Opinion
No. 2474.
November 26, 1930.
Appeal from the District Court of the United States for the District of Massachusetts; James M. Morton, Jr., Judge.
Suit by Charles Dooley and another against Mina E. Fritz. From a decree referring the case to a special master and a decree denying plaintiffs' motion to dismiss [ 38 F.2d 123], plaintiffs appeal.
Appeal dismissed.
This is a bill in equity seeking to restrain the foreclosure of a mortgage for $250,000 on a certain hotel in Boston, the mortgage also covering the furniture and furnishings of the hotel. The bill is founded upon an alleged oral agreement, made between the parties about November 15, 1929, whereby the defendant, the mortgagee, is said to have waived certain breaches under the mortgage and to have agreed that the mortgaged property should be handled and carried along under an arrangement materially different from that contained in the mortgage; that is to say; that if the plaintiffs would allow the defendant to take possession and physical control of the hotel, and such other personal property as the plaintiffs had upon the hotel premises of the value of about $2,000, and of all income then and thereafter payable from the tenants and guests of the hotel, the plaintiffs' ownership and management of the hotel property would continue as theretofore and the defendant would provide the necessary funds to pay the taxes then due, also other necessary disbursements, and would allow all income to accumulate for the purpose of meeting the obligations due and to become due under the mortgage; and would not foreclose her mortgage, and the property would be managed and controlled for the benefit of both the plaintiffs and the defendant until all advancements made by the defendant were repaid and discharged. It is then alleged that the plaintiffs, relying on the aforesaid agreement, consented to the entry of the defendant and her agent upon the property under the terms of the agreement, and permitted them to receive and collect all moneys thereafter paid by the guests and to make full use of the property real and personal; that since that day they have received approximately $2,500, and since then there has accrued an indebtedness owing by guests of approximately $2,500; that thereafter on the 29th day of November, 1929, the defendant, in violation of her contract and without legal right so to do, entered upon the property for the purpose of foreclosing the mortgage, and since the 29th day of November, 1929, has excluded the plaintiffs from the control and possession of the hotel property and the income therefrom; that at the time the defendant was permitted to enter upon the property under the agreement, she was allowed to use temporarily and have access to the books and papers of the business conducted by the plaintiffs at the hotel; that since the breach of said agreement by the defendant, the plaintiffs have demanded of her the books and papers and personal property, and an accounting of the moneys had and received, which demands the defendant has neglected and refused to comply with.
The prayers of the bill are: (1) For an injunction to restrain the foreclosure proceedings; (2) to restrain the defendant from interfering with and excluding the plaintiffs from their ownership and possession of the premises and property described; (3) that she be ordered to forthwith deliver to the plaintiffs the books of account and other papers above mentioned; (4) that she be ordered to account to the plaintiffs for all moneys received by her on account of the hotel property and from the guests, and for all moneys to which the plaintiffs may be entitled; (5) that the defendant be ordered to perform the terms of the alleged agreement set out in the plaintiffs' bill; (6) that if the performance of the agreement is not granted, the court award the ownership and control of the premises to the plaintiffs, subject to the performance of such obligations as the court may impose upon them; (7) that certain issues (defining them) be framed and submitted to the jury; (8) that the plaintiffs be awarded judgment and execution for such damages as they may be found to have sustained; and (9) that they be granted such other and further relief as justice may require.
The bill was filed December 16, 1929. December 20, 1929, a restraining order was entered enjoining the defendant from proceeding with the foreclosure until further order of the court; also enjoining the defendant from interfering with and excluding the plaintiffs from their ownership, control, and possession of the property described.
On December 31, 1929, after hearing on affidavits, the restraining order was continued until further order of the court.
