Farr v. Hobe-Peters Land Co.

• Decision Date: 18 October 1910
• Docket Number: 1,634.
• Citation: 188 F. 10
• Parties: FARR et al. v. HOBE-PETERS LAND CO.
• Court: U.S. Court of Appeals — Seventh Circuit

188 F. 10

FARR et al. v. HOBE-PETERS LAND CO.

No. 1,634.

United States Court of Appeals, Seventh Circuit.

October 18, 1910

Rehearing Denied April 11, 1911.

James Wickham and Frank R. Farr, for appellants.

Edward M. Smart and R. N. Van Doren, for appellee.

Before GROSSCUP, BAKER, and SEAMAN, Circuit Judges.

SEAMAN Circuit Judge (after stating the facts as above).

This case proceeded to final hearing and decree, upon the issues raised by the pleadings as to the merits of the respective claims of title, involving various complications both of law and fact, and voluminous evidence; and the main controversy thereunder, as discussed both in the opinions filed by the trial court and in the arguments on the appeal, relates to the sufficiency and effect of a judgment obtained by the appellant Farr, in the circuit court of Price county, Wis., January 21, 1901, which purports to bar, not only the mortgagor, under whom the appellee claims title, but the Minnesota Lumber Company mortgagee and original assignor thereof, 'from any and all right, title and interest in and to the lands' in suit. The proceedings resulting in such judgment were instituted under the Wisconsin statute (Wis. Stat. 1898 Secs. 1197-1210), when no assignment of the mortgage in question appeared of record; and in such event it is conceded in the opinion filed below (as revised before entry of the decree) to be the established rule under the statute-- and undoubtedly so settled in Warner v. Trow, 36 Wis. 195, 200-- that any assignee or holders thereof were bound by such proceedings. Thus the decree upon the merits rests on the two-fold assumption, that the prima facie force of the judgment in the state court was not only impeachable in another suit and forum, but was so impeached in reference to the appellee's claim, through oral testimony which was received as tending to prove that the judgment-plaintiff was then chargeable with notice of the unrecorded assignment.

Error is assigned as well for want of equitable jurisdiction to quiet title, as sought in the bill and granted by the decree-- whether the above-mentioned conclusion as to notice in fact were either supported or unsupported by the testimony-- contending in substance: (a) That such relief, in favor of the appellee having no possession of the lands in suit, is beyond the chancery powers of a federal court, and that the provisions of the state statute (section 3186, Wis. Stat.) vesting in state courts equity powers to that end are inoperative for extension of the federal powers; and if so applicable in any sense, (b) that the trial court was bound by the established law of Wisconsin, in reference to the above-mentioned tax title judgment of the state court, which limits applications by third parties for relief from its prima facie force, to the court wherein the judgment was obtained.

Jurisdiction of the case, however, is challenged upon another ground-- plainly presented, both by bill and evidence and by the assignments of error and arguments upon the appeal-- raising the fundamental inquiry, whether the complainant, as assignee of the claim in controversy, can sue for its enforcement in the federal court. The solution is not free from difficulty under the seeming conflict in various opinions to be mentioned, but we must be prepared to overrule this objection before either of the other questions is open to review.

1. The bill is for equitable relief, founded alone upon complainant's alleged equities in the lands, as assignee of a mortgage interest, derived through a succession of assignments from the original mortgagee, including (as averred) unperfected foreclosure proceedings by one of its assignors; and the relief sought and granted was to have title adjudicated in its favor, as against the defendants, and to clear the title of adverse claims recorded in favor of the defendants. Federal cognizance of the suit is invoked solely on the ground of diversity of citizenship under the averments (a) that both the complainant and the original mortgagee were and are citizens of Minnesota; (b) complainant's immediate assignor is a citizen of Illinois; and (c) the defendants are all citizens of Wisconsin. But the bill further avers that one of the assignees of the mortgage, through whom the complainant derives title (alleged to be an assignment in trust), is and was a citizen of Wisconsin; and the evidence proves another intermediate holder of the mortgage to be a Wisconsin corporation. Thus the question directly arises: Can the suit be entertained under the limitation imposed by the present statute-- section 629 and amendments-- as carried forward from the eleventh section of the judiciary act of 1789? Omitting exceptions not involved here, this provision reads that the federal court shall not 'have cognizance of any suit * * * to recover the contents of any promissory note or other chose in action in favor of any assignee, or of any subsequent holder * * * unless such suit might have been prosecuted in such court to recover the said contents if no assignment or transfer had been made.'

