Atchison, Topeka & Santa Fe Railway Co. v. Cross

The opinion of the court was delivered by Smith, J.: In their petition the plaintiffs below alleged that the Atchison, Topeka & Santa Fe Railway — 569 — Company, defendant in this case, purchased the entire line of the Atchison, Topeka & Santa Fe Railroad Company at a foreclosure-sale, under a decree of the United States circuit court for the district of Kansas, in which decree, among other things, it was provided that the purchasers of the Atchison, Topeka & Santa Fe Railroad Company should, as a part of the purchase-money, pay, in addition to other things, all liabilities, dues and demands which might be asserted and finally determined against the railroad company •, that the defendant railway company' became the purchaser and took possession of said property, and is now in use and occupation of the same by virtue of said decree and its bid and purchase, and has become liaable to pay said judgment and interest thereon, and has paid on same the sum of $4000, but no interest, the defendant refusing to pay on some pretext unknown to the plaintiffs. It is unnecessary to discuss whether, under the terms of the decree confirming the sale of the railroad property, the purchasers became liable for the payment of the judgment held by defendants in error against the old company without an order of court “adjudging the same to be prior in lien to the general mortgage, and directing payment thereof.” The quoted language has received much attention from counsel, and its meaning, when read in connection with other parts of the decree, is the subject of totally divergent views. The decision obanother question in the case is, in our judgment, conclusive against a recovery by the defendants in error. It must be conceded that the plaintiffs below took no greater rights against the Atchison, Topeka & Santa Fe Railway Company than they had against Edward King and his associates, the purchasers of — 570 — the road at the master’s sale, who conveyed to the railway company. In fact, the petition alleges that the railway company was the purchaser, and we shall treat it as such. The purchasers of the railroad property at the master’s sale, by that act, became parties to the equity suit in which the foreclosure was had, upon which the decree for a sale was based, and submitted themselves to the jurisdiction of the court, at least as to all - matters connected with the sale. (Clarkson v. Read et al., 15 Gratt. [Va.] 288; McDonald v. National Bank, 58 Kan. 461, 49 Pac. 595.) Admitting that the railway company, the purchaser, was liable for the payment of the claim of defendants below, it was only so made liable because it bought property out of which, for equitable reasons, this judgment with interest was decreed to be paid. The amount to be paid on the judgment was determined in a case where these judgment creditors, the complainants in the equity suits and the purchasers at the master’s sale were parties. The nature of the proceeding was, under the order defining the master’s duties, a marshaling of demands against the old company, or its property, and the ordering of a subsequent report to the court of the names and residences of the creditors of the railroad company and the amounts of their respective claims. The question decided by the court in confirmation of the report of the special master relative to the claim of defendants in error was, How much of their demand ought to be paid out of the property of the insolvent railroad company ? The judgment of the defendants below, and all like it, having been, by the decree appointing the receivers, made preferred claims on the property, why was not an adjudication of the federal court in the particular case in which the re — 571 — ceivers were appointed, and to which the purchasers made themselves parties, determining the amount plaintiffs below should be paid, binding on the latter? The judgment was for the payment of $4000 out of the property of the old road. The purchasers were liable only because they bought the property of the old company, against which the amount of this judgment was a superior claim. The allowance of $4000 only by the special master and the court as a demand against the property fixed the status of the claim as to the amount for which the property of the old company was liable. The purchasers were not bound to pay any claim for which the receivers were not liable. The amount to be paid was to be derived out of the property formerly owned by the railroad company, whether in the possession of the receivers or the new company (the purchaser). If there was not enough in the receivers’ hands, then the new company, after the order confirming the special master’s report, was bound for the deficiency and required to satisfy the claim to an amount for which the court adjudged the property was liable. Counsel for defendants in error say that under the decree confirming the sale the purchasers are liable to pay this judgment in full; that the receivers were directed to pay such judgments as of course, and that this direction stands in the decree of confirmation against the purchasers. Admitting this, the impediment in the way of their clients is the judgment of the United States circuit court, not appealed from, in a proceeding where all the parties were before it, and in which it was adjudged that the property of the old company was liable to defendants in error for $4000 and no more. The special master was required, in the decree appointing him, to give notice — 572 — to “all creditors of said railroad company (the old corporation) and to all parties having specific claims upon the property of said railroad company, or upon any property which has or shall come into the possession of the said receivers,” to exhibit their claims, etc. The situation here cannot be likened to that where a claim is exhibited for allowance before an assignee in insolvency or a receiver in ordinary cases. In the present case, as shown above, the property which the new company bought, and that remaining in the receivers’ hands which it did not buy, stood charged with this judgment. The United States circuit court decided that the property held by the receivers was liable for $4000 only. This property, and that purchased by the railway company, had the same source of ownership, namely, the Atchison, Topeka & Santa Fe Railroad Company, and it all stood equally charged with the payment of this claim. The proceedings were had in the equity suits. The court was administering upon the estate of the insolvent railroad corporation, winding up its affairs and determining the amount of claims justly payable out of the assets. It had these judgment creditors and the purchaser of the road before it. The court, when administering this estate and passing on matters referred to Quinton as special master, determined the amounts of other judgments which the railway company should pay. In the case-of P. P. Elder, as administrator, against the old company, a judgment of the same character as this was “declared to be a lien upon the property of said railway company,” and it. was further ‘ ‘ ordered that said railway company pay the same within thirty days from this date.” It will be seen from this that, in the consideration of claims presented to the special master, the court exercised — 573 — its power to order the railway company to pay like judgments within a time fixed. This action of the court indicates that the orders made concerning such demands were not restricted to providing for their payment solely out of the assets then in the receivers’ hands, but it undertook, with all parties before it, to adjudicate the amount which the purchasing company should pay. The proceedings before the special master were had for the purpose of determining claims against an insolvent estate. The plaintiffs in error, having gone into the federal court and submitted their claim for allowance, must be held to the amount of the' award. At least, they cannot set it aside in this collateral manner. The judgment of the court below will be reversed, with directions to enter judgment in favor of the plaintiff in error. Johnston, Greene, Ellis, JJ., concurring.