COLONIAL & U.,
CO. 91. HUTCHINSON MORTG. CO.
contended, for,_ ;if,colTElct, would establish the !pr.acticetbatevery,objectionto questions,every.Jrefusal to answer, and every qUElstion the character;of tlieanawer, niust first be referrelLto and.passeduponby the court:issuing the commission before the court suhpcena could deal with the witness. This would compel frequent stoppages in the course of an examination, and compel counsel and'the witness, in case of personal privilege claimed, to make frequent journeys "across the continent" to obtain the ruling of a distant court upon-each question as it should arise. I cannot assent to an interpretation oftha; rule that would place such grievous burden upon witness and The practice which the rule provides for is the practice as to the contumacious witness, not as to the settlement of interrogatories. The rule refers to the practice then obtaining in equity with respect to the compulsitm of testimony by the witness, or his punishment for refusal to testily. As an incident to the power of compulsion, and by analogy to· the. rule obtaining with respect to depositions at law under oral interrogatories, the court or judge having jurisdiction of the witness,for the purposes of the exercise of the power of compulsion and the punishment of a refractory witness, must,determine the materiality of 'the question declined to be answered. '
& U. S.
Limited, v. et ai.
(O£rcuo£t Court, S. D. Iowa, C. D. November 21,1890.)
L AOCOUN'1'ING IN EQUITY.
ready made, and the fund thus created was intrusted to defendant to be loaned on localities and improved farms. Defendant was forbidden to make loans in on certain kinds of lands. These instructIons having been violated, complainant tendered to defendant the notes and mortgages whicn represented the loans lmproperly made. and demanded a settlement of the aocount. ,HeZd, that complainant was entitled to an accounting in equity.
to these were added tbe amounts paId'in on the principal and interest of loans al-
From t1meto tim,e complainant forwat'dedlump sums of money to c'lefendant, and
'W)lere a bill in equity against a corp01'8tion waives an answer under oath and seeks nc special discovery from the individual defendantBJ the officers and stOckholders of the corporation, against whom no relief Is askea, are not proper parties defendants, and a demurrer by tbem will be sustained.
Demu.rrers to bill in equity.
Whiting S. Olark and Chas. A. Olark, for complainant. Read Read and Lehmann .for defendants.
5mBAS, J. The complainant is a foreign corporation, engaged in loaning money on farm property, and in the carrying on of this business it cOlll:ltituted the defendant, an Iowa corporation, its agent, and intrusted to it the entire management of its affairs in the state of Kansas. According to the avermentsofthe bill, it was the custom of complainant
to forward from tim'e to time to the defendant corporation lump sums
of money, and to these were added the amounts paid in from time to time upon the principal and interest of loans already made, and the fund thus created was intrusted to the defendant corporation, to be loaned out upon the security of improved farms. In the instructions given to the defendant it was forbidden to make loims in certain named localities, and also upon certain kinds of lands. Under the agreement between the parties, the defendant corporation guarantied the titles ofthe lands upon which it made loans, and was bound to make weekly and mOl1thly reports Of the business conducted by it, and was further bound to collect the interest and principal of the loans as they matured, to see that the borrow.ers kept the taxes on the mortgaged property paid up, and generally to exercise proper supervision over the business intrusted to it. All compensation for its services the defendant was entitled to a fee of 5 percent. upon the amount of each loan; one-halfto be paid when the loan. was made, and the remainder in annual payments during the life of the .loan. It is charged in the bill that the defendant corporation in many instances violated the express ins: Jctions given it, and made many loans of the money to it upon lands situated in localities in which it was forbidden to make loans, and also upon lands of a. character and quality which it was forbidden to take as security. It is also charged that the defendant failed to make proper reports of its doings; that finally the complainant terminated the agency, and, upon ascertaining the fact that the defendant corporation had violated the instructions giv'eoit in regard to the Idans to be made, complainant caused an investigation to be made, and, upon learning the full facts, it tendered back to defendant the notes and mortgages which represented the loans improperly made, ilriddemanded a full accounting of the moneys received by defendant, and a settlement and adjustment of the account betweeritheparties. In the bill this tender is repeated, and complainant offers to place in the hands of the court, or of a receiver to be appointed, such notes and mortgages, to be disposed of as the equities of the parties may require. The bill is very lengthy, and I shall not attempt to state it more fully, as the foregoing is sufficient to show the nature of the questions presented by the demurrers interposed by the defendants. To this bill the defendant corporation and Charles and Paul Hutchinson, two of its managing officers and principal stockholders, are made parties defendant. The first question raised by the demurrers to the bill is that the case is not one of which a court of equity can take jurisdiction, the remedy at law being adequate. Counsel for defendants have supported the demurrers in a very clear and able argument, yet, in spite of the cogent reasoning employed, it must be held that the bill presents a case within equitable cognizance. The averment of facts in the bill shows that the defendant corporation undertook a duty in the nature of a trust. As agent for the complainant, it received large sums of money, and agreed to dispose of the same under certain restrictions and limitations, thereby undertaking to apply the same faithfully, and in accordance with the
COLONIAL & U. S. ¥ORTG.CO. V. HUTCHINIlON MORTG. CO.
