Provident Life & Trust Co. of Philadelphia v. Camden & T. Ry. Co.

• Decision Date: 12 January 1910
• Docket Number: 95 (1,316).
• Citation: 177 F. 854
• Court: U.S. Court of Appeals — Third Circuit
• Parties: PROVIDENT LIFE & TRUST CO. OF PHILADELPHIA v. CAMDEN & T. RY. CO. et al.

177 F. 854

PROVIDENT LIFE & TRUST CO. OF PHILADELPHIA v. CAMDEN & T. RY. CO. et al.

No. 95 (1,316).

United States Court of Appeals, Third Circuit.

January 12, 1910

William A. Glasgow, Jr., Spencer Simpson, and Benjamin Nields, for appellant.

French & Richards, Abraham M. Beitler, and Samuel Dickson, for appellee.

Argued before GRAY and BUFFINGTON, Circuit Judges, and CROSS District judge.

CROSS District Judge. The Camden & Trenton Railway Company executed two mortgages to the Provident Life & Trust Company of Philadelphia as trustee. The first, dated November 1, 1899 was made to secure an issue of 750,000 bonds, and the second July 2, 1901, to secure an issue of 1,750,000. Bonds to the amount of $710,000 were certified and are outstanding under the first mortgage and under the second (a general mortgage) to the amount of $622,500. Default was made in the payment of the coupons due November 1, 1907, on the first mortgage, and of those due January 1, 1908, on the second mortgage.

The president of the Camden & Trenton Railway Company thereupon, on February 18, 1908, filed his bill of complaint in the Court of Chancery of the state of New Jersey, charging, among other things, that said company was hopelessly insolvent; that for a long time it had been operated at a loss; that the deficit for the year 1907 was $46,558.90; and that it owed about $200,000 over and above its mortgage indebtedness. The allegations of the bill having been admitted by the answer of the company, a receiver was appointed, pursuant to the prayer of the bill. In September, 1908, as appears by a statement in the brief of the appellees, and not denied at the argument, the appellant, Daniel Killion, filed a petition in the Circuit Court of the United States for the District of New Jersey, setting out that he owned a $1,000 bond secured by the first mortgage above mentioned; that the company was insolvent; that its roadbed was in a dangerous condition, so that accidents frequently occurred; that it was necessary for the protection of the bondholders that the property be proceeded against promptly and sold; and that he had requested the trustee to institute a suit to foreclose said mortgage, but that, acting in collusion with the other bondholders to deprive him of his rights, it had refused so to do. He therefore asked for a rule that the trustee show cause why it should not institute such a suit at once, so that the premises might be sold by an order of said court. The trustee answered said petition, stating that it had been requested by over 90 per cent. of the bondholders secured by the first mortgage to institute foreclosure proceedings thereon, and that it intended to do so at once. The trustee thereupon applied to the Court of Chancery of New Jersey for permission to sue the receiver appointed by that court, which was granted by the chancellor upon terms, among others, that all known bondholders should be made parties defendant to such suit when instituted. Accordingly, Killion, the appellant herein, was made a defendant. Subsequently a similar suit was commenced upon the second mortgage, whereupon the two actions were consolidated by order of the court. Killion, however, did not cause his appearance to be entered in the suit to which he was a party, nor did he file any answer thereto. Consequently a decree pro confesso was entered against him, and an order of reference made to a master, with the specific direction, among others, that he should 'ascertain and report what is due and payable to the complainant trustee for principal and interest upon the two mortgages made to it by the defendant. ' Killion was allowed to appear before the master, and upon the coming in of his report filed exceptions thereto, which were entertained by the court and disposed of after Killion's counsel had been heard thereon. Killion, however, was not heard upon the settlement of the final decree, for the reason, as stated therein, that a decree pro confesso had been entered against him. He accordingly has appealed from such decree, and has filed 13 assignments of error. It may properly be noted at this point that Killion, as was admitted at the argument, holds but one $500 bond issued under the first mortgage, the amount of which, with interest thereon to date, was tendered him in open court at the time this appeal was allowed, upon condition that he would assign his bond; which proposition, however, he declined. He is not interested at all under the second mortgage; the amount due upon which, owing to the consolidation of the two suits, as already stated, is included in and forms a part of the decree appealed from.

No appeal has been taken by any one, and manifestly could not be by the appellant, from so much of the decree as relates to the second mortgage, so that in any event the complainant trustee is entitled to a sale thereunder.