January 7, 1930, the defendant filed an answer to the plaintiffs' bill. In the answer the defendant states that in September, 1928, she sold the hotel and furnishings in question to the complainants according to the terms of a certain contract hereto annexed and marked "A"; that in reliance upon the covenants of said contract marked "A," she passed title to the property in question by a quitclaim deed, annexed and marked "B"; that the consideration for the deed was a certain mortgage note for $250,000, annexed and marked "C," given by the plaintiffs to the defendant, secured by a second mortgage, containing a power of sale, annexed and marked "D"; and that on the day of the execution of the mortgage, September 24, 1928, the complainants paid the defendant the sum of $1,000 on the mortgage note. In addition to these averments, the answer contains certain admissions and certain denials of matters set up in the plaintiffs' bill, and, by way of counterclaim of matters of a legal nature, it alleges that the complainants after entering into possession of the real estate and personal property on the 24th day of September, 1928, "failed, neglected and refused to devote their alleged experience and capacity as hotel proprietors to carrying on said hotel property; and more particularly said complainants (a) wilfully and fraudulently committed waste upon said premises and suffered the same to fall into a state of great neglect and disrepair; (b) so neglected the business of conducting at all times a first-class hotel on said premises as to impair greatly the value thereof as collateral security for your respondent's said mortgage note; (c) suffered and permitted certain persons to have extensive and improper use of and facilities upon said premises without any consideration, in fraud of your respondent." It also alleged (1) "that one of the terms of the mortgage hereto annexed and marked 'D' is that the mortgagors shall pay taxes when same become due and payable, and the respondent says that on said October 15, 1929, real estate taxes in the sum of ten thousand eighty dollars ($10,080), plus legal interest thereon, remained unpaid, and that the complainants then, theretofore, and thereafter failed, neglected, and refused to pay said taxes, in breach of the covenants of the said mortgage marked 'D' and also of the covenants of said contract marked 'A'"; (2) "that the complainants have surreptitiously taken certain books of account which they recently had turned over to her before she had an opportunity for fully examining same and up to the present time have failed and refused to return said books to your respondent so that she can complete her said examination, in violation of the covenants hereto annexed and marked 'A'"; and (3) "that sometime in November, 1929, the complainants made an assignment or alleged assignment to one Henry I. Morrison, Esq., formerly complainants' attorney, of the moneys which the complainants claimed to be due them from respondent in their bill, * * * said assignment being a direct violation of a provision of said contract marked 'A.'"
And by way of equitable counterclaim the defendant alleged in her answer that the "complainants collected in advance certain rents covering the said period [from November 15, 1929, to November 29, 1929], * * * and put the said rents to their own uses * * * and in justice and in equity should account to your respondent therefor."
The answer prayed: (1) That the bill be dismissed; (2) that the complainants be enjoined from in any way interfering with the foreclosure of the mortgage; (3) that the case be referred to a master; (4) that the complainants be ordered to vacate the portion of the premises now occupied by them in order to pay respondent the fair rental value of that portion of said premises from November 29, 1929; (5) that they be ordered to return for her examination the books of account surreptitiously taken by them; (6) that they be ordered to render an account of their conduct of said premises since September 24, 1928, including an accounting of all moneys received, disbursed, and otherwise handled by them in connection with the management of the hotel property; (7) that they be ordered to pay over to your respondent such sums of money as they shall be found to have diverted to their own uses in fraud of your respondent and in violation of terms of the agreement hereto annexed and marked "A," and that this court enter a money judgment in favor of your respondent; and (8) for such other and further relief as respondent in equity and good conscience may be entitled to obtain.
January 28, 1930, a decree was entered referring the case to a special master to hear the parties and their evidence, and to report to the court his findings of fact and his conclusions thereon, together with such parts of the evidence as any party may, in writing, request.
January 31, 1930, after hearing on plaintiffs' motion to vacate the reference to a master, it was ordered that the plaintiffs be given to February 3, 1930, to elect whether to proceed before a master or not, but, if plaintiffs decided not to proceed before a master, then the injunction was to be dissolved.
