1. The amount of a supersedeas bond as well as the sufficiency
of the security are matters to be determined by the judge below,
under the provisions of the twenty-ninth rule.
2. The discretion thus exercised by him will not be interfered
with by this Court.
Page 88 U. S. 18
3. If, however, after the security has been accepted, the
circumstances of the case or of the parties or of the sureties upon
the bond have changed so that security which at the time it was
taken was "good and sufficient" does not continue to be so, this
Court, on proper application, may so adjudge and order as justice
may require.
McCarter, the holder of a third mortgage, given by the Lake
Superior Ship Canal, Railroad, and Iron Company on about 400,000
acres of lands -- pine lands, hardwood lands, iron lands, copper
lands, and farming lands -- in Michigan, filed a bill in the
Circuit Court for the Eastern District of Michigan to foreclose his
mortgage. Subsequently to this, the company was decreed bankrupt
and, one Jerome and another having been appointed its assignees,
they were brought in by supplemental bill. On the 15th of June,
1874, the complainant got a decree of foreclosure.
The decree directed the sale of the canal, corporate franchises,
and two land grants to pay $1,057,686, and also what might be due
to one hundred and twenty bondholders whose debts were not included
in the above amount.
The sale was to be made subject to prior liens of $1,500,000 and
upwards (apparently about $2,000,000), so that with the decree of
$1,057,686, the property, if sold, would, in order to pay all
charges against it, have to produce $3,057,686, or at least
$2,500,000. The prior encumbrances were carrying interest at the
rate of 10 percent a year.
An appeal was soon afterwards applied for to SWAYNE, J., to
operate as a supersedeas. A body of affidavits was produced on the
side of the defendant, from men of business, men of science, and
men of wealth to show an immense value in the mortgaged property,
that its value far exceeded the amount of the decree and all prior
liens, taking these at their principal sums and adding all the
interest that had already accrued or would accrue during the
litigation, and moreover that the property, from the anticipation
of finding new mines on it, was rising in value. A body of
Page 88 U. S. 19
affidavits, nearly or quite as large and from a similar class of
persons, was produced to show the contrary; the highest value given
to the lands by any of these being $2,500,000. After hearing and
considering these affidavits, an appeal was allowed by SWAYNE, J.,
to operate as a supersedeas, and the security fixed at $10,000,
with two persons, named Wells and Crosby, as sureties. An appeal
bond was given accordingly.
There was no allegation in making the present motion that there
was any altered condition of the mortgaged property or of the
sureties in the appeal bond. The case, however, was No. 655 on the
calendar, the case last argued prior to the date of the motion
having been No. 96, and it appearing that the present case would
hardly, in regular course, come on to be heard for two years.
Affidavits by the same persons who had made them before, and
affidavits by numerous other persons on both sides, were now
produced and laid before the court; there being now, as before,
vast differences in the estimates of the property mortgaged, and as
to whether it would be found more valuable than it now was or
not.
To understand the arguments in the case, it is necessary to
advert to certain statutes and to the twentieth rule of this
Court.
The twenty-second section of the Act of 1789, [
Footnote 1] confers upon this Court the power
to review the final judgments and decrees of the circuit court by
means of a writ of error, and the judge who signs the citation is
directed to take good and sufficient security from the plaintiff in
error, "to answer all damages and costs if he fail to make his plea
good."
The twenty-third section prescribes the mode by which this writ
of error may operate as a supersedeas and stay execution, and when
the writ so operates, this Court is directed, when they affirm the
judgment or decree, to adjudge to the respondent in error, "just
damages for his delay, and single or double costs, at their
discretion."
Page 88 U. S. 28
THE CHIEF JUSTICE delivered the opinion of the Court
This is a bill filed by a junior mortgagee of the Lake Superior
Ship-Canal, Railroad and Iron Company against the company, a
bankrupt, and its assignees in bankruptcy for the foreclosure of
his mortgage and a sale of the mortgaged property, subject to
certain prior encumbrances. The decree appealed from ordered the
payment of $1,057,686 to the complainant by the company or the
assignees and, in default of such payment, the sale of the
mortgaged property, subject to an encumbrance thereon of $1,500,000
and upwards. From this decree both the company and the assignees
have appealed. The justice who granted the appeal and signed the
citation accepted the supersedeas bond in the sum of $10,000. The
appellee now moves to increase the amount of the bond and require
additional sureties.
