Gill v. Frances Inv. Co.

• Decision Date: 27 June 1927
• Docket Number: No. 4997.,4997.
• Citation: 19 F.2d 880
• Parties: GILL et al. v. FRANCES INV. CO.
• Court: U.S. Court of Appeals — Ninth Circuit

19 F.2d 880 (1927)

GILL et al. v. FRANCES INV. CO.

No. 4997.

Circuit Court of Appeals, Ninth Circuit.

May 23, 1927.

Rehearing Denied June 27, 1927.

COPYRIGHT MATERIAL OMITTED

Joe Crail, Harold C. Morton, F. Von Schrader, Barker & Keithly, Donald Barker, and Harry A. Keithly, all of Los Angeles, Cal., for appellants.

Joseph L. Lewinson, of Los Angeles, Cal., for appellee.

Before GILBERT, RUDKIN, and DIETRICH, Circuit Judges.

GILBERT, Circuit Judge (after stating the facts as above).

We are not convinced that it was error to deny the appellants' motion to dismiss the suit for want of jurisdiction. It is contended that, while the bill was framed with the appellee, a citizen of Utah, as complainant, and against all of the defendants, including the trustee, as citizens of California, the trustee should have been aligned as a co-complainant, in which case the requisite diversity of citizenship would be lacking. It is to be observed that the deed to the trustee, while it conveys the legal title, also vests in the "legal holder of the note" the power to declare the note payable on default of interest, and in case of foreclosure the power in the "then legal holder" to have a receiver appointed to take possession of the property described in the conveyance.

Is the trustee an indispensable party? The court below was of the opinion that, by virtue of the default entered in the Torrens proceeding, the trustee had been judicially foreclosed of any right or interest in the property, and that it was immaterial whether it was in or out of the case. It is true that the presence of a trustee of property conveyed as security for the payment of bonds may be indispensable in a case where there is more than one beneficiary of the trust and interests therein are diverse, as in First Nat. Bank v. Radford Trust Co. (C. C. A.) 80 F. 569, where Judge Lurton held that the trustee was a necessary party for the purpose of establishing the complainant's rights to the bonds it held and the application of the proceeds of the foreclosure sale to the same. But in the present case there was but one debt, secured by the trust deed, and there is but one legal holder of the promissory note. The appellee demands nothing of the trustee, and the trustee can demand nothing of the appellee.

The prayer of the complaint is that the decree in the Torrens proceeding be vacated and declared null and void, so far as it affects the interest of the appellee in the property described in the trust deed, and that a decree of foreclosure and sale be ordered. Although the trust deed purports to convey the title, it is intended as a mortgage, and under the law of California is declared to be a mortgage. Hollywood Lumber Co. v. Love, 155 Cal. 270, 100 P. 698. "When the purpose of the trust ceases the estate of the trustees also ceases." Sacramento Bank v. Alcorn, 121 Cal. 379, 53 P. 813.

In Sidney Stevens Impl. Co. v. South Ogden Land Co., 20 Utah, 267, 58 P. 843, it was held that where the trustee is not vested with the legal title, or with a beneficial interest in the trust, and the common law has been so modified that no legal title passes by the deed of trust or mortgage, the reason of the rule which requires the presence of the trustee fails, and in such jurisdictions the trustees are not indispensable parties to an action of foreclosure.

In Bates v. New Orleans B. R. & V. R. Co. (C. C.) 16 F. 294, Judge Coxe said: "The real contention in this case is between the plaintiff and the Louisiana corporations. The defendants McCook and Alexander, who are citizens of New York, are sued merely in their representative character as trustees. Their connection with the controversy is collateral and subsidiary to the main issue. * * * Their presence on the record may be necessary to effectuate the relief sought by the plaintiff, but their citizenship ought not to be considered on the question of removal."

In Interstate Refineries v. Barry (C. C. A.) 7 F.(2d) 548, the court said: "James N. Johnson, the trustee in the mortgage, was a proper party, but he was not an indispensable party, because he has no personal interest in it or in the property; because no relief is asked against him personally, because the bill does not contain any averment or showing that any of the notes that were to be secured by the mortgage have ever passed into the hands of any innocent purchasers for value, and because Johnson, neither as a person, a trustee, or otherwise, nor any of the holders of such notes, are now parties to this suit; because no decree in this suit can estop or bind any of them if they do not intervene in this suit, and either he or they may at his or their option intervene herein and protect any rights they may have in this suit."

In Walden v. Skinner, 101 U. S. 577, 25 L. Ed. 963, it was held that jurisdiction was not defeated by the fact that with the principal defendant were joined as nominal parties the executors of a deceased trustee, citizens of the same state as the complainant.

The appellants contest the jurisdiction in equity on the ground that the appellee had an adequate remedy at law, and they cite the decision of this court in Eggers v. Krueger (C. C.) 236 F. 852, in which it was held that a defendant, who knew within four weeks from the date thereof that a judgment had been rendered against him, had an adequate remedy at law under the provisions of section 473 of the Code of Civil Procedure of California, which provides that a court may on motion within six months relieve a party from a judgment taken against him through his mistake, inadvertence, or excusable neglect.

The answer to the contention is that the judgment under the Torrens Act here involved was not taken against the appellee. The appellee was not a party to the proceeding, nor was it named therein, nor was its assignor, the Delta Company, served with process therein, nor was the judgment taken through the appellee's mistake, inadvertence, or neglect. Lapham v. Campbell, 61 Cal. 296; Baker v. O'Riordan, 65 Cal. 368, 4 P. 232. And even if the appellee had been made a party in that proceeding, the remedy under section 473 would not have been adequate, for neither were the appellants nor any of the other parties defendant, except the Austins and the Belfords, made parties to the registration proceeding. In a separate suit, not only could the appellee bring those parties int...