FEDEU'i/
four the security giveh for the payment: 'dr· the judgment to remliin until the determiriation of the suit. The faOure to files replication is a merely technical omiSsion, which the court would never permit to interfere with a decision accorqing to the equities of the case as developed in the testimony. ''
BURTON
et al.
(OWeuit (Jourt, D. Colorado. February 19, 1889.) QUIETING TITLE-REe ADJutJiOA'.t'A. " A decree quieting title inplainti1J;s In a suit under Code Civil Proc. Colo. § ,257, providln!f. that, an actiOn I;IlIly be brought by any person in possession 01 "real property 'against any 'person who claims an estate or interest therein ad· " verse to him for the purpose of determining such adverse claim, estate. or interest." is conclusive against alladver.se claims or interests then held by, de· fendants, whether pleaded in.clefense or not.
In Equity. On plea and exceptions to answer. Teller &: Orahood, for complainant. . &:" Vaik and E. 'Miles j for defendants. BREWER, J. This case smnds on a plea and exceptions to the answer. The facts, as developed, are these: In 1884 one Ruf1.'Is Clark ,was the owner of the real estate in question. He sold and conveyed it to -Henry and Loveland for the sum 0[870,000, of which $10,000 was paid in cash,andatrust deed for the balance to two trustees. A few hundred dollars only having been paid upon this balance, the trustees, at the request of Clark, advertised the property for sale, and sold the entire tract to, Clark for 876,800. In pursuance of that sale a deed was made to Clark" who subsequently conveyed it to the. South Denver Real Estate Company. While the advertisement of the sale was in thenames o(both trustees, orily one attended the sale, and only one executed the deed. Prior to theoriginal.conveyanceby Clark to Henry and Loveland certain portioneof this land had beeu·subdivided into lots and blocks, and the { plat thereof recorded in the office of the recorder of deeds, but neither the: conveyance from Clark, nor thetruBt deed, nor the advertisement of sale: took any notice of thisplattingj but described the lands simply by quarter secti'ODs and PlutS. thereof. At the time of the sale in pursuance of of Clark by his attorney; the trustee made this announcement: . desire to sell this property for the highest possible price it will bring' in cash.· In,order to ascartain the best pl'jceobtainable for the whole propel'ty I 'Yill tirst Offer it in b;l Jots and blocks separately, and the rest}n tracts of about twenty-two. to ..acres. each, After, whole is thUs and t.lle aggregate of the liighest bids computed, then thewhble tract WIll be offered m one body. If the aggregate of the high-
139 elJtbid'll. J'v,ben offered, in blocks, e,'qual& tbe st. b.j<iWbe.n Off.e.r.eda..!! a .the, propert.y WJ..·.11 b.est.r.Hck .... iilg to sqcn' bids in parcels; 'other-wise if will be 80lq .. " . In pursuance of. this announcement· it was so offered' in lots, blocks, the aggnlgate 'of the various bids, the and parcels, and, on amount.was$76,798.87. Then it wasofl'eredas a whole, and $76,800 offered, and the property struck off to the bidder. ,Prior to the sale, one McIntosh, who is a party .to this bill, and oUf' of the principal stock' holders in the real estate company, being deskous of obtaining the land i entered into a written contract.with Clark, by which the latter agreed to have the .property sold under the trust· deed, and if he o1;>tained title thereto at such sale, to convey. to the former at a named price. It was also stipulated in this. contract that Clark should attend the sale, and make bids in pursuance of instructions from McIntosh. The sale and the deed to Clark were on the 3d of August, 1886. Thereafter, and on the 12th .of April, 1887, Henry: and Loveland filed a bill in the state court, alleging that the sale anddee.d were void on the ground that they were made· and executed by one trustee, and not by both, and also on the ground of some defects in. the advertisement, etc., praying that that deed and aJI subsequent conveyances be canceled and held for naught, and that upopthe payment of the balance due on the original purchase price a conveyance should be ma.de to them. To that complaint the various defendants answered, and .also filed a cross-complaint, in which they set out .the original sale fromClark,the trust deed, the advertise1llent, sale, and deed, and subsequent conveyances, and alleged that the proceedings of the complainants were casting a cloud upon their title, and prayed that it might be quieted, and the defendants in the cross-complaint decreed to have no right or claim or interest in or to the property. The plea.dings having all been perfected, the case went to trial, and a detree .WllS entered in which it was found that none of the material allegations ofthe bill of complaint were sustained, and that all ofthe material allegations of the cross-complaint.were sustained. and adjudged that the original bill be dismissed for want of equity, and that the title of the cross-cotri'plainants be quieted, and forever set at rest as against all claims whatsoever of the complainants, or either of them. This decree was taken to the stipreme ,court of the ,state for review, and by that tribunal afnrmeel,! Thereafter, on July 16, 1888, this bill was filed, which is called a· "bill-to redeem," and sets up the facts heretofore stated, except the proceedings in the state court; tenders the balance due on the original purchase price, with interest; and prays a decree for redemption. It sets upa title in complainant, derived from sundry mesne conveyances from Henry and Loveland. It also sets up a title derived by conveyances from the parties whQ bid for the several lots and parcels at the trustees' sale. Now, the plea sets up the proceedings in the state'court as a bar to all claims which complainant may have deriVed thfoughhis r.onveyaxwes , : - ;' !.' . . ..- , ." '.,', · .
