CITIZENS'& SOUTHERN BANK v. Pine Forest Inn Co.
| Decision Date | 15 March 1929 |
| Docket Number | No. 465.,465. |
| Court | U.S. District Court — District of South Carolina |
| Parties | CITIZENS' & SOUTHERN BANK OF SOUTH CAROLINA v. PINE FOREST INN CO. et al. |
M. Rutledge Rivers and Julian Mitchell, both of Charleston, S. C., for plaintiff.
Legare Walker, of Summerville, S. C., for defendant Baroness de Graffenreid.
Henry Buist, of Charleston, S. C., for defendant Globe Automatic Sprinkler Co.
The plaintiff brought its action in the state court to foreclose a mortgage executed by the Pine Forest Inn Company covering real estate and all additions thereto. The complaint alleges that the mortgage contained a clause to the effect that it should include all equipment, fixtures, machinery, etc., incidental to or used in connection with the Pine Forest Inn, together with all additions to the same. It further alleges that the defendant Gertrude Baroness de Graffenreid had obtained a judgment against the Pine Forest Inn Company, and claims an interest in the mortgaged property. It also alleges that the Globe Automatic Sprinkler Company claims some right or interest in the fire protection system on the mortgaged premises sought to be foreclosed. The remaining allegations are those usual and appropriate for a bill of foreclosure and sale. The plaintiff and the defendant Pine Forest Inn Company are both citizens of South Carolina. The Globe Automatic Sprinkler Company is a citizen of New Jersey. The citizenship of the defendant Gertrude Baroness de Graffenreid does not appear in the record.
The Globe Automatic Sprinkler Company filed a petition removing the case to this court on the ground that there existed between it and the plaintiff a separable controversy. The petition states that the interest of the Globe Automatic Sprinkler Company in the fire protection system upon the mortgaged premises sought to be foreclosed is the right of the Globe Automatic Sprinkler Company to a first prior lien on the fire protection system on the mortgaged premises by reason of an agreement of sale and purchase thereof between it and the Pine Forest Inn Company duly entered into and recorded before the system had been installed on the premises. There are no allegations in the petition asserting a fraudulent joinder, nor is any such claim made.
The plaintiff has made a motion to remand the case to the state court and the sole question presented for decision is whether or not there is a separable controversy between the plaintiff and the Globe Automatic Sprinkler Company, which can be wholly determined between them without the presence of the other parties.
This same question was before this court in the case of Mace v. Mayfield, 10 F.(2d) 231, and it was there held that in an action brought by a mortgagee against a mortgagor and other parties claiming liens or some interest in the premises, for the purpose of a sale of the property and distribution of the proceeds among the lienholders according to their respective priorities, a controversy respecting one of the lienholders' claims did not present such a separable controversy as to authorize a removal. The decision was rested upon the case of Fidelity Insurance, Trust & Safe Deposit Co. v. Huntington, 117 U. S. 280, 6 S. Ct. 733, 29 L. Ed. 898.
The learned counsel for the Globe Automatic Sprinkler Company argued with great ability that the decisions lead to a contrary conclusion, and in view of the earnestness with which this argument has been made, I have reconsidered the question decided in Mace v. Mayfield and examined the decisions more fully.
Where a mortgagee or lienholder brings an administration bill by which he seeks the sale of the entire property free of incumbrances, and the distribution of its proceeds to all parties interested according to their rights, every lienholder and every person interested in the property is a necessary party to the accomplishment of the main purpose of the suit, and the controversies between the plaintiff and the lienholders and claimants are inseparable parts of the main and single cause of action he presents. The relief which the plaintiff seeks in such a suit is not the bare adjudication of the amount owing by his debtor, nor is it the sale of the interest of the owner of the fee in the property; but in addition to these, it includes the determination of the amounts and priorities of the liens upon it, the sale of the entire property discharged from those liens, and the distribution of the proceeds among the parties to the suit, according to their respective rights. It matters not that the plaintiff in such suit might have maintained an action against the owner of the fee alone, and that the controversy between them might have been fully and completely determined without the presence of the incumbrancers. The only relief that could be obtained in such an action would be to determine the amount of the plaintiff's claim or lien as against the owner, and to subject the interest of the owner of the fee in the property to a sale subject to the rights of the incumbrancers. But this falls far short of the complete relief usually sought in such suits; and the plaintiff has the right to complete relief in a single suit in equity. These principles are firmly established. Winchester v. Loud, 108 U. S. 130, 2 S. Ct. 311, 27 L. Ed. 677; Shainwald v. Lewis, 108 U. S. 158, 2 S. Ct. 385, 27 L. Ed. 691; Ayres v. Wiswall, 112 U. S. 187, 5 S. Ct. 90, 28 L. Ed. 693; Fidelity Ins. Trust & Safe-Deposit Co. v. Huntington, 117 U. S. 280, 6 S. Ct. 733, 29 L. Ed. 898; Graves v. Corbin, 132 U. S. 571, 585, 588, 10 S. Ct. 196, 33 L. Ed. 462; Torrence v. Shedd, 144 U. S. 527, 12 S. Ct. 726, 36 L. Ed. 528; Sweeney v. Grand Island, etc. (C. C.) 61 F. 3.
From these principles it follows that there is no separable controversy here between the Globe Automatic Sprinkler Company and the plaintiff, but that controversy is incidental to the main controversy between the plaintiff and the Pine Forest Inn Company for the foreclosure of the mortgage. But, in addition to this, when the nature of a mortgage of real estate under the law of South Carolina is taken into consideration, there can be no doubt whatever that there is no separable controversy. It has long been settled in South Carolina that, since the act of 1791 (section 5223 of the Code of Laws of South Carolina of 1922, vol. 3), a mortgage of real estate is not a conveyance, but merely a pledge, and the mortgagee has no title even after condition broken, but merely a lien upon the mortgaged property. Simons v. Bryce, 10 S. C. 354, 369; Seignious v. Pate, 32 S. C. 134, 136, 10 S. E. 880, 17 Am. St. Rep. 846; Hardin v. Hardin, 34 S. C. 77, 80, 12 S. E. 936, 27 Am. St. Rep. 786; Burkett v. Whittemore, 36 S. C. 428, 435, 15 S. E. 616; Glover v. U. S., 164 U. S. 294, 296, 17 S. Ct. 95, 41 L. Ed. 440.
Inasmuch as the plaintiff, as mortgagee, has no title to the property, but merely a lien, it follows that it could not bring an action against the Globe Automatic Sprinkler Company, to test the validity of the latter's lien, or any claim of priority as between the two, without making the Pine Forest Inn Company a party to such action. In other words, the plaintiff is not in position to attack the validity of the lien of the Globe Automatic Sprinkler Company or to assert any priority over the same, except in and through a suit brought by it against the Pine Forest Inn Company to foreclose its mortgage. The mortgage giving merely a lien, the suit is a suit by one lienholder against the owner and other lienholders to establish the lien and its rank, and under the principles laid...
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