PITTSBURGH, CINCINNATI, CHICAGO, mentioned in the above deed of trust, subject บ. ing so registered, it shall then be transferable only on the books of the company until released from such registry on said books by (See 8. C. Reporter's ed. 493-515.) its owner;" also, that it "shall not become obligatory until it shall have been authentiFederal question-pendency of a suit in a cated by a certificate annexed to it, duly Federal court. 1. A claim that a lien on property was wholly under the United States as gives the Supreme court. 2. The pendency of a foreclosure sult in a Fed- [No. 16.] Argued April 11, 12, 1898. Decided Janu- INS The facts are stated in the opinion. Messrs. E. W. Kittredge and Joseph [494] *Mr. Justice Harlan delivered the opinion of the court: This writ of error brings up for review a final judgment of the supreme court of Ohio affirming a judgment of the circuit court of Franklin county, in that state. " signed by the trustee." To each bond was attached this certificate: "I hereby certify that this bond is one of the series of bonds described in and secured by the deed of trust or mortgage above mentioned. A. Parkhurst, Trustee." The property and rights covered by the above deed of trust, and which were ordered to be sold by the decree in this case if the Columbus, Chicago, & Indiana Central Railway Company did not, by a named day, pay the amount found due to the plaintiff, was a line of railroad extending from Columbus, Ohio, to Indianapolis, Indiana, including a branch from Covington to Union, together with the franchises, equipment, property, tolls, and interests appertaining thereto. The case made by the record is set forth in an extended finding of facts covering sixteen pages of the present transcript. Many of the facts so found are not necessary to be here stated. Those which bear more or less upon the present inquiry may be thus summarized: *The Columbus & Indianapolis Central [498] Railway Company prepared, signed, and sealed the 1,000 bonds referred to (part of which were the 36 bonds held by Lynde), and to secure the same executed and delivered the mortgage or deed of trust to Archibald Parkhurst, as trustee. The above deed recited the consolidation of the Columbus & Indianapolis Railroad Company and the Indiana Central Railway under the name of the Columbus & Indianapolis Central Railway Company, the consolidated company becoming liable for and assuming all the just debts and liabilities of the respective constituent companies; that, for certain purposes, a new series of bonds, 1,000 in number, and each for $1,000, should be issued, dated November 1st, 1864, to be secured by a deed of conveyance covering the mortgagor company's road, its appurtenan[495] *The general question presented for deter- ces, franchises, equipments, property, tolls, mination is whether certain railroad prop-income, and interest, to a trustee to secure erty may be sold in satisfaction of a judg-the payment of said bonds and interest warment obtained in 1891 by Charles R. Lynde rants. Such a deed was made, and conveyed in the circuit court of the United States for the southern district of Ohio for the amount of 36 coupon bonds, part of 1,000 bonds issued by the Columbus & Indianapolis Central Railway Company, an Ohio corporation, in the year 1864. The bonds were secured by a deed of trust, and were made payable to William D. Thompson or bearer, on the 1st day of November, 1904, each bond reciting, among other things, that it was one of an issue of not exceeding $1,000,000, and had a special lien on all of the railway property, equipments, and franchises of the company, as to A. Parkhurst, trustee, for the "purpose of assuring the punctual payment of the said 1,000 bonds and each of them to each and every person who may become the holder of the same or any of them," the mortgagor company's entire railroad from Columbus to Indianapolis, including the branch from Covington to Union, its franchises, etc., in trust to secure the bonds about to be issued by it. The deed contained all the provisions usually found in such instruments. Parkhurst accepted the trust, and the mortgage or deed of trust was duly recorded in Ohio and Indiana. Shortly after the signing and sealing of the 1,000 bonds they were all duly certified by the trustee in the form above stated. Prior to January 1st, 1867, of the 1,000 bonds 790 had been duly issued in exchange for a like number and amount of the exist ing second and third mortgage bonds of the Columbus & Indianapolis Railroad Company as provided in said mortgage, and 31 of said bonds had been duly issued and sold by the railway company. The highest serial number of the 821 bonds so exchanged and sold was No. 833. The remaining 179 of the 1,000 bonds, including the 36 bonds described in the petition, having been delivered prior [497]to 1870, by the trustee, Parkhurst, *to Benjamin E. Sinith, as president of the company, remained in the latter's possession as president, and the companies into which the same was successively consolidated as hereinafter set forth, until the months of November and December, A. D. 1875, and the happening in those months of the events to be presently stated. On or about the 11th day of September, 1867, the Columbus & Indianapolis Central Railway