Court Opinion

ID: 6842271
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:21:53.66018+00
Date Added: 2024-06-11T16:04:53.373914
License: Public Domain

HAYES, District Judge
(dissenting).
The complainant (appellant), resident of New York, is a trustee under a joint corporate mortgage executed by Twin City Power Company, of South Carolina (a South Carolina corporation which owns several thousand acres of land and riparian rights on the South Carolina side of the Savannah river and all the stock in the Twin City Power Company of Georgia, the latter company owning large acreage and riparian rights on the Georgia side), and Twin City Power Company of Georgia on all the lands, rights, and franchises of both corporations to secure the payment of $1,000,000 bonds. The property is suitable for a valuable power site and was acquired by the mortgagors for that purpose and as such constitutes the real security of the mortgage.
The Savannah River Electric Company is a South Carolina corporation which has erect*334ed a dam across the Savannah river several miles below the property of the Twin City ; Power Company, and now proposes to erect another dam between the two sites which will overflow practically all of the lands of Twin City Power Company and destroy its power site. Pursuant to section 4990, vol. 3 of the Code of South Carolina of 1922, it served notice on the Twin City Power Company and Halpin, trustee, that it would condemn all . lands of Twin City Power Company in South Carolina, including riparian rights, franchises, and privileges. Within thirty days thereafter, Halpin and the power company served notice that they ref used, to consent to the condemnation.
Halpin as trustee, without making the mortgagor a party, filed this suit in the District Court of South Carolina, praying an injunction against further proceeding in condemnation by the Savannah River Electric Company. Abundant facts and equitable grounds are stated in the bill which, if true, warrant the injunction. The defendant moved to dismiss the suit for failure to make Twin City Power Company a party. On-hearing the motion the court dismissed the suit on the ground that the mortgagor was an indispensable party and, if not indispensable, at least a necessary party without whose presence the court, in its discretion under Equity Rule 39 (28 USCA § 723), would not proceed. From this decree Halpin appeals.
Does a mortgagee by virtue of his lien have a property right in the premises which he can protect by injunction from injury by an outside party without joining the mortgagor in the suit? The law of South Carolina treats a mortgage as a lien, the mortgagor still holding the title and • possession even after default, coupled with the power of sale on default. The law of that state by statute prescribes that no question as to the legality of the condemnation can be raised in the condemnation proceeding. The only question is the ascertainment of the amount of damages. The owner must bring a separate suit in equity if he wishes to challenge the right to condemn, and the only purpose of the suit is to determine that right. Town of Greenwood v. Yoe, 89 S. C. 24, 71 S. E. 238. If the mortgage creates a specific lien on the premises for the payment of the debt, it is surely a property right of which he cannot be deprived without due process of law. Í can see no valid reason why the mortgagee should be deprived or limited in applying to a court .of equity for relief to- restrain any wrongful or unlawful impairment or destruction of his security. On the contrary, valid reasons exist why he should not be so deprived. Frequently property is mortgaged in excess of its true value which is intimated in this case. The interest of the mortgagor is nil. He may not care to protect the mortgaged premises; he may not want to invoke the aid of the court on account of the attendant delay and expense. Is the interest of the mortgagor so intermingled with, or inseparable from, that of the mortgagor that he cannot protect it in a court of equity from injury by strangers except by making the mortgagor a party? I do not so understand the law.
If the defendant has no legal right to condemn the property, the condemnation is unlawful and the defendant occupies a position no more favorable than a trespasser.
’ “The right of a mortgagee under certain conditions to bring an injunetional suit to protect its security independently of the mortgagor is thoroughly established. Some of the eases cited above not only recognize such right on the part of the mortgagee but further hold that the mortgagor is an unnecessary party. Such rule is applied where the suit is brought to restrain threatened injury to the security by trespassers or other tort-feasors, and where the threatened injury is by outsiders, strangers to the affairs and contracts of the mortgagor.” Mahon v. Guaranty Trust Co. (C. C. A.) 239 F. 266, 270.
In City and County of Denver v. New York Trust Co. (C. C. A.) 187 F. 890, 894, we find the following language:
“The Trust Company as the representative of the bond holders has certain rights independently of its mortgagor, the Water Company, and is not concluded by the action or nonaction of the latter. Though possession, management and operation of the mortgaged property, with their usual incidents, remain with the Water Company, the derivative interest of the Trust Company is such as to entitle it to protection and to preserve the property pledged to it from unlawful injury or destruction.”
