811 should not be required to e:x:amine and pass upon: them unmall persons interested in' such determination are befoJ;'e 'it. The objections to the master's report are therefore overrpled.
FARWELL
et al.
'lJ. BROWN
et ale
(Oircuit (Jourt, D. indiana. JUDGMENT-RES ADJUDICATA. '
July 21, 1888.)
Where, in foreclosure proceedings against the husband's property under & , mortgage to the wife, hIs creditors are permitted to become parties defendant, and by cross-bill they seek to recover judgment against the husband, and to have the mortgage notes to the wife declared fraudulent and without consideration, and the court on the trial strikes out aU the evidence on the question of fraud as not being properly raised' on the pleadings, and decrees for wife, the controversy between them becomes rea adjudicata, and such creditors cannot maintain an action against her to annul the mortgage. and to hold' her as a trustoo for creditors of the proceeds of the mortgagcd property.
In Equity. On plE:'lt to the bill. The complaint is in the nature of a creditors' bill, whereby the complainants, J. V. Farwell & Co., of Chicago, and Woods, Perry & Co., of Boston, as, creditors of Francis M. Brown, seek to have the defendant Cornelia Brown declared trustee for their use of moneys derived from the' sale on foreclosure of goods mortgaged by said Francis M.Brown to the said Cornelia,his wife, on the alleged ground that the mortgage was made in fraud of the complainants and other creditors of the husband. The complaint shows that. the complainants, upon their own motion, were admitted as parties defendant to the proceedings in foreclosure, which were had in the state court in the Muncie circuit, and that in that court they were given judgments for the respective amounts due them against Francis M. Brown, but it was held and adjudged by tbe court" that the question of the bona fides of the said mortgage as to these complainants was not in issue, and was not tried or adjudged in said proceedings, but the same remained open and undecided." In an amendment to the bill more specific references and I'ltatements in respect to the proceedings in the state court are made, to the efrect that the question of the validity of the mortgage was excluded from consideration by the court. The complainants, it is also shown, appealed the case to the supreme court, which affirmed the judgment' and decree of the circuit court. For the opinion, see Bank v. Brown, 14 N. E. Rep. 35$. The plea.set.s out a transcript of the proceedings and judgment of the state court, and asserts that by force thereof the issues tendered here were finally adjudged, and .the complainants estopped from their further presentation. It appearsifrom the transcript that, having been admitted as defendants in the case, the complainants filed a cross-bill against Francis M. and Cornelia Brown and other parties, wherein, upon aveI:rnents less. full,
812
FEDERAL REPORTER.
but of the same general scope as those contained in their bill here, they asked to have the mortgage declared fraudulent and void, and the mortgaged property subjected to the payment of their demands. Issues oflaw and of fact were joined upon this cross-bill and other pleadings in the case, and trial had before the court, which made the following finding: "The court finds for the plaintiff, Cornelia A. Brown, upon her complaint in this cause, and that she is entitled to a foreclosure of the mortgage set out, etc. And as to all other questions and issues presented and raised by, under, and upon the cross-complaint of the said parties composing the firm of J. V. Farwell & Co., the court finds for the plaintiff, the said Cornelia A. Brown." This finding, and the decree upon it, were entered at the June term of the couft, 1885, the hearing having been had at the previous term in May. Pending that hearing, as is alleged in the amendment to the bill, the plaintiff therein, the said Cornelia, moved "to strike out of the evid'ence in the cause all the testimony, and all other evidence admitted upon the trial, which proves or tends to prove in any manner whatever the fraudulent character of the mortgage executlild by the said Frank M. Brown to the said Cornelia A. Brown, because the cross-complaint of complainants was insufficient in averment to present the issue;" and afterwards a bill of exceptions was signed and made a paft of the record, showing "tpat at the time of announcing his finding and judgment the court sustained said motion to strike out the testimony, and all other evidence ltdmitted upon the trial, which proves or tends to prove in any manner whatever the fraudulent character of the mortgage executed, etc., and did not consider the same, or any part thereof. in making up his finding and judgment, because the. fraudulent character of said mortgage was not triable, and was not tried in this action." The opinion of the supreme court, so far as pertinent to the present discussion, is as follows: '''rhe cross-complaint is good as against Francis M. Brown. It is not good 8S against the appellee. (Cornelia,) so far as it attempts to charge her with fraud; but it is good so far as it shows that she claimed an interest in the property in contruversy. The demurrer to it was therefore properly overruled. But in overruling this demurrer the trial court did not decide in advance that it would receive evidence tending to prove that the mortgage was to defraud creditors. ... ... ... It cannot, therefore, be justly assumed that the court misled the appellants. A party who files a bad pleading, and not the court, is in fault. The appellants were in fault in not making their cross-complaint sufficient for all that they desired to accomplish. ... ... ... Ae there was no pleading el),titling the appellants to introduce the evidence struck out, we cannot condelnn the ruli ng of the trial court." It is further to be noted that the Muncie National Bank, holding a mortgage upon the goods of Francis M. Brown, junior to that of Mrs. Brown, had procured the appointment ()f a receiver, who had taken possession of the goods, and that bank and the receiver so appointed were made defendants to the action of Mrs. Brown. Flower8, Bemy &; Holstein and &; Calkins, for complainants. The Rtatute declares that a bill of exceptions" shall be a part of the record." Rev. St. 1881', § 629. A bill of exceptions is not only an absolute verity, uut it controls the record. Pace v. Oppenheim, 12 Ind. 533; Jelley v. !loberts,
FARWELL t1. BROWN.
