Whiting v. Bank of the United States

APPEAL from the Circuit Court of the United States for the District of Kentucky.

The case as stated in the opinion of the Court, was as follows:-

'This is the case of a bill, purporting to be a bill of review. The substantial facts, as they appear on the record, are as follows:-Gabriel J. Johnson, being the owner in remainder of a five acre lot, No. 9, in Louisville, Kentucky, of which his mother, Enfield Johnson, was tenant for life, under the will of his father, and being also the owner in fee by another title of another piece of land adjoining the five acre lot, a part of the slip No. 2, on the 12th day of November, A. D. 1818, conveyed the same in mortgage to James D. Breckenridge, to secure the latter for his endorsements of three certain notes of Johnson to Ruggles Whiting, each. for four thousand dollars, and for any other notes and contracts which Breckenridge should thereafter make, execute, accept, or endorse for the benefit of Johnson. Afterwards, on the 9th day of August, A. D. 1820, Johnson & Breckenridge, as his surety, being indebted to the Bank of the United States in the sum of nine thousand nine hundred and thirty-one dollars and thirty-seven cents, arrangements were made between them and Whiting, by which Whiting assumed the payment of the same debt, and gave his note therefor, to the bank accordingly; and as security for the due payment thereof, Johnson and his mother Enfield Johnson, Breckenridge and Whiting, on the same day, executed a mortgage of the five acre lot and slip of land above mentioned to the Bank of the United States, reciting, among other things, the foregoing arrangement. The condition of the mortgage, among other things, stated, that it was agreed by the parties, that after the satisfaction of the said demands due by Whiting to the bank, and by Gabriel J. Johnson to Whiting, the estate or the residue thereof, or any surplus in money, by the sale thereof, should be paid or conveyed to Enfield Johnson, or her assigns. The mortgage also contained a stipulation for the sale of the premises, to meet the payment of the debt due to the bank. In April, 1823, the debt due and thus secured to the bank remaining unpaid, a bill for a foreclosure and sale was brought by the bank, in the Circuit Court of the United States for the District of Kentucky; and to that bill Gabriel J. Johnson, Enfield Johnson, and Whiting were made parties. But Breckenridge was not made a party. At the November term of the Circuit Court, A. D. 1826, a decree of foreclosure of all the equity or right of resumption of the defendants in the mortgaged premises, was passed; and a further decree, that the premises should be sold by commissioners. The sale took place accordingly; the bank became the purchasers, and the sale was confirmed by the Circuit Court, at May term, 1827. In the intermediate time between the original decree of foreclosure and the sale, viz., on the 26th of February, 1827, Whiting died in Massachusetts, leaving the plaintiffs in the present bill, Paulina Whiting, and Helen B. Whiting, and one L. R. Whiting (since dead without issue) his children and heirs at law who were then infants under age; and the youngest, Helen, did not come of age until 1831.

The present bill is brought by Paulina Whiting and Helen B. Whiting, by James Richardson, administrator of Ruggles Whiting, and by Gabriel J. Johnson and Enfield Johnson, against the Bank of the United States: and after stating the proceedings in the original suit upon the mortgage, and that the sale was made at a great sacrifice of the property, it relies on the following grounds of error in the proceeding, decree and sale in the original suit. 1. That it was irregular and erroneous to entertain the bill, and pronounce the decree for foreclosure and sale, without Breckenridge being made a party defendant. 2. That it was irregular and erroneous to sell the property mortgaged without a revival of the suit against the heirs of Whiting. 3. That it was unjust and oppressive to sell in the manner and at the price at which the sale took place.

The answer of the bank denies all equity in the plaintiffs, and insists that the decree and sale were fair and just. It also denies that Whiting and Breckenridge had any title to the property; and insists that they joined in the mortgage, merely to complete the arrangements made between Johnson and themselves. It also denies that the death of Whiting was known at the time of the sale. It states that the property was, after the purchase by the bank, improved, and parts thereof sold to bona fide purchasers, for valuable considerations; and by reason of the improvements, and the extension of the city, parts of the grounds so sold are now among the most beautiful and densely built parts of the city. The answer also states, that Whiting died insolvent and deeply indebted to the bank, by certain other judgments and notes.'

The case was argued by Mr. Underwood, at the bar, and by a printed argument submitted by Mr. Lovering for the appellants; and by Mr. Serjeant for the appellees.