Company, which made the above mortgage of 1864, was consolidated with the Union & Logansport Railroad Company and the Toledo, Logansport, & Burlington Railroad Company, and became the Columbus & Indiana Central Railway Company; and on or about the 12th day of February, 1868, the latter company and the Chicago & Great Eastern Railroad Company were consolidated and became the Columbus, Chicago, & Indiana Central Railway Company, one of the defendants in this action. No authority or consent was thereafter given by the board of directors of the Columbus, Chicago, & Indiana Central Railway Company for the issue or sale of the above 179 bonds, or any of them. pose of securing their payment executed and It was set forth in the latter instrument The 821 second-mortgage bonds of the Columbus & Indianapolis Central Railway Company referred to in said mortgage were part of the bonds secured by the mortgage to Parkhurst, trustee. On or about the 22d day of January, 1869, the Columbus, Chicago, & Indiana Central Railway Company leased to the Pittsburgh, Cincinnati, & St. Louis Railway Company its entire railroad and property, including the railroad and property here in question, for the term of ninety-nine years from the 1st day of February, A. D. 1869, renewable forever. And on or about the 1st day of February, 1869, possession of the leased railroad and property was delivered to the Pittsburgh, Cincinnati, & St. Louis Railway Company, which continued to hold possession thereof and to operate the same as les-[499] see till after the sale to which reference will be presently made. It was provided in that lease that no bonds beyond the $15,000,000 of first-mortgage bonds secured by the mortgage to Roosevelt and Fosdick, and the $5,000,000 of second-mortgage bonds secured by the The Columbus, Chicago, & Indiana Central Railway Company on or about the 20th day of February made and executed its 15,000 bonds of that date, each for the sum of $1,000, bearing interest at the rate of seven per cent per annum; and in order to secure their payment executed and delivered its mortgage or deed of trust of that date to James A. Roosevelt and William R. Fosdick, trustees, conveying to them all its property, -such conveyance including the property formerly belonging to the Columbus & In-mortgage to Fowler and Thomas, and the dianapolis Central Railway Company that had been previously conveyed to Parkhurst, trustee. That mortgage was recorded in the states of Ohio, Indiana, and Illinois immediately after its execution. Afterwards and before Roosevelt and Fosdick, trustees, began the foreclosure suit hereinafter mentioned, the Columbus, Chicago & Indiana Central Railway Company issued and sold of the 15,000 bonds so secured, bonds to the amount of $10,428,000 or more. On or about the 15th day of December, A. [498]p. 1868, the *Columbus, Chicago, & Indiana Central Railway Company made and executed its 5,000 bonds, each for the sum of $1,000, of that date and due upon the 1st day of February, A. D. 1909, with interest at seven per cent per annum, and for the pur172 U. S. U. S., Book 43. said $2,000,000 of income bonds, should be issued by the lessor company without the consent of the board of directors of the respective parties to the lease. This lease was duly recorded in the states of Ohio, Indiana, and Illinois on or about the 29th day of May, 1873. 34 On the 1st and 2d days of February, 1875, Roosevelt and Fosdick commenced their actions concurrently in the circuit courts of the United States for the southern district of Ohio, the district of Indiana and the northern district of Illinois, for the foreclosure of the mortgage made to them as trustees, and for other purposes, "but," the finding states, "not affecting the Parkhurst mortgage aforesaid or the bonds thereby se cured." 529 In these actions William L. Scott ap- | and control until after the sale of the railpeared and filed a cross bill in October, 1881, road and the property hereinafter set forth. elaiming to be the owner of certain bonds se- Such further proceedings were had in the cured by the mortgage to Roosevelt and Fos- foreclosure suits that on the 15th, 16th, and dick, and praying, among other things, for 23d days of November, 1882, in the several[501] its foreclosure. But he asked no relief circuit courts similar decrees were entered, against the Parkhurst mortgage or the wherein it was adjudged that in case the bonds secured thereby. Prior to the begin- Columbus, Chicago, & Indiana Central Railning of the foreclosure suit Thomas re- way Company failed for ten days to pay the signed his trust under the mortgage made to sum found due in the decree the mortgage Fowler and himself, and thereafter that should be foreclosed and the property contrust was administered by Fowler alone. veyed by it—which, as we have seen, includIn said actions the Columbus, Chicago, & ed all the property described in the petition Indiana Central Railway Company, Fowler, herein-should be sold for the payment of and others were made parties defendant, and the principal and interest of said bonds, subwere duly served with process or entered ject to the outstanding sectional bonds prior their appearance therein. in lien to the mortgage to Roosevelt and Fosdick, and to all other, if