The twenty-second section of the Judiciary act of 1789 provides
that every justice or judge signing a citation or any writ of error
shall take good and sufficient security that the plaintiff shall
prosecute his writ of error to effect and answer all damages and
costs if he fail to make his plea good. The twenty-third section
provides that if the judgment or decree is affirmed upon the writ
of error, the court shall adjudge and decree to the respondent in
error just damages for his delay, and single or double costs, at
its discretion. [
Footnote 2]
The act of 1803 [
Footnote 3]
provides that appeals shall be subject to the same rules,
regulations, and restrictions as are prescribed in cases of writs
of error.
Under the Act of 1789, the amount of the security to be taken is
left to the discretion of the judge or justice accepting it. The
statute is satisfied if in his opinion the security is "good and
sufficient."
Doubts having arisen as to the extent of the security to be
required where there was no supersedeas or stay of execution, an
act was passed directing that in such cases the amount should be
such as in the opinion of the judge would be sufficient to answer
all such costs as upon the affirmance
Page 88 U. S. 29
of the judgment or decree might be adjudged or decreed to the
respondent in error. [
Footnote
4]
In Catlett v. Brodie, [
Footnote
5] decided in 1824, this Court held that in cases where the
writ of error operated as a supersedeas, the security ought to be
sufficient to secure the whole amount of the judgment. Mr. Justice
Story, in delivering the opinion of the Court, said,
"It has been supposed at the argument that the act meant only to
provide for such damages and costs as the court should adjudge for
the delay. But our opinion is that this is not the true
interpretation of the language. The word 'damages' is here used not
as descriptive of the nature of the claim upon which the original
judgment is founded, but as descriptive of the indemnity which the
defendant is entitled to if the judgment is affirmed. Whatever
losses he may sustain by the judgment's not being satisfied and
paid after the affirmance, these are the damages which he has
sustained and for which the bond ought to give good and sufficient
security,"
Accordingly it was ordered that the suit stand dismissed unless
security should be given to an amount sufficient to secure the
whole judgment.
That was a judgment in an action at law for the recovery of
money not otherwise secured, and the decision established a rule of
practice for that class of cases. Afterwards, in Stafford v. Union
Bank, [
Footnote 6] decided in
1853, the court, with one dissenting judge, held that a supersedeas
which had been allowed upon an appeal from a decree for the
foreclosure of a mortgage on slaves should be vacated unless a bond
was given which would secure the payment of the decree. Mr. Justice
McLean, who delivered the opinion of the Court, after referring to
the case of
Catlett v. Brodie, said,
"If this construction of the statute be adhered to, the amount
of the bond given on the appeal must be the amount of the judgment
or decree. There is no discretion to be exercised by the judge
taking the bond where the appeal or writ of error is to operate as
a supersedeas."
Thus the rule which had been adopted in respect to judgments at
law was extended
Page 88 U. S. 30
to decrees in chancery. It was a rule controlling to some extent
the discretion of the judge in such cases, and to be observed so
long as it continued in force.
It did continue until the case of
Rubber Company v.
Goodyear, [
Footnote 7]
decided in 1867, and the adoption at the same time by the court of
the present rule twenty-nine. That rule provides that where the
judgment or decree is for the recovery of money not otherwise
secured, the security must be for the whole amount of the judgment
or decree, including just damages for delay, and costs and interest
on the appeal; but in all cases where the property in controversy
necessarily follows the event of the suit, as in real actions,
replevin, and in suits on mortgages, or where the property is in
the custody of the marshal under admiralty process, as in case of
capture or seizure; or where the proceeds thereof, or a bond for
the value thereof, is in the custody of the court, indemnity in all
such cases is only required in an amount sufficient to secure the
sum recovered for the use and detention of the property, and the
costs of the suit, and just damages for the delay and costs and
interest on the appeal. Such was the established rule of practice
under the act when the bond now in question was taken. To some
extent, the old practice had been changed. The act itself remained
the same, but experience had shown that the rules which had been
adopted to give it effect were not suited to all the cases arising
under it, and the new rule was made for the better adaptation of
the practice to the protection of the rights of litigants.
This is a suit on a mortgage, and therefore, under this rule, a
case in which the judge who signs the citation is called upon to
determine what amount of security will be sufficient to secure the
amount to be recovered for the use and detention of the property,
and the costs of the suit, and just damages for the delay and costs
and interest on the appeal. All this, by the rule, is left to his
discretion.
In
Bluck v. Zacharie, [
Footnote 8] it was held that in such a case, the
Page 88 U. S. 31
justice taking the security was the sole and exclusive judge of
what it should be. Since then, in
Rubber Company v.
