Gasquet v. Fidelity Trust & Safety Vault Co.

LOCKE, District Judge,

(after stating the facts.) Although the language of the hill in this case, and the direct prayer for a foreclosure and sale of the mortgaged property, might lead to the conclusion reached by the court below, that the'purpose intended was simply such foreclosure and sale, a more careful examination of its representations, and of the record of the subsequent proceedings, the decree pro confesso, the questions submitted to the special master, and findings by him, (all of which are plainly within the original purpose of the bill, and supported by the prayer for further relief,) and the representations of (he bill that complainant was acting in the capacity of a trustee, and praying that the bondholders might be brought in, show plainly that it-was a bill for the final settlement and disposition of a trust: fund. Such creditors as the bondholders in this case, who are allowed to prove debts, belonging to a. class on whose behalf a suit is brought, are regarded as quasi parlies, and may have a standing' in court, and be heard by intervention or cross bill upon anything touching their rights in the disposition of the trust. Anderson v. Railroad Co., 2 Woods, 628; Carter v. City of New Orleans, 19 Fed. Rep. 659; Williams v. Morgan, 111 U. S. 684, 4 Sup. Ct. Rep. 638. Had the trustee, in selling the trust property, by collusion with a purchaser at the sale', or by any other improper or fraudulent proceedings, diminished the funds, the eestuis que trusteut, the actual parties in interest, could certainly be heard upon the question as to the amount to which they were entitled; and we consider the same principle will apply in any suit to protect the funds from loss from any act prior to the origin of the foreclosure proceeding.

In the numerous cases found reported upon this subject the question has been, did or did not. the matter of the cross bill grow' out of, and did the relief demanded 'herein depend upon, the' subject-matter of the original bill? Wherever the conclusion has been in the affirmative, the cross bill has been sustained, and, where not so relating or dependent, it has been dismissed. The very object and purpose of a cross bill is to allege and set up new matters not alleged in the original bill, and the only measure of its validity as the foundation of an ancillary suit is the connection which the relief prayed for under it has to the subject-matter of the original bill. In a bill intended for the final settlement and determination of a trust no question can be of greater importance, or more clearly the subject-matter of the suit, than the ascertaining of the amount of the trust fund; and it would appear to us that any cross bill alleging the wrongful diminution of such fund would be entitled to a hearing in the same case before the rights of the parties were finally adjudicated. The questions raised by appellants in their cross bill are directly connected with the administration of the trust, and it ■charges that the value of said trust fund has been reduced by the conduct of the trustees. The hearing and determining of the validity of such allegations we consider directly connected with the administration 'and final settlement of the trust, which is the subject-matter of the original bill, and that the petition or cross bill "filed for that purpose makes an ancillary or dependent cause, in which substituted service should have been sustained. ■

The position taken and strongly urged by the appellee, that the matters and things presented by appellants were fully heard and determined by the decree of December 12th, from which no appeal has been taken, and are therefore res adjudicata, cannot be accented, as in that decree the settlement with the trustee is especially reserved. Also in the agreement of January 3d, by which it is urged appellants are estopped, it was specially stated that it should not be construed so as to bar appellants from the right to assign as error any action of the court upon the petition. We are not called upon to determine the sufficiency of the allegations of the petition or cross bill, or how far affirmative relief, if any, under it might extend, but whether the matter of such allegations is so connected with and relates to the subject-matter of the original suit as to constitute the foundation of such ancillary or dependent suit as would justify a substituted service, and this question we answer in the affirmative.

It is ordered that the decree of January 4, 1893, which set aside the orders of the 7th and 9th of November, 1892, authorizing services to be made on solicitors of record of appellee herein, be reversed, and the cause be remanded to the circuit court, with directions to re-establish such orders and such service, and take such proceedings in said cause as, according to right and justice, ought to be had, and that the appellee pay the costs herein.