Elwell v. Fosdick/Opinion of the Court

by Samuel Blatchford

United States Supreme Court

134 U.S. 500

Elwell  v.  Fosdick

It is contended for the bank that Elwell had no authority, as trustee in the second mortgage, to release errors in the foreclosure proceedings or in the decree, and to waive the right to appeal from the decree; that his attempt to do so was a breach of trust, and outside of the powers and duties conferred upon him by the trust-deed; and that the release does not bar the right of the bank, as the holder of bonds secured by the trust-deed to Elwell and Fish, to prosecutet his appeal by the leave of the court, in the name of Elwell, nor furnish any reason for dismissing it. In the petition of intervention filed by the bank on the 24th of June, 1884, six days before the final decree was entered, it was alleged 'that neither before the rendition of the final decree in this cause in this court, nor after its reversal by the supreme court, has the said Elwell shown any diligence or attempted to make any arrangement to prevent a sacrifice of the interests of your petitioner and others similarly situated:' and 'that, unless it shall be permitted to become a party to this suit and file its answer therein, it will lose its rights in the premises under some collusive compromise or colorable sale, or through the indifference or neglect of the said Elwell.' The court denied the prayer of the intervening petition of the bank, stating 'that the trustees under said second mortgage are parties to this suit, and have appeared and answered herein, and that there is no proof showing that said trustees are not acting in good faith.' It thus appears that the court passed upon the question of collusion on the part of Elwell, and held that the bank was bound by the acts of Elwell, representing it as trustee. No action was taken by the bank to appeal for more than three months. By an order made August 3, 1885, it was allowed to appeal in the name of Elwell, trustee, but it failed to perfect any appeal under such allowance. Such appeal was reallowed on the 28th of June, 1886, and was perfected on the 30th of June, 1886, being exactly two years after the entry of the final decree, and the last day on which the appeal could be taken. Meantime, by an instrument executed in October, 1884, and filed in the circuit court in November, 1884, at a time when no appeal was pending from the decree, the release of errors was executed by Elwell, trustee.

We are of opinion that this release bound all the bondholders represented by Elwell. It appears by the release that only 955 of the convertible bonds were issued; that 58 were issued in exchange for coupons, all of which coupons had been paid out of the proceeds of the sale of the property; that, of the remaining 897, the holders of 617 did not desire further litigation; and that the holders of the remaining 280 had hitherto declined to contribute to the cost of the litigation, or to protect the trustee against loss, or the payment of costs or counsel fees. No substantial reasons appear for permitting the bank, as the holder of only $14,000 of the bonds, to defeat the plainly expressed will of the holders of the remainder. Sage v. Railroad Co., 99 U.S. 334. The allegation of neglect or collusion on the part of Elwell, as trustee, was found by the circuit court to be untrue. The trustee represented the bond-holders, not only in the proceedings which resulted in the entry of the decree, so that the bondholders were not necessary parties, but he also bound them by his release of errors. His relations to them had not changed between the time of the entry of the decree and the time of the execution of the release. Shaw v. Railroad Co., 100 U.S. 605, 611, 612; Bank v. Shedd, 121 U.S. 74, 86, 7 Sup. Ct. Rep. 807; Barnes v. Railway Co., 122 U.S. 1, 7 Sup. Ct. Rep. 1043. The release of errors, although not found in the transcript of the record, is properly brought before this court, for the purpose for which it is presented. In Dakota Co. v. Glidden, 113 U.S. 222, 225, 5 Sup. Ct. Rep. 428, this court, speaking by Mr. Justice MILLER, said: 'But this court is compelled, as all courts are, to receive evidence dehors the record, affecting their proceeding in a case before them on error or appeal. The death of one of the parties after a writ of error or appeal requires a new proceeding to supply his place. The transfer of the interest of one of the parties by assignment or by a judicial proceeding in another court, as in bankruptcy or otherwise, is brought to the attention of the court by evidence outside of the original record, and acted on. A release of errors may be filed as a bar to the writ. A settlement of the controversy, with an agreement to dismiss the appeal or writ of error, or any stipulation as to proceedings in this court, signed by the parties, will be enforced.' By the provisions of the mortgage to Elwell, he, as trustee, could proceed to collect the mortgage debt, by litigation or otherwise, only at the request of the holders of a majority of the bonds. As appears from the terms of the release, and is not controverted, the majority of such holders desired the litigation to cease. The trustee was authorized to put an end to it, and his waiver of an appeal binds all who act in his name as trustee. The bank was not a party to the suit, and its right to appeal depended entirely upon the action of the trustee. Ex parte Cutting, 94 U.S. 14, 21; Ex parte Cockcroft, 104 U.S. 578. All that the circuit court did was to allow the bank to appeal in the name of the trustee. The bank is bound by all the preceding acts of the trustee, done in good faith. On the facts of the case, the appeal must be considered as the appeal of the trustee, and as barred by his release executed long before the appeal was granted. The result is that the appeal must be dismissed, and it is so ordered.

FULLER, C. J., having been of counsel in this case, did not sit in it, or take any part in its decision.

Notes