DETWEILER II. HOLDERBAUM.
337
DETWEILER '11. HOLDERBAUM
et Ill.
(Circuit Court, S. D. Iowa. June 3,1811O.) 1. FEDERAL COURTS-JURISDICTION-SUITS TO FORECLOSE MORTGAGES-PARTIEB.
Rev. St. U. S. §737, provides that, when there are several defendants in any suit in t,he federal courts, one or more of whom are neither inhabitants of nor found within the district in which the suit is brought, and do not voluntarily appear, the court may entertain jurisdiction, and proceed to trial and adjudication of the suit between the parties who are properly before it; but thE' judgment rendered thereon shall not cOllclude or prejudice other parties not regularly served with process, nor voluntarily appearing to answer, and the non-joinder of such other parties shall not constitute matter of abatement or objection to the suit. Beld, that the actdoes , not give the circuit court jUrisdiction of a suit to mortgage given by an executor under a power in the will on land devised to testator's children, where some of the devisees are non-residents, and are neither made parties defendant, nor appear to answer. In such case the court cannot proceed with the suit,and foreclose the mortgage, without atrecting the interest of the devisees who are not parties, since, the mortgage covering all the ·land, and the devisees being joint tenants, a decree would affect the interest of the non-resident devisees just as if they owned the entire property. Nor can the mortl!'agebe foreclosed as to the interest of those devisees only who are parties to tbe SUIt, sinee the entire lien would thus be cast on their interest.
S. .
SAME.
a.
In Equity. Bill to foreclose a mortgage on real estate. Rev. St. U. S. §737, relating to the jurisdiction of federal courts, provides that, "when there are several defendants in any suit at law or in equity, and onebr more of them are neither inhabitants of nor found within the district in which the suit is brought, and do not voluntarily appear, the court may entertain jurisdiction, and proceed to the trial and adjudication of the suit between the parties who are properly before it; but the judgment or decree rendered therein shall not conclude or prejudice other parties not reguJarly served with process, nor voluntarily appearing to answer, and non-joinder of parties who are not inhabitants nor found within the district as aforesaid shall not constitute matter of abatement or objection to the suit." Kauff'lMn&: Guern8ey, for complainant. . John Leonard Son and Gatch, Connor Weaver, for defendants. SHIMS, J. Michael Holderbaum was during his life-time a resident of Iowa, owning a farm in Page county, in this state. By his will, he appointed A. C. Holderbaum executor thereof, and authorized him to negotiate a loan to take up certain mortgages then existing against his realty. His property was devised to his children and grandchildren. Aft!ll" his death, his executor negotiated a loan of complainant for the purpose named,in the will, and to secure payment thereof executed, as executor, a. mortgage on the realty in Page county. 'i'he present bill was for the purpose of foreclosing this mortgage; the complainant being a citizen of the state of Ohio. To this bill, as it now stands, there a.re made d.efendantsthe executor and the immediat!l children of Michael Holderbaum. Two grandchildren, who ,represent the interest of their v.42F.no.7-22
deceased mother, a. daughter of the testator, are not parties to the bill. They reside in The parties made defendants to the bill contest the validity of the mortgage, denying the right of the executar'to give the same.i'Under the provisions of the will of Michael Holderbaum, the title of one-twelfth of the realty is held by the, in Ohio. , ,';; , . '" ' ,interposed of want, parties presents the question'whether the court would be'atithorized to hear and determine the ,issue of thevalidlty:otihemortgage, and, ifheld valid, to grant a decree in the absence oftheparties ",ho hold the , title ooe,twelfth of the property. As the grandchil,'dren are ,state as thecolliplainant, they could not be , ,pa,t#es d.efendaqt'whliout afl'ecting:the jurisdiction of the court, and hence the question is narrowed down to the , of section 737 oftbe'Revised Statotesandiequity:rule 47, proceed to hear and determine the ",ho hold tbetitle to an undiVIded share of the realty? The general rule is that all persons mathesupject-matter Of :spouHtbemade, partJes" inord,erJhat the court may by the one hearing and decree bind all the parties, thereby preventing further ,;Stor(ff Eq.Pl'. § 72. Theetoeptidns to this general .ru!e,- jand:dlhe ,reasons, ,why sllcll.excepti,ons ha,v.e :been introduced, are Aamyiistate.d<in:.ShMldBv.;Bah·oW, 17 ',How..l3(};and the 'cases therein cited,Jo, which dt is. held that: the equity rule ,and statutory enactment ,.above del;la'rtatory of the principles recognized and enforced ..by,thecoun."Jo,Ribon .v. ,Railroad 00.1,16'WalLA46, it is said: ·c' :" The l{lequity astOJpartiesdefendant:fs that all, wbose interests will oWe .to b¢ obtltinedmust be J:!eforg the court; and. if by do appear, :or, . fJ\<?In a)l1l'jscli?tiOlll}l ;person of theUnited .. he th.e bIll must dISmissed. Where a decree 'ealfbe' made' as to those WIthout 'affectl,ng the rights of those who are absent, tbe court will proceed; but. if the"oirtteresWof thosepresent'and of those absent are inseparable, the obstacle, is Insuperable; " See, also,(1I'egorll v; SteMpn,19ll J;T.,S; !O:SUp. Ot. Rep.-:422.,' , As already stated, the questions to be heard and determined are as to 'validityof·thembrlgage, which involves the power ofthe e:xecutor to.execute the and; if :held valid, the consequent right toenfotce ,the :same by-. decreeing a<sale of the mortgaged property.' The first con.sideration is whether the party:owning the title, and the beneficial inter,est in the. realty; is anedessary party defendant; in-other words, if, un·der the .will of MichaeLHolderbaum, there was only one devisee, A.B., ;would ,the court proceed to foreolosea mortgage given by the executor <without thepreaence. of:A:J B. as a' party defendant? There could be question that, under such circumstances, A; B. would havtla direct '4ntetest in thesubjeot.ma:tter of the suit. ,If the mortgage. is to be Ioreclosed, and, the laud 'Sold t!Ilereunder, it is his ti tie' and interest that is ·,affected.. ,The executorhalt,;llo'beneficiaL interest in <the .land. .If the
v.