Before entering upon the consideration of the various assignments of error, one of the propositions raised and argued in behalf of the appellees demands attention. The point made is that, inasmuch as the Camden & Trenton Railway Company, its receiver, and the other defendants have taken no appeal, the appellant cannot. That proposition is well recognized in equity practice, and must be regarded as settled. So far as the record shows, no application was made by Killion to the other defendants to join in the appeal, nor was there any refusal on their part to do so, nor did he make any application to the court for a summons and severance, or any equivalent thereof. In the case of Hardee v. Wilson, 146 U.S. 179, 181, 13 Sup.Ct. 39 (36 L.Ed. 933), the court says:

'In the case of Masterson v. Herndon, 10 Wall. 416 (19 L.Ed. 953), it was held that it is the established doctrine of this court that in cases at law, where the judgment is joint, all the parties against whom it is rendered must join in the writ of error; and in chancery cases all the parties against whom a joint decree is rendered must join in the appeal, or they will be dismissed. There are two reasons for this: (1) That the successful party may be at liberty to proceed in the enforcement of his judgment or decree against the parties who do not desire to have it reviewed. (2) That the appellate tribunal shall not be required to decide a second or third time the same question on the same record. In the case of Williams v. Bank of the United States, 11 Wheat. 414 (6 L.Ed. 508), the court says that, where one of the parties refuses to join in a writ of error, it is worthy of consideration whether the other may not have remedy by summons and severance; and in the case of Todd v. Daniel, 16 Pet. 521 (10 L.Ed. 1054), it is said distinctly that such is the proper course.'

Again, in Davis v. Mercantile Trust Company, 152 U.S. 590, 14 Sup.Ct. 693, 38 L.Ed. 563, it is stated that one of the ordinary rules respecting appeals is that all the parties to the record who appear to have any interest in the order or ruling must be given an opportunity to be heard on such appeal; citing Masterson v. Herndon, 10 Wall. 416, 19 L.Ed. 953, Hardee v. Wilson, supra, and Inglehart v. Stansbury, 151 U.S. 68, 14 Sup.Ct. 237, 38 L.Ed. 76. And later on in the opinion, speaking of the appellant therein, who as a bondholder had been allowed to intervene in a foreclosure proceeding, the court says:

'Neither does the appeal from the decree stand in any better condition. In a decree for the foreclosure of a mortgage the two parties principally and primarily interested are the mortgagee and the mortgagor. No third party should be permitted to disturb such a decree unless and until both mortgagee and mortgagor are given an opportunity to be heard. The mortgagor may be unwilling that the decree should be set aside notwithstanding irregularities in prior proceedings, for fear that on a subsequent hearing a larger sum may be decreed against him. It is not necessary in any given case to determine that his interests would or would not be promoted by the setting aside of the decree; it is enough that in that matter he has a direct interest, and because of this interest common justice requires that no change shall be made in the terms of that decree, nor shall it be set aside without giving him a chance to be heard in its defense. Ordinarily it may be presumed that all the parties to the record are interested, and so it is often said that all such parties must be joined as appellants or appellees, plaintiffs in error or defendants in error; but it is unnecessary to rest this case upon the mere fact that the mortgagor in this case was a party to the record-- the only defendant in the first instance.

It was not only such a party, but is also one directly and vitally interested in the question whether the decree of foreclosure and the sale shall stand, and yet it is not before us.'

Again, in Beardsley v. Ark. Louisiana Railway Company, 158 U.S. 123, 127, 15 Sup.Ct. 786, 788 (39 L.Ed. 919), the Supreme Court by Chief Justice Fuller, says:

'It is settled, for the reasons too obvious to need repetition, that in equity cases all parties against whom a joint decree is rendered must join in an appeal if any be taken; but this appeal was taken by John D. Beardsley alone, and there is nothing in the record to show that his codefendants were applied to and refused to appeal, nor was any order entered by the court on notice granting a separate appeal to John D. Beardsley in respect of his own interest. The appeal cannot be sustained. Hardee v. Wilson, 146 U.S. 179 (13 Sup.Ct. 39, 36 L.Ed. 933); Davis v. Mercantile Co., 152 U.S. 590 (14 Sup.Ct. 693, 38 L.Ed. 563).'

See also, Sipperly v. Smith, 155 U.S. 86, 15 Sup.Ct. 15, 39 L.Ed. 79; Wilson v. Kiesel, 164 U.S. 248, 17 Sup.Ct. 124, 41 L.Ed. 422; Inglehart v. Stansbury...