« ForrigeFortsett »
ings erected or to be erected thereon, and all franchises, rights, or privileges of the said party of the first part of, in, to, or concerning the same.” The habendum clause is: "To have and to hold the said premises, and every part thereof, with the appurtenances, unto the same party of the second part.” In June, 1856, the Toledo & Illinois Railroad Company entered into an agreement of consolidation with the Lake Erie, Wabash & St. Louis Railroad Company, and the Toledo, Wabash & Western Railway Company was thereby formed. That agreement provided that “all mortgages given by either of the parties shall be as valid and binding upon the whole of the road, real estate, fixtures, and personal property which may be described in such mortgage as though the same had been originally executed by such consolidated corporation.” The Toledo, Wabash & Western Railway Company made a mortgage, which was subsequently foreclosed. By the decree of sale the purchaser of the Ohio part, Boody, took subject to the first mortgage. Boody conveyed the Ohio Division to a new Ohio corporation, organized with power to construct, maintain, and operate a road from Toledo to the Indiana state iine, and called the Toledo & Wabash Railroad Company. This company, on October 12, 1888, gave a bond to Edwin D. Morgan, trustee, for $900,000, and secured it by mortgage of its railroad, made and to be made, all right of way and all land occupied thereby, together with the superstructure, depots, depot grounds, and buildings erected thereon, and the rails, tracks, side tracks, bridges, fences, viaducts, culverts, rights, privileges, franchises, and accessions of the party of the first part, together with all its rolling stock, machinery, furniture, and equipments of its said road now and hereafter to be acquired; being the same property described in the deed of Matthew Johnson, marshal and commissioner, to A. Boody, Esq., and dated October 8, 1858, and by A. Boody conveyed to the party of the first part. The habendum clause was: “To have and to hold the premises, and every part and parcel thereof, and all its increase, accessions, and incidents, unto the said Morgan and his successors,” etc. The condition of the mortgage and bond was that the Toledo & Wabash Railroad Company would pay the $900,000 of bonds issued by the Toledo & Illinois Railroad Company, and secured by the first mortgage. The mortgage recites that it is executed for the benefit of the bondholders under the first mortgage. On October 15, 1858, the Toledo & Wabash Railroad Company gave a second mortgage to E. D. Morgan, trustee, in which the description of the property conveyed is the same as above, as is also the habendum clause. The true intent and meaning of this mortgage is declared to be as follows: "First. That this mortgage attaches to the property above described, as subject to and subordinate to said bonds of the Toledo & Illinois Railroad Company, or said issue of nine hundred thousand dollars, whether evidenced by said bond of the party of the first part, made to Edwin D. Morgan, trustee," etc. "Second. That the party of the first part, or any railroad company into which it may become à component part by consolidation, shall be chargeable with said sum of nine hundred thousand dollars, as a prior lien and incumbrance to any other debt thereon.” The Toledo & Wabash Railroad Company, of Ohio, soon after executing the foregoing mortgages, entered into articles of consolidation with the Wabash & Western Railway Company, an corporation, thereby forming the Toledo & Wabash Railway Company. It was provided in that agreement that all mortgages given by either of the parties "shall be as valid and binding upon the whole of the road, real estate, fixtures, and personal property which may be described in such mortgage as though the same had been originally executed by such consolidated corporation.” This company took possession of the property, and operated it. Later it acquired certain terminal property in Toledo. It issued the equipment bonds. It made no mortgage at any time. In 1865 the Toledo & Wabash Railway Company and various Illinois companies entered into an agreement of consolidation, whereby the Toledo, Wabash & Western Railway Company was formed. It was this agreement which created the lien in favor of the equipment bonds which was adjudicated in Compton's suit.
