St. Louis S. W. Ry. Co. v. Jackson

ADAMS, District Judge, after stating the case as above, delivered the opinion of the court. It is urged at the outset by counsel for the appellee that this appeal should be dismissed for the reason that S. W. Fordyce and A. H. Swanson did not join in the same. It appears from an inspection of the intervening petition and the responses thereto that neither Fordyce nor Swanson were made parties to the proceeding now under review. No notice was served upon them, and no appearance entered for them. The only ground urged by counsel for treating them as parties to the litigation is that the court below, in its final order appealed from, directed, in case the St. Louis Southwestern Railway Company failed to pay appellee’s demand within 90 days, that Fordyce and Swanson, as receivers, should take possession of the railroad for the purpose of raising a fund, under the orders of the court, to satisfy and pay off appellee’s claim. The record shows that Fordyce and Swanson were finally discharged as receivers, and — 565 — the sureties on their bonds were also released and discharged, by an order made in the principal case as early as October 26, 1893. This was more than four years before the proceeding was instituted in which the order of the court under consideration was made. Mot being officers of the court, they were not subject to the jurisdiction of the court over them as such officers in said proceeding; and as they were neither made parties thereto, nor entered their appearance therein, it is not apparent why the court below assumed to exercise jurisdiction over them by embodying in its orders any direction to' then. In our opinion, they were not required, under 1 ho principles announced in the case of Estis v. Trabue, 128 U. S. 225. 9 Sup. Ct. 58, arid cases there cited, to which our attention is directed, to join in the appeal of the railway company, in order to confer jurisdiction upon tliis court; and the motion to dismiss is without merit. The assignment of errors and the argument of counsel on the merits of the case present the question whether, according to the true construction of the several orders and decrees of the court made in the principal case, and in the two interventions of the appellee, his claim was, at the date of the order appealed from, a subsisting lien against the property of the appellant railway company, and whether the same ought now to be paid by said railway company. Whether appellee’s claim was originally made a lien upon the railway by a state statute or an order of court is immaterial. It must be conceded that it was, by virtue of one or both of these authorities, originally fixed as a lieu upon the railroad and its property. But it was a lien upon property in the bauds of the court, subject to divers other liens and claims, and necessarily subject to such orders and decrees of the court in the matter of its satisfaction and discharge as, in consideration of the rights and equities of all partios in interest, should seem equitable and just. The comprehensive powers of a court of equiiy are, without doubt, sufficient to warrant it in discharging a lien once attached to property by the substitution of other property or money in lieu thereof. In fact, it is a common practice in equitable proceedings to order property incumbered by many liens sold free and discharged from all of them, subjecting the proceeds of such sale in money to the same priorities and liens as originally attached to the property itself. Such being the established equitable doctrine, it becomes necessary to inquire whether the court, by the several orders and decrees involved in tliis case, extinguished the lien of appellee, as originally fixed upon the property itself, by providing other methods for its satisfaction and discharge. Counsel for appellee claim that by the true construction of the order of January 31, 1890, and the decree of foreclosure, appellee’s claim still remains a lien upon the railroad purchased by the appellant; and this was the view of the trial court. While the decree of foreclosure refers to the liens created by the order of January 31, 1890, and continues them in force until paid, it also provides a definite scheme for their payment, namely, by permitting the purchaser to pay the same, together with, divers other obligations of — 566 — the receivers, as a part of the purchase price for the property acquired. The decree required a certain sum to be paid in cash, and also provided for the payment of such additional sum in cash as the court might order upon confirmation of the sale. After the report of the sale was made by the master appointed for that purpose, the court, by its order of January 20, 1891, as amended by the order of January 28, 1891, with knowledge, as shown by the record, of the existence of pending claims against the receivers, required, as a condition of confirmation of the sale, apparently in view of the right reserved for that purpose in the decree, the payment into the registry of the court of the sum of $30,000 over and above that originally required to be paid; the same to be