HOLDERBAl;JM.:
839
mortgage by the eJtecutol' is valid, it reaches the title and interest which paElsed under the will to :the Granting that the executor had the same "power under the will to mortgage the land that the testator had in his life-time, that power has been executed, and the executor has ceased to have any further power over the land, and he never had any actual beneficial interest therein. If the mortgage sought to be foreclosed had been executed by the testator during his life-time, is it not clear beyond question that the court should refuse to proceed unless the party to whom the title passed, and in whom the equity of redemption existe<i, was made a party defendant. Story, Eq. PI. § 196; 2 Jones, Mortg. § 1414; Shields v. Keyes, 24 Iowa, 298. The necessity for the presence of the owner of the title and of the equity of redemption is still greater when, as in the case at bar, the mortgage Was "executed after the death of the testator, and after the devisee's rights had vested in him. The reasonS for such a course are of a substantial, and not a purely technical,eharacter. If a decree of foreclosure is taken without the presence of the heir or devisee,und a sale is had, such proceedings cast a cloud upon the title of the heir or devisee which may be a material injury to him. If the cQurtproceeds to a decree and sale, it invites per"sons to purchase "at such sale; and it ought not to do so if it is apparent that the S&le is practically formal, and will not convey a substantial interest. Furthermore, a court oUght not to decree a sale of realty under circumstap,ces that clearly show that a fair price cannot probably be realized at such sale, owing to the doubt and uncertainty as to the interest and title which will pass at such sale. If the court, in" the case supposed, llheuld proceed to a decree and sale of the realty without the presenCe of A. B., the owner of the title, he would not be bound by the decree in any particular, and the foreclosure decree and sale would amount to little beyond an assignment of the mortgage debt to the purchaser at such sale." Under such circumstances, it seems to me clear that the (Jourt should refuse to proceed in the supposed case unless the devisee, A. B., was made a party defendant; and, if this could not be done without ousting the jurisdiction of the court by reason of thecitizenshi p of the parties, then the cause should be dismissed. But it iflclaimed that, as the owners ot the undivided eleven-twelfths of the realty are before the court, the cause should be proceeded with, leaving the other interests unaffected. Can this be done, in justice to parties? The absent parties in question have just the same rights and interest to be considered, and to be affected by the decree and sale t nsthough "they owned the entire property, instead of an undivided share decree entered forecloses the mortgage, and orders a sale thereof. ofthe realty,their interest is affected just the same. as though they owned the entire ;property· "The cloud cast by such decree and sale upon their interests is.jQstthe same. It was suggested in argumentthat the decree might order' the sale c>f the undivided eleven-twelttbs of the property The result of this would owned bythe parties defendant before the bethst the lien ofthe entire debt would be cast upon the title of the owners .41tere$t, which would be manifestly unjWtt to
F:E:DERAL nltPORTER,
vol. 42.