February 5, 1930, the plaintiffs, not having elected to proceed before the master, filed a motion requesting that, in so far as they seek equitable relief in their bill, their bill be dismissed without prejudice, and that, in so far as the allegations of the bill seek recovery ex contractu, they may be transferred to the law docket of the court.
On February 12, 1930, after hearing on the motion, it was decreed that the motion to dismiss be denied, 38 F.2d 123, and that the reference to the master be continued. It was further ordered that the hearings before the master be had concurrently with those which are to be held before him as auditor in the case on the law docket of the court brought by the defendant in the equity suit against the plaintiffs in that suit. In this lawsuit the grounds of complaint alleged are the legal grounds of complaint set up by the defendant in its answer to the bill in equity by the way of counter-claim.
It is from the decrees of January 28 and February 12, 1930, that this appeal is taken.
The assignments of error are: (1) That on the state of the record and the facts and circumstances of the case it was not within the discretion of the court to deny the motion to dismiss the bill; (2) that the denial thereof in legal effect deprived the complainants of their right to a jury trial upon the issues of law raised by the respondent in her answer to the bill; and (3) in referring the case to a master in that, upon the record and under the facts and circumstances disclosed, the cause of action is not a proper one, either as a matter of law or a matter of discretion, for reference to a master.
There are five other assignments of error, but they are sufficiently covered by those above set forth.
Charles W. Lavers, of Boston, Mass., for appellants.
Daniel F. McCormack, of Boston, Mass., for appellee.
Before BINGHAM, ANDERSON, and WILSON, Circuit Judges.
We are met at the outset with the objection that neither of the decrees are final and appealable, either in denying the complainants' motion to dismiss or in referring the case to a master. As this goes to the jurisdiction of this court, the question must first be determined.
In United States v. Bighorn Sheep Co., 276 F. 710, 711, the Court of Appeals for the Eighth Circuit had under consideration the question whether a decree sustaining a motion to dismiss portions of the plaintiff's bill was final and appealable. It is there said: "Under the statutes conferring jurisdiction upon the courts of appeal of the United States, an appeal can only be taken from a final decree, unless the acts of Congress have made exceptions. A decree is final when it terminates the litigation between the parties on the merits of the case, and leaves nothing to be done but to enforce by execution what has been determined. St. L., I.M. S.R.R. Co. v. Southern Express Co., 108 U.S. 24, 28, 3 S. Ct. 6, 27 L. Ed. 638; Bank of Roundout v. Smith, 156 U.S. 330, 333, 15 S. Ct. 358, 39 L. Ed. 411; Heike v. United States, 217 U.S. 423, 429, 30 S. Ct. 539, 54 L. Ed. 821; Carmichael v. City of Texarkana, 116 F. 845, 846, 847, 54 C.C.A. 179, 58 L.R.A. 911."
And it was held that, as the order of dismissal disposed of only a part of the issues involved in the bill, leaving the suit pending as to the other issues there charged, the decree of dismissal was not a final and an appealable one.