any, paramount liens thereon, but free from the lien of the moitgage to Roosevelt and Fosdick; that the decree should not in any manner affect, prejudice, or preclude the holders of the paramount liens or any of them, but should be without prejudice to the right of them and each of them. It was also adjudged that the purchaser of the mortgaged premises should be invested with, and should hold, possess, and enjoy the same and all the rights, privileges, and franchises appertaining as fully and completely as the Columbus, Chicago, & Indiana Central Railway Company at the commencement of the suit by Roosevelt and Fosdick held or then held and enjoyed, or was entitled to hold or enjoy, but free from liens then represented by any party to said cause. In the bills of foreclosure the plaintiffs, among other things, prayed for the appointment of a receiver or receivers of all the railroad, equipment, and appurtenances and other mortgaged premises, and of the earnings and income, rents, issues, and profits thereof; that the net amount of such earnings should be first applied to the pay[800]ment of the interest on all the bonds issued under the mortgage to the plaintiffs, and to the payment of the interest on all mortgage bonds having prior liens on the property, in such order as the court might direct; and that the balance should be applied to the payment of the sums due and in arrears to and for the sinking fund provided for in the mortgage to them for the redemption of the bonds issued under said mortgage. In that decree it was further adjudged that the sale decreed to be made, and the conveyance, after confirmation thereof, to be executed and delivered, should be valid and effectual forever, and that thereby the defendants in said suits, respectively, and all persons claiming or to claim under them or any of them, subsequent to the beginning of the suits by Roosevelt and Fosdick, as purchasers, encumbrancers, or otherwise, howsoever, should be forever barred and foreclosed of and from all rights, estate, and interest, claim, lien, and equity of redemption of, in or to the premises, property, rights, and interests so sold and every or any part thereof. Such proceedings were had in the foreclosure suits brought in the circuit courts of the United States that, on the 2d and 3d days of February, 1875, Roosevelt and Fosdick were duly appointed receivers of the railroad, equipment, and appurtenances and other mortgaged premises embraced in and covered by said mortgage, and of the earnings, income, rents, issues, and profits thereof; and they were directed not to disturb the possession of the mortgaged premises by the Pittsburgh, Cincinnati, & St. Louis Railway Company under the lease to it, but should collect and receive the rental payable by the lessee, and apply the same as provided by the further orders of the court. And in the order of appointment it was further directed that the Columbus, Chicago, & Indiana Central Railway Company forthwith transfer and convey to the receivers the said railroad equipment and appurtenances and other mortgaged premises embraced by the mortgage, and including the income, rents, issues, and profits thereof. The conveyance so ordered was duly executed and delivered to Roosevelt and Fosdick as receivers, on or about May 25th, 1875. That deed was not Afterwards, and on or about the 30th day recorded, and the plaintiff Charles R. Lynde of January, 1883, the circuit courts for the had no actual knowledge of its existence un-northern district of Illinois and the district til the commencement of this action in 1891. of Indiana, and on the 31st day of January, Immediately after their appointment the 1883, the circuit court for the southern disreceivers, in pursuance of the above order, trict of Ohio,-the said purchase money havtook possession and control of all said rail- ing been paid,-by orders entered in those road and property, its income, rents, issues, causes, duly confirmed and approved the sale, and profits, subject, however, to the physi- and ordered said premises and property, cal possession and operation of the railroad rights and franchises, to be conveyed to the by the lessee. They continued in possession purchasers in fee simple, in accordance with On or about the 10th day of January, 1883, in conformity with the decree, the said property and every part thereof was sold by masters theretofore appointed to execute the order of sale, to William L. Scott, Charles J. Osborn, and John S. Kennedy, for the sum of $13,500,000, which sum was insufficient *to[502] pay the outstanding bonds and interest seeured by the mortgage to Roosevelt and Fos dick. the former decrees of those courts. Such & conveyance was made February 21st, 1883. Subsequently, on or about the 17th day of March, 1883, Scott, Osborn, and Kennedy, with their respective wives, executed and delivered their deed of that date, conveying said premises and property, rights and franchises, to the Chicago, St. Louis, & Pittsburgh Railroad Company, which was authorized to purchase and own the same. On or about the 10th day of June, 1890, the Chicago, St. Louis, & Pittsburgh Railroad Company was duly consolidated with the Pittsburgh, Cincinnati, & St. Louis Railway Company, together with other railway companies, under the