them,as it would compel them to pay the entire debt, or else to seek reimbursement from the share left unsold, and they would then be compelled to assume the burden of proving the validity of the mortgage in another suit against their co-devisees. Again, the sale of an undivided eleven-twelfths' of a farm will never realize as good a proportionate prlce as a sale of the entirety. When a court sees that difficulties of this nature will ensue if the cause is sent to a decree in the absence of parties having a beneficial interest in the property sought to be foreclosed, it should l'equire them to be brought in; and if this cannot bedooe, for ,jurisdictional reasons, then the cause will be dismissed, and the litigants will be retnitted to the comts of the state wherein all the parties ruay be brought in, and thus the one prooeeding may settle once for all the matters in controversy. The facts do not present a case wherein a mortgage is sought to be foreclosed upon the lnterestof a part owner or of a tenant in common, and where the decree is sought only against interests of such owner. The bill charges that the mortgage is upon the interest of all the parties, and, if validly executed, srtoh is its legal effect. The children and grandchildren all take title under the will of Michael Hol,derbaum, and they are therefore joint tenants of the r e a l t y . ' . The case, cited by counsel for complainants, of Stephen v. Beall, 22 Wall. 329, and mainly relied on as an authority in support of the jurisdiction, clearly indicates the different rule that should be applied to cases wherein a mortgage on realty is given on the interest of a part owner, and that' interest alone is sought to be reached by a foreclosure decree, and lleaSe the present. where the mortgage is upon the entire interests 'of joint tenants. In that case, Mrs. Beall was the owner of orle-fourth of the property, and gave a conveyance in the nature of a mortgage, which described the entire property, but the legal effect of which was to create a lien upon her one-fourth interest, and no more. A bill to enforce the mortgage lien was filed against Mrs. Beall and her husband; her children, who owned the remaining three-fourths of the property, not being made parties defendant. The circuit court dismissed the bill for want of prop-' ar parties,and on appeal the supreme court reversed the ruling. In the' opinion filed, the supreme court points out the fact that the record clearly showed, notwithstanding the general terms used in the conveyance, that it cOllveyed only the one-fourth interest of Mrs. Beall, without af-: fecti'ng the interests of the children, and further that the bill did not seek to aflect their rights, but deciared only against the interests ·of Mrs. Beall. Under these circumstances, the supreme court held that the: children had no intereRt whlltevedn the controversy, and that it would; not be proper to make the children parties to the proceedings.. Instead' ef supporting the view'of complainant in this case, the reasoning in this that it is necesopinion tends in the opposite direction; for it sary to establish the fact that the children's intel'est in the property waS ndt affected by the conveyance of the mother, in order to support thEj conclusion that they hudno interest in the foreclosure proceedings.' The difference in the facts of the two is such that I do not soo how theruUng of. the supreme ·court be held· to8.pply:to the case
can
AMES V. HOLDERBAUM.
341;
Deeming the objection of want of parties well taken; under the facts· shown upon the face of this record, and as the absent parties cannot be made defendants without ousting the jurisdiction of the court, the order will be that the cause be dismissed without prejudice to the right of complainant to proceed in a court of competent jurisdiction.
AMPlS
11. HOLDERBAUM ef,
at
(Circuit Court, S. D. Iowa. June 8, 1890.) FEDERAL COURTS-JURISDICTION-SUIT TO FORECLOSE MORTGAGE.
Dndel:' Act Congo March 8,1875, § 8, (18 D. S. St. p ..470, c.187,) which is expressly left in force by amendatory. Act Congo Aug. 18, 18811, (25 U. S. St. p. 488, c. 866,) and.' whi\lh provides that" when, in any suit commenced in anI circuit court of the Unite\l States to enforce any legal or equitable lien upon * * real or personal property within the district where such suit is brought, one or more of the defendants' therein shall not be an inhabitant of, or found within, the said district, * * *. it . shall be lawful for the court to make an orQ.er directing such absent defendant or defendants to appear," etc., the circuit court has jurisdiction of a suit by a resident of another district to foreclose a mortgage on land situated within the district, though some of the defendants are, and others are not, residents of the district in which the suit is brought. " .
In Equity. Bill to foreclose mortgage on real estate. Kaujf'rnflnt!c Guernsey, for complainant. John Leonflrd t!c Son, and Gatch, Connor t!c Weaver, for defendants. SHIRAS, J. The complainant is, and was when this suit was brought, a. citizen of the state of Illinois; A. C. Holderbaum was a citizen of, Iowa, and Henry and David Hochstetler were citizens of Ohio; and the property covered by the mortgage sought to be foreclosed is in Iowa. The motion to dismiss is based upon the theory that under the statute of August 13, 1888,1 the jurisdiction of the circuit court of the United States is based solely upon the diverse citizenship of the adversary parties, and that, under the construction given thereto by the supreme -court in the case of Smith V. Lyon, 10 Sup. Ot. Rep. 303, this court can, not takp, jurisdiction of this cause, because two of the defendants are citizens of Ohio. If this suit was 8 purely personal action, wherein the . place of bringing the suit was dependent upon the residence of the parties, the objection urged to the jurisdiction would have weight; but is . the rule l'ecognized in Smith v. Lyon applicable to suits for foreclosure of mortgnges on realty, wherein the place of bringing suit is determined by the location of the realty covered by the mortgage? Under the statutes ·of Iowa. the mortgagor retains the legal title and right of possession of mortgaged realty,and proceedings for the foreclo8urethereof must be· brought in the county wherein the realty, or some part thereof, is situated. The decree operates in rel1l., and may be rendered -without-per-' 125 U. S. St. p. 4.33, C.
866.