171 ,;1',' ,Cl",
GRAY
v;HAVEMEYER etal.
(tJltclflt"COtltt of Appeals; Elkhth Circuit. October 81,1892.) No.188. t. TffiL " PAnTIES-JOINT , LIENS-PRIORI-
a to a mortgagee and certain mechanic'S' lienors were madl:l parties, the court directed a sale of the property and an application of the proceeds to the payment, first of costs. next of the mortgages in their order, and next of the mechanics' liens; and decreed the ,atn0unt due each lienor, and the equality of all the ,mechanics'Jiens in point oftiine, I:(eld, thafth'e decree was:not'joint lis respects the mechanics' liene: to prevent an ,appeal by: one'alone, but WAS several as to,each.
2. ',$AME,,:","NECESSA'RV )\lEGHANICS' LIENORS. But, where one of the1Jlephanics' Uenors appealed. seeking to have his lien given priority, the otlij:lI"s were necessary parties, since the court could not ,: subordinate their Uensrtohis in their absence. ' 11 SAME-OWNER Oll' PROPEltTY-PROVINCE OF OOURT-EsTOPPEL.
, lieJ;lQrbeinQ' a subcontr,actof, and seeking by his appeal to have' his lien adjudged prior to the thortgap;es, as well as to the other me'chani{is' liens. the owner of: the land was also a necessary party to the appeal, sincehewQuJd bEl for a balance due on the mortgage notes, but not ,oDthe am,ount ,of the subcontractors' lien: and the court could assUttle;the possible the land to sell for enough to meet both lien and mortgages, and the consequent injury to the owner. since the decree appealed' , be injuriousto,the subcolltraotor only.by assumiug the same posSIbility. , , 111 a suit to foreClose a mortgagll givenbn realty in Nebraska, and executed' by a resident of that it waae.-rpr f,or the court to ,allow attoran item of uI!'dllr a provision of the mortgage for such an neys' f,ees, , allowance in case of 'since the supreme court of Nebraska had determined that sueh a'prov1'8ion,in a mortgage was invalid. Bendey v. TownCt. Eep. 109 U.S. 665, and Dodge v. Tulleys, 12 Sup. Ct. Rep. ,728. .: '; U. S. 451,. ' ',', ·i.l ' I'" .'.<,'
4. FEDERAL 'Cot1RTs-FoLLOWING STATlll PRACTICE-COSTS OF FORECLOSURE.
Appeiu 'fi:oom theCireillt Court of the United States for the Dis· trict of Nebraska. In EqUity. Bin to foreclose a, mortgage, brought by Sarah A. HavemeyeragainstJ. R.· Van Closter, mortgagor;O. F. Davis Company, subsequent mortgagee; Fred W. Gray, mechanic's lienor; and other lienors. Decree. :for "complablant. Defendant· Qray appeals, causing citation, to issu,e, only tocoJ1lplainant, Havemeyer, and defendant O. F. Davis, Company. Modified and affirmed. John C" Wharton ,arid William Baird, for appellant. John L. KennedY,ltnd,M. L. Learrted,for'appellees. Before CALDWELL a.nd SAN:sORN, Circuit Judges, and SHI· RAS, DistriAt Judge. SHIRAS, District Judge. On tM 6th day of December, J. H. Van Closter executed and delivered to Sarah A. Havemeyer a mortgage on certain lots in the city of Omaha, Neb., to secure the payment of a promissory note for the sum of $2,500. The mortgage was recorded in the office of the register of deeds of Douglas county, Neb., on the 17th day of January, 1890. On the 6th of December,
GRAY V. HAVEMEl:ER.
