US SUPREME COURT DECISIONS

With the delivery of a mortgage to secure bonds of one corporation, there was delivered to the trustee stamped on each bond a guaranty by another corporation whereby the latter guaranteed

"to the Trustee of the within-mentioned mortgage, for the benefit of the holders thereof, punctual payment of the principal of the within bond and the interest thereon . . . according to the tenor of

Page 244 U. S. 267

the several coupons belonging thereto."

Upon foreclosing the mortgage, the trustee obtained judgment against the guarantor company for a deficiency.

Held:

(1) That whether the guaranty were treated as having created an aggregation of as many obligations as there were bonds, each constituting a separate contract between the guarantor and the respective bondholder, or a single obligation for the benefit of the bondholders collectively, in either case there was a merger of the original cause or causes of action in the single judgment recovered by the trustee.

(2) The judgment being held as an unit by the trustee, for the benefit of all the bondholders, a suit to enforce it by a majority of them, though alleged to be on behalf also of all others similarly situated, could not be maintained without joining the trustee as a necessary party.

(3) In such suit, for the purpose of testing the district court's jurisdiction on the basis of diverse citizenship, the trustee, though made a defendant, must be realigned as a plaintiff, no hostility on its part appearing beyond a refusal to institute the action, assignable to no other motive than to aid the federal jurisdiction, and its real attitude being friendly as evinced by its answer.

One corporation, after guaranteeing bonds of another, passed into a receivership in the district court which ended in foreclosure of its own bonds and sale of its property, without reservation in the decree of liens or similar rights or power of the court concerning them. Meanwhile, by independent proceedings in a state court, the bonds of the second company were foreclosed and a deficiency judgment was rendered against the first company on the guaranty, which judgment, being presented as a claim in the district court proceedings, was rejected because the first company's liability to pay it was contingent at the date set for proving claims in that court. Held that a suit brought later in the district court upon the ground that, by its decree, the equities of persons interested in the deficiency judgment were wrongly ignored, and seeking to have that judgment impressed as a lien upon the property so sold, was not within the district court's jurisdiction as a suit ancillary to the foreclosure proceedings in which its decree was rendered.

Affirmed.

The case is stated in the opinion. chanrobles.com-red

Page 244 U. S. 268