Robertson v. Carson

APPEAL from the Circuit Court for the District of South Carolina; the case being thus:

William Carson, of South Carolina, died in August, 1856, somewhat indebted, but possessed of considerable real and personal estate, including a plantation called Dean Hall, and leaving a widow, Caroline, and two minor sons, William and James. By his will he appointed two persons, named Robertson and Blacklock, his executors, and directed all his estate to be sold by them on such terms as they should deem judicious; and the proceeds, after payment of his debts, to be divided into three parts, all 'to be held in trust' by his executors; the interest of one-third to be paid to his widow, and the interest of the other two to be devoted to the support of his sons till they came of age, and the principal to be then paid to them.

The executors, soon after his death and near the close of the year 1856, sold Dean Hall to one Elias Nonus Ball, most of the purchase-money being in the form of a purchase-money mortgage reserved to them as executors. Ball, in 1863, the rebellion being now in full action, agreed to sell it to a firm trading under the name of Hyatt, McBurney & Co., and which was composed of five persons, to wit, Hyatt and McBurney, aforesaid, and three other persons named, respectively, Gillespie, Hazelton, and McGann. Hyatt, McBurney & Co. paid the purchase-money in 'Confederate States' notes, the usual currency during the rebellion of South Carolina. With this Ball paid off his bonds to the executors, and Robertson, one of them, surrendered his bonds and entered satisfaction on the mortgage. Ball then conveyed the plantation (by what kind of deed as respected warranty did not appear), to McBurney and Gillespie, two partners, as already said, of Hyatt, McBurney & Co., 'to such uses as they or the survivors of them should appoint, and until such appointment to the use of the said Hyatt, Hazelton, McGann, McBurney, and Gillespie, partners, trading as Hyatt, McBurney & Co., according to their respective interests in the partnership.'

Hyatt, some time after, by deed, bearing date 8th May, 1863, released his interest in the plantation, and on the last-named day, Hyatt retiring from the partnership, McBurney and Gillespie appointed the plantation to his use to secure a bond of the remaining partners to him for $40,000, given for the purchase of his interest in the partnership. Hyatt was and now is a citizen of New York. Gillespie so also, apparently. Hazelton was domiciled at Liverpool, England; and McGann then, as now, was a citizen of South Carolina. Ball, the purchaser, was a citizen of New Jersey.

The executors, at the time they sold the plantation to Ball, sold to him also certain personal property. This was sold on credit, and one W. J. Ball became jointly bound with the said E. N. Ball, and as his surety for the payment of the price of it.

McBurney and Gillespie remained in possession of Dean Hall until August, 1866, when the two sons of Carson having reached their majority, and having transferred all their interest in their father's estate to their mother, his widow, she, describing herself as a citizen of New York, filed a bill in the court below against the executors (Robertson and Blacklock), against E. N. Ball, W. J. Ball, McBurney, and the two sons Carson; these two being made parties apparently for mere form. But from a fear perhaps of ousting the jurisdiction of the Circuit Court, if it made them parties, the bill did not attempt to make either Hyatt, who, as already said, like the complainant, was a citizen of the State of New York, Gillespie, Hazelton, or McGann (the four persons who, with McBurney, constituted the firm of Hyatt & McBurney, and for whose use along with that of McBurney, the plantation had been conveyed when conveyed to Hyatt & McBurney), parties to the bill. And of those whom it sought to make parties, only Robertson and Blacklock (the executors), and McBurney and W. J. Ball were served. The purchaser, Elias Nonus Ball, was not served. [The same was true as to the sons Carson, though these last were, as already said, added for form only, and the omission to serve them was obviously unimportant.]

The purpose of the bill was:

As respected the executors, to make them account in good money, for the proceeds of the sales which they had made, if the sales should stand:

As respected the defendant McBurney, to set aside his purchase and re-establish the mortgage given by E. N. Ball to the executors, upon the ground that he, McBurney, paid no valuable consideration for his purchase; that the pretended payment of his bond by Ball, the mortgagor and purchaser from the executors, and the release and satisfaction of the mortgage was procured by him without valuable consideration, and was a breach of their trust by the executors. That McBurney aided and procured the executors to commit the breach of trust, and with full knowledge of the same, became possessed of Dean Hall without any valuable consideration passing from him to Ball, or from Ball to the executors, and that he should, in equity, be declared to hold the premises for the benefit of the complainant:

And as respected W. J. Ball, to make him respond as surety for the debt of E. N. Ball, incurred in the purchase of the personal property.

