34, 38, 42 S. Ct. 256, 66 L. Ed. 450; 1 Bates, Fed. Eq. Proc. § 8.

By the decrees of the first and second trust deeds the legal title was conveyed to the trustee for the benefit of the Union & Mercantile Trust Company. By equity rule No. 37, a trustee of an express trust, or a party in whose name a contract has been made for the benefit of another, may sue in his own name without joining with him the party for whose benefit the action is brought. See, also, Dodge v. Tulleys, 144 U. S. 451, 455, 12 S. Ct. 728, 36 L. Ed. 501. There was no evidence to show that the resignation of Moorhead Wright, the original trustee, and the appointment of the complainant as his successor, was fraudulent or collusive. The first and second trust deeds contained provisions for the appointment of a successor to the trustee, in case of his resignation or refusal to act. This power of appointment was conferred upon the beneficiary in those deeds by the grant from the mortgagors, and no claim is made that the appointment was not made in pursuance of the grant. The appointment of the new trustee was the exercise of a valid power. 1 Perry on Trusts, §§ 287, 288; 3 Jones on Mortgages, § 1774; Shaw v. Paine, 12 Allen (Mass.) 293, 296; 39 Cyc. 271.

Appellants assert that the decree awarding reformation of the second trust deed, as prayed in the bill, so as to include the "headquarters 40" acres was not supported by sufficient evidence. The rule is well established that the reformation of a written contract will not be warded, unless the proof of an alleged mutual mistake is clear, convincing, and satisfactory. Philippine Sugar, etc., Co. v. Phil. Islands, 247 U. S. 385, 391, 38 S. Ct. 513, 62 L. Ed. 1177. Bailey v. Lisle Mfg. Co. (C. C. A.) 238 F. 257, 266; Southern Surety Co. v. United States Cast Iron Pipe & F. Co. (C. C. A.) 13 F.(2d) 833, 837.

On behalf of the complainant there was direct testimony by three persons who participated in the arrangements for and execution of the trust deed that it was intended to include this 40 acres. The vice president of the Union Trust Company testified that this 40 acres and an adjoining 40 acres was omitted from the first trust deed at the request of the grantors, because they wished to subdivide and sell this land as a town site; but he says he asked Mr. Williams and Mr. Turner, who conducted the negotiations relating to the second trust deed, to include in it the entire 80 acres and also the other tracts omitted from the first trust deed, and that they agreed it should all be included. The vice president then delegated the preparation of the trust deed to Mr. Buttner, the mortgage loan officer of the trust company, with instructions that these lands were to be included. Mr. Turner, one of the grantors, testified that the grantors constituted a partnership, and when they found that, because of a crop failure, they would be unable to pay the interest and taxes due they applied to the Union Trust Company for an extension of time. He said that the trust company requested, and that Mr. Williams and he agreed, that they would include the 80 acres and the other lands in the second trust deed. Mr. Buttner testified that Mr. Williams and Mr. Turner agreed to include the 80 acres and all other lands that had been omitted from the first trust deed.

In preparing the description of the lands to be included in the second trust deed, a map or plat was used, and Mr. Williams or Mr. Turner called off to Mr. Buttner the descriptions of the lands to be included, and Mr. Williams checked off the lands on the map. Mr. Buttner then had the trust deed prepared in his office by his secretary. The trust deed appears to have been sent, after its preparation, to the grantors at the Dixie Plantation, to be executed. Mr. Turner also testified that Mr. Campbell was not present at the time of the negotiations, but that Mr. Williams and he had authority to do whatever they desired to have done. Mr. Williams at that time managed the plantation, Mr. Turner was at the plantation every two weeks, but Mr. Campbell had very little to do with it. The omission of the 40 acres was discovered by the trust company in 1925, after a survey had been made of the plantation, and Mr. Williams, upon learning of the omission, wrote several letters to the trust company, and in these letters, and also in conversations with officers of the trust company, stated that it was the intention to include the 40 acres. Mr. Campbell was dead at the time of the trial. His widow was a party to the suit, as his executrix and as his widow, but entered no appearance, and a pro confesso decree was entered against her. As circumstantial evidence bearing on the intention of the parties, it appears that the list of the lands conveyed as written in the second trust deed contains a duplication of the 40 acres immediately south of the "headquarters 40," first conveying it as a "first and prior lien," and again conveying it subject to the first trust deed. Another circumstance bearing upon the intention of the grantors is found in the third trust deed, in the recital:

"It is understood that first parties are intending to include all the property owned by Dixie Plantation, aggregating to fifty-two hundred (5,200) acres, subject, however, to a prior incumbrance to the Union & Mercantile Trust Company of Little Rock, Arkansas, in the aggregate sum of one hundred and fifty thousand dollars ($150,000)."

There was no direct testimony that it was not the intention of the parties that the 40 acres should be included. As indirect testimony it was shown that some time in the fall or early winter of 1921, there was a meeting of creditors of the partnership at the Interstate National Bank of Helena,...

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