Another issue raised by the bill and ross bills and Compton's answers was the effect of a decree of the United States circuit court of Indiana denying
the existence of a lien in favor of equipment bonds of the same issue as those held by Compton, upon the Ohio decree in Compton's favor. It was contended by complainant below that Compton was a party to the Indiana decree, and was thereby estopped to plead the Ohio decree. The master and the court below decided in Compton's favor on this point. The facts in respect to this issue were as follows: In 1878 one Tysen brought suit on behalf of himself and such other owners of equipment bonds of this issue as might desire to come into said suit, and contribute to the expense thereof, to establish that the bonds entitled their owners to a lien on the part of the Wabash main line, extending from Toledo to the Illinois state line. The cause was removed to the federal circuit court, and resulted in a decree sustaining the lien. Railway Co. v. Ham, 114 U. S. 587, 5 Sup. Ct. 1081. It was appealed to the supreme court of the United States. The de cree of the lower court was reversed, and the bill of complainant was dismissed. To this action Compton never became a party. His counsel did file a brief in the supreme court, but he paid no part of the expense of the suit. In 1880, pending the suit in the Indiana court, but prior to the rendition of the Indiana decree, Compton began a suit in the common pleas court of Lucas county to establish and enforce a lien on the railroad extending from Toledo to the Illinois state line, by virtue of his ownership of $150,000 of the par value of these equipment bonds. Compton made parties to this suit all the railway companies succeeding the Toledo & Wabash Railway Company (which issued the equipment bonds) in the ownership of the property, and all the mortgagees whose mortgages were executed, after the issuance of the bonds, except the Central Trust Company and Cheney, trustees, who took their mortgage pending the appeal from the common pleas decree. Neither the Farmers' Loan & Trust Company nor E. D. Morgan, trustees of the underlying Ohio divisional mortgages, were parties. In March, 1882, the common pleas court entered a decree sustaining the lien claimed, and ordered a sale of the part of the railroad in Ohio to pay the amount of the bonds found due, subject to the prior lien of the mortgages of the Farmers' Loan & Trust Company and E. D. Morgan, trustee, on the same property. The cause was appealed to the district court of the proper judicial district, and by that court reserved for decision to the supreme court of the state, which in 1888 sustained the ruling of the common pleas court (Compton v. Railway Co., 45 Ohio St. 592, 16 N. E. 110, and 18 N. E. 380), found that the amount due on Compton's bonds was $339,920.40 with interest from May 1, 1888, and that this amount was a lien on the railroad in Ohio and Indiana, and ordered that, on default in the payment of the amount due after 10 days, the Ohio part of the road should be sold to enforce the lien.
The finding and action of the supreme court of Ohio sufficiently appeared from the fifth and sixth paragraphs of its decree, as follows: "That upon the consummation of such consolidation said bonds issued as aforesaid by the Toledo & Wabash Railway Company, known as 'Equipment Bonds,' and all moneys due and to grow due thereon, and among them such of said bonds as are now owned as aforesaid by the plaintiff, and the moneys due and to grow due thereon, became an equitable lien upon all of the said railroad and real property, and the structures thereupon, and the fixtures and appurtenances thereto appertaining, which were owned by said Toledo & Wabash Railway Company at the time of said consolidation, and which, through said consolidation, passed to and vested in the said Toledo, Wabash & Western Railway Company, and which afterward passed to and vested in the defendant the Wabash, St. Louis & Pacific Railway Company, which last-named company was at the time of the commencement of this suit in possession of the same, being all of its railroad, and property connected therewith, commencing in the city of Toledo, in the state of Ohio, and extending therefrom, through the counties of Lucas, Henry, Fulton, Defiance, and Paulding, in said state, and through the counties of Allen, Huntington, Wabash, Miami, Cass, Carroll, Tippecanoe, Fountain, and Warren, in the state of Indiana, to and terminating at a point in the west line of State Line city, in said last-named county, and that said bonds are now a lien on such railroad and property, and the plaintiff is entitled to enforce the same. That the said lien of said bonds is prior and superior to