The executors, McBurney, and W. J. Ball, answered, setting up:

1st. Matter of form. That Hyatt, Hazelton, Gillespie, McGann, and Elias Nonus Ball were indispensable parties to the bill; the answer of W. J. Ball alleging in addition, and in regard to the sale of the personal property bought by E. N. Ball, that he, the respondent, was but a surety, and that the said E. N. Ball was the principal debtor, and the person alone acquainted with the facts of the case.

2d. Merits. That the payments were made in money that was universally current in the South, money which had value, and which was received on deposit in all the banks of South Carolina at the time; that in fact the payments were made in checks on the Bank of South Carolina. It alleged further, that with this same money received the executors had paid off the debts of their testator.

The court below (Chase, C. J., presiding) with some hesitation overruled the objection as to parties, observing that 'it would be a positive wrong for the Circuit Court to turn from its doors a suitor in another State, seeking a remedy against citizens in this State, and thus deny to her, upon a doubtful question in reference to parties, a right secured to her by the Constitution;' and that the court would 'strain a point in favor of the constitutional right of citizens of the several States to sue the citizens of other States in the courts of the United States.'

On the merits it decreed that the surrender of the bonds of E. N. Ball by Robertson, the executor, and the satisfaction of the mortgage of Dean Hall, were done in breach of his duty as trustee, and were null and void; that the obligations were not discharged; that the mortgage of Dean Hall was a valid and subsisting mortgage, and that the complainant was entitled to the bonds and to enforce the mortgage as a security for the same. And after finding a certain sum due as principal of the mortgage, it decided that if the debt and interest were not paid by a day named, the plantation should be sold by the marshal under foreclosure.

On the 15th of June, 1872, that is to say, after the date of filing the bill in this case, and indeed after the decree made, Congress, by 'An act to further the administration of justice,' enacted as follows:

'SECTION 13. That when, in any suit in equity. . . to enforce any legal or equitable lien or claim against real or personal property within the district where such suit is brought, one or more of the defendants therein shall not be an inhabitant of or found within the said district,. . . it shall be lawful for the court to make an order directing such absent defendant to appear, plead, answer, or demur, to the complainant's bill at a certain day therein to be designated; which order shall be served on such absent defendant, if practicable, wherever found; or, where such personal service is not practicable, such order shall be published in such manner as the court shall direct, and in case such absent defendant shall not appear, plead, answer, or demur, within the time so limited,. . . it shall be lawful for the court to entertain jurisdiction, and proceed to the hearing and adjudication of such suit in the same manner as if such absent defendant had been served with process within the said district,' &c.

Mr. Edward McCready and Mr. Edward McCready, Jr., for the appellants, charging multifariousness and great disorder on the bill, argued that there was plain error in the action of the court below:

1. In overruling the objection as to parties. They contended that the objection under the aspect of one of form was really one of substance, and of great substance; the property and rights and character of Elias Nonus Ball being certainly involved, and none the less certainly involved or the less completely because they were not directly involved; that if the complainant succeeded in this suit he, E. N. Ball, who was the principal debtor in the bond for the personal property, would have to pay what his surety had paid for him; while as to the real estate since fraud and collusion were charged, to which he was averred to be a party, he would have to pay the amount whether his deed to McBurney and Gillespie contained a warranty or not.

Then, the conveyance to McBurney and Gillespie, was to them both in trust; to Gillespie as much as to the other. McBurney was brought in by the bill and Gillespie was left out. Why was this done? Being co-trustees, one was as important as the other. If McBurney had died, the legal estate would have survived to Gillespie. In truth, to be in a form perfectly regular, not only the trustees but the cestuis que trust, Hazelton and McGann, should have been made parties. On the payment of Hyatt's claim against the four partners, the interest of all four in the estate would come into action.

But Hyatt especially ought to be made a party. He had released his interest in the land immediately after the purchase, and the trustees had appointed a use of Dean Hall to secure the bond of the other partners, given to secure the price of the purchase of his interest in the firm.

The copartnership of which Hyatt was a member expired on the 31st of May, 1863, and he then sold his interest in the firm to the other partners and retired from business. His interest in the plantation was only by the mortgage upon it, which he held under the appointment from the trustees, to secure the bond of his late copartners.

As the record now stood, no decree upon it in favor of the complainant could end the litigation. Hyatt was free to bring his bill to foreclose his mortgage of Dean Hall, and Hazelton, Gillespie, and McGann free to bring their action in ejectment against any person who might purchase at the sale prayed for.

The case was not one where the doctrine of one partner representing the firm applies. Here was a conveyance to trustees; not to the firm, but to two individuals.

2. In regard to the merits. The counsel argued that McBurney was a purchaser for value; that the case showed no fraud, and that the whole transaction was in the then ordinary course of business in the South, and that the bills of the Confederate States were not then valueless-far from it; and that the payments were protected by the cases in this court of Thorington v. Smith, Delmas v. Insurance Company, and Planters' Bank v. Union Bank.

