Winters v. Hub Min. Co.

• Citation: 57 F. 287
• Parties: WINTERS et al. v. HUB MIN. CO. et al.
• Decision Date: 15 May 1893
• Court: U.S. District Court — District of Idaho

57 F. 287

WINTERS et al. v. HUB MIN. CO. et al.

United States Circuit Court, D. Idaho.

May 15, 1893

S. B Kingsbury and F. E. Ensign, for plaintiffs.

Texas Angel, for defendant Hub Min. Co.

BEATTY District Judge.

The action is at law, commenced in, and removed from, the state court. The plaintiffs having conveyed, by deed, the Hub mine to defendants Atkinson & Crocker, the latter, to secure the unpaid balance of purchase money, executed their mortgage on the mine to plaintiffs. Thereafter, the defendant the Hub Mining Company purchased the mine of defendants Atkinson & Crocker, and agreed to assume and pay such mortgage debt. Subsequently, plaintiffs brought their action in the state court against all the defendants, for foreclosure of the mort gage, in which a decree and judgment of foreclosure was granted against defendant company alone which took its appeal to the state supreme court. After defendant company had perfected its appeal by giving the statutory supersedeas bond, an order was procured from the state trial court for the sale of the mortgaged property under the decree; and after sale a deficiency of the judgment remained, for which a personal judgment is now asked in this action against defendant company, which, alone of defendants was summoned or appeared in either action. Defendant company, by its answer, alleges the invalidity of the mortgage sale, because the order therefor was procured after appeal taken to the state appellate court, where the cause is now pending, thereby barring this action; that the original sale of the mine to Atkinson & Crocker by plaintiffs was accomplished by fraud; and that said Atkinson & Crocker, in purchasing the mine of plaintiffs, did so only as the agents for the defendant company to be thereafter organized. Plaintiffs' demurrer to the answer, and their motion to eliminate portions thereof, raise the questions to be determined.

1. In the purchase of the mine from plaintiffs by Atkinson & Crocker, the latter could not act as the agents of defendant company, and the purchase must be regarded as made by them for themselves, as it seems well settled that a contract made in the name of or for a corporation to be subsequently organized can in no way bind or affect it. Battelle v. Pavement Co., (Minn.) 33 N.W. 327; Match Co. v. Hapgood, 141 Mass. 149, 7 N. E. Rep. 22; and Abbott v. Hapgood, 150 Mass. 248, 22 N. E. Rep. 908.

2. That plaintiffs consummated the sale to Atkinson & Crocker by fraud, if an available defense to defendant company, is one that should have been determined by the former action, and cannot be urged here.

3. Can plaintiffs maintain any action for a personal judgment against defendant company upon the mortgage debt? It is clearly alleged in the pleadings of both parties that at the time the sale of the mine was made by Atkinson & Crocker to defendant company it assumed and agreed to pay the balance of the purchase money then remaining unpaid to plaintiffs. So far as observed, there is nothing in the voluminous pleadings to show to whom or how such promise was made, or that it was accepted by plaintiffs. The most that can be inferred is that it was such a promise as is implied when a grantee takes a conveyance with a recital therein that he shall pay the incumbrance on the property purchased. This is the most favorable view that can be taken for plaintiffs, in the absence of any showing that they accepted or relief upon such alleged promise. The liability of the grantee, with whom it exists, and in what forum it may be enforced, under such circumstances, is a theme which has been most fruitful of discussion, and much difference of opinion, but which it is not deemed necessary to now review at length.

It has been mooted that such grantee is not liable to the mortgagee, either at law or in equity, because there is no privity between them; but it is held that the grantee's promise is made for the benefit of the mortgagor, who can enforce it, while the mortgagee cannot, until it appears that he accepted it; then the grantee becomes principal, the mortgagor his surety, and the mortgagee may maintain a personal action at law against the grantee for the debt,--but that the only way by which such relation and liability of the parties can be created and enforced at law is by the mutual agreement of the three parties. Shepherd v. May, 115 U.S. 511, 6 S.Ct. 119. No such agreement is shown in this case. But, whatever the rule may be at law, it seems now settled by the preponderance of authority in this country that the mortgagee may, without direct acceptance of the grantee's promise, maintain against him his equitable action. This upon the same principle that a creditor, in the collection of his debt, instead of proceeding against the surety, may avail himself of any equities or securities in the hands of, or contracts or promises made by, the principal, for the protection of his surety. So, here, when the defendant made its promises to assume the debt, it became the principal, A. & C. its sureties, and its promise an available asset or contract which plaintiffs, as creditors, can enforce by direct action against defendant. This promise, however, not being made to nor accepted by plaintiffs, so far as appears, no contract or privity exists between them and defendant company, and they can have no legal rights against it. Such is certainly the rule maintained by the supreme court. Keller v. Ashford, 133 U.S. 610, 10 S.Ct. 494. Although this case was before referred to, in the ruling upon the first hearing of these questions, in support of the view then taken, plaintiffs' counsel still repeatedly insist in their briefs, and cite state authorities, as they say, ad nauseum, that a legal action may be pursued. In Keller v. Ashford the facts were that the grantee had accepted a deed containing a provision making it 'subject, however, to certain incumbrances now resting thereon, payment of which is assumed, by said party of the second part;' and the court, upon page 620, 133 U.S. and page 496, 10 S.Ct. Rep., says:

'Upon the question whether the mortgagee could sue at law, there is no occasion to examine the conflicting decisions in the courts of the several states, because it is clearly settled in this court that he could not.'

Counsel, in their last briefs, do not say this authority was before misconstrued, but simply claim the contrary, and cite state decisions in support of such claim. A clear understanding that this court aims to be governed by the authority of the supreme court and not by conflicting rulings of the state courts, may save much labor. Without further remark, it is held that plaintiffs cannot maintain in this court their action in its present form, but, if it is not for other reasons barred, their pleadings must be reformed.

4. It only remains to determine the effect of the former action upon this, and let us not lose sight of the real question. It is not whether the mortgagee may not have a judgment against the grantee for the deficiency remaining after a foreclosure sale, the affirmative of which is so frequently asserted in general terms by counsel, but it is whether such judgment must be taken in the foreclosure proceedings, or may be in a subsequent, separate, distinct,...