Hallett v. Moore

• Decision Date: 04 April 1933
• Citation: 282 Mass. 380,185 N.E. 474
• Parties: HALLETT et al. v. MOORE.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

282 Mass. 380

185 N.E. 474

HALLETT et al.

v.MOORE.

Supreme Judicial Court of Massachusetts, Suffolk.

April 4, 1933.

Case Reserved and Report from Supreme Judicial Court, Suffolk County.

Suit by Herbert K. Hallett and others against Harold A. Moore, mortgage trustee, for protection of bondholders of mortgage bonds, wherein a single bondholder was permitted to intervene as plaintiff, but his motion to amend petition to intervene was denied. On reservation and report, etc.

Order denying motion to amend petition to intervene affirmed, and decree rendered in accordance with opinion.

T. Hunt, of Boston, for plaintiff.

H. S. Davis, of Boston, for defendant.

M. Z. Kolodny and J. L. Sullivan, both of Boston, for intervenor.

RUGG, Chief Justice.

This is a suit in equity brought on June 10, 1931, by a committee for the protection of holders of mortgage bonds of the aggregate face value of $1,200,000 originally secured by a first trust mortgage on real estate in Brookline-both bonds and mortgage having been executed by the Pelham Hall, Inc., and the bonds having been sold through American Bond & Mortgage Company-against the defendant both as an individual and as trustee under the mortgage. The object of the suit is to obtain an accounting for the proceeds of a foreclosure sale held by the defendant under the mortgage. It is alleged in the bill that the plaintiffs are owners of more than nine tenths of the entire issue of bonds so secured; that the mortgagor has defaulted in the performance of many covenants contained in the mortgage; that after such defaults the defendant as trustee, in accordance with the terms of the trust mortgage, has taken possession of the real estate covered by the mortgage and has sold it at public auction and has received therefor $450,000; that the bonds are wholly unpaid, and that the amount thus received is in the hands of the defendant for retable distribution among the holders of the bonds after deduction of certain costs and expenses, all as provided in the mortgage; and that the bill is brought in behalf of the plaintiffs and ‘such other holders of the bonds as may care to become parties plaintiff.’ The prayers are for an accounting and for distribution ratably of the amount in the hands of the defendant among holders of the mortgage bonds, and for further relief. The defendant's answer admits most of the allegations of the bill, but avers that he is entitled to retain expenses for foreclosure of the mortgage amounting to $7,346.42, and sets up in some detail claims for reimbursement out of the fund in his hands for sums aggregating $181,500 advanced by him as trustee in order to complete the building contemplated by the mortgage, which sums with interest are averred to be due to him under the terms of the mortgage in priority and paramount to the amounts due to the holders of bonds.

Apparently no issue of fact was raised between the original parties to the suit, since, at the request of all parties, the case is to be heard on bill and answer as amended provided the contentions of the intervenor now to be stated are decided adversely to him. Thus the plaintiffs contest as matter of law the defendant's claim for priority for his advancements.

After the filing of the original answer, the individual holder of one bond secured by the mortgage filed a ‘Motion to intervene as Party Complainant’ for the purpose of contesting the claim of the defendant to reimbursement in priority to the rights of the holders of bonds for sums advanced by himself in order to complete the building. That motion was allowed, counsel for plaintiffs stating in writing that he made no objection. The petition to intervene alleged that the intervenor with others had instituted a suit in the superior court against the defendant and all the persons named as plaintiffs in the bill in the case at bar, and others as defendants including the American Bond & Mortgage Company, and copy of the bill in that suit was annexed to his petition. The intervening petition did not incorporate any of the allegations of that bill; it was founded merely on an alleged purpose to contest the claim for priority urged by the defendant. It introduced no new facts.

Thereafter, the intervenor filed a motion to amend his petition to intervene. In this motion the intervenor sought to introduce allegations at considerable length charging the defendant with bad faith in respect to many of his acts connected with the completion of the building, the procurement of the foreclosure of a second mortgage on the property and failure to collect rents and profits from the property for the benefit of the bondholders. He also alleged the pendency in the United States District Court for the District of Massachusetts of an action by the defendant against the Maryland Casualty Company for breach of the condition of a bond signed by it as surety and given to guarantee the completion of the building by the landowner, for money spent by him in completing the building after the owner and the contractor had failed to do so, and set out at length the finding of an auditor appointed in that case in the main adverse to that plaintiff, but there are no allegations that there has been a verdict or finding predicated on the auditor's report, or that the case has gone to judgment.

