Railway Steel Spring Co. v. Chicago & E. I. R. Co.

ALSCHULER, Circuit Judge (after stating the facts as above). The only question involved is as to the eonelusiveness of the judgment of the Indiana state court; appellant contending for the right to defend upon the merits of the original claim. The right of the claimant to proceed in the state court against the receiver, and the conelusiveness upon the receiver of any judgment there rendered, is freely conceded. But it is contended that, under the terms of the decree and sale, the purchaser thereunder is entitled to make the asserted defense. We find no authority for the contention that a purchaser under a decree of this nature is in any different or better position than was the receiver at the time of the sale. That he is not was squarely so held in an apparently well-considered opinion in the same district, Manhattan Trust Co. v. Chicago Electric Traction Co. (C. C.) 188 F. 1006. An earlier decision in the same court (Guaranty Trust Co. v. Chicago Union Traction Co. [C. C.] 175 F. 284), cited by appellant to the contrary, is not upon its facts in conflict, since the state court judgment there in question had not been rendered at the time of the foreclosure sale. In appellant’s reply brief it is stated that “the Supreme Court of the United States has never squarely decided the question here involved.” The eases from that court, which appellant cites as tending to support the principle it contends for, are not in our judgment applicable. Appellant bases an argument on the clause of the decree which gives purchaser “the right to contest any claim or demand existing at the time of the sale and then undetermined,” insisting that, since at that time the appeal from the circuit court judgment was pending, the claim was “then undetermined.” Definitions and academic refinements are resorted to in appellant’s brief in support of the proposition that, owing to the pendency of the appeal, the cause was “then undetermined.” We are of opinion that the finality of the state court judgment as an adjudication of the merits of the ease was not affected by the appeal. That, in any event, this is the law respecting Indiana judgments is apparent from what the Supreme Court of that state said in Waring v. Fletcher, 152 Ind. 620, 630, 52 N. E. 203, 207: “In this state an appeal to the Supreme or Appellate Court, without filing an appeal bond, does not, as in some states, suspend the judgment from which the appeal is taken; nor does the filing of an appeal bond suspend the operation of such judgment except that it stays execution thereon. For all other purposes, the judgment appealed from, even if an appeal bond is filed, is as effective and binding upon the parties as if no appeal had been taken” — citing a number of Indiana decisions. Language somewhat similar was employed in the later ease of Hoyle et al. v. Stellwagen et al., 30 Ind. App. 674, 66 N. E. 910, wherein the Waxing-Fleteher Case was cited. To deny appellant the right to interpose a defense upon the merits of the original eause in no manner transgresses that part of the decree which provides that the purchaser .shall have the right to appear and make defense to any claim, debt, or demand. It had the undoubted right to defend against any such claim, and, where the merits had not theretofore been determined, to resist upon any and all grounds which the receiver, if then in authority, might have urged. In a claim not then reduced to judgment it might resist upon the merits; if in judgment it might still resist upon any grounds whereon judgments might be attacked — want of jurisdiction, existence of the judgment might be denied,' its payment or release asserted, the contention of fraud in its procurement in [433] terposed, in short, any defense proper to be made to such a claim the decree was preserved in the purchaser. But we cannot see that it undertook further to extend the purchaser’s privileges, and give it immunities which the receiver himself would not have had but for the sale. The District Court did not deprive the purchaser of the right to assert any defense to this claim which was proper to be made. There is here no element of surprise or of innocent purchase, if indeed this could in any way affect the matter. Evidently this was a purchase by a railway company of the property of a railroad company of otherwise same name, through the agency of a previously constituted “purchasing committee,” whose ignorance of such an outstanding judgment would have involved the grossest of negligence, not lightly to be attributed. It is also apparent that appellant took part in the proceedings in the state courts to the extent of petitioning the Supreme Court for a rehearing, at a time when it alone was empowered to act in the name of the receiver who had long theretofore been discharged. We conclude that the District Court properly struck out of appellant’s answer those parts which set up a defense upon the merits of the original demand, and its decree is accordingly affirmed.