1 Loveland
.,. 'Olark; 18 Pac. Rep.' M4.
FEDERAL REPORTER,· vol.
37.
from Henry and Loveland; and the answer, besides· being in· support of the plea, sets up defenses to ijJ.e title obtained by the conveyances from the bidders for the lots and parcels. -This, I think, presents all the substantial facts in the case. Some technical questions have been argued, but I think it useless to notice them, and proceed to the substantial matters. I have not mentioned all of the conveyances by which titws have been transferred, or the various parties who have interests, but have treated the complainant on the one side and the real estate company on the other as the real parties in interest, for, their rights being settled, all other questions and rights are disposed of. Now, are the proceedings in the state court a bar to this action? It is said by counsel for complainant that the state case proceeded on the theory that the sale and deed were absolutely void, while this accepts the sale as apparently valid, but goes upon the theory that it is voidable, and seeks simply redemption, and that the wrongful and fraudulent contract between Clark and McIntosh was not set forth in the bill of complaint in the state court, or made the basis of relief. Inasmuch as complainant holds under Henry and Loveland, by conveyances since the former case, this action must stand as between the same parties in reference to the same property, and I think it would be difficult, even if no cross-complaint had been filed in the original case, to draw any substantial distinction between the two actions, or avoid holding that the former was a bar to this. The fact that new matter is added in the complaint makes no difference. In the case of OromweU v. County of Sac, 94 U. S. 352, the supreme court lays down in very clear language the rule controlling as follows: "In considering the operation of this judgment, it should be borne in mind, is a difference between the effect of a judgment as stated by counsel, that as a bar or estoppel against the prosecution of a second action upon the same claim or demand, and its effect as an estoppel in another action between the same parties upon It different claim or cause of action. In the former case, the jUdgment, if rendered upon the merits, constitutes an absolute bar to a subsequent action. It is a finality as to the claim or.demand in controversy; concluding parties and those in privity with them, not only as to every matter which was offered and receiv,ed to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that pose. Thus, for example. ajudgment rendered upon a pr()missory note is conelusive as to the validity of the instrument and the amount due upon it. although it be subsequently alleged that perfect defenses actually existed of which DO proof was' offered; such as forgery. want of consideration, or payment. If such defenses were not presented in the action and established by competent evidence, the subsequent allegation of their existence is of no legal judgment is as conclusi vet so far as future proceedings consequence. at la ware concerned. as though the defenses never existed. The language, therefore. which is sa often used, that a judgment estops not only as to every ground of recovery or defense actually presented in the action. but also as to every ground which might have been presented. is strictly accurate When applied to the demand or claim in controversy. Such demand or claim,having passed into judgment. cannot again be brought into litigation between the at. III w upon any' ground whatever."
But I shall not stop to pursue this question, for, when we consider the decree in former case, it was a decree upon the cross-complaint, and
BURTON fl. BUMA.
