Case Name: CHARLES HOLDEN vs. GEORGE W. STICKNEY AND THE FREEDMAN'S SAVINGS AND TRUST COMPANY
Court: Supreme Court of the District of Columbia
Jurisdiction: District of Columbia
Decision Date: 1875-04
Citations: 2 MacArth. 141
Docket Number: No. 3926
Parties: CHARLES HOLDEN vs. GEORGE W. STICKNEY AND THE FREEDMAN’S SAVINGS AND TRUST COMPANY.
Judges: Olin, J., dissenting.
Reporter: Reports of cases argued and determined in the Supreme Court of the District of Columbia (District of Columbia - reported by Mackey)
Volume: 9
Pages: 141–145

Head Matter:
CHARLES HOLDEN vs. GEORGE W. STICKNEY AND THE FREEDMAN’S SAVINGS AND TRUST COMPANY.
In Equity. —
No. 3926.
I. When the trustee named, iu a deed of trust given to secure the payment of a promissory note, with power in the trustee to sell the land if the note is not paid, dies, the person who created the trust and the note is a necessary party to an original bill in equity for the appointment of a new trustee.
II. In this case the person who executed the trust-deed conveyed away his remaining estate and interest in the premises, but continued to be liable for the payment of the note, and it was held that he was still interested in the appointment of a proper person to sell the property in such manner as not unnecessarily to cause a deficiency. The purchaser is also declared to be a proper party, as he is directly interested in the account and sale of the property. It might be otherwise in case of a foreclosure.
III. It is well settled that a decree obtained in a suit in equity without making those parties to the suit iu which it is had, whose rights are affected thereby, is void as to those parties, and such decree may be impeached by original bill.
STATEMENT OR -THE CASE.
The complainant executed his negotiable promissory note on the 13th of October, 1870, for the sum of $5,000, payable in four years, with interest at ten per cent., the said interest to be paid semi-annually, and at the same time, to secure the payment of said note, made a trust-deed to one Daniel Eaton, on a lot of ground, in square 732, in this city.
It further appears that one Thomas H. Talbot purchased the note about the time of its date, paying- to said Holden the amount of its face, and accepted the deed of trust a-s security for the advance, and deposited both the note and deed of trust with the Freedman’s Savings and Trust Company, which collected the interest for him as it fell due and was paid. Afterward the Freedman’s Bank loaned to said Talbot $1,500, and took the said Holden’s note for $5,000 and the deed of trust as security. Eaton, the trustee, departed this life in February, 1873, and the bank instituted a suit in equity by original bill, and had the defendant, George W. Stickney, appointed trustee in the place and stead of said Baton, deceased. The complainant was not made a party to that suit and had no notice of it, and defendants allege that said Holden was not made a party to such suit for the appointment of a new trustee for the reason that he had conveyed all his remaining equity and interest in the trust premises to one John Chester, on the 30th day of September, 1871, and that said Chester is tenant of the freehold and in possession.
It is also a fact in the case that said Chester was not made a party to the record in that suit, nor was his interest in said premises disclosed in the bill therein. The record in that suit, numbered 3201, was made an exhibit in this suit, from which it appears that the Freedman’s Savings and Trust Company was the sole complainant and Paul Eaton and Isabella Eaton, minor heirs of said D. L. Eaton, were the only defendants. It appears that Holden made default in April, 1874, in the payment of the interest falling due at that time; and Mr. Stickney then proceeded to advertise the trust-property for sale, claiming to do so by virtue of the decree in equity suit 3201, appointing him trustee. Complainant seeks to perpetually enjoin him from selling the property, and to set aside as null and void the decree therein, and asks for general relief.
The court below perpetually enjoined Stickney from acting as trustee, and from this decree in the present suit the defendant appealed.
William A. Meloy for plaintiff:
As to appointment of guardians ad litem for infants, cited 5 Bacon Abg., 153; 8 Pet., 128; Hill on Trustees, 197; Alexander’s British Statutes, 679.
As to necessary parties, cited 1 Story’s Eq. Pl., 427; Hill on Trustees, 207, 208; Perry on Trusts, 275.
T. J. D. Fuller for defendant:
Holden, having conveyed his interest in the premises prior to the decree, does not stand in a position to question the validity of the decree. He was a stranger, and any other stranger might as well call in question the validity of the decree as he. The court below erred in not requiring Holden to do equity before invoking its aid to arrest the collection of his debt, for which he was in default. The court erred in mulcting the defendants in costs, when at most, if error existed, it was the error of the court, and not of the defendants. It was in the power, and it was but the reasonable duty, of the court to require Holden to pay his note and interest before it interfered by perpetual injunction to prevent Stickney from acting under its own decree.
