Farmers' Loan & Trust Co. v. Denver, L. & G. R.

126 F. 46, 1903 U.S. App. LEXIS 4281
CourtCourt of Appeals for the Eighth Circuit
DecidedNovember 23, 1903
DocketNos. 1,810, 1,815
StatusPublished
Cited by37 cases

This text of 126 F. 46 (Farmers' Loan & Trust Co. v. Denver, L. & G. R.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Farmers' Loan & Trust Co. v. Denver, L. & G. R., 126 F. 46, 1903 U.S. App. LEXIS 4281 (8th Cir. 1903).

Opinion

SANBORN, Circuit Judge,

after stating the case as above, delivered the opinion of the court.

On February 2, 1894, the Jefferson Investment Company held the legal title to the land here in controversy in trust (1) to pay $25,849, the unpaid part of its purchase price then evidenced by the notes and mortgage to Baker, and all moneys expended for the property; and (2) upon the repayment of these .amounts by the railroad company to convey the property to that corporation.

The Farmers’ Loan & Trust Company, under the after-acquired property clause of its deed of trust of 1890, had a lien upon the equitable title of the railroad company. It had a lien upon the right of the railroad company to pay the $25,849 owing for the land, and any other moneys expended for it, and to acquire the property by means of that payment, but it had nothing more. In reliance upon [49]*49the trust deed of the investment company, the corporation which held the legal title, and upon the representation of that company and of the railroad company by their agent, Newhouse, who negotiated and procured the loan from him, that these corporations needed his nioneys to save the property from the foreclosure of the mortgage to Baker, Hutchison loaned them $50,000. At least $21,049 °f the money obtained by this loan was used to pay the notes of Baker, and to procure a release of his mortgage for the purchase price. The Farmers’ Toan & Trust Company brought Hutchison into the court below, and besought that court to adjudge that the bondholders whom it represents have the paramount lien upon this land, that this tract shall be sold under the direction of the court, and that all its proceeds shall' be applied to the payment of the bonds secured by the mortgage of 1890, so that neither Hutchison, whose money paid the unpaid portion of the purchase price owing to Baker, nor the investment company, which obligated itself to repay it to him’, shall have any security or derive any benefit from the land which the money of the one and the obligation and mortgage of the other saved from the foreclosure of the mortgage to Baker. The circuit court granted the prayer of the trust company that the land should be sold, but it conditioned this grant of relief with a provision that out of the proceeds of the sale Hutchison should first be paid the $21,049 which had been paid upon the debt for the purchase price out of the moneys which he loaned to the investment company and the railroad company.

This decree, does not impress one at first blush as either unjust or inequitable. Neither the Farmers’ Toan & Trust Company nor the bondholders paid any consideration for, or loaned any money upon the faith of, the tract of land here in question. This land was acquired by Newhouse and the investment company after all the bonds had been issued except those which were subsequently taken by New-house when he had complete knowledge of all the legal and equitable rights of the parties. The mortgage to Baker to secure the payment of a part of the purchase price was superior, in law and in equity, to the mortgage to the trust company. The latter attached to nothing but the equitable estate of the railroad company, and it was a condition precedent to the acquisition of the title by that company that it should pay the moneys expended for the property and the unpaid part of the purchase price. A mortgage of future-acquired property attaches to the interest obtained by the mortgagor only, and is inferior to junior liens, incumbrances, or equities under which the property comes to the mortgagor. U. S. v. New Orleans & Ohio Railroad, 12 Wall. 362, 20 L. Ed. 434; Central Trust Co. v. Kneeland, 138 U. S. 414, 423, 11 Sup. Ct. 357, 34 L. Ed. 1014. Why may not Hutchison, who holds the first mortgage upon the legal title, insist that the moneys taken from the proceeds of his loan, and applied to the payment of a part of the purchase price of the property, shall be repaid to him before his mortgage is subjected to the after-acquired property clause of the prior mortgage to the complainant? Counsel for the trust company urge many reasons why, in their opinion, the court could not lawfully impose such a condition, and why, in their judgment, the decree below is erroneous.

[50]*50They say that this condition could not be imposed, and that the decree ought to be reversed, because Hutchison filed no cross-bill and prayed for no affirmative relief, while the decree directs that $21,049 and interest shall be paid to him out of the proceeds of the sale of the land. It is true that the general rule is that a cross-bill is indispensable to the grant of affirmative relief to a defendant in equity. But there is an exception to this rule, as well settled and uniformly applied as the rule itself. It is that no cross-bill is requisite to the application of the maxim that he who asks equity must do equity. It is that any relief, affirmative or otherwise, may be granted to a defendant which the principle embodied in this maxim requires the court to impose upon the complainant as a condition of granting all or a part of the relief he seeks, regardless of the pleadings which present it. Morgan v. Schermerhorn, 1 Paige, 544, 546, 19 Am. Dec. 449; Ruddell v. Ambler, 18 Ark. 369, 379; McClaskey v. Barr (C. C.) 48 Fed. 130, 134; De Walsh v. Braman, 160 Ill. 415, 43 N. E. 597; Hudnit v. Nash, 16 N. J. Eq. 550, 553, 555; Crocker v. Lowenthal, 83 Ill. 579, 584; Walker v. Abt, 83 Ill. 226, 230. In Morgan v. Schermerhorn, 1 Paige, 544, 546, 19 Am. Dec. 449, the chancellor said that, where one comes to a court of equity to seek relief against a usurious contract, he must pay or offer to pay the amount actually due, before he will be entitled to an answer as to the alleged usury, and added, “If a party comes here to seek equity, the court will compel him to do equity.” In Hudnit v. Nash, 16 N. J. Eq. 550, 553, 555 the second mortgagee exhibited a bill against Nash, the owner of tlv-' first mortgage, the third mortgagee, and the owners of the equity oí redemption, in which he alleged that the first mortgage was usurious and void. Nash answered that he held the paramount lien, but he filed no cross-bill. The court said, “But if a party comes into: equity and asks relief, the court will compel him to do equity, although the defendant has not demurred to the bill;” that the complainant’s decree must be upon terms of paying Nash’s mortgage; that no decree could be made except such as could be granted on the prayer of the complainants’ bill; and it entered a decree of sale of the premises, and of application of the proceds, first, to the payment of Nash’s mortgage; second, to the payment of the mortgage to the complainant; and, third, to the payment of the third mortgage. This decree was affirmed in the appellate court. No cross-bills are required, to enable the defendants to secure decrees establishing their rights in suits for accounting, partition, and specific performance. McClaskey v. Barr (C. C.) 48 Fed. 134; Coxe v. Smith, 4 Johns. Ch. 271, 278; Story’s Eq. Pl. § 394; Jennings v. Webster, 8 Paige, 503, 35 Am. Dec. 722. In De Walsh v. Braman, 160 Ill. 415, 43 N. E. 597, Braman exhibited a bill in equity to compel De Walsh and his trustee to convey to him the title to two city lots. De Walsh answered that he had expended $1,118.77 in making improvements upon the property, which had not been repaid to him, but he filed no cross-bill. Nevertheless the Supreme Court of Illinois conditioned the decree for a conveyance of the title to the complainant, with the payment to the defendant of the $1,118.77 and interest.

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Bluebook (online)
126 F. 46, 1903 U.S. App. LEXIS 4281, Counsel Stack Legal Research, https://law.counselstack.com/opinion/farmers-loan-trust-co-v-denver-l-g-r-ca8-1903.