Rheinberger v. Security Life Ins. Co. of America

• Decision Date: 16 February 1945
• Docket Number: No. 8451.,8451.
• Citation: 146 F.2d 680
• Parties: RHEINBERGER v. SECURITY LIFE INS. CO. OF AMERICA. CITY OF EVANSTON et al. v. NERLOVE.
• Court: U.S. Court of Appeals — Seventh Circuit

146 F.2d 680 (1944)

RHEINBERGER v. SECURITY LIFE INS. CO. OF AMERICA.

CITY OF EVANSTON et al. v. NERLOVE.

No. 8451.

Circuit Court of Appeals, Seventh Circuit.

December 28, 1944.

Rehearing Denied February 16, 1945.

O. D. Buckles and George A. Mason, both of Chicago, Ill., for appellants.

Arthur S. Lytton and Olaf A. Olson, both of Chicago, Ill., for appellee.

Before SPARKS, KERNER, and MINTON, Circuit Judges.

KERNER, Circuit Judge.

Appellee, Nerlove, as sole surviving trustee of the Security Life Insurance Company of America Trust (which Trust, or its predecessor Company, is hereinafter referred to as Security), filed his complaint in equity for an injunction against withholding possession of and obstructing two strips of land, and compensation therefor. The District Court granted appellee a prohibitory and mandatory injunction. From this order, appellant, City of Evanston, appeals. The question of compensation to the Trust for the withholding or obstruction of the property was expressly excluded from and held open by the order, and is not involved in this appeal.

To secure her note for $25,000, in 1925 Mrs. Barker executed and delivered her trust deed to certain property, which note and trust deed became a part of the assets of Security.

When Mrs. Barker failed to pay her note in 1930, Security filed a bill to foreclose the trust deed in the Circuit Court of Cook County, Illinois, making the City of Evanston a party defendant and alleging that the right, title and interest of any and all defendants were "subject and inferior" to its lien by virtue of the trust deed. The only relief that Security sought in its foreclosure suit was that the trust deed be decreed to be a first lien; that defendants be required to pay Security the amount due; and that defendants be barred from all rights of redemption. The City filed an answer which denied that Security's rights were superior to its own as to certain parts of the property. The parts were three strips: one taken by condemnation which is not involved in this appeal; the south 33 feet which the City claimed by virtue of a quitclaim deed from Mrs. Barker given subsequent to the trust deed and the use of said strip for purposes of a public street known as Oakton Street since 1926; and the east 39 feet by virtue of long continued user for a public street known as Florence Avenue.

On the basis of a master's report, the Illinois Circuit Court found that the defendants' rights and interests in and to the property were subject and inferior to the lien which Security had acquired by virtue of the trust deed. The decree provided that the defendants and all persons claiming under them, or either of them, in the absence of redemption within the statutory period (which did not occur), should "* * * be forever barred from all equity of redemption and claim of, in and to said premises, and every part and parcel thereof." The decree further provided that if the party in possession failed to surrender it to the person acquiring the property at the master's sale, a writ of assistance should be issued in accordance with the practice in the Illinois Circuit Court. No appeal was taken. A master's sale was made to Security and duly approved. On July 3, 1934, the master's deed issued to the trustees of Security. No writ of assistance was ever applied for.

For more than four years, Security did absolutely nothing. It was not until July 20, 1938 that Nerlove caused a written demand for possession of the strips in question to be served upon the City. The City took no action thereon, and again, Security took no action to back up its demand for nearly two years.

On April 25, 1940, Security filed its petition in the District Court which instituted the instant action. It charged that the City was wrongfully using the two strips as part of Florence Avenue and of Oakton Street, and that such occupancy constituted a continuing trespass. By way of relief it asked for a temporary and permanent injunction against the City's further possession of the two strips and against interference with attempts to remove the curbing, pavement, and other "obstructions." Presumably the term obstructions referred to the water and gas mains, sewer, electric conduits and lamps, telephone pole and trees.