confidence reposed in it, which is of the very essence of a trust. The -theory of the billis that the defendant corporation expressly violated the instructions given it, and misapplied th.e funds intrusted to it by loaning the same upon property which, by reason of its location or quality, came within the restrictions imposed upon the defendant, as agent for the compla,inant, and for this breach of trust it is now sought to compel the defendant to account. As the defendant corporation refused to take back the ,mortgages which it is claimed evidence the loans made in breach of the trust confided to it, the complainant seeks the aid of a .court ofequity to. direct the disposition to be made of these pending the settlement of the account between the parties. It may be entirely true. ,as contended for by defendant's counsel, that the complainant might accept these mortgages for their value, and sue the defendant for the damaKes caused by loans made on insufficient security; but it does not follow tllat the complainant was compelled to adopt that course. Asis said in Taylm v. Benham, 5 How. 233: "Every person who receives money to be paid to another, or to be applied to a particular purpose. to which he does Dot apply it, is a trustee. and may be sued either at law for money had and received, or in equity, as a trustee, for a breach of the trust. " Many of the loa,ns averred to have been improperly made are not yet due. What!lfIlOunts can be realized from the mortgages cannot be known at the.present time. Had complainant chosen to accept the mortgages pro tanto, and sued for damages, assuming that such a course was open to complainant, it is clear that it would have been almost imascertained, by the verdict of a jury, the amount necespossible to sary to be pai4to cpmplainant, because the data for anything approachlng an exact estimate does not now exist. Had complainant, tendering back the mortgages in question, sued at law for so much money hadlmd received, it would/in order to ascertain the sum due, be necessary to have a full and complete accounting between the parties; because the sUIIlS loaned '011 thelllortgages: in question were not specific amounts, forwarded in, each case by complainant, but were amounts taken' fronL the genetal fund placed with defendant, and made up of sums forwarded by complainant and collections made by the defendant of other loans. In any event, to effectuate justice between the parties, a full accounting would have beeIinecessary of the entire business dealings between the parties,-a task to \vhich the powers of a court of law would be wholly inadequate. ,However this may be, it is clear that the complainant has the right to call the defendant corporation to an account for the manner in which it has performed, or failed to perform, the trust confided to it; and, as it is apparent that such accounting involves many and complex questions, including the disposition to be made of the mortgages tendered back to the defendant, the expenses connected therewith, the sums received as interest thereon, and the compensation, if any, due to the defendant, it follows ·that, not only by reason of the right of complainant of the trust, but also by reason ofthe complexity to call for a settled, and the disposi.tion to be made of the mortofthe account to
vol. 44. '
'gages in question,there existsgtounds .for the exercise of equitable jurisdiction. Much of the argument in support of the demurrer was addressed to the proposition that, where the- rights of the parties arise upon contract,and an accounting is sought in order to ascertain the amount to be adjudged to ..the complainant, a court of equity cannot take jurisdiction simply because the account is voluminous,and embraces lilllny separate items. As a general proposition, thisig undoubtedly true, ,yet thel'e are many exceptions to be made inthe application of it to particular cases. Much stress was laid in support of the proposition upon the ruling of the supreme conrt in Root v. Railway Co., 105 U. S. 189, in which was filed a bill for an accounting for profits and, savings' alleged to have accrued to an infringer of a patent, the bill having been filed after the termination of the life of the patent. The authorities are fully collated and commented on, and the conclusion is reached"That a bill in equity for a naked account of profits and damages against an infringer of a patent cannot be sustained; that such relief ordinaril,risincideutal to some other equity. the right to enforctlwhich secures to lhe patentee !Jis standing in court: that the most general ground for eqUitable interposition is to insure to the patentee the enjoyment of his specific rig-ht,by injunction llgainst a continuance of the infringement. but that grounds for equitable relief mllY arise other than by way of injunction. as where the title of the complai nant Is equitable merely, or eq lIitable interposition, is nepded on account of the impediments which prevent a resort to remedIes purely legal; and such an equity may arise