175
1889, the said Van Closter executed· another mortgage on the, same lots to secure the payment of five promissorynores for $25 each, and payable to the O. F. Davis Company, which mortgage was recorded in the register's office of Douglas county OD the 18th day of JanuarY,1890. At some time in the latter part of the year 1889, the exact date not being made to appear on the record, the firm of Statler Bros. contracted with J. R. Van Closter for the erection of three houses upon lots 1 and 2, in block 15, in Hanscom place, the mortgages above named being given upon the west 50 feet of these lots, upon which was one of the buildings erected by Statler Bros. In December" 1889, Statler Bros., as we understand the record, contracted with Fred W. Gray for the furnishing of the door and window frames and other woodwork and material needed in the erection of the three houses upon lots 1 and 2. On the 20th of December, 1889, Gray furnished for each of the three houses five cellar window frames and two'cellar door frames, no other delivery being made until the following March, when the furnishing of the material was resumed, and completed in June, 1890. On the 20th day of August, 1890, Gray made out under oath a claim for a mechanic's lien under the statute of Nebraska, which was, on the same day, duly filed for record and recorded in the register's office of Douglas county. On the 10th dayo£ March, 1891, Sarah A. Havemeyer filed in the United States circui,t court for the district of Nebraska a bill for the foreclosure of the mortgage held by her, the mortgagor, Van Closter, having defaulted in the payments thereinealled for, and to this 'bill the O. F. Davis. Company, Fred W. GraY,and a number of others holding liens upon the realty were made parties defendant. .The O. F. Davis CompJi,ny! answered the bill, admitting the averments thereof, and filed a cross bill praying for the foreclosure of the mortgage held by it. Fred W .. Gray answered the bill of complainant, setting forth his claim for a mechanic's lien, averring that there was due him the sum of $3,456.91 for materials furnished and used in the erection of the houSles built for Van Closter by Statler Bros., the same being furnished under an agreement made before December 20,1889, and praying that the same might be adjudged to be a lien prior and paramount to that of complainant's mortgage. The case was submitted to the circuit court upon the pleadings, the notes and mortgages, and a stipulation of facts signed on behalf of the complainant and the defendant Gray. The court granted a decree wherein it is found that the mortgages are valid liens on the realty; that the defendant Gray has a mechanic's lien for materials furnished upon the realty covered by the f\lr the sum of $1,202; that certain other of the defendants have liens for matflrials furnished; that for the sum of $12, being the Yallle of the materials f11l'nished by the defendant Gray on the 20th of December, 1889, and before the recording of the mortgages, the said Gray has a lien priOlo LO the mortgages, but that for the remainder of the sum due him his lien is inferior to that of the mortgagees; that, with the exception of the $12 just mentioned, the 'mechanics' liens, including ,that of F. W. Gray, are equal in point· of time. Based upon these findtngs,a foreclosuue of the mortu:ages was decreed, it being directeo
FEDERAL REPORTER,
voL 53.
that the proceeds' of· the sale I!lhall be applied in payment of costs, next to the payment of·the $12 to F. W. Gray, next to the payment (Yf tbesWl1s due on the mortgages in their order, next to the payment of the mechanics' liens; and finally to the payment of certain judglieJ!holders. From this decree the defendant Gray prayed an appeaJ.to this court, assigning as error the refusal of the trial court to adjudge his entire claim to be' the prior lien upon the property. The citation was directed to and served upon Sarah A. Havemeyer and the,O. F. Davis Company, and they alone have appeared in this " " ", ! '" The "appellees, upon 'appearing in this court, filed a motion to dismiBsthe appeal on ,the, ground that Van Closter, the owner of the rMltY80'Ught to be subjected to sale; and the mechanics' lienholders otllerthan the appellant, are not made parties to the appeal, and therefofethis court dOe81 not have before it the parties whose interests are d.iMetlYin'\7olvM; and whose presence is necessary to the proper disposition of the q,*tions upon which the judgment of this court is in'\7oked. This motioll','was subnli:lJtM in connection with the arguments· u.pon· the' mairi case, ,and in ·support thereof. counsel for' appelthat the decl'oo' appealed from is in fact a50int decree in fa.'\Tor 01 all the mechallius' lienholders, and therefore all 'should have joined bithE! appeali ',We' do not think this position is maintainable. So the mechanics' liens are concerned, it is not decreed that a luri:tp flmnrshall be applied, to the payment of these liens, to be divided pro rata among them,buti the amount· due each lienholder is separatelydecreed, and then' ripon the question of priority it is adjudged that they stand upon an.equality. Upon this question of priority the decree is in favor. ·of and is adverse to each one of the lienholders as between himself and the others of this class, and the appellant, Gray, has the right to assert that his lien is paramount to those of the other lienholders, and that the decree is erroneous in not awarding him this priority. Upon that question the appellant is not jointly interested with, the other lienholder.s, but his interest is adverse to' them. The contention, therefore, that,' being jointly interested, they should have joined in the appeal, cannot be sustained; but the' real difficulty arises upon the point whether this court has before it the parties indispensably necessary.to enable this court to pass upon the rights and interests involved ill the litigation. It will be remembered that the' only .parties before this court are the holders of the two mortgages and the appellant, Gray. The latter seeks to have it adjudged by this court-First, that his lien is prior to that of the mortgagees; second, that his lien is prior to that of the other mechanics' lienholders. Upon the first proposition, the question is whether this court should attempt to deal therewith in the absence of the owner of the realty, J. H. Van Closter; The latter is not personally bound for the payment of the claim heM by the appellant, who was a subcontractor under Statler Bros. Under the statutes of Nebraska, the subcontractor may, by obs$'ving. the requirements of the statute, create a lien upon the proper.tyr for the improvement of which the materials were furnished, but he does not becoineentitled to a personal claim ,against the owner of the property. Can it be said, therefore, that it
v.