'141
a decree quieting title. The cross-complaint wall properly filed, for the matter set up therein was germane to that presented in the original complaint. The propriety of its presence was unchallepged, and the parties went to trial upon that, and the decree of the lower court was affirmed by the highest court of the state. Now, if a decree in an action quieting title amounts to anything, it must be held that in a case like this it has quieted defendants' title as against all claims growing out ofthe transactions of the sale. The Colorado Code provides not merely for settling the title, but every title, claim, or interest, and the decree which was rendered quieted the title as against all claims. l It is said in Pomeroy on Remedies, section 369. that the object of this statutory action is the "putting all litigation to rest." In Green v. Glynn; 71 Ind. 339, the court observes: "The very object of the action to quiet title is to determine all conflicting claims and to remove all clouds from the title of the complainant. If one having a claim is brought into court by a complaint to quiet title, and fails to assert his claim, he is concluded by the judgment, even though he omitted to assert his real claim. The statute was intended to secure repose, and to settle in oue comprehensive action all conflicting claims. ... ... ... If one brought into court, and being not only allowed full opportunity to assert such claim as he may have, but directly challenged to do so, neglects to USe this opportunity expressly afforded him, he has no right to again vex the courts or those claiming adversely to him by instituting a new and distinct action against the party who summoned him into court." In Farrar v. Clark, 97 Ind. 449, I find this language: "The qUl'stion as to the effect of a judgment in an action to quiet title is important butnot difficult. If, as has been so often held, the purpose of the action is to determine and quiet title, then it is manifest that the judgment determining and qUieting title must be conclusive. The decree quieting title in the appellees was not a mere empty declaration. It was a conclusive adjudication. Title will not be quieted unless the decree can operate, and if it doe!l operatt', then it puts at rest the question of title. In a case similar W present, the court said: 'Of what avail, then, can it be to the plaintiff to have his I itle qUieted in him when, after that is done, he cannot r cover possession upon it? EqUity will not grant a relief in form which must be valueless in fact.' ... ... * The object of the action to quiet title was to settle all claims, and the question of title was the dominating one in that action, and the trolling one in this. It is a mistake to suppose that the object of a suit to quiet title is to settle partiCUlar claims. On the contrary, it is, as was in stance said in Barton v. McWhinney, 85 Ind. 481, an action to quiet the plaintiff's title against all claims of the defendant, whatever they may be. If, then; all claims are included, all claims are necessarily finally adjUdicated, and the question of title forever settled... The Oregon Code is very like the Colorado one, and something of a similar question was presented under that Code to the United States circuit court of that district in Starr v. Stark, 1 Sawy. 276, Ilnd the court disposes of the :qJatter in these words: " 1 Code Civil Proo. § 257. An aetion may be brought by any person in possession, by himself or his tenant, of real property, against any person who claims an estate Q1' interest therein adverse to him, for the purpose of determining such adverse claim, 6S,
J'EDERAIi REP0BTEBjVOl.
37·
at hiS option split It up into manllJuitlnvitb which defendant." By the final decree .insQpl1's snit, the tc:! between the,PNties is determined, and aU questions or matters a1fectipg such title are cdnclud'ed tl]ereby. If either party omits to set forth arid prove all thegrol1n(ls of his right, or, his adversary's want of it, he Cannot correct ,his error by bringing another suit upon the portion or fragment, of the case omitted. **. '" ' If they failed to bring to the consideration of the court by proper proof oJ; allegation anything material to a correct determination oithe controversyforwpjch SQch suit was given and brought to It was'their own fault, and they must abide by the consequences." In Sedgwick & Wait, on the Trial of Title of Land,it is declared that a decree in an action to quiet title is conclusive, and puts all litigation to rest as regards the parties to it, and the titles involved, and in Reed v. Calderwood, 32 Cal. 111, under a similar statute, the court observes : "ltinay be admitted that the plaintiffs were not in strictness entitled to a decree enjoining the defendants from making any further contest on the plaintiff's title, whether judicially orothel'wise;still the error must be disregarded, for it cannot affect any substllntral right oithe party.. The decree would have been a bar to subsequent litigation on the same subject-matter if the injunction clause had been omitted, and that clause may be of positive service in preventing the bringing of suits by ,the defendant which, if brought, wO,uld be sme to fail. The defendant, however, is mistaken in supposing that the injunction will preclude him from availing himself of an after-acquired title." Arid in Pa,rrish v. Ferris, 2 Black. 609, the suprenie court of the United States observed in reference to the Ohio statute, which is like the one of this state, as follows: "The statute authorizes any person in possession of real property to institute a suit ag!lil1st anyone who claims an estate or interest therein adverse to him, for the purpose of determining such adverse estate or interest. Now, it is quite apparent that the title of the defendant to the lands in question is involved. underthis act, and that the determination of the comt must be conclusiveagidnst him, and all claimmg under him, as between the parties. If not, the act is of no effect. " . And indeed, if a decree in an action to quiet title does not quiet it, it is difficult to conceive the object or purpose of such an action. It does not seem tome open to question. r have not the slightest doubt that the decree under the cross-complaint in the original action barred all of complainant's claims springing out of the trustee's sale, and passing to him through the conveyances of LovElland and Henry. It follows from this that the plea must be sustained. With reference to the exceptions tqthe answer, it is unneoessary to notice them in detail; it is enough to say that the bidders at the sale took nothing by their bids, either at law and had therefore nothing to convey to complainant. The method of sale adopted by the trustee was one in frequent use. Its propliety ,c!1unqt be questioned. Indeed, it may be considered as settled. Many decrees even contain 8/ provision directing such method of sale. I remember the decree in the Wabash foreclosure contain'ed a similar proas there is DO suggestion that there was any mistake in the several bids, or that the ,amount bid fot the land in gross did 'n'ot exceed the amount of the several bids, or that the property
to,
.