the rights, interests, estates, claims, and liens of the defendants in this action, and each of them, in and upon said railroad and property, upon which said lien is hereby declared, and is prior and superior to the rights, interests, estates, claims, and liens of all persons and corporations who have derived any such rights, estates, claims, and liens from, by, or through the said defendants, or any of them, since the commencement of this action, or otherwise. But, as to all that part of said railroad and property which is situate within the state of Ohio, such lien is inferior and subject, but inferior and subject only, to the two mortgages mentioned in the petition herein, one of which was executed by the Toledo & Illinois Railroad Company to the Farmers' Loan & Trust Company on the Sth day of September, 1853, for the security of the bonds of that company amounting to $900,000, due, as extended, August 1, 1890, and bearing interest at the rate of seven per cent. per annum, payable semiannually on the 1st day of February and August in each year, and the other of which was executed by the Toledo & Wabash Railroad Company to Edwin D. Morgan, trustee, on the 5th day of October, 1858, for the security of the bonds of that company amounting to $1,000,000, due on the 1st of November, 1878, and bearing interest at the rate of seven per cent. per annum, payable semiannually on the 1st day of May and November in each year. (6) That the said defendants, or any of them, pay to said plaintiff the said sum of $339,920.40 now due on said bonds owned by the plaintiff as aforesaid within ten days from the entry of this decree, and, if default shall be made in such payment, that an order of sale issue for the sale, as upon execution at law, of all said railroad and real property, together with the structures thereupon and the fixtures and appurtenances thereto appertaining, upon which the lien of said bonds known as 'Equipment Bonds' is hereby declared to exist, which is situated in the state of Ohio, and the jurisdiction of this court, subject, however, but subject only, to the lien of the two mortgages hereinbefore mentioned as executed by the Toledo & Illinois Railroad Company to the Farmers' Loan & Trust Company, and the Toledo & Wabash Railroad Company to Edwin D. Morgan, and to the indebtedness secured by each of said mortgages, and that from the proceeds of such sale the costs of this action, as taxed, to be paid, and the residue of such proceeds be brought into court, to abide its further order herein on the footing of this decree. That before offering the property, hereby directed to be sold, for sale, the officer conducting the same shall cause the same to be appraised according to law by three disinterested freeholders of either or any of the counties in which the same is situated, and such appraisal shall be of the value of said property, subject to the incumbrance and lien of the two mortgages herein before mentioned, as executed, respectively, by the Toledo & Illinois Railroad Company and the Toledo & Wabash Railroad Company, subject to which it is directed to be sold, and over and above the lien of such mortgages, according to the amount of the indebtedness secured thereby, as the same shall be ascertained by the officer conducting such sale, with interest computed to the time of the sale."
After this case had been appealed to this court, and before the hearing, a motion was made by appellees to dismiss the appeal, or affirm the decree of the court below, on the ground that since the rendition of the decree herein a decree had been rendered in the United States circuit court for Indiana, on the same cause of action, limiting Compton's remedy to a redemption of the four senior mortgages,-two in Ohio, and two in Indiana, -and no appeal had been taken from that decree, and the record of the Indiana suit was filed to establish ground for the motion. The record shows that the Indiana decree was exactly like that from which this appeal was taken, and contained the same provision in respect to Compton's lien, requiring him to redeem the Ohio and Indiana Division by payment of the amount due on both the Ohio and the Indiana divisional mortgages within 10 days, or to be forever barred of claiming anything thereunder.
John H. Doyle, Judson Harmon, and John G. Milburn, for appellant.
Wager Swayne, Rush Taggart, and Henry Crawford, for Wabash R. Ca.
Before TAFT and LURTON, Circuit Judges, and RICKS, District Judge.
TAFT, Circuit Judge, after stating the case, delivered the opinion of the court.
The first ground pressed on us by appellant's counsel for reversing the decree of the circuit court is that there was no jurisdiction to enter it. The contention is—First, that the circuit court had no power to entertain and grant relief on the bill of Knox and Jesup, because the parties to it had not the necessary diverse citizenship; and, second, that no power existed to bring in Compton, because, he being a citizen of the District of Columbia, his presence as a party would destroy the necessary diversity of citizenship, even if it before existed. It must be conceded that the circuit court had no jurisdiction to hear and determine the controversies presented by the Knox and Jesup bill, on the ground of diverse citizenship of the parties, for it did not exist. The jurisdiction was assumed on a very different ground. When the bill was filed in the court below, the property which it was thereby sought to sell on foreclosure was in the possession of receivers appointed by that court in a previous litigation instituted to foreclose mortgages junior to the Knox and Jesup mortgage, and to sell the road to pay all junior liens and floating indebtedness. It is true, the litigation had proceeded to foreclosure sale and final decree; but for