« ForrigeFortsett »
principle of the maritime law, a mortgage of a railroad should be subordinated to claims for repairs and supplies, is plausible, but, in my judgment, quite fallacious. It is made in misconception of the underlying principle of the admiralty that repairs and supplies are awarded priority when, and only when, they are furnished in a foreign port, solely upon the credit of the vessel, and when, and only when, they are absolutely necessary to enable the ship to finish her voyage, and thus to preserve the security of the mortgage. The principle is grounded upon necessity. The ship in the course of her voyage has arrived at a foreign port in distress, and is unable to pursue the voyage or return to her home port. The owner is presumed to be unknown, and to be without credit at the foreign port. Unless the master can obtain the needed repairs and supplies, and pledge the credit of the vessel therefor, the ship will rot at the wharf, and the mortgage security be put in jeopardy. Therefore it is that from the very necessity of the case the master is authorized to pledge the credit on the vessel for necessary repairs and supplies. If, however, the supplies be in fact furnished upon the credit of the owner, although necessary, the admiralty accords no maritime lien for them; and the burden is also rested upon the material man to show that the repairs or supplies furnished were necessary to the continuance of the voyage. There is manifestly no such condition of things in respect of a railway, and the analogy does not obtain. Upon this subject the supreme court of Alabama in Meyer v. Johnston, 53 Ala. 237, 345, well observes: “A ship far from home, in distress, and without recourse, must perish, and perhaps her crew with her, if a bottomry bond given then for repairs and supplies shall not have precedence of other liens upon the vessel. But the court does not consider a railroad on terra firma. So beyond the reach of help from those who own it or are concerned in it as to justify the adoption in such case of the rule relating to a ship abroad and about to perish.” In Railroad Co. v. Cowdrey, 11 Wall. 459, 482, the supreme court has distinctly held that the principle giving priority to the last creditor for aiding to conserve the thing “has never been introduced into our laws except in maritime cases, which stand on a par. ticular reason.” I cannot yield assent to a doctrine that would practically destroy the immense bonded interest in railway properties, and place mortgage securities at the mercy of reckless and hostile directors. Mr. Justice Brewer well observes in Kneeland V. Trust Co., supra, that:
“No one is bound to sell to a railroad company or Work for it, and Whoever has dealings with a company whose property is mortgaged must be assumed to have dealt With it on the faith of Its personal responsibility, and not in expectation of subsequently displacing the priority of the mortgage lien.”
Nor, if I could here adopt to its fullest extent the principle of the maritime law, would it prove availing to the granting of this petition. The sureties neither stipulated for security nor have they paid the debt. They could acquire no possible right until payment, and if they had paid, under any theory of the maritime law, they could only be subrogated to the rights of the judgment creditor. As I have stated, the lien of the judgment, so far as it affected the mortgaged property, was subordinate to the lien of the mortgage. There is no showing here that execution ever issued upon the judgment, or was levied upon property not subject to the mortgage, or that any property was released by the giving of the supersedeas bonds.
In a somewhat similar case in the admiralty the surety was adjudged to have no lien. Judge Dyer in that case well observed:
“When libelant incurred the obligation which ultimately he had to pay, he had it in his power to exact security that should amply protect him; and having omitted to do so, in the language of the court in the case cited on the argument, he can only be considered as now possessing the rights which arise against the person for whom he incurred the obligation for having paid money for him which he had voluntarily and without consideration undertaken to pay.” The Robertson, 8 Biss. 180, Fed. Cas. No. 11,923.
The decree in this case was on appeal affirmed by Mr. Justice Harlan.
The precise question here involved was passed upon by Mr. Justice Brewer (then circuit judge) in the case of Blair v. Railroad Co., 23 Fed. 523, adversely to the claim of the surety. It is urged, however, that that case is in effect overruled by Trust Co. v. Morrison, 125 U.S. 607, 8 Sup. Ct. 1004. In the latter case the railroad company had mortgaged its lines to the Union Trust Company in 1871. Default in payment of interest occurred in 1873, and continued thereafter. The company was harassed by suits, and a judgment was rendered in November, 1872, in favor of one Holbrook, upon which, in October, 1874, an execution was issued, and the sheriff threatened to levy upon the rolling stock of the company. By the law of the state of Illinois, rolling stock is deemed personal property, and made liable to execution and sale in the same manner as the personal property of individuals. The company, believing the judgment to have been fraudulently obtained, filed a bill in equity to enjoin proceedings for its collection. An injunction was granted therein, upon condition of giving an injunctional bond, with surety, for the payment of the judgment if the injunction should be dissolved. Morrison, at the request of the company, executed such a bond as surety. The bill for the injunction was in February, 1877, dismissed; and in June, 1879, the decree of dismissal was upon appeal affirmed. Holbrook then prosecuted Morrison upon the injunctional bond, and on the 30th day of September, 1880, obtained judgment. In November, 1877, pending the appeal, the trust company filed a bill for the appointment of a receiver and the foreclosure of the mortgage. A receiver was appointed and, finding this appeal with other suits pending against the company, and being met with claims for protection by sureties on appeal bonds, asked the court for its advice and instruction in respect to such appeal bonds and to the protection of the sureties in the event of adverse decision. The court, on consideration, made a decree authorizing the receiver, in his discretion, to prosecute or defend the appeals, and “to protect such sureties as, in his judgment, ought to be protected in equity and good conscience by means of the protection afforded to the property and assets of the company by means of the giving of such