In Mercantile Trust Co. v. Columbus, 203 U. S. 311, 27 S. Ct. 83, 51 L. Ed. 198, the right of the mortgagee to injunctive relief, independent of the mortgagor, was recognized.
Mortgagees have obtained injunctive relief against injury to mortgaged premises in many instances without making mortgagors parties to the suit. Carter v. Fortney (C. C.) 170 F. 463, affirmed by the Fourth Circuit Court of Appeals, per curiam, 203 F. 454; *335Ex parte Haggerty (C. C. W. Va.) 124 F. 441; Consolidated Water Co. v. City of San Diego (C. C.) 84 F. 369; Id. (C. C. A. 9th) 93 P. 849; City of Denver v. Mercantile Trust Co. (C. C. A.) 201 F. 790; Equitable Trust Co. v. Denney (C. C. A. 7th) 24 F.(2d) 169.
In tho last ease the mortgagee of a traction company was permitted to enjoin a competing bus line without making the mortgagor a party.
Tho mortgagor is not an indispensable party in a suit by the mortgagee to enjoin threatened injury to the mortgaged property by third persons. Cyclopedia of Federal Procedure, § 3184.
In tho instant ease complainant prays injunction against threatened injury by an outsider, a stranger to the affairs of the mortgagor. The sole relief sought is the preservation of tho premises, contracts, and franchises embraced in the mortgage, against the alleged wrongful tailing by the defendant. It is suggested that no decree can he entered without affecting the mortgagor. If so, it is incidental, not primary. The mortgagee does not seek damages for mortgaged premises taken or injured. Herein lies the'clear distinction. If there is to he a recovery for premises taken or injured, obviously the mortgagor would he indispensable, for there could he only one award of damages. Compensation is to be substituted for the res, and the mortgagor and the mortgagee are interested .and necessary parties to all suits of that character. If, in the instant ease, the mortgagor and mortgagee had consented to condemnation, and damages remained to bo assessed for the property taken, the mortgagee could not move the ease to the federal court for no separable controversy exists. The compensation covers the whole injury and will be distributed as their interests appear. This, as I understand it, is the reason in the rule laid down in Re City of Seattle (D. C.) 237 F. 100; Fishblatt v. Atlantic City (C. C.) 174 F. 196; Helena Power Transmission Co. v. Spratt (C. C.) 146 F. 310 and Bellaire v. B. & O. Ry. Co., 146 U. S. 117, 13 S. Ct. 16, 36 L. Ed. 910. But these decisions by no moans support the proposition presented in this suit, fo-r this is not a condemnation pro•eeeding nor an action to recover damages.
Niles-Bement-Pond Co. v. Iron Moulders’ Union, 254 U. S. 77, 80, 41 S. Ct. 39, 65 L. Ed. 145; Mahon v. Guaranty Trust & Safe Deposit Co. (C. C. A.) 239 F. 266, and Consolidated Water Co. v. City of San Diego (C. C. A. 9th) 93 F. 849, cited in tho opinion in this ease, are distinguishable for in each of these eases there is privity between the party sought to be restrained and the absent party, who was held indispensable.
The mortgagee is the owner in the sense that he ean test the legality of the proposed condemnation; he has a separate right to protect the premises from wrongful injury in order to protect his lien, and so long as his relief is confined solely to enjoin the wrongful taking, ho may have such relief without making mortgagor a party, since the preservation of the premises from wrongs of others do not affect in a legal sense the mortgagor. A final decree would not affect that interest, nor leave the controversy in such a condition that its final termination will ho wholly inconsistent with equity and good conscience. If the taking is lawful the mortgagor could not, if present, prevent it. If it is unlawful, the mortgagee who deems the taking destructive of his interest has the undoubted right to prevent it regardless of its effect on tho mortgagor. After tho mortgagor pledges his property to secure a debt, neither equity nor good conscience requires the mortgagee to suffer his security to become impaired for the sake of permitting the mortgagor the intimated advantage of having his mortgaged premises condemned.
The District Court held that the mortgagor was an indispensable party and dismissed the bill as a matter of law. The decree then dismisses the hill as a matter of discretion because the mortgagor is regarded, at least, a necessary party without whose presence tho court may proceed in its discretion. If the judge’s mind was convinced on the legal proposition that the mortgagor was indispensable, it had no opportunity to exercise a sound, judicial discretion. If the court is satisfied that the party is not indispensable, it might alter its views about it being a necessary party. I think the case should be remanded for further proceedings. Equitable Trust Co. v. Denney (C. C. A.) 24 F.(2d) 169.