HAVEMEYER.
....... 1, I
is a matter of indifference to the owner of the property whether the mortgagees or the appellant is awarded priority of payment out of the proceeds realized from a sale of the property? If the appellant was entitled to hold Van Closter personally liable for the sum due him on his lien, it might be well said that it was a matter of indifference to him whether the mortgages or the mechanics' liens were first paid out of the proceeds of the sale, as the order of payment would not change the amount for which he would remain personally liable, in case the property did not sell for enough to pay all the liens in full. Is this true, however, in a case wherein the owner of the property is personally liable upon the mortgages, but not upon the mechanic's lien ?The decree rendered in the circuit court directed that payment should be made-First, of the mortgages; and, second, of the mechanic's lien;. and under this decree it is clear that, if the property. sells for enough to pay the mortgages, the owner of the property will not be left personally liable for any sum. If, however, this court should adjudge that the appellant is entitled to priority of payment, and the property does not sell for enough to pay the mortgages as well as the lien, then the owner of the property will be personally liable for the balance left unpaid upon the mortgage debts, and. thus a burden will rest upon him which cannot be imposed under the decree as it now stands. Thus it appears that the appellant seeks to change the decree in a which will directly and injuriously affect the rights. and interests of the owner of the property decreed to be sold. It is suggested that such injury is dependent upon a contingency, and that the court will not assume that the property will not sell for enough to pay the liens in full. The only ground upon which the appellant can assert that the decree entered by the circuit court is prejudicial to him is that it is uncertain whether the property will sell for enough to pay all, and therefore he may fail in receiving payment in full. Thus, if in this case the court had ordered the property sold, before passing upon the question of priority of payment, and the sale had realized enough to pay all the liens in full, any technical error committed by the circuit court in decreeing the order of payment would not have justified an appeal, because it would have worked no prejudice. to anyone. 80 if the trial court had, in the first instance decreed the order of payment, and an appeal had been taken, without superseding the execution of the decree, and before the case had been reached in the appellate court the property had been sold for enough to pay all the liens, and such fact had been made to appear upon a motion to dismiss, certainly the appellate court would not retain the case and determine the abstract questions of law arising upon the errors assigned. Courts will not consider merely moot cases. Therefore, to invoke the action of this court in reviewing the decree of the circuit court, the appellant is compelled to ask the court to recognize the possibility that the property may not sell for enough to pay the mortgages and his lien also; for it is only upon this theory that the decree complained of can work him an injury, and under such circumstances it is not open to the appellant to insist that a reversal of the decree and the awarding priority to his lien should be held to affect the rights and interests of the owner of the propert,}; v.53F.no.2-12 '
178
FEDEnAL REPOnTER,
vol. 53.