was not finally struck off on the single bid, thesepro....te bidders have no claim, either in law. or equity. Furthermore, it may well be doubted whether there was any memorandum in respect to their bids, sufficient to sustain them under the statute of frauds. Eppich v. Clifford, 6 Colo. 493; Grafton v. Oummings.99 U. S. 100. As no cause of action appears in respect to this claim of title it is unnecessary to any time upon the exceptions to the answer thereto. The order. therefore, will be that the plea be sustained, and the exceptions to the answer overruled. '
GIBSON t7. RICHMOND & V.&.
Co.
(Q(rc'Uit Oourt, 8. D. New York. February .23, 1889.) RAn-ROAD C<mPANIES-BoNDS AND ¥ORTGAGES-RIGHTSOF MORTGAGEES.
The state of North Carolina. under act Jan. 27, 1849, tbe N;' C. R. Co., subscribed for $3,000,000 of' its $4,000,000 authorized capital stock; with the right to vote thereon. and to appoint eight of the twelve directdra.: The state created a statutory mortgage upon its stock to secure constr,uction', bonds issued by it. and subsequently created a second mortgage on its stock to secui'e an issue of bonds. Thereafter, and while the road was paying 6 per' cent. per annum on its capital stock, defendant. with notice of the rights of: the second bondholders. took a lease of the road ata rental cient only to pay the interest on the first mortgage bonds. The chartEir ail" thorized the N. C. R. Co. to lease its property and franchises, and it w,asnot claimed that the lease was improvident, or in any respect invalid. The plainant, a second mortgage bondholder, filed a bill against the defendant" the lessee, to compel it to account for the excess of earnin'gs above the amount of interest on the first mortgage bonds, upon the theory that by the' hypothecation of its shares to the second mortgage bondholder:s the state. fm·' pliedly agreed to become a trustee for them, and exercise its control as a nia-' jority stockholder in the N. C. R. Co., so as to preserve the earnings for the' benefit of their bonds, thus making the earnings a trust fund which COmplain·' ant could follow into the hands of the defendant. the defendant beiJ;l'g a r,,·, cipient with notice. The defendant demurred to the bill. Held, (1) that in the absence of ,any averment of fraud in the making of the lease the com· plainant could not maintain the, action. (2) That the state was no mOre a. trustee than anv other majority shareholder of a corporation who mortgages, his stock, and was under no dutyto the mortgagee except to conduct itself' honestly in exerting its power of control for the interests of the mortgagees' and the. other creditors and of the corporation. '
"
In Equity.
Edward L. Andrews, for complainant. George Hoadley, for defendant.
On demurrer to 'bill.
;:
WALLACE,J. The 1J0mplainant is the owner of certain bonas1'or: 81,000 each of the state of North Carolina, created pursuant to an act of' the legislature'Qf the state, and containing a certificate executed· by; the authorized officers of the state, which recites that "ten shares of the stock in the North Carolina Railroad Company, originally subscribedfol"by the state, are hereby mortgaged as collateral security for. the' of