applied, according to the terms of the order, in payment, among other things, “of the debts and claims allowed and that might be allowed against the receivership.” By the terms of the order of confirmation, the possession of the property purchased was not to be delivered to the purchaser until the sum of $30,000 should be paid into the registry of the court for the purposes aforesaid. When that sum was so paid, the purchaser was entitled to a deed, which the master was directed to execute, and als.o to the possession of the property purchased by him. These orders and this course of procedure were clearly contemplated in and by the provisions of the decree of foreclosure, and were manifestly intended to have the effect upon the title to the property in question as expressed in the twelfth subdivision of the decree, which reads as follows: “The purchaser or purchasers of the property at the sale herein ordered shall be invested with and shall hold possession and enjoy the property so bought and conveyed to them, * * * and all the rights, privileges, and franchises appertaining thereto, as fully and completely as the St. Louis, Arkansas & Texas Railway Company in Arkansas and Missouri heretofore and now holds and enjoys the same; * * * and the said purchaser or purchasers shall have and bo entitled to hold and enjoy said property free and discharged from the lien or incumbrance of the several mortgages hereinbefore referred to, and free and discharged from the claims of all parties to this suit, whether such persons are parties hereto by representation or otherwise.” From all of the provisions of, the decree of foreclosure and the orders of the court under consideration, it seems that it was the intention of the court to provide for the deposit of enough money at one time or another, pending the process of transferring possession to the purchaser of the property sold, to pay all probable liens, and for the delivery of the railroad property to the purchaser free from the same. This, in our opinion, is rendered more clear by a clause in the order of January 20, 1891, which, after providing for the payment into the registry of the court of the additional sum of $30,000, to be applied as already stated, reads as follows: “Tbe payment of said sum shall not affect the liability of the road or the purchaser for any other or greater sum or sums for which the receivership or railroad may be liable under the orders of this court or the decree for the sale of said road.” This clause, by necessary implication, in our opinion, means that, to the extent of such claims as could be paid out of the $30,000 to — 567 — The deposited in the registry of the court, the road was relieved of liens, and (he purchaser relieved of liability therefor. If, perchance, there might be any claims exceeding said sum of 830,000, the court, by the final clause of tiie decree of foreclosure, and its order of May 14, 1891, relating to the delivery of the possession of tiie property to the purchaser, retained jurisdiction over tiie purchaser and the property purchased, to require a further deposit or other satisfactory provision for their payment. A consideration of the first intervening petition of the appellee, tiie responses thereto by Fitzgerald and the railway company, and tiie order of the court thereon, instead of affording any ground for the contention of the appellee, conduces to the opposite result. The intervener, in Ids petition, among other things, tenders the issue that there had been deposited in the registry of the court, by order of the court, a sum of money for the purpose of paying off such claims as his. Tiie respondents met this issue, denying intervener’s rigid to have his claim for personal injuries paid out of the fund so deposited, and alleging their superior right to the same. Tiie court, on April 18, 1893, after hearing the issue so presented, made the order of that date, under and by the terms of which it is insisted (hat the lien of appellee's claim was recognized, and continued against the property itself. In determining the true meaning of this order, it must be considered in the light of the decree of foreclosure, disclosing, as already observed, a manifest purpose to provide a scheme for the payment of lien claims so as to enable the purchaser to receive the property free and discharged from all liens, and also In 1 lie light of the order of confirmation of sale, in effect, as already observed, releasing tiie road and the purchasers thereof from liability for any and all claims within the limit of $30,000 then deposited in the registry of the court, and particularly in the light of the issues tendered on which the order itself was made. Oo considering this order, we art» of the opinion that its true meaning is a declaration (hat tiie claim of the intervener is preferential in its character, and falls within the purview of ihe order of January 31, 1890; that is to say, is superior and paramount in right to any lien acquired by tiie purchaser, and because of such superiority should be paid out of the fund deposited for the purpose of satisfying such claims. Counsel