God, in his providence, removed the trustee, and separated him from the trust. The trust, nevertheless, remained. The minors could not execute it; were incapable of receiving it or executing it. The defendants were the owners of the trust, the beneficiaries of it, and could invoke the power of the court to evacuate it, and to appoint a trustee to do it, without notice to Holden. He, at most, may not be concluded by the decree, if not made a party to the suit, but the decree is nevertheless a valid one.

Opinion:
Mr. Justice MacArthur
delivered the opinion of the court:
From the facts admitted in this case it appears that the decree appointing Stickney trustee was obtained in a suit in which the only defendants were the infant heirs of the original trustee, and consequently they have no beneficial interests in the result of the suit. Neither the person who executed the note and trust-deed nor the person who purchased the trust-property and who was then in possession as tenant of the freehold were brought before the court, although they were the only parties whose rights could be affected by the decree. It is argued that, as Holden had made a conveyance of his interest in the land, he was no longer interested in the appointment of a trustee to sell it. We must, however, remember that, although he had conveyed away his estate, he still remained liable upon his note, and had not parted with his right to have that note paid out of the trust-property. The very object of the bill in 3201 was to procure the appointment of some one to sell the property so as to pay the note, and in the payment of the note no one was more interested than Holden, and in reference to the property, certainly Chester, who had purchased it with that incumbrance, was equally interested in the adjustment of the account and the execution of the trust, so far as related to the sale of the property by the new trustee. Holden had created the trust, and he had a right to see that the new trustee was a proper person to execute it. Mr. Perry, in his book on Trusts, at section 277, says: "In removing and substituting trustees, the court does not act arbitrarily, but upon certain general principles, and after a full consideration of the case. It always has regard to the wishes of the author of the trust, to be gathered from the instrument of trust; if he has expressed a disapprobation of an individual, the court would refrain from appointing him; and so the court will not appoint a new trustee with a view to the interest of some of the cestuis que trust, for the trustee ought to hold an even hand between all parties, and not favor a particular one." Now, in the present case, it cannot be denied that Holden had a right to see that a person was appointed as the trustee who would at least be fair and even-handed ia the performance of his duty, and who would conduct the-sale of the premises in case Holden was unable to pay his note in such a manner as-not needlessly to cause a deficiency, when, by a proper execution of the trust, the obligation might be entirely satisfied.
In view of these considerations, we cannot doubt but that Holden was a necessary party to that suit, and probably Chester also, as he purchased subject to an incumbrance of which he had at least implied notice, although he might not be a party to the foreclosure.
Mr. Story, at section 427, Equity Pleadings, announces the doctrine that a decree obtained without making those parties to the suit in which it was had whose rights are affected thereby is fraudulent and void as to those parties. And even a purchaser under it, having notice of the defect, is not protected by such decree, for otherwise the decrees of a court of chancery might be used as an engine for the purpose of effecting the greatest fraud. He refars to Cooper's Eq. Pl., 96 and 98 ; Mitf. Eq. Pl., 93, 94; Gifford vs. Hart, 1 Sch, and Lef., 386; Kennedy vs. Daly, 1 Sch. and Lef., 355, 374, 375.
The same authorities also settle the piinciple that such a decree may be impeached by original bill. The present-case shows that the only defendants in equity-suit 3201 were the infant heirs of the trustee named in the deed of trust. They were incapable of executing the trust, were subject to no liability, and had no perceptible interest in the subject-matter of the suit. In a word, they were merely nominal parties. It is even averred in the bill in t hat case that they had no interest in the property. Who, then, are the parties in interest 1 Clearly the maker of the note and the owner of the land. The bill in that case shows no reason why they are not brought before the court, and the conveyance to Chester is not even disclosed. Nobody in point of fact wasrepresented in the suit'but the cestuis que trust. The bill was subscribed and sworn to by Mr. Stickney, who was the principal officer of the bank, and the decree appoints him trustee. That is, the cestui que trust, who filed the bill, had itself substantially appointed its own trustee.
We doubt not but Mr. Stickney is a fair and honorable gentleman, and would act from a sense of duty; but the court must look with marked disfavor upon this proceeding.
In view of the defective character of the decree appointing the new trustee, it is almost certain that the property cannot be sold for its full value. No prudent purchaser would be willing to invest in a title so questionable. Upon looking into the proceedings, he would find the objections we have been discussing, and a fair purchaser would probably decline to bid for it at all; and, if purchased by any one except the bank, it would be for an inadequate consideration.
•The chief-justice is of opinion that the decree below ought to be affirmed for this reason alone. Mr. Justice Wylie and myself, while concurring in that view, are also of opinion that Holden was a necessary party in the suit brought by the bank, and that, consequently, the decree had therein was void as to him.
Decree below affirmed
Olin, J., dissenting.