Court Opinion

ID: 3491014
Source: CourtListenerOpinion
Date Created: 2016-07-05 21:59:28.698761+00
Date Added: 2024-06-11T13:53:59.726331
License: Public Domain

ON REHEARING.** See ante, 144. — REPORTER.
The decree is in accord with the provisions of the indenture and is affirmed.
Giving the provisions of the indenture reasonable construction discloses express power in the trustee to bid and purchase, at the foreclosure sale, in behalf of all the bondholders, whose interest he is bound to protect, without personal possession of the bonds. Such purchase by the trustee does not divest the trust but only vests the legal title in the trustee for the benefit of the bondholders, who thereby become the equitable owners of the res. The inchoate right to the benefit of the security becomes thereby an equitable right of participation in the res. Such enforcement of the provisions of the indenture by decree cannot be successfully contested by the mortgagor and, as no bondholder objects, solicitude relative to protection of the mortgagor is gratuitous. The provisions of the indenture amply protect the rights of all parties in case of purchase by the trustee without possession of the bonds.
The following from Richter v. Jerome, 123 U.S. 233, 246
(8 Sup. Ct. 106), is applicable:
"All the rights the bondholders have or ever had in the mortgage, legal or equitable, they got through *Page 719 
the trust company, to which the conveyance was made for their security. As bondholders claiming under the mortgage, they can have no interest in the security except that which the trustee holds and represents. If the trustee acts in good faith, whatever binds it in any legal proceedings it begins and carries on to enforce the trust, to which they are not actually parties, binds them. Kerrison v. Stewart, 93 U.S. 155, 160;Corcoran v. Chesapeake  Ohio Canal Co., 94 U.S. 741, 745; Shaw
v. Railroad Co., 100 U.S. 605, 611. Whatever forecloses the trustee, in the absence of fraud or bad faith, forecloses them. This is the undoubted rule."