out, and inhere in,the nature of the account itself, springing frOm special and peculiar circumstances which disable the patentee from a remedy at law or render his remedy in alegal.tribunal difficult, inadequate, and incomplete. and. as such cases cannot be defined more exactly, each must rest upon its own particular circumstances, as furnishing a clear and satisfactory ground of exception from the general rule." This case, therefore, holds that, even in the ahsence of any other equity, the nature of the accounting may be such that a court of law cannot deal adequately therewith, and in such case jurisdiction in equity can be sustained. The case at bar falls fairly within the ruling in Parkersburg v. Brown, 106 U. S. 487, 1 Sup. C1. Rep. 442, wherein it is said: "The right which the plaintiffs so have to call on the city to render an account of the property is one which can ve properly adjUdicated in this suit in eqUity. It involves the taking of an account, the sale, under the direction of the court, of what remains of the property, and the ascertainment of the proper charges to be allowed to the city against the moneys it has received and against the proceeds of sale."
120 U. S. 130, 7 Sup. Ct.
Even more applicable is the language used in Kirby v. Railroad Co., 430, wherein it is said: "The case made by the plaintiff is one of which a court of eqUity may take cognizance. The complicated nature of the accounts between the parties constitutes itself a sufficient ground for going into eqUity. It would have bee'n difficult, if not impossible, for a jury to unravel the. numerous transactions involved in the settlements between the partIes, lind reach a satisfactory conclusion as to the amount of drawbacks to which Alexander &Ga.
COLONIAL & U. S. :MORTG. CO.
HUTCHINSON :MORTG. CO.
were entitled on each settlement. Justice could not be done except by employing the oJ inv:estigation peculiar to courts of equity. " But, as already said, it is not necessary to base the jurisdiction in equity upon thevnature of the account alone. The averments of the bill show that there existed between the parties a trust of a fiduciary nature, and the nQ,merousbreaches of such trust on part of defendant, and seeksluetthiment thereof, and thus we have presented a ease of'undoubteq:eq\litable jurisdiction as against the defendant corporation. On behalf of the defendants, Charles and Paul Hutchinson, the deiIlurretspresentthe questiop' whether they are proper parties to the bill. No relief is prayed, against these defendants, and from the averments of the bill it they are, joined ,as defendants solely for the purpose of, securing' a ,full answer from the corporation; yet the bill expressly under oath, and :<;loes not seek any special discovery from tne individual defendants. The general rule is well settled that no be made a party defendant who has no interest in the suit, whpm no decree nor relief is sought, or who in fact is merely a witness in the case. Under the former practice, an exceptionto this general rule existed in suits against corporations,in which, in order to secure an answer under oath and when needed to compel full discovery, it was permissible to join as a defendant an officer or stocke holder therein. As all parties, regardless ofinterest, are now permitted llndcompel1able to testify, the 'ilooessity for making an officer of the corporation a party for the purposes of discoreryno longer exis,ta. Inthe present instancej the bill, lis already said; does not require the answers of defendants to be under oath, but expressly waives the sarne, and it is difficult to see what good purpose is subserved by making the officers paijies' If they should refuse to answer, no decreecould, be rendered against them for any relief, for none is prayed, and, if it was to make them answer fully on behalf of the corporation, no ground exists for such a course, for neither discovery nor answer under oath is prayed for. All the effect that could be given to an answer filed by them would be that of a pleading on behalf of the corporation, and, so far as answering the bill is concerned, the defendant corporation is competent to answer for itself. ,If the corporation fails to answer, a decree pro etmfissOJ oah ,be taken against it, and: in proving up its claims thereunder the complainant can procure the testimony of the officers of the. corporation and all other evidence needed. If the defendant ration answers,thep the issues presented by that answer are the ones to be heard and determined, and the filing of answers by the other defendants would Ol:l1Y incumber the record to no good purpose. It not appearing, therefore,'that any reason exists for making Oharles and Paul Hutchinson parties defendant, it must be held that they are improperly joined Il.S defendants, and upon,that ground ,the demurrers to the bill a,re,SuStained. Leaye granted to amend by dismissingtbe bill as to them, and the defendant corporation is ruled to answer the bill by the January rule-day. ' ,
HOLDERBAUM et al., (two cases.)