o:hly cOntingently and:1'emotely, and: :that, therefore, the COUllt can rightfully'proceed with the case without the presence of the owner of the realty; . Theabsance of necessary parties is perhaps the more readily perceivable .with regard to. the Iilechames' lienholders,who were adjudged to stand on an equality with the appellant. ·By the decree of thecircllit court, it was determined that all· the lienholders were entitled to share equally in the proceeds of the sale after the payment of costs, of $12 to appellant, and of the sums due the mortgagees. The appellant now seeks to have it declared that he is entitled to priority over' the other lienholders. It is apparent that, if these parties had not been before the circuit court, its decree w01lldnot be binding uponthem.:fu this partic1llar. That court had the right to adjudicate the question of priority: between the several lienholders because they ha:d been made parties to. the proceeding, and had been dllly served with process. The appallant now seeks to set aside the decree of the circuit court,: and to have this court adjUdicate anew the question of priority between the several lienholders, without bringing before this court whose rights 'are to be passed upon and settled by the decrea'now sought. by the appellant. 'The mortgagees have no interest in that question,: and cannot represent the absent parties. Of the persons interested in,the matter of priority between the lienholders, there is-but one: before the court; ·to wit, the appellant. Upon what theory Mn it bEl'held that this court ought to proceed to conS'ider the OOITootness o:Hhe decree of the circuit court on the question of the rel8Jtiv-e prioritieso:f the several lienholders when none of them, save the appelbtnt,wollld be bound by any decree we might enter? The reasons demanding the enforcement of the general rule that a c.ourt shollld .not pI'()cood in a case, unless all the parties whose interests will necessarily be ,affected by any decree that might be rendered are before the.court, :a.rewell stated in Gregory v. stetson, 133 U. S. 579, 10 '422. See, also, Coiron v. Millaudon, 19 How. 113; Ribon v. Railroad Co., 16 Wall. 446; Williams v. Bankhead, 19 Wall. 563. In our jUdgment, under the facts of this case,and in the absence of the owner of the realty and the several mechanics' lienholders who were adjudged by the circuit court to stand on an equality With appellant, this court shollld not proceed to adjudicate anew the questions of priority. presented by the errors assigned by the appellant. There is, however, one question appearing on the face of this record in which the parties before this court are adversely interested, and Which, being a manifest 'errol" can be taken notice of under the provisions of the eleventh rllle of this court. The decree, as part of the costs, awards the complainant the sum of $290 as attorneys' fees, the same being allowed unde1.' a proVision in the mortgage which declares that,.in the event of the foreclosure of the mortgage, a reasonable sum, to be determined by the court, shall be awarded as an attorney's .fee in the cause. It has been by repeated decisions of the supreme court of the United States that the validity of provisions of this nature is a question of locallawin which the federal courts are bound by the rule adopted by the supreme court of the state in whielt
GRAY t. HAVEMEYER.
179
the question arises. Thus, in Bendey v. Townsend, 109 U. S. 665, 3 Sup. Ct. Rep. 482, it is said: "The decree below is therefore right in all respects, except in allowing a solicitor's fee of $100. The land is In Michigan. the notes and mortgage are made ann payable in Michigan, and by the law of Michigan, as settled by repeated and i;niform decisions of the supreme court of that state, a stipulation in a mortgage to pay an attorney's or solicitor's fee of a fixed sum is unlawful and void. and cannot he enforced in a foreclosure, either under the statutes of the state or by a bill in equity. .. .. .. Upon such a question, affecting the validity and effect of a contract made and to be petformed in MIChigan, concerning land in Michigan. the law of the state must govern in proceedings to enforce the contract in a federal court held within the state. Brine v. Insurance Co.. 96 U. S. 627; Insurance CO. Y" Cushman. 108 U. S. 51,2 Sup. Ct. Rep. 236; Hmelting CO. Y. Hall. 106 U. S. 86, 1 Sup. Ct. Rep. 128."
In Dodge v. Tulleys, 144 U. S. 451, 12 Sup. Ct. Rep. 728, the question came up in a case appealed from the circuit court for· the district of Nebraska, wherein it was held that"There is a stipulation in the trust deed for the payment of an attorney's fee of $1,000, in case of foreclosure, but such stipulations have been held by the supreme court of Nebraska to be unauthorized. Dow Y. Updike, 11 Neb. 95. 7 N. W. Rep. 857; Hardy v. Miller, 11 Neb. 395, 9 N. W. Rep. 475. It seems that in 1873 an act passed the legislature of Nebraska expressly authorizing in any written instrument for the payment of money a stipulation for not exceeding ten per cent. as an attorney's fee In case of suit. Gen. St. Neb. p. 98. This act was repealed in 1879. Laws Neb. 1879, p. 78. In the cases cited.. the supreme court of the state held that by the repeal of the statute the contract right to recover at· torneys' fees was taken away, so. as this court follows the decisions of the high· est court of the state in such matters. (Bendey v. Townsend, 109 U. S. 665, 3 Sup. Ct. Rep. 482,) the provision in the trust deed for the payment of $1,000 as attorneys' fees cannot be regarded as of binding force. "
