Ribon v. Railroad Companies/Opinion of the Court

by Noah Haynes Swayne

United States Supreme Court

83 U.S. 446

Ribon  v.  Railroad Companies

This is an appeal in equity from the decree of the Circuit Court of the United States for the District of Iowa. The appellants are the complainants. A brief statement of the case as presented in the record will be sufficient for the purposes of this opinion.

The Mississippi and Missouri Railroad Company was incorporated to construct a railroad from Davenport, on the Mississippi River, to a point at or near Council Bluffs, on the Missouri River. It executed five mortgages to secure different sets of bonds, and issued stock in shares of $100 each, to the amount of $3,500,000. The company built a part of its roadway, and became greatly embarrassed. A large majority in interest of the bondholders and stockholders decided to sell all the property of the company to the Chicago and Rock Island Railroad Company, or to such other corporation as that company might designate to receive the transfer; and in order to pass the title it was determined to have the mortgages foreclosed and a sale made under the decree. The Rock Island company entered into the arrangement, and agreed to pay $5,500,000 as the consideration of the sale. Payment was to be made in bonds as specified in the contract. The majority in interest of the bond and stockholders of the Mississippi company agreed among themselves as to the distribution of the fund. Such proceedings were subsequently had that under a decree in a suit in equity, wherein the trustees in one of the five mortgages were complainants, and the trustees of the other four and the Mississippi company were defendants, a sale was made to the Chicago, Rock Island, and Pacific Railroad Company for the sum of $2,100,000. Five and a half millions of the bonds of the purchasing company were nevertheless paid over according to the prior contract, and have been distributed according to the agreement among themselves, of the majority in interest of the stockholders and bondholders of the Mississippi company. The Chicago, Rock Island, and Pacific company is in possession of the property so sold to them, and operating the finished part of the road. It is not denied that the proceedings touching the sale are upon their face regular and valid.

The holders of the bonds of the Mississippi company, to the amount of $185,000 and of six thousand shares of the stock, refused to become parties to the arrangements and proceedings of the majority in interest-never assented to the sale, and did not participate in the distribution of the proceeds.

The complainants are dissenting bond and stockholders. They filed this bill for themselves and such other dissenters as might choose to become parties and contribute to the costs of the litigation. The prayer of the bill is that the sale may be declared fraudulent and void; that the property may be resold under the decree; that the money arising from the sale be applied, first, to the payment of the bonds of the complainants and of the other dissenting bondholders who may become parties, and that the residue be applied upon the stock of the complainants and of such other dissenters as may become parties, and for other and further relief.

The appellees demurred to the bill, and assigned for cause, among others, the want of indispensable parties. The demurrer was sustained, and the complainants not electing to amend, the court dismissed the bill.

The want of parties is the only point we have found it necessary to consider.

The rule in equity as to parties defendant is that all whose interests will be affected by the decree sought to be obtained must be before the court; and if any such persons cannot be reached by process-do not voluntarily appear, or from a jurisdictional objection going to the person in the courts of the United States, cannot be made parties-the bill must be dismissed. Where a decree can be made as to those present, without affecting the rights of those who are absent, the court will proceed. But if the interests of those pres nt and of those absent are inseparable, the obstacle is insuperable. The act of Congress of 1839 and the rule of this court upon the subject give no warrant for the idea that parties whose presence was before indispensable could thereafter be dispensed with. The subject was fully considered in Shields v. Barrow. ^[1] What is there said need not be repeated.

The rule that all to be affected by the result must be before the court is subject to certain exceptions. But they have no application to the case before us, and need not, therefore, be considered. The rule, as we have stated it, is well settled in equity jurisprudence. ^[2]

In the case before us the two railroad companies were properly made defendants-the Mississippi and Missouri company because it was the mortgagor and the owner of the mortgaged premises up to the time of the sale, and because if the sale were annulled its title would be restored; the Chicago, Rock Island, and Pacific company, because it was the purchaser and is in possession of the property under a claim of title. But the Mississippi and Missouri company has nothing at stake. It is without means, present or prospective. It has been stripped of all its property and effects, and only cumbers the ground.

The trustees in the five mortgages which were foreclosed should have been made parties. Their presence as such was indispensable. If the sale should be annulled they might be in the situation of the plaintiff who collects a judgment which is afterwards reversed. He may be called upon to refund and compelled to do so. A question would also arise whether the consideration of the agreement under which the five and a half millions of bonds were paid had not failed, and whether all the bondholders and stockholders who participated in the distribution of the proceeds of the sale should not be required to refund. If either or both were too numerous for all to be brought before the court, some might have been made parties in their own behalf and as the representatives of the others. ^[3]

Dodge v. Woolsey et al., ^[4] to which our attention was called by the learned counsel for the appellants, presents no material points of analogy to the case before us, and affords no support to this bill in the particular under consideration. The bill in this respect is fatally defective. We do not deem it necessary to pursue the subject further. The demurrer was properly sustained and the bill properly dismissed.

DECREE AFFIRMED.

Notes

1. 17 Howard, 130.
2. Caldwell v. Taggart, 4 Peters, 190; Story v. Livingston, 13 Id. 359; Marshall v. Beverley, 5 Wheaton, 313; Coy v. Mason, 17 Howard, 580; Russell v. Clark's Ex'rs, 7 Cranch, 69.
3. Story's Equity Pleadings, 7th ed., §§ 120-121, 128, 131, 132, and notes.
4. 18 Howard, 331.