For the appellants, Paulina and Helen Whiting, it was contended, they have an evident interest in the land. Being all infants at the death of their father, in February, and at the rendition of the last decree in May, they are within the exceptions of every statute of limitations operating by direct or remote analogy on this case; and their rights being joint, the disabilities must be removed before the statute can run. In England the limitation to bills of review is twenty years, and by the law of the United States five years, on writs of error; which furnishes the criterion in this case. Act of the Legislature of Kentucky, of 1816. May vs. Marsh, 2 Litt. Rep. 148

The interest of Whiting in the land was also certain and evident, and material. The title to the bank was his only security for a part, at least, of his large demand, and the only consideration for his assumption of the debts of Johnson to the bank. The hopeless insolvency of Johnson rendered the security of the land the only means of indemnity for his responsibility for the debt of ten thousand dollars-the bank held the property as a trustee for his benefit.

The proceeding in the original cause was to be regulated by the laws of Kentucky; and as Breckenridge had an interest in the property, he should have been made a party. The record shows the existence of this interest, and he has been deprived of it by the decree of the Court; and yet no notice of the proceedings has been given to him.

By the laws of Kentucky the assignee of a promissory note is liable to the assignor, if due diligence has not been used to collect the note; and Brackenridge was the endorser of notes given for a steamboat. Whiting had proceeded on the notes against Johnson, and had obtained judgment against Johnson. He then made an agreement to discharge Johnson, holding Breckenridge liable on his endorsements. The mortgage was the means of indemnity to Breckenridge, and for this reason he was a necessary party in the proceedings to foreclose. Any balance which should remain after paying the debt to the bank, would have been applied for the relief of Breckenridge, on the notes of Johnson. Morrett vs. Western, 2 Vern. 663. Haines vs. Beach, 3 Johns. Ch. Rep. 456. 4 Ch. Rep. 605. Ensworth vs. Lambert, 6 Ch. Rep. 450. 4 Con. Rep. Su. Ct. U.S. 190. Caldwell vs. Taggart, 4 Peters, 190. Mayo vs. Tompkins, 6 Mun. 520.

The sale of the property after the decree of foreclosure was irregular, without reviving the proceedings against the representatives of Whiting. His death before the sale made it as necessary to make his heirs and representatives parties as it was originally necessary to make Whiting a party. If it is said, that there was a right to sell under a levy made before the death of the defendant; a number of authorities sustain the contrary position.

The party defendant has a right to come in after a sale, and object to it; if any thing in the proceedings has been irregular or illegal. If the return to the order of sale had stated that all the parties were dead, would the Court have confirmed the sale? By the laws of Kentucky the defendant has a right to point out what part of the estate may be sold under an order of sale. The necessity of the presence of the defendant at the sale, is therefore apparent. Both Breckenridge and Whiting were dead at the time of the sale, and yet the sale was confirmed. The decree confirming the sale should therefore be opened, and the parties now before the Court should be allowed to come in and redeem. Allen vs. Belcher et al. 2 Hen. & Mun. 595. Also Mackey vs. Bell, 2 Mun. 523. Lovell vs. Dana, 2 Mun. 367. Forman vs. Hunt, Ibid, 622.

The interest in the complainants is sufficient for a bill of review. 4 John J. Marshall's Reports, 500. This case shows that a bill of review will lie in such a matter as that now presented to the Court.

This case will be decided by the cases which have been decided in the Courts of Kentucky. In Kentucky bills of review are allowed for errors on the face of the record, and not in cases where the error is in the decree only. In Kentucky a bill of review lies for any error in the proceedings in the case. There the decree does not, as in England, set forth the whole matter in the cause; and to deny a bill of review on the principles which apply to the cases in the Court of Chancery in England, would be to deny it altogether.

If this is the law, and it will not be denied, the record exhibits such errors as may be brought before the Court by a bill of review. Brackenridge was a necessary party. He had a deep interest in the proceedings against the land.

No exception will lie to the bill on the ground of the interference of the statute of limitations. It was filed within five years after the sale, and the termination of the minority of the children of Whiting. The law of the United States saves the rights of minors.

While it is admitted that no case has been cited in which a bill of review has been sustained, principally like that now before the Court; yet it is claimed that in such a case a writ of error would lie if the proceedings had been at law; and the bill of review in a chancery case is analogous to a writ of error in a case at law. The argument for the appellees is, that if in the course of the proceedings to sell the property, exceptions were not taken to their regularity, they cannot now be taken notice of by a bill of review. Yet writs of error are maintained in suits on the ground of want of parties. The practice is to send back the proceedings, and allow amendments to be made which will bring the merits of the case forward. This is a similar case. 6 John J. Marshall's Rep. 197.

