LJOMIS V. DA.VENPORT & ST. P. R. CO.
B01
the defendant, whatever the rights ot ehe other creditors might be, would succeed to all the rights and take the title of the assignee. There is no suspicion that the sale wa3 not a fair one. The purchaser took his own chances, and if the claim brought but a small price it was because the title to the property had been clouded by the wrongful act of Charles E. Gibson, in which the defendant voluntarily participated, and to which he made himself a party. Sterens v. Hauser, 39 N. Y. 302; Rrtnkin v. lIctrper, 23 1\10.586; Den v. Lippencotl, G N. J. Law, 473; Lynn v. Le GierlