Illinois Trust & Savings Bank v. City of Des Moines

• Decision Date: 17 May 1915
• Docket Number: 18-A.
• Citation: 224 F. 620
• Parties: ILLINOIS TRUST & SAVINGS BANK et al. v. CITY OF DES MOINES et al.
• Court: U.S. District Court — Southern District of Iowa

224 F. 620

ILLINOIS TRUST & SAVINGS BANK et al. v. CITY OF DES MOINES et al.

No. 18-A.

United States District Court, S.D. Iowa, Central Division.

May 17, 1915

W. D McHugh, of Omaha, Neb., and Henry & Henry, of Des Moines Iowa, for complainants.

H. W Byers, of Des Moines, Iowa, for respondents.

WADE District Judge.

In 1901, the Des Moines City Railway Company issued bonds of which more than $2,000,000 are still outstanding, secured by a trust deed upon all its assets, including its 'liberties, easements, privileges, and franchises.' The Illinois Trust & Savings Bank, complainant herein, is trustee in the deed of trust securing said bonds, and as such brings this action to restrain the city of Des Moines from tearing up the tracks of said railway company, and from removing the same from the streets, or interfering with the use of the streets by said company.

The bill recites that on the 4th day of September, 1905, an action was brought by citizens of Des Moines to test the right of the Des Moines City Railway Company to use the streets of the city, alleging that its franchise had expired and that it had no further rights in the streets of the city of Des Moines. It is also recited that on the 13th day of May, 1913, by a decree rendered in the Supreme Court of the state of Iowa, it was adjudged that the franchise had expired, and that the Des Moines City Railway Company had no further rights in the streets of Des Moines, and that said decree provided that unless the Des Moines City Railway Company procured a franchise within a time fixed, which time will soon expire, that the city of Des Moines would then have the right to remove the plant, tracks, and equipment from the streets and public places of said city. The bill further recites that neither the trustee, complainant herein, nor the bondholders, were parties to said litigation; that they never were notified to appear in said proceedings, although their trust deed was duly recorded in the records of Polk county, Iowa, and also a matter of public knowledge in the city of Des Moines. It is further alleged that without the franchise the said Des Moines City Railway Company 'would be wholly bankrupt and insolvent, and would be wholly unable to pay its said bonds secured by the said trust deed.'

The city of Des Moines appears, and by motion raises the question that, conceding all the averments of the complainant's bill, it is not entitled to any relief, for the reason that all the rights of the trustee and the bondholders were adjudicated by the proceedings aforesaid against the Des Moines City Railway Company. Other defenses are raised by the motion, but by agreement of counsel the motion is submitted only for the purpose of having determined the question as to whether or not the judgment rendered in the action against the Des Moines Street Railway Company is binding upon the trustee and the bondholders.

It being conceded, for the purpose of this motion, that neither the trustee nor the bondholders were parties to the suit against the street railway company, we have the question presented as to whether a judgment against a mortgagor of real property is binding against the mortgagee; such action being commenced and judgment rendered after the execution of the trust deed and without notice to the mortgagee. It is not denied that, if the judgment rendered by the Supreme Court is enforced, the bondholders will be deprived of a large part, if not all, of the more than $2,000,000 invested by them.

Article 14 of amendments to the Constitution of the United States provides, among other things.:

'Nor shall any state deprive any person of life, liberty, or property, without due process of law.'

Section 9, article 1, of the Constitution of Iowa, provides:

'No person shall be deprived of life, liberty, or property without due process of law.'

It is fundamental that a mortgage or trust deed, securing an indebtedness, is 'property' within the meaning of the Constitution of the United States and the Constitution of the state of Iowa.

"Due process of law' means, ordinarily, judicial proceedings in court. ' Stewart v. Polk County Supervisors, 30 Iowa, 9, 1 Am.Rep. 238. 'Due process of law means a course of legal proceedings which secures to every person a judicial trial, before he can be deprived of life, liberty, or property. ' Peerce v. Kitzmiller, 19 W.Va. 564. It means 'being brought into court to answer according to law. ' Lowry v. Rainwater, 70 Mo. 152, 35 Am.Rep. 420; Parsons v. Russell, 11 Mich. 113, 83 Am.Dec. 728; Foule v. Mann, 53 Iowa, 42, 3 N.W. 814. After the trust deed was given upon the property of the Des Moines Street Railway Company, the street railway company owned the legal title; the trustee for the bondholders owned the equitable title; each had a separate and distinct and valuable interest in the property.

All of the foregoing will be conceded by counsel for the defendant, but they contend that the mortgagee is bound by the proceedings against the mortgagor, because it is said that the mortgagee is 'in privity' with the mortgagor. It is true that there is a 'privity' between the mortgagor and the mortgagee, but it is not such privity as to bind the mortgagee in an action against the mortgagor to which the mortgagee is not a party.

It will be observed that the trust deed was executed in 1901. The action to test the rights of the street railway company was commenced in 1905, four years after the execution of the trust deed. The mortgagee is in privity with the mortgagor in the sense that the mortgagee has no greater rights than the mortgagor had at the time the trust deed was executed, and it would be bound by any proceedings instituted against the street railway company prior to the execution of the trust deed; but there is no privity between the street railway company and the trustee, in the litigation which was instituted after the trust deed was executed.

'To make a man a privy to an action, he must have acquired an interest in the subject-matter of the action either by inheritance, succession, or purchase * * * subsequently to the action. ' Seymour v....