Richter v. Jerome (123 U.S. 233)/Opinion of the Court

The argument of counsel for the appellants seems to proceed on the ground that there are two equities growing out of the mortgage to the trust company, which may be dealt with in two separate suits, as they are separate and distinct in their character. One he calls the mortgagor's equity, consisting of the rights of the canal company in the lands growing out of the contract by Anthony for their sale to the Averys, Wild, and Conant. This equity, if we understand counsel correctly, it is conceded was sold under the proceedings for foreclosure, and now belongs to the purchaser. The other he denominates the 'bondholders' equity,' and it arises out of the purchase by Ayer from Anthony of his rights under the contract with the state of Michigan for building the wagon road when he (Ayer) had knowledge of the former contract under which the canal company could have perfected its title to the unpatented lands included in the mortgage, if he had not interfered. Under this equity counsel say they now seek to recover for the bondholders 'only the profits which Ayer made by stepping into Anthony's shoes in the premises.'

We are unable to see how these two equities, if there are two, can be separated in the way contemplated. They both grow out of the canal company's rights under the contract between Anthony and the Averys, Wild, and Conant. If the canal company could not recover from Ayer, neither the bond holders nor their trustee in the mortgage can. The title upon which their right of recovery rests, if such a right ever existed at all, was in the trust company, as the trustee of their security, at the time the original foreclosure was had, and it was part of the mortgagor's equity which was sold. It was then what this bill seeks to make it now, part of the security of the bondholders under the trust company mortgage, and, being such, it passed with the rest to the purchaser at that sale.

Something is also said in the argument about the equitable claims of the bondholders upon Ayer as the successor of Anthony, growing out of the false representations made to them as to the title of the lands covered by the mortgage when they paid the money and took their bonds; but all such claims come from the mortgage, as to which, in all proceedings for foreclosure, they are represented by their trustee when its interests are not in conflict with theirs. All the equities now asserted were proper subjects for adjudication in the former suit, if they existed. They formed part and parcel of the security which was then enforced, and, not being excepted from the sale, passed by it.

This makes it unnecessary to consider whether there was such fraud on the part of Anthony as to charge the lands in the hands of Ayer, even if the trust company were now proceeding against him under the mortgage. The decree is affirmed.