The single justice ruled that, since the motion to amend the petition to intervene raised issues of fact independent of those raised by the bill and answer, the original plaintiffs were domini litis and that their control of the proceedings could not be interfered with by the intervenor, that the intervenor must take the record of this class bill as he found it, that if he desired to raise new issues he must do so by suit on his own account, and as matter of law denied the motion to amend the petition to intervene. At the request of all parties, he reported that ruling to the full court for determination. If that ruling was right, the case is to be heard upon bill and answer.

The first question to be decided is whether there was error in thus denying the motion to amend the petition to intervene.

As bearing upon this question, a brief summary of the allegations of the bill in the suit in equity alleged by the intervenor to have been brought by himself and others in the superior court is relevant. That suit was brought on May 1, 1931, by plaintiffs, some of whom were holders of bonds secured by the mortgage described in the present bill. The defendants embraced all the plaintiffs and the defendant in the case at bar, and other corporations and individuals. The allegations of that bill are that the defendant in the case at bar (hereafter called the defendant) entered into a scheme, outlined at considerable length, with the American Bond & Mortgage Company whereby they intended to reap a secret profit at the expense of the bondholders or of the Maryland Casualty Company, that the defendant has been guilty of other fraudulent acts in failing to take possession of the real estate covered by the mortgage, that his interests are hostile to those of the bondholders and that he ought to be removed as trustee, that a protective committee of bondholders having ulterior designs has been formed, and that all the acts of the defendant in connection with the real estate and in foreclosingthe mortgage have been illegal and ought to be set aside as voidable. There are sweeping prayers for temporary and permanent injunctions, for removal of the defendant as trustee, and for other relief. That bill was amended by amendment allowed on August 4, 1931, wherein was set forth the foreclosure of the mortgage by the defendant with the allegation among others that such foreclosure was illegal and voidable.

It is manifest that the intervenor is a participant in prosecuting as a party other litigation hostile to the purpose of the plaintiffs in the present bill and inconsistent with relief here sought, and that by his proposed amendment he is seeking to interject into the present suit issues not hitherto raised and antagonistic to the theory on which this suit is founded. The present suit was properly brought as a class bill by the plaintiffs in their own right and in behalf of other bondholders secured by the same trust mortgage. Spear v. H. V. Greene Co., 246 Mass. 259, 266, 267, 140 N. E. 795. It was based on allegations that the mortgage had been foreclosed.

One who brings a suit such as the present holds and retains absolute dominion over it unless the court orders otherwise upon findings made after hearing that it is not being prosecuted in good faith, with vigor and reasonable capacity. There can be but one master of litigation for the plaintiffs. The original plaintiffs assumed the burden of prosecuting the cause to a conclusion and the liability to costs if defeated. It would be impracticable to permit litigation in these circumstances to be conducted by the independent action of several plaintiffs acting without harmony and according to divergent ideas as to the establishment of the liability of the defendant. This is the general rule supported by many authorities. Handford v. Storie, 2 Sim. & S. 196, 198. Hirshfeld v. Fitzgerald, 157 N. Y. 166, 182-184,51 N. E. 997,46 L. R. A. 839;Duerson's Adm'r v. Alsop, 27 Grat. (68 Va.) 229, 236;Thompson v. Fisler, 33 N. J. Eq. (6 Stewart) 480, 481;Manning v. Mercantile Trust Co., 26 Misc. 440, 57 N. Y. S. 467; Price v. North, 2 Younge & C. Ch. 620, 628, 635; Watson v. Cave, 17 Ch. D. 19, 22; 1 Daniell's Ch. Pr. (6th Ed.) 794. See 21 C. J. 289, 290, and cases collected. It is on this principle that persons taking antagonistic positions with reference to the main purpose of the suit cannot join as plaintiffs. Cholmondeley v. Clinton, 1 Turn. & Russ. 107, 116; Ellicott v. Ellicott, 2 Md. Ch. 468, 471; Hill v. Wilson (C. C. A.) 210 F. 200.Parsons v. Lyman, 4 Blatchf. 432, Fed. Cas. No. 10779. See, also, Hendrickson v. Wallace's Ex'r, 31 N. J. Eq. (4 Stewart) 604...