813
50 Ind. 8; Oarmichael v. Shiel. 21 Ind. 66. By this bill of exceptions. made at the time of announcing the finding and judgment, the court declared, at the instance of Mrs. Brown. that he laid all question of fraud out of the case. This was equivalent to the court dismissing that part of the cross-complaint. The court declared that it would not try to decide the merits of the fraudulent character of the mortgage; and. inasmuch as Mrs. Brown procured this actinn, she is bound by it; because, where one has a right of election and chooses one course. he cannot thereafter take the other. She might have permitted the court to pass on the merits of the question, because the objections to the pleadings were, in the language of Mr. Ryan. techniccU; and with jUdgment the pleadings would have been good. It is well settled that where the record discloses that a question of fact went out of the case on a technicality, and therefore the court did not pass upon the merits. that it is no bar to a new action well stated. Paine v. State, 7 Blackf. 206; Estep v. Laj'sh, 21 Ind. 190; A.thearn v. Brannan.S Blackf. 440; Outler v. Oox, 2 Blackf. 178; Griffin"v. Wallace. 66 Ind. 417. In considering whether a case went off on technical ground or on the merits. the court wiIllook at the law as it was then understood by the bench and bar. Foster v. BUsteed, 100 Mass. 409, (\\ foreclosure ;case.) All must agree that the question of fraud was never tried. And tbis. narrows the inquiry to the point whether we were llound to present it in that case. We had no mortgage, judgment. or other lien upon the property, nor were we ever made parties to Mrs. Brown's complaint. Nor did she ever make any charge or challenge against us. We were permitted to defend. In our answers we attacked the amount of hel' debt by pleading no consideration and payment. This did not put in issue the integrity of the mortgage. Of course, if there was no dput, or if it were lessened byoperation of law, the mortgage would be reduced accordingly. But under these answers no evidence could be offered concerning the mortgage. The crosscomplainant songht-First, to recover judgment against the husband; second. it described the notes upon which Mrs. Brown sued, and charged that they were without consideration, and therefore the mortgaf(e should not be enforced. The property, as shown by tIle cross-complaint, was then in the custody of the court, and we could aC'luire no lien upon it by execution or otherwise. All matters relating to the fraud are cOIl,sidered as Ollt of the cross-complaint. Now, the precise question is, were we bound in law, if we attacked the amount of Mrs. Brown's demand in that action, to make any othH attack which the law permits? It seems to us that there is a distinction between a defendant challenged to bring forward any claIms he may have upon property, and a case where a crp.ditor attacks both the amount of the debt and the validity of the security held by another. A man may take a judgment on a secured note. and afterwards by another suit foreclose the. mortgage. In the suit upon the note the maker might interpose an answer as to the amount of the debt. and to the mortgage he might plead another answer, that it was obtained by fraud. This shows that the debt is matter, and the mortgage another subject-matter. So, where a man has a claim which he may use for a defense, he is not bound to use it as a defense, but may use it in attacking. Freeman on JUdgments says: "Thus. where a Ilefendant, sued for the price of a horse, set np as a defense a breach of war, ranty of soundness of the horse, and failed to appear at the trial. and judgment was rendered against him, he was allowed afterwards to recover of the plaintiff fOl' the same breach of warranty, because this was an affirmative calise of action which the defendant had a right to litigate as plaintitl'." Section 272. In Ulrich v. Drtschell, l'8 Ind. 359, it is said: "It is not universally true that, where a party pas an opportunity to litigate a question and neglects to avail himself of it, that the judgment is conclusi vet The test is whether he is bound to set up all his defenses."