The facts in reference to the source of the complainant's interest in the mortgage are as follows: In 1892, one Holmes (whose citizenship does not appear) executed a mortgage covering about 7,000 acres of land in Wisconsin, owned by him, in favor of Minnesota Lumber Company, a Minnesota corporation, as mortgagee, securing notes made by Holmes. In 1899, one Murphy completed a purchase of the notes and mortgage for himself and one Craig, and the mortgagee indorsed on the mortgage an assignment in blank, leaving the name of the assignees to be inserted at their option; and it was agreed between Murphy and Craig-- citizens, respectively, of Colorado and Illinois, as alleged in the bill-- that Craig, who advanced the purchase money, should have one half of the mortgage interest and hold the other half as security for payment of Murphy's half interest, and that Murphy was to act for both in selling the lands. Murphy held the instruments, contracted to sell to Ogema Lumber Company, a Wisconsin corporation, a portion of the lands, and subsequently, without notice to Craig, delivered the notes and mortgage to that corporation, to secure both his personal indebtedness to it and the contract of sale above mentioned. In 1901 Craig and Ogema Lumber Company joined in an agreement (which fixed their interests respectively) to have the mortgage assigned to one Barry, a citizen of Wisconsin, in trust for foreclosure and sale and to make division of such interests. Murphy then stipulated that Craig's name be inserted in the blank assignment as the assignee, and upon such insertion the assignment was recorded; and Craig executed an assignment to Barry, which was also recorded. Barry commenced foreclosure by advertisement, as assignee, made purported sale of the lands to Craig as purchaser, and delivered his certificate of such sale December 23, 1901. On February 20, 1902, Craig quitclaimed to Hobe-Peters Land Company, the complainant, and the present bill was filed May 15, 1902, while the statutory period for redemption from the alleged foreclosure extended one year from the sale.

Thus no legal title to the lands had vested thereunder-- whether the foreclosure was of prima facie validity, or was void for want of the statutory notice, as contended respectively-- but the complainant had acquired, as assignee thereunder, all equities which then existed under the mortgage, without other rights in the premises; and it is unquestionable that the suit is for the enforcement of alleged rights conferred by the instruments referred to, as choses in action, and is subject to the foregoing jurisdictional provision, as uniformly construed by the authorities. Corbin v. County of Black Hawk, 105 U.S. 659, 665, 26 L.Ed. 1136; Shoecraft v. Bloxham, 124 U.S. 730, 735, 8 Sup.Ct. 686, 31 L.Ed. 574; Plant Inv. Co. v. Key West Ry., 152 U.S. 71, 76, 14 Sup.Ct. 483, 38 L.Ed. 358; New Orleans v. Benjamin, 153 U.S. 411, 432, 14 Sup.Ct. 905, 38 L.Ed. 764; Kolze v. Hoadley, 200 U.S. 76, 83, 26 Sup.Ct. 220, 50 L.Ed. 377.

The test of limitation, therefore, rests on the interpretation of the clause against suit by the assignee, unless it 'might have been prosecuted in such court * * * if no assignment or transfer had been made. ' Both the mortgagee and the ultimate assignee, Craig, who transferred the interest to complainant, were citizens of another state and entitled to sue in the federal court, so the test is narrowed to the inquiry whether the restriction includes, as well, the intervening assignees, through whom title is traced. If such assignees are included, no doubt is entertainable that both of the above-mentioned Wisconsin holders of the mortgage must be so designated. The fact that the assignment to Barry was in trust cannot prevent its application (as contended), for the reason that the citizenship of a trustee is alike controlling of the right to sue (Dodge v. Tulleys, 144 U.S. 451, 455, 12 Sup.Ct. 728, 36 L.Ed. 501; 1 Foster, Fed. Prac. Sec. 19); and the transfer to the Ogema Lumber Company of the instruments (inclusive of the blank assignment) was not only operative as the assignment of an interest in the mortgage, but was expressly so recognized by all other parties in interest, under the arrangement with Barry.

Decisions of the Supreme Court are numerous in the interpretation of various phases of this provision, and some of the cases have involved construction of the terms above quoted, but we believe no decision of that tribunal, cited by counsel or examined in our research, settles the answer to the present inquiry; nor does aid thereto appear in any ruling of a Circuit Court of Appeals brought to our attention. The cases however, may well be...