for appellee insist that because (he order contains the words that the claim “is a lien’’ upon the mortgaged premises superior, etc., such recital is an adjudication that the claim was then a subsisting lien against the property itself, which was binding upon the court below in making the order now under review. In our opinion, this is unsound. Under the issues presented, it was necessary and proper for ilie court to declare the claim to be a lien wiihin the purview of (he order of January 31, 1890, as a preliminary finding in support of the final and effective order for relief, requiring the same to be paid out of the fund of $30,006 set apart for the payment of such claims as should be allowed against the receivership. Tiie bare fact that the court recites (hat the claim “is a lien'’ should be read in the light of the issue tendered and tiie prior orders of the court therein referred to, and, so read, the court — 568 — clearly means to declare that the claim was so a lien as to be entitled to be paid out of said fund. When such construction can reasonably be given to the words above quoted, relied upon by counsel for appellee, as is responsive to the issue joined, and in harmony with the. prior orders and decrees made in the principal case, the court should adopt that construction, rather than single out these words, and give to them a literal interpretation irresponsive to the issue joined, inconsistent with the order of January 20, 1891, and repugnant to the entire theory of the decree of foreclosure. That the conclusion already announced is correct also appears from a consideration of the culminating order in the case. The court, after declaring the claim of the appellee to be a lien, noticeably fails to follow such declaration with any order in the nature of a provision for its foreclosure, which alone would be consistent with the theory that the claim was then a subsisting lien against the railroad, but, on the contrary, after declaring that it should be paid out of the $30,000 fund referred to in the order as having been “deposited by said purchasing trustee in the registry of the court for the payment of such debts,” makes the final and only decretal order to respond accurately to the issues submitted, as follows: “The clerk is directed to draw an order, payable to said intervener or his solicitor of record, on said depository, for the signature of the judge, for said sum so allowed said intervener.” For the foregoing reasons, it is our opinion that the. court, in the exercise of undoubted power, displaced the lien once existing in favor of such claims as that of the appellee against the railroad itself, by requiring the purchaser to deposit a sufficient amount of the purchase money in the registry of the court to fully satisfy the same, and that by so doing the appellee’s right was transferred from the property to the money so deposited. The second intervening petition of Jackson, which resulted in the order now under review, is predicated upon the theory that by reason of the orders and decrees of the court, already sufficiently stated and considered, his claim became, has always remained, and now is, a lien upon the railroad property purchased by the appellants, and that, inasmuch as it has not been paid to him, the .relief afforded by the order of the court below in this case is proper. For the reasons already stated, this theory is, in our opinion, unsound. The fund deposited by appellant in the registry of the court took the place, pro tanto, of the railroad. The lien for the payment of such claims as that of the appellee, to the extent of the amount of the fund deposited for their payment, was transferred from the railroad to the fund itself; and the fact that the fund has been lost or placed in jeopardy, without fault of appellants, by orders of the secretary of the treasury transferring it from the depositary designated by the court to a bank which proved to be insolvent, cannot, however unfortunate be the results, afford any grounds for reinstating the lien upon the property purchased and once fully paid for by the appellants, or for requiring the appellants to pay the claim of the appellee a second time. — 569 — In the view we have taken of this case, it is not deemed necessary to express any opinion upon the question, argued by counsel, as to whether the receipt by aj)pellee of the draft drawn upon the German National Bank for the payment of his claim is in itself a payment thereof. In our opinion, the proceedings in the case resulting in the deposit of the fund in the registry of the court by the purchaser was in itself a discharge of any obligation resting upon the purchaser or the property purchased, irrespective of any of the facts relating to the steps taken by the appellee to secure his money from the registry of the court. It results from the views here expressed that the appellee has no ground for equitable relief against the appellant or its property, and that the order of the court below granting to him the relief prayed for was erroneous. The case will be remanded, with directions to the trial court to dismiss the petition.