814
FEDERAL
Cl!-se ,is peculiar. ,The property was in, tJle custody of the law. and, w'hHelle'hadnot made'an assignment, yet the generaJ had an lIot 0111y in this proHerty, b-:t in disputing the amount of Mrs. Brown's claIm. ' If the amount of that claIm could be reduced orextiilguished, the creditol'S wO!Ild get a larger division on distribution. 'fherefore they had one cause of 'action to resist her claim against the receiver in' this suit, because a jUdgment against her husband in a suit to which the receiver was a party would establish the amount of the debt when in the'other case; and, if the property did not sell for enough to pay Mrs. Brown's jUdgment, she could provide for the residue, and sharf'in any other property coming into the hands ,of tllereceiver not covered by the mortgage. Creditors are often required to plead inter sese. If in a recei vership creditor A. presents a claim secul'edBy mortgage on the property, creditor B. might attack the amount, and credItOr C. the security or mortgage; or one creditor might do both. But if ont' creditor does the one, is he estopped thereafter from doing the other? It c:lertainly was understood by the bar and bench, at the time these proceedings. were had, that a mortp;age could be foreclosed against a receiver, and the property sold without special permission. I doubt if GUbe1'tv. McCorkle, UO Ind. 215,11 N. E. Rep. 29,6, changes the ruie, as that question seems not to have been contested. Now, we were not asserting specific liens on thiR property in our behalf, but only resisting the amount of an ,allt'ged lien. This did not bring before the court the question as to the fraudulent character of the mortgage. Mrs. Brown had no right to foreclose the mortgage against us; but we pad a right to attack both the amount of her not as lienors, but as general distribudebt arid thevl!-lidity or her tees. ''l'he!evidence touching the amount of the debt would not affect the integrity of the mortgage. and viee,ve1'sa., Harding v. Hale, 2 Gray, H99, illustrates the princi"ple. So.hl're, Mrs. Brown cannot say, "¥ou brought your action to set aside a mortgage for fraud. and failed becatise I objected to that question qn' technical ground, and now yOIl shall not try it on a good p;round." When the matter in the fitst suit is ruled out as inadmissible under the pleadings, such matter is not 'res adjudicata. 2 Lead. Cas. 673; Freem. Judgm. § 263; Baker v. Rand, IS Barb. 152.
Ritter it Ritter, 'for'defendants. WOODS, J., (after 8tating the facts (L8 (Lbove.) It is the well-settled rule of practice in Indiana that in an action of foreclosure a party defendant Ulustbrillg forward for adjudication whatever right or interest he may have or claim in the mortgaged property, and that, in default of so doing, the, de,cree, though silent on. the will deemed as effective to ,bar the right 's an express aqjudication could be made. 'Ulrich v. DriacheU, 88 Ind. 354; H08ev. Allwein, 91 Ind. 501. In addition counsel have cited the following: Tate VI Hunter, 3 Strob. Eq. 139; Stockton v. Ford, 18 How. 418; Rinck v.Wood, 43 Bal'b. 320; Hotel v. Parker, 58 Mo. 327; Oovington v. Sargent, 27 'Ohio St. 237; Prentis8v.Drtnaher, 20
v. Greene, 29 Ga. 420; Deweyv. Peck, 33 Iowa, 242; MU'f'/'ell v. Smith, 51 Ala. 305; Kelly v. Donlin, 70 Ill. 378; Hatch v. Garza, 22 Tex. 177; Mar8h v.Mandeville, 28 Miss. 128. Counsel for Mass. 394; complainant, not disputing this rule, contend that it does not apply, because, as the record shows, the court, at the instance of the respondent, (complainant in the action referred to,) ruled that the issue was not
Wis. 314; 111.$Ur{)/nce 00. V. Six.bury,'17 Hun, 424; Loringv. Man.'Jjield,17
FARWELL '/7. BROWN.