November 28, 1890.)
(Oircuit Court, S. D. Iowa, O. D.
A testator directed that all his debts should be paid out of the first assets realized, and that his executor should manage his real and personal property so as "to real. ize the largest and best income therefrom, and in paying of! the indebtedness on the land." The executor was given power to negotIate loans and execute mortgages for the purpose of meeting the indebtedness on the land, and to sell a certain portion whenever he could realize enough to pay of! the incumbrances. After payment of "all indebtedness and liens on my real estate," the assets remaining were to be divided between the testator's wife and children. in a suit to foreclose mortgages given by the executor under the power, that the will did not attempt to create a trust for the payment of debts secured on the real estate in preference to the unsecured debts, and that neither the will nor any part thereof was void because in violation of the rights of creditors, each of whom had the right to pursue his statutory remedy for the collection of his debt, if he chose to do sO. Crediton of the testator having acquiesced for 10 years in tbe executor's management of the estate under the provisions of the will, tbey cannot now question the validity of mortgages executed by him under the authority given.
The power of the executor is not limited toa single renewal of the mortgages ill. existence at the time of the testator's death. nor to loans made to pay of! the orig" inal mortgages, but extends to such further renewals or loans as were fairly necessary to enable him to carry out the trust. The title to the realty passed to the executor for the purposes of the trust. and he had power to make loans and execute mortgages without applying to the probate court for authority. The provision of the will that "all my just debts shall be paid out of the first realized assets of my estate" does not charge the payment of the debts on the land; so as to create a lien prior to that of a mortgage given by the executor.
WILLS-CONSTRUCTION-CHARGE ON LAND.
The mortgages given by the executor named the grantor as "A. C. H., executor of the estate of M. H.," and were signed" A. C. H., Est. M. H." The notes secured read" I promise to pay, " and were signed" A. C. H., Executor Estate M. H." Beld, that the mortgages were the deeds of the executor, and so executed as, to bind the property of the estate; the rules relating to the execution of sealed instrnments not applying, Code Iowa §§ 49, 2112, having abolished the use of private seals.
In Equity. Bills for foreclosure of mortgages. Submitted on pleadings and proofs. Kauffman« Guernsey, for complainants. John uooard &- Son and Gatch, Connor« Weaver, for defendants. SHIRAS, J. On the 12th day of June, 1879, Michael Holderbaum, then a resident of Madison county, Iowa, executed a will, the material parts of which are as follows: " Item 2. I desire that all my just and equitable debts be paid out of the first realized assets of my estate, including expenses of last illness and funeral expenses. "Item 3. I desire that my executor hereinafter named shall stand in my place and stead, for the purpose of managing and controlling my real and personal property in such a way and manner as to realize the largest and best income therefrom, and in paying off the indebtedness on said real property. "Item 4. I desire that my said executor, for the purpose expressed. in item 3. shall have full power and authority to negotiate a loan or loans for the pur-