In Collins v. Miller, 252 U.S. 364, 40 S. Ct. 347, 349, 64 L. Ed. 616, the Supreme Court had under consideration an appeal from a judgment entered in a habeas corpus proceeding. In that case the petition alleged that the relator was unlawfully detained for foreign extradition on three charges. The judgment denied relief as to one of the charges and ordered a further hearing by the Commissioner as to the others. It was held that the judgment was not final and appealable; it did not dispose of the whole case. The court there said: "A case may not be brought here by appeal or writ of error in fragments. To be appealable, the judgment must be, not only final, but complete. United States v. Girault, 11 How. 22, 32, 13 L. Ed. 587; Holcombe v. McKusick, 20 How. 552, 554, 15 L. Ed. 1020; Bostwick v. Brinkerhoff, 106 U.S. 3, 4, 1 S. Ct. 15, 27 L. Ed. 73; Grant v. Phoenix Ins. Co., 106 U.S. 429, 431, 1 S. Ct. 414, 27 L. Ed. 237; Dainese v. Kendall, 119 U.S. 53, 7 S. Ct. 65, 30 L. Ed. 305; Covington v. Covington First National Bank, 185 U.S. 270, 277, 22 S. Ct. 645, 46 L. Ed. 906; Heike v. United States, 217 U.S. 423, 429, 30 S. Ct. 539, 54 L. Ed. 821; Rexford v. Brunswick-Balke-Collender Co., 228 U.S. 339, 346, 33 S. Ct. 515, 57 L. Ed. 864. And the rule requires that the judgment to be appealable should be final not only as to all the parties, but as to the whole subject-matter and as to all the causes of action involved. Louisiana Navigation Co. v. Oyster Commission, 226 U.S. 99, 101, 33 S. Ct. 78, 57 L. Ed. 138; Sheppy v. Stevens, 200 F. 946, 119 C.C.A. 330. The seeming exception to this rule by which an adjudication final in its nature of matters distinct from the general subject of the litigation, like a claim to property presented by intervening petition in a receivership proceeding, has been treated as final, so as to authorize an appeal without awaiting the termination of the general litigation below (Central Trust Co. v. Grant Locomotive Works, 135 U.S. 207, 224, 10 S. Ct. 736, 34 L. Ed. 97; Williams v. Morgan, 111 U.S. 684, 699, 4 S. Ct. 638, 28 L. Ed. 559; Trustees v. Greenough, 105 U.S. 527, 26 L. Ed. 1157), has no application here. Nor have cases like Forgay v. Conrad, 6 How. 201, 204, 12 L. Ed. 404, and Thomson v. Dean, 7 Wall. 342, 345, 19 L. Ed. 94, where decrees finally disposing of property which the successful party was entitled to have carried into execution immediately, were held appealable, although certain accounts pursuant to the decree remained to be settled."
The complainants apparently contend that the decrees are final and appealable because they deprived them of a trial by jury upon the issues of law raised by defendant in her answer by way of counterclaim and require those issues to be tried in the equity suit. This is plainly not the case. The issues of law tendered in the answer by way of counterclaim, the plaintiffs can have stricken from the answer, if they desire; and if an application therefor is denied, by preserving their right, have the question reviewed. While Equity Rule 30 (28 USCA § 723), as construed by the Supreme Court, allows a defendant to avail himself, by way of counterclaim, of matter which might be the subject of an independent suit in equity, as well as of subject-matter of an equitable nature arising out of the cause of complaint stated in the bill, it confines and limits counterclaims to those which are equitable. American Mills Co. v. Amer. Surety Co., 260 U.S. 360, 365, 43 S. Ct. 149, 151, 67 L. Ed. 306. It is there said: "That which grows out of the subject-matter of the bill must be set up [by counterclaim] in the interest of an end of litigation. That which does not may be set up if the defendant wishes in one proceeding in equity quickly to settle all equitable issues capable of trial between them in such a proceeding, even though they are not related. Buffalo Specialty Co. v. Vancleef (D.C.) 217 F. 91. The formality of cross-bills is not required, and the rule goes as far as possible to facilitate the prompt disposition of equitable controversies between the same litigants. The rule should be liberally construed to carry out its evident purpose of shortening litigation, but the limitation of counterclaims to those which are equitable is imperative." This is the rule in this Circuit. Krentler-Arnold Hinge Last Co. v. Leman (C.C.A.) 13 F.2d 796, 801.
What we have said of the decrees here in question shows that neither of them was final, but interlocutory only. Neither disposed of all the issues and were but steps toward a final hearing and decree. Further proofs were to be taken, and, until that was done, the entire controversy presented by the pleadings could not be adjudicated. Rexford v. Brunswick-Balke-Collender Co., 228 U.S. 339, 345, 346, 33 S. Ct. 515, 57 L. Ed. 864.
The appeal is dismissed for want of jurisdiction. No costs.