some reason, not plainly disclosed, the court refused to deliver possession to the purchasers, and retained it in the custody of the court for the purpose of protecting the interests of all the parties to the original litigation. Knox and Jesup wished to foreclose their mortgage, to marshal all liens, to sell the road at the highest price, to preserve the road and its income from waste by the appointment of a receiver. It is manifest that no other court than that in which the receivers then in possession had been appointed could grant such relief. Whether other courts could decree foreclosure and marshal Tiens, or not, certainly no other court could take possession of and sell the road, and deliver an unclouded title to a purchaser. If Knox and Jesup could not file their bill in the court below, then the act of that court in maintaining possession of the mortgaged property through its receivers would result in great injustice to them, and would constitute an abuse of its process. To prevent this, the court below had inherent ancillary jurisdiction, pending its possession of the railroad, to hear and determine all petitions for relief presented to it in respect of the possession and control of the road. It is of no importance that the custody of the railroad was likely soon to be changed from the court to the intending purchaser under the previous foreclosure proceedings, at which time any tribunal of competent jurisdiction could give all the relief prayed by Knox and Jesup. Their mortgage was then due. They were not obliged to await the uncertain delays of other litigation before taking steps to assert their rights. They therefore properly appealed to the court below, as the only tribunal which could do so, to give them adequate relief at once; and this was properly accorded to them, without regard to the citizenship of the
parties to their bill. The foregoing reasoning is fully supported by many decisions of the supreme court. Necessity and comity both require that where, by its officers acting under color of its order or process, a court has taken into its custody property of any kind, another court, though of equal and co-ordinate jurisdiction, should not be permitted either to oust the possession of the first court, or in any way to interfere with its complete control and disposition of the property for the purpose of the cause in which its action has been invoked. This principle has been laid down by the supreme court of the United States in a long line of cases. Hagan v. Lucas, 10 Pet. 400; Williams v. Benedict, 8 How. 107; Wiswall v. Sampson, 14 How. 52; Peale v. Phipps, Id. 368; Bank v. Horn, 17 How. 151; Pulliam v. Osborn, Id. 471; Freeman v. Howe, 24 How. 450; Youley v. Lavender, 21 Wall. 276; Bank v. Calhoun, 102 U. S. 256; Barton v. Barbour, 104 U. S. 126; Krippendorf v. Hyde, 110 U. S. 276, 4 Sup. Ct. 27; Covell v. Heyman, 111 U. S. 176, 4 Sup. Ct. 355; Heidritter v. OilCloth Co., 112 U. S. 294, 5 Sup. Ct. 135; Gumbel v. Pitkin, 124 U. S. 131, 8 Sup. Ct. 379; Railroad Co. v. Gomila, 132 U. S. 478, 10 Sup. Ct. 155; In re Tyler, 149 U. S. 181, 13 Sup. Ct. 785; Porter v. Sabin, 149 U. S. 473, 13 Sup. Ct. 1008; Byers v. McAuley, 149 U. S. 608, 13 Sup. Ct. 906. Again, every court has inherent equitable power to prevent its own process from working injustice to any one, and may entertain a petition by the aggrieved person, either in the form of a simple motion, or by intervention pro interesse suo in the cause in which the process issued, or by ancillary or dependent bill in equity, and may afford such relief as right and justice require. The existence of such a power, independent of statutory jurisdiction, is recognized by the supreme court in Freeman v. Howe, 24 How. 450; Minnesota Co. v. St. Paul Co., 2 Wall. 609-633; Railroad Co. v. Chamberlain, 6 Wall. 748; Krippendorf v. Hyde, 110 U. S. 276, 4 Sup. Ct. 27; Pacific R. Co. of Missouri v. Missouri Pac. Ry. Co., 111 U. S. 505, 4 Sup. Ct. 583; Stewart v. Dunham, 115 U. S. 61, 5 Sup. Ct. 1163; Phelps v. Oaks, 117 U. S. 236, 6 Sup. Ct. 714; Dewey v. Coal Co., 123 U. S. 329, 8 Sup. Ct. 148; Gumbel v. Pitkin, 124 U. S. 131, 8 Sup. Ct. 379; Johnson v. Christian, 125 U. S. 642-646, 8 Sup. Ct. 989, 1135; Morgan's L. & T. Railroad & Steamship Co. v. Texas Cent. Ry. Co., 137 U. S. 171, 11 Sup. Ct. 61.
Now, it frequently happens that under the process of the federal courts, exercising the original and lawful jurisdiction conferred expressly by the federal constitution and statutes, possession is taken and control exercised over property in which persons not indispensable parties to the suit have an interest, by lien, mortgage, and in other ways.
In such cases there often is no diversity of citizenship between such persons and the plaintiff or defendant to the suit which would warrant the federal court in hearing an independent suit between them. But it may be essential, to preserve intact their rights in the property, that such third persons should be permitted, at once, to have specific relief, which can only be granted by a court having possession and control of the property. And yet, in accordance with the principle already stated, no court but the federal court can exercise possession and control over the property in its custody. Of