The court then proceeds to show that it is a general rule of equity that, when a trustee is called upon to discharge the duties of his trust, a reasonable allowance may be made him for the counsel fees incurred in the rr?per performance of the trust, and the right of a court of the Dmted States to make such allowance In a proper case cannot be limited or taken away by state legislation. In the case now before the court, the proceeding for the foreclosure is not brought by a trustee, but by the party directly interested as mortgagee, and the right to an attorney's fee is based only on the stipulation contained in the mortgage. The mortgage is upon realty situated in Nebraska, the debt secured thereby is payable in Nebraska, and the mortgagor is a resident of that state, and was such when the mort· gage was executed. The validity of the provision for the allowance of an attorney's fee is therefore dependent upon the law of that state, and it is well settled that, since the repeal by the legislature of braska of the act of 1873, an agreement for the allowance of an attorney's fee is invalid in all mortgages or other instruments executed since the repealof that act. Dow v. Updike, 11 Neb. 95, 7 N. W. Rep. 857; Hardy v. Miller, 11 Neb. 395, 9 N. W. Rep. 475; Otoe Co. v. Brown, 16 Neb. 395, 20 N. W. Rep. 274; In re Breckinridge, 31 Neb. 489, 48 N. W. Rep. 142. It was clearly error, therefore, to allow any attorney's fee in this case, other than the $20 docket fee provided for in section 824,.Rev. St. U. S. The decree appealed from will therefore be modified by disallowing the attorney's fee for $290, and :in all other respects it will sta:nd affirmed.
180
FEDEBALREPOBTER,
vol. ,53.
JOSEPH et aI. v. 1\'EW ALBANY STEAM FORGE & ROLLING MILT. 00. (Circuit Court, .D. Indiana. No. 8,767. 1. SERVICE OF PROCESS-CONCLUSIVENESS OF RETURN-COLLATERAL ATTACK.
November 1, 1892.) .
In Indiana" the return of the sherifl', showing that he has made service in the manner prescribed by the statute, is conclusive, as against a resident of tb.e state, both as to facts in the personal knowledge of the officer and facts which he must ascertain from others; and such return cannot be impeached collaterally, for the purpORe of quashing the service and return and ousting the court of jurisdiction, by showing that the facts statl:d in the return are untrue. .
2. SAME7'""STATE STATUTES-RuLES OF COURT.
The federal circuit court for the district of Indiana, having adopted the st:l.te statutes relating to service of process in actions at law, is bound by the statute, as coustrued by the supreme court of the state; and, as there .to be no difference iJ,l tb,e, force and effect of the marshal's return . iIi actions at law and sui+,a inequity, a return to a subpoena in chancery. '>s1).qWing tb,at service )las in the manner by the statute, Is aglii.nBt a' collateral attack. ' .
:rn'Equity. Bill by Joseph Joseph and othets against the New Albany Steam Forge & Rolling Mill Company. On motion to quash the' service and return. ' Overruled. C. l;J, & H. E. Jewett, for plaintiffs. ,William. A. Ketcham, for defendant. BAKER, District Judge. Suit by plaintiffs, citizens of the state of Ohio, a,gainst .the defendant, a corporation organized and existing under the laws of 't he statepf Indiana, and a,citizen thereof, to foreclose a pledge of chosesin action, and for other equitable relief. A subpoena in chancery in this case was issued in due form to the marshal of district, June 6,. 1892, and he D;lade. return of his doings, indorsed on said writ, as fQ!.\pws: "I receiv.ed this writ at Indianltpolis, in said district, at 12 o'clock M., June 6, 1892, and. served the same as follows: I read this writ to and in the presence and hearing of John Marsh, agent of the within-named defendant, in custody of all its property and In charge of its office, and by leaving with said Marsh a true copy of this writ at the office of the defendant company, at New Albany, Indiana, June 13th, 1892. 'l'he president, vice president, secretary, superintendent, manager, or .any other superior officer or agent of said company. except John Marsh, not found. "Willi:1111 L. Dunlap, U. S. Marshal. "By James N. Payton, Dept."
The defendant moves to quash the service and return on the ground that said Marsh was not its agent, nor in its employ, at the time of, or since, the service of the writ as aforesaid. This motion is supported by the affidavit of· John.Marsh, who deposes that he was not the agent, nor in any manner in the employ, of the defendant, when the writ was· served. ,This affidavit is controverted in some of its by the counter affidavit of the deputy marshal who executed the writ. If '. required to dispose of the motion on the return and affidavits, I should feel great hesitancy in quashing the service