The heirs may come in and show they were not parties to the sale, and may examine the manner in which it was conducted. This is essential to the proceedings in the case.

It is said that the decree is final on the order of foreclosure of the mortgage; but this is erroneous. The proceedings in the case are not final until the property is sold, and the proceedings of sale confirmed by the Court. The equity of redemption continues, until the sale of the property and the ratification of the sale. A party who has a decree of foreclosure in his favour, in proceedings on a mortgage, cannot hold the property under the decree. By the decisions of the Courts of Kentucky, a sale of the mortgaged premises must be made, and the residue of the proceeds of the sale, after payment of the debt, must be paid to the mortgagor. Suppose part of the estate sold and the mortgage satisfied; does not the residue belong to the mortgagor? This shows a continuing interest in the property mortgaged, until the proceedings of sale are completed.

Mr. Sergant for the appellees.--

The objections by the appellants are to the sale of the property. The first matter to be noticed is, that the interests in the land sold under the decree of foreclosure, have essentially changed. The property has been sold without warranty, and large and expensive buildings have been erected upon it. This is stated in the answer of the Bank of the United States to the complainant's bill; and in the agreed statement of facts.

'It is admitted that the bank pulled down a plain brick dwelling-house, as appears in said will, No. 2, on said lot where Fifth Cross Street, if extended, would run and extend said street to Walnut Street, and they sold, as stated in the answer, to different persons, and the improvements stated of the Roman Catholic church and others, extension of the street and other improvements have been made and put upon the ground, and that the persons named are living on the lot aforesaid.'

All these persons have expended large sums in the improvement of the property, and the question before the Court is, whether all that was done in 1827 shall be undone; and the parties be permitted to come in and redeem. This is what is asked. It is not the course of a Court of equity, on a bill of review, to bring into review what has been decided. If such a bill were allowed, it would be in the nature of an answer, and bring again into controversy all that had been passed upon by the Court. The res adjudicata, is in equity as at law. The rule must be the same.

There are bills of review in the nature of original bills, as when a person has not been made a party to the original proceedings, and may be affected by them. Mr. Breckenridge might in this case have come in, if he had been injured.

There are two other descriptions of bills of review in England. 1. A bill filed after the original bill has been enrolled, or there has been a final decree. 2. A bill filed when the decree has not been made, and before enrollment.

The error must be apparent on the face of the decree, and the Court cannot go into the evidence in the original proceedings. Story's Equity, 334. Lord Eldon in Perry vs. Philips, 17 Vez. 178. No persons but parties or privies can have a bill of review. Gilbert, For. Rom. 186. Slingsby vs. Hale, 1 Chan. Cas. 122. And none but those who have an interest in the proceedings can maintain such a bill; nor unless they suffer from the particular error assigned, or pointed out in the decree. Webb vs. Pell, 3 Paige, 368. Mitford (by Jeremy), 205. Other persons in interest, and privies in title or estate, who are aggrieved by the decree, may have an original bill in the nature of a bill of review, so far as their own interests are concerned. Wyatt, 98. 100. Mitford, 92.

Opportunities, during the proceedings on a bill in chancery, to interpose and correct errors, are always afforded, as by demurrer or by plea, when proper parties may be introduced. 16 Vez. 325. Mitford, 180. Cowper, 185. 3 Paige, 222. 2 Paige. 281. The Court will then decide on the matters presented, and if necessary there may be an amended bill, or a supplemental bill. But such a decision would not be an error in the decree to entitle to a bill of review. This is much stronger where a party has been omitted and does not complain; as in the case before the Court, in which Breckenridge is not a party.

But in addition to all these matters, Whiting had not a title to the property, or any interest in it. It had never been his, and the proceeding to foreclose against him, divested every equitable claim he could set up. The decree of foreclosure was in the lifetime of Whiting, barring him and his heirs, and the statute of limitations began to run from the time of the decree. An execution levied does not stop by the death of the party. The sale did not require as a prerequisite to its proceeding and completion, that the heirs should be brought in.

Finally. The bill of review is barred by length of time. Elmendorf vs. Taylor, 10 Wheat. 150. More than five years have elapsed from the decree to the filing of the bill of review. The statute, as has been said, began to run its course in the life of Whiting; and it was not stopped by disabilities occurring on his death.

Mr. Justice STORY delivered the opinion of the Court.