Goodyear, and
French v. Shoemaker, [
Footnote 9] remarks have been made by judges
announcing the opinion of the Court which, if considered by
themselves, would seem to indicate that this discretion could be
controlled here upon an appropriate motion. The precise point
involved in this case was not, however, before the Court for
consideration in either of those, and we think was not decided. We
all agree that if, after the security has been accepted, the
circumstances of the case or of the parties or of the sureties upon
the bond have changed so that security which, at the time it was
taken, was "good and sufficient" does not continue to be so, this
Court may, upon a proper application, so adjudge and order as
justice may require. But upon facts existing at the time the
security was accepted, the action of the justice within the statute
and within the rules of practice adopted for his guidance is final.
And we will presume that when he acted, every fact was presented to
him that could have been. So while we agree that in a proper case,
after an appeal or writ of error taken here, this Court may
interfere and require additional security upon a supersedeas, it
will not attempt to direct or control the discretion of a judge or
justice in respect to a case as it existed when he was called upon
to act, except by the establishment of rules of practice. If we can
be called upon to inquire into the action of the justice in respect
to the amount of the security required, we may as to the pecuniary
responsibility of the sureties at the time they were accepted.
We understand the counsel for the appellee to contend, however,
that in this case, the justice did not act within the established
rule, and that on this account we may review his action. The claim
is that the rule requires indemnity for interest upon the appeal,
and this is construed to mean that the security must be such as to
secure the payment of all the accumulation of interest upon the
mortgage indebtedness
Page 88 U. S. 32
pending the appeal and supersedeas. This we think is not the
requirement of the rule. The object is to provide indemnity for
loss by the accumulation of interest consequent upon the appeal,
not for the payment of the interest. What the loss is likely to be
depends upon the facts. As to this the justice, after consideration
of the case, must determine.
In this case, there can be no loss to the appellee if, as is
contended by the appellants, the value of the mortgage security is
sufficient to pay all the encumbrances, with accruing interest,
when a decree of affirmance shall be rendered upon the appeal.
Neither can there be if, as is contended by the appellee, the value
of the property is much less than the amount of the prior
encumbrances. If, upon the case made by him, the property
depreciates in value during the continuance of the appeal, he will
suffer no loss, because if sold now, upon his theory, he would
receive nothing. Not being worth as much as the amount of the prior
encumbrances, it is not to be supposed that a purchaser can be
found to take it at a price that would yield anything to apply on
his debt. The appellee may lose the opportunity of bidding in the
property at a reduced price and speculating upon its rise, but the
loss of such profits is not recognized by the court as legitimate
"damages for the delay." In either view of the case, therefore, a
judge would be justified in accepting a bond for a comparatively
small amount.
There is another consideration which will justify the action of
the judge under the rule. As has been seen, the suit is brought for
the foreclosure of a mortgage. The debtor is a bankrupt
corporation. Its whole property, including its corporate
franchises, has passed to its assignees in bankruptcy. It is in no
condition to accumulate property which can be subjected to the
payment of its debts. It is, to all intents and purposes, dead. No
damage can result, therefore, from the appeal by reason of the
delay in obtaining an execution against the company under the
provisions of Rule Ninety-two, regulating the practice in courts of
equity, for the collection of any balance that may remain due to
the
Page 88 U. S. 33
complainant upon the mortgage debt after the security is
exhausted. If the company were not in bankruptcy, the pendency of
this suit would not prevent an action at law to recover the debt
from other property pending the appeal. For these reasons, a judge,
in the exercise of a reasonable discretion, might properly accept
security less than would be sufficient to insure the payment of
accumulating interest, even upon an appeal by the corporation
itself.
But it is apparent that the corporation is only a nominal party
to this appeal. The real parties in interest are the assignees. The
complainant is a creditor of the estate. Upon proof of his claim,
he will be entitled to receive his dividend with the other
creditors. The accumulated interest will participate in this
dividend as well as the principal of his debt. He has, therefore,
without any further security, all the indemnity which the assignees
can give him without they or their sureties assume personal
responsibility.
All these facts were proper for the consideration of the judge
when he determined upon the amount of security necessary to
indemnify the appellee against loss by the appeal. We think,
therefore, upon the case made, the action of the justice approving
the bond is conclusive.
Motion denied.
[
Footnote 1]
1 Stat. at Large 85.
[
Footnote 2]
1 Stat. at Large 85
[
Footnote 3]
2
id. 244.
[
Footnote 4]
1 Stat. at Large 404.
[
Footnote 5]
22 U. S. 9 Wheat.
553.
[
Footnote 6]
57 U. S. 16
How. 139.
[
Footnote 7]
73 U. S. 6
Wall. 156.
[
Footnote 8]
44 U. S. 3 How.
495
[
Footnote 9]
12 Wall.
79 U. S. 86,
79 U. S. 99.