name of and thereby became the Pittsburgh, Cincinnati, Chicago, & St. Louis Railway Company. The latter company was, at the commencement of this suit, and through its predecessors in title has been ever since the conveyance to Scott, Kennedy, and Osborn,-in the actual, peaceable, and undisputed possession of all said railroad, premises and property, rights and franchises, including that described in the petition. The history of the 36 bonds in suit is as follows: On and before the 1st day of November, 1864, Benjamin E. Smith was the president of the Columbus & Indianapolis Central Railway Company. He continued to be president of that corporation and of its successors into which it was successively consolidated, until the sale of the railroad hereinbefore mentioned in 1883. In the months of May, July, and August, 1878, Lynde purchased the 36 bonds in good faith, in the usual course of business, for valuable consideration (being about ninety cents on the dollar, which was at the time the usual market price for them), without knowledge or notice of the unauthorized or fraudulent acts of Smith, and without any knowledge or notice that the bonds had not been sold by the Columbus & Indianapolis Railway Company, and thereby became the bona fide holder and owner of the bonds and the coupons thereto belonging. Before the 36 bonds had been purchased by him the railway company had not made default in the payment of interest[504] on them, and no holder prior to Lynde had elected that the principal sum should become due. At the time Lynde purchased the bonds the coupons due May 1st, 1878, were still attached to the bonds and were unpaid. On or about the 27th day of August, 1878, Lynde presented the 36 bonds for registration to the secretary of the Union Trust Company, New York, which had been designated by the Columbus, Chicago, & Indiana Central Railway Company as registering agent for such bonds in the city of New York,-to put the bonds in the name of the party registering them and taking them out of the register and making them to bearer; and the secretary then caused the same to be registered in the name of Lynde. At the time of such registration no inquiry was made by the secretary as to whether or not the bonds had been regularly issued by the Columbus & Indianapolis Central Railway Company. In the months of November and December, The coupons maturing May 1st, 1878, on [503]1875, Smith borrowed *for his own purposes these 36 bonds, which were attached to them $48,000 from W. H. Newbold, Son, & Co., when Lynde purchased, were paid to the latbrokers in Philadelphia, executing and deliv- ter by the firm of A. Iselin & Co., Wall street, ering to them his individual notes. At that New York, upon presentation by Lynde of the time he had, as president of the Columbus, coupons in October, 1878; and the 36 coupons Chicago, & Indiana Central Railway Com- maturing November 1st, 1878, were paid to pany, the custody and possession of the 179 Lynde by the same firm upon the presentahereinbefore described; and, without the tion of the coupons in April, 1879. Iselin & knowledge, authority, or consent of that com- Co. were acting for the receivers and a bondpany, but falsely pretending to W. H. New- holders' committee,-that committee furbold, Son, & Co. that he was individually the nishing the money for taking up the coupons, owner of such bonds, delivered certain of and being afterwards reimbursed by the rethem, including the 36 described in the plain-ceivers. In October, 1879, Lynde presented tiff's petition, as collateral security for the payment of his notes. He subsequently renewed his notes, with the same collateral, from time to time until about the 14th day of January, 1878, when the 36 bonds were sold by W. II. Newbold, Son, & Co., and the proceeds applied to the payment of Smith's notes. The balance was paid over to him or for his use, and no part of it was used for the benefit of the railway company. At the time the bonds were so pledged all the past-due coupons had been cut off, and while they were so held as collateral security the subsequent coupons, as they fell due, were cut from the bonds and delivered to Smith, but were never presented for payment. At the sale of the bonds, Newbold, Son, & Co. themselves became the purchasers of the 36 bonds, paying the full market price and buying them in good faith without knowledge of any defect in them; and thereafter they sent them to New York for sale. the coupons falling due May 1st, 1879, on the From the year 1871 until after the pur- The Columbus, Chicago, & Indiana Central Railway Company made default in the payment of the interest coupons upon said 821 bonds due on the 1st day of May, 1875, and on the 1st day of November, 1875, and the interest coupons were not paid until after June 30th, 1876, when they were paid by or on behalf of the receivers hereinbefore mentioned, all which facts were known to Lynde at the time he purchased the 36 bonds described in the petition. facts, the court of common pleas found the equities of the case in favor of Lynde. It held that the 36 bonds and the coupons thereto annexed were the valid and binding obligations of the Columbus & Indianapolis Central Railway Company and of the Columbus Chicago, & Indiana Central Railway