bonds.” He was also authorized for the purposes of that decree to use any money coming into his hands as such receiver, over and above the expenses of operation and repairs. It further appeared that the receiver had used funds, under authority of the court, in the purchase of certain real estate which was not covered by the mortgage, and also in the purchase of personal property and rolling stock; and this property was subsequently to the sale, and by order of the court, conveyed by the receiver to the purchaser, although it was not covered by the mortgage. The sale was made “subject to the lien of any and all claims against the said railroad property and assets which are now before this court by intervening petitions, and which shall be upon final determination and adjudication decreed to be paid as liens paramount to the indebtedness secured by said mortgage or trust deed.” The intervening petition of the surety was filed prior to that decree. The court in that case emphatically affirmed the general rule which I have sought to state, but found in that case special equities which authorized the allowance of the claim of the surety. There was an actual diversion of the income to the purchase of real and personal property, which, by subsequent order of the court, was conveyed to the purchaser, and which, under the decree of the court, should have been used to protect the surety. The trust company was also bound by the decree which authorized the receiver to protect the surety. That decree seems to have been passed either by the express assent of the trust company or without its objection. The trustee did not seek to obtain possession of the road until more than four years after default in payment of interest, remaining inactive when it should have known that large liabilities were being incurred by the company in the prosecution of its enterprise. The court declare the case to be a special one, and say that, “taking all the circumstances into consideration, we cannot say that equitable relief was unduly extended in allowing the intervener's claim.” It would seem that the decision is placed largely upon the fact that the earnings of the road had been appropriated to the purchase of property not covered by the mortgage, and which, by supplemental decree, was conveyed to the purchaser at the sale. The case is peculiar in its facts, and is plainly distinguishable from the case here presented; the court taking occasion to say that it is not its intention to decide anything in the case in conflict with the general doctrine which it had theretofore asserted. The trust company, recognizing the equitable position of a surety without reward, assents to the granting of the petition here. The second mortgage bondholders object. With whatever of favor I may be inclined to consider the case of sureties, and however desirous to relieve them from their liabilities, I cannot see that the court would be justified in imposing the burden of their voluntarily assumed obligations upon the second mortgage bondholders, who were equally innocent, Without their consent. The petition will be denied. * ,
HATCH et al. W. FERGUSON et al.
1. APPOINTMENT OF GUARDIAN-BOND-WASHINGTON STATUTE. -
Appeal from the Circuit Court of the United States for the District of Washington. |
This was a suit by Dexter Hatch, Arthur Hatch, Cyrus Hatch, and Ezra Hatch, by their next friend, Josephine Hatch, against E. C. Ferguson, Henry Hewitt, Jr., the Everett Land Company, Judson La Moure, and Minnie E. La Moure to annul a judicial sale of certain land. The circuit court rendered a decree for the complainants. 57 Fed. 966. Defendants appealed. Affirmed.
For a prior opinion on a jurisdictional question, see 52 Fed. 833.
Brown & Brownell, for appellants.
Before McKENNA and GILBERT, Circuit Judges, and HAWLEY, District Judge.
GILBERT, Circuit Judge. The complainants in this suit are the minor children of Ezra Hatch, deceased, and devisees of his last will and testament. They bring suit to set aside the judicial sale of their interest in the pre-emption claim of their testator and the decree of partition upon which the same was sold. Ezra Hatch died on the 8th day of July, 1890, leaving five children, to whom he devised all his estate, real and personal, appointing E. C. Ferguson the executor of his will and the guardian of his minor children. He left a pre-emption claim, to which he had acquired patent, and a homestead claim, upon which he and his wife and family "had resided for four years. It was believed by the executor that the widow of Ezra Hatch was the owner of an undivided one-half of each claim. In September of the same year the widow made proof upon the homestead claim, and paid the commutation price therefor, but, before patent issued, she gave to E. C. Ferguson a power of attorney to sell all her interest in both claims. On the 21st day of October, 1890, under the power of attorney, Ferguson sold and conveyed to the defendant Hewitt all the right, title, and interest of Josephine Hatch in and to said lands. On the 7th day of April, 1891, Hewitt, having purchased the interest of Esther Hatch, the only one of the children of Ezra Hatch who was of age, commenced, in the superior court of the state of Washington for the county in which said land was situate, a suit against the appellees and E. C. Ferguson, their guardian, for the partition of the pre-emption claim; alleging in the complaint that the plaintiff was the owner of an undivided six-tenths interest therein, and that the appellees were the owners of an undivided four-tenths interest. It was found by the court in the partition suit that the title was as alleged in the complaint, and that the land could not be divided. A sale was accordingly ordered. Hewitt became the purchaser, and the sale was subsequently confirmed by the court. Hewitt thereafter conveyed 10 acres of the land to the defendant La Moure, and the remaining 150 acres to the defendant the Everett Land Company. The circuit court, upon final hearing, found the appellees to be entitled to the relief sued for, ruling that the partition decree and sale were void for the reason that Ferguson was not the guardian of the children, and that Josephine Hatch had no interest in said claim at the time of her conveyance to Hewitt, but that the whole of the claim belonged to the children of Ezra Hatch. These rulings of the circuit court are assigned as error.
By the terms of his will, Ezra Hatch appointed E. C. Ferguson executor, without bonds, and also appointed him the guardian of the persons and estate of the minor children until they should each become of age. It contained no provision by which the guardian's