An objection has been raised to the jurisdiction of the District Court. Jurisdiction over the City's person is conceded, so the issue is narrowed to whether there was jurisdiction over the subject matter. This question is always open and it is our duty to determine it. Jones v. Brush, 10 Cir., 143 F.2d 733; Page v. Wright, 7 Cir., 116 F.2d 449; Caesar v. Burgess, 103 F.2d 503. The Security Life Insurance Company of America went into equity receivership in the federal court in 1932. Ever since the original appointment of the receiver, the subsequent appointment of three trustees and, following the resignation of two of said trustees in 1936, the final designation of Nerlove as sole surviving trustee, the property and assets of Security have been and now are in the custody and control of, and are being administered and liquidated under orders of, the District Court. Its jurisdiction has never been relinquished or terminated. The trust agreement between the receiver and trustees, entered into pursuant to the District Court's order, which is still in effect and under which the trustee is operating, provides for semi-annual reports by the trustee to the District Court which must be approved or disapproved by said court. The trustee may not dispose of an asset of the trust if it is worth $5,000 or more without specific order of said court authorizing same, and all disbursements made by the trust for fees, expenses or other items incident to said trust are subject to the discretion and authorization of said court. Hence when the deed was issued to the trustees the property became an asset of the trust, immediately subject to the custody, administration and protection of the District Court. Since Nerlove, as trustee, stood in the shoes of the receiver, and in the same relation to the District Court, any suit by him in the course of winding up the affairs of Security was ancillary to the main suit and cognizable in that court. Green-Boots Const. Co. v. Hays, 10 Cir., 56 F.2d 829; cf. Porter v. Sabin, 149 U.S. 473, 479, 13 S.Ct. 1008, 37 L.Ed. 815.

The City claims the fee to or an interest in these strips by virtue of the plat of 1866, by adverse possession, by common law dedication, and by fifteen years' user under the Illinois statute which provides that "All roads in the state which have been laid out in pursuance of any law of this State, * * *, or which have been established by dedication or used by the public as highways for fifteen (15) years, and which have not been vacated in pursuance of law, are hereby declared to be public highways." Ill.Rev.Stat.1943, Chap. 121, § 152.

On the trial the City offered survey maps, plats, drawings, historical documents, and the testimony of many aged residents and other witnesses to show that Oakton Street and Florence Avenue were public highways long prior to the date of the mortgage. The trial judge excluded this evidence on the ground that if it were admitted, it would amount to a collateral attack on the Circuit Court's foreclosure decree. D.C., 51 F.Supp. 188.

The principal question is whether in this action, the foreclosure decree was conclusive upon the City.

Appellee, contending that it is, argues that the foreclosure decree is not subject to collateral attack because the court had jurisdiction of the person and of the subject matter; that all issues of fact or law which were or could have been raised are considered as having been raised and determined and are within the rule of res judicata, and cites, among other cases, Healy v. Deering, 231 Ill. 423, 83 N.E. 226, 121 Am.St.Rep. 331; Sielbeck v. Grothman, 248 Ill. 435, 94 N.E. 67, 21 Ann.Cas. 229; Clark v. Zaleski, 253 Ill. 63, 97 N.E. 272; Gregory v. Suburban Realty Co., 292 Ill. 568, 127 N.E. 119; Armstrong v. Obucino, 300 Ill. 140, 133 N.E. 58; Knaus v. Chicago Title & Trust Co., 365 Ill. 588, 7 N.E.2d 298; and Barry v. Commonwealth Edison Co., 374 Ill. 473, 29 N.E.2d 1014.

On the other hand appellant contends that the only proper object of the foreclosure suit was to cut off the equity of redemption of all persons claiming under Mrs. Barker any title or interest inferior or subject to the mortgage, and that the rights of the City, being prior, adverse and paramount to the rights of the mortgagor and appellee, could not be contested in the foreclosure suit and consequently are not barred by the decree.

The doctrine that where a court has once acquired jurisdiction it has a right to decide every question which arises in the cause, and its judgment or decree, however erroneous, cannot be collaterally assailed, is only correct when the court proceeds according to the established modes governing the class to which the case belongs and does not transcend in the extent and character of its judgment or decree the law or statute which is applicable to it. Armstrong v. Obucino, 300 Ill. 140, 143, 133 N.E. 58. In other words, though the court may possess jurisdiction of the person and of the subject matter, it is still limited in its modes of procedure and in the extent and character of its decree.

It may be well at this point to discuss some of the cases claimed by appellee to be decisive of the question. It will not be necessary to discuss them all. He relies principally upon Knaus v. Chicago Title & Trust Co., 365 Ill. 588, 7 N.E.2d 298; Healy v. Deering, 231 Ill. 423, 83 N.E. 226, 121 Am.St.Rep. 331; Sielbeck v. Grothman, 248 Ill. 435, 94 N.E. 67, 21 Ann.Cas. 229.

In the Knaus case, supra, foreclosure proceedings were instituted in which Knaus was named as defendant. There was no claim of the existence of a prior, adverse and paramount title. The only question at issue was whether or not the complainant...