Company; that Lynde was the owner and holder of those bonds and coupons, and each of them, as well as the coupons that accrued May 1st, 1879, to May 1st, 1891, inclusive; At the time of the demand made by Lynde that there was due to him on such upon Parkhurst, trustee, hereinafter set coupons, down to the entry of the decree, forth, and at the time of the commencement the sum of $47,673.37; and that, under of this action, interest coupons which had and by virtue of the said mortgage or theretofore fallen due upon more than 700 deed of trust described in the petition, of said 1000 bonds described in said mort-Lynde had a valid and subsisting lien, gage had been paid. to secure said bonds and coupons, upon the railroad property described in the petition as of November 1st, 1864, and was entitled to a decree for the payment of the sum so found due. A decree was subsequently entered in conformity to these conclusions. Upon a writ of error to the circuit court of Franklin county that judgment was affirmed. The judgment of the latter court was also affirmed upon writ of error to the[597] supreme court of Ohio. On or about the 27th day of June, A. D. 1891, at Newark, in the state of New Jersey, Lynde made a personal request and demand in writing of Parkhurst, as trustee, to commence an action for the foreclosure and sale of the premises in accordance with the provisions of the deed of trust, for and on account of the default made by the Columbus Indianapolis Central Railway Company in the payment of the coupons upon the 36 bonds; and then and there offered to the trustee sufficient security and indemnity to protect him against all expenses and personal responsibility by him to be made and incurred in the commencement and prosecution of an action for the foreclosure and sale of the premises. Parkhurst as such trustee refused to take the action requested. While the cause was pending in the supreme court of the state, Lynde died, and the Long Island Loan & Trust Company qualified as his executor. The first question to be considered relates to the jurisdiction of this court to review the final judgment of the supreme court of Ohio. The Columbus, Chicago, & Indiana Central The contention of the defendant in error Railway Company and the Pittsburgh, Cin- is that the record presents no Federal ques cinnati, Chicago, & St. Louis Railway Com- tion which this court will review; and that pany have neglected and refused to pay the the state court based its decision upon an coupons due upon each of the bonds described independent ground, not involving a Federal in the petition, being coupons from and in- question, but depending upon principles of cluding coupon maturing May 1st, 1879, to general law and broad enough to sustain its and including coupons maturing May 1st, judgment. Its further contention is that the 1892, the last two of which fell due since the supreme court of Ohio rightly held that nei commencement of this suit. ther Lynde nor the trustee, Parkhurst, were [506] *On the 1st day of October, 1890, the Pitts- affected by the proceedings in the foreclos burgh, Cincinnati, Chicago, & St. Louis rail-ure suits instituted in the circuit courts of way Company made its mortgage to the Far- the United States. mers' Loan & Trust Company of New York, Upon looking into the record, we find that and to W. N. Jackson of Indiana, as trustee, the defendant railway company claimed in for the purpose of securing an issue of bonds its answer that, if a lien at any time atto be made by that company to amount in tached to the property in question to secure the total to 75,000 bonds at the par value of the 36 bonds purchased by Lynde, such lien $1,000 each, to be issued as in said mortgage was wholly devested and discharged by the set out, and upon the property described in above proceedings in the Federal courts, unthe answer and cross petition of the said der which that company claims title. This, Farmers' Loan & Trust Company filed in this it would seem, was such an assertion of a cause, including the line of railroad and right and title under an "authority exercised other property connected therewith, described under the United States" as gives this court in the petition of the plaintiff herein; that jurisdiction to re-examine the final judg said mortgage was duly recorded as required ment of the state court. Rev. Stat. § 709. by law in all of the counties in the several states through or into which that line runs; that by virtue of that mortgage there have been issued bonds to the total number of 5,318, being the bonds numbered from 1501 to 6818, both inclusive, and amounting in the total to $5,318,000; and that said bonds are now outstanding and in full force, and no default has been made in the payment of interest thereon. As conclusions of law from the foregoing In Dupasseur v. Rochereau, 21 Wall. 130, 134, 135 [22: 588, 590, 591], which was a suit to subject certain lands in satisfaction of a debt secured by a mortgage, and for the amount of which debt judgment had been obtained.—the defense was rested upon the ground that the defendant purchased the property at a sale made under a judgment of the circuit court of the United States for the eastern district of Louisiana, in a named case, "free of all mortgages and encum |