815
tried, and could not be tried in that action, and struck out the evidence adduced on the subject. Freem.Judgm. § 278. If the record bore out this proposition of fact, the court could not but agree with counsel, but upon close examination it does not appear that the state court ruled, and, indeed, it could not have ruled, on the record before it, that an issue could not have been formed in the case upon which the question of the validity of the mortgage as between complainants and Cornelia Brown could have been detElnilined. The motion made to strike out the evidence involved no such proposition, but, by implication at least, indicated the opposite view; and when the court said or held that the "fraudulent character of the mortgage was not triable," the meaning was "not triable upon the ,issues made," and this the supreme court affirmed on appeal,and declared the appellants at fault for not having presented the issue in ,a proper 'Way. That decision, whether right or wrong, concludE'S the point between the parties here. The legal effect of this record therefore is, not that the complainants were denied a trial of the issue now terldered by an improper ruling of ,the court made at the instance of their adversary, but that no such issue was before tbe court; and consequently, under the rule stated, the rights involved must be deemed to have been settled and denied by the decree, as if the issue had been properly formed and. determined adversely to the complainants. The fact that the complainants ·were not made parties originally, but were admitted to defend upon their own mdtibn.,' if of any special significance, would seem to add empl1asis to the requirement that they should have brought forward in that suit every cause for attack upon the mortgage which they had. It was certainly not competent for them to aSsail it for wlmt of consideration,-if that be the proper construction of their cross-complaint,-and hold in reserve for another attack the charge of fraud, as distinguished from want of consi4eration. Indeed, the attllck now sought to be made on the grO'llnd of fraud is predicated largely on "want of .consideration." If the objection made by Mrs. Brown to the cross-complaint was technical" and might have been waived so as to permit a valid adjudication of the question of ,fraud as, if well pleaded,it is also true that, the objection having heen made and, as the supreme court of. the state has said, well made, the complainants might have obviated it by proposing the necessary amendment of their cross-bill, and, not having done this, must be · to have chosen to abide by the issue as, made, however technic·ally construed. Plea sustained.
816
HUNT "'. PATCHIN.
(Circuit Court, D. Nevada. June 8,1888: 1. MINES AND Mmum--LoCATION AND ACQUISITION-TRUSTS-CONFIDENTIAL RELATIONS. '
The owners in common of mining claims, owing to difficulty in raising money to pay the taxes and do the labor required by statute to prevent a forfeiture of the claims, after extensive correspondence between complainant, who was the principal owner, and defendant. who was acting as manager of the mines, determined to allow a forfeiture, and let defendant immediately relocate the claims in new names. which he did in his own name alone, after writing for advice to complainant. who prepared and'sent him a form of notice in his name as locator. Held, tha.t a trust attached to defendant's title in favor of his associates.! ,
2.
SAME-LIMITATION OF ACTIONS-RUNNING OF STATUTE.
An action begun May 18, 1885, to enforce such trust, the relocation having been made January 1,1883. is not barred by the statute of Nevada limiting to two years the time for an action to recover a mining claim. where there was no intimation that defendant denied the trust until May 29, 1883, ,when,' in answer to one who delivered a message from complainant in relation to a sale of the mines.,he said that he had relocated the whole mine in his . qwn name, but if a sale was made he would do square thing by his associates. . Where defendant, after relocating a mining claim in his own name for the lJenetit of himself and associates, and after action brought to enforce the trust, applies to enter the land as mining ground, advertises in pursuance of statute, and, no protest having been made. pays the purchase money, and has a certificate of ehtry issued to him, the complainant's right is not concluded by the certificate"though he does Dot ,set up an adverse claim Hnd bring suit to establish his right within the time allowed by statute, as his title is not adverse to. but a part of, that upon which the certificate was obtained.
8.
SAME-FAILURE TO SET UP ADVERSE CLAIM.
Bill to establish a trust in certain mining claims. and A. B. Hunt,for complainant. Trenmore Coffin and George S. Sawyer, for respondent. Before SAWYER, Circuit Judge. J. D. T01'reySCYn
In Equity.
SAWYER, J. This is a bill in equity to establish a trust in three mining claims in favor of complainant, and to compel a conveyance to him of the undivided sixtieths parts. For some years prior, and down to, January 1, 1883, the complainant, the defendant, and one JlI.mes were owners as tenants in common of three 'silyer mining claims in eastern Nevada, of which complainant held thirty-one sixtieths, James twenty sixtieths and defendant nine 8ixtieths. These proportions were fixed by a mutual interchange of conveyances. The interest of James, whatever it is, has become vested in complainant, making his interest now, if he has any, fifty-one sixtieths, and that of defendant, nine sixtieths. During the year 1882 the parties found it inconvenient to raise money enough to pay the taxes and do the amount of work on the claims
tAs to wben equity will raise l!' resulting trust....see Bitzer v. Bobo, (Minn.) 38 N. W. Rep. 609, and note; Hay v. Marttn, (Pa.) 14 Atl. .l:Wp. 333, and note; Hoar v. Hoar,! N. Y. Supp. 379.