Messrs. James Lowndes and W. W. Boyce, with whom was Mr. Caleb Cushing, for the appellees:

1. As to parties. The Federal courts, sitting in equity, are exceptionally liberal in dispensing with parties, and for two obvious reasons. The first is the limitation upon their jurisdiction by the citizenship of parties; the other is the limitation upon their jurisdiction by their inability (until the statute of 1872) of bringing in parties by publication. The narrowing effect upon their jurisdiction of these limitations has led them to enlarge the rule as to parties.

In pursuance of this liberal policy, the courts have acted upon this principle, viz., that where a party, not before the court, is not an inhabitant of or found within the district where the suit is brought, the court will proceed without such party, unless he is an indispensable party, or one whose rights are necessarily affected by the decree.

There are three classes of parties: 1. Formal parties. 2. Necessary or convenient parties. 3. Indispensable parties. The Federal courts dispense with parties of the first two classes.

The parties dispensed with in Payne v. Hook and in Traders' Bank v. Campbell, directly affected in their interests by the decrees; and they were in a stronger sense 'necessary parties' than those whose absence is objected to in this case.

To apply these principles to the case, Ball passed all his interest in Dean Hall to McBurney and Gillespie by his deed. Ball's presence would be convenient to the defendants, because they might make their claim over against him. But he is only a convenient party, and his convenience is to the defendants. A stronger case than this is that of a mortgagor making a second mortgage; but by the statutes in South Carolina he need not be made a party. The case of Caldwell v. Carrington, was a case similar to this.

Gillespie, in his character of co-trustee with McBurney, is not an indispensable party. The other trustee, McBurney, is before the court, and fully represents the trust estate. If Gillespie came in, he would have nothing to do but to sign McBurney's answer. An absent co-trustee is not an indispensable party.

Hyatt, McGann, Hazelton, and Gillespie, in their character of copartners of Hyatt, McBurney & Co., are not indispensable parties. They are cestuis que trust, under the conveyance to McBurney and Gillespie, and their trustee, McBurney, who is before the court, fully represents them. By the forty-ninth rule in equity, the trustee under a devise of realty is the proper party to defend a suit affecting it. This case is an analogous one. It is decided that a copartner is not an indispensable party; a partner before the court being taken to represent sufficiently the others. At law, service on one copartner is sufficient in South Carolina. Suits like this are within the reason of that rule. The property is realty; a fact which makes the case stronger than Payne v. Hook, or than Traders' Bank v. Campbell.

McBurney and Gillespie exercised their power of appointment by mortgaging Dean Hall to Hyatt. Is, then, Hyatt, as mortgagee, an indispensable party? The mortgage was simply a copartnership transaction. It amounted, in fact, to nothing more than setting aside in severalty Hyatt's share in the assets of Hyatt, McBurney & Co. The equitable lien which Hyatt had on the copartnership assets, for his share on an account with his copartners, was as sufficient a security to him as the mortgage. The mortgage was idle, for Hyatt's lien existed antecedently to it and independently of it. There was no new consideration given for the mortgage by Hyatt, and he is therefore not, by virtue of the mortgage, a purchaser for value. It would be great hardship to hold him to be an indispensable party, by reason of a supposed deed which did not materially change his rights.

There is another principle observed by the Federal courts of equity, viz., that where the joinder of a party will oust the court of its jurisdiction, it will go very far in dispensing with parties.

It is on this principle that the Chief Justice rested his decree overruling the objection to want of parties in this case. Hyatt and Gillespie being both citizens of New York, where the complainant, Mrs. Carson, also has her domicile, to order them to be made parties is to send the complainant out of the Federal courts. To send her out of those courts is, in consequence of the decisions of the State courts of South Carolina on this class of questions, to take away from her all redress.

Since the decree was rendered in this case, an act of Congress has provided that absent defendants may be brought into the United States courts by publication. If this court holds that this act so enlarges the jurisdiction of the Federal courts as to allow the absent parties in this case to be brought in, then the rule laid down in Pugh v. McCormick will apply, viz., that this court will not send back a case when, by reason of a new statute, the decree appealed from has ceased to be error.

To sustain the decree is not to adjudicate the rights of any one in his absence. Its effect would only be to place the appellee in possession of lands as against those now actually in possession. The absent claimants are in noways concluded.

2. The question of merits was argued fully; the counsel contending, among other things, that the executors (after the sale converted into trustees) were bound to hold the proceeds of sale; that the Confederate States had never attempted to make their notes a legal tender; and that, as frequently decided, of late, in South Carolina, the so-called payment was no payment at all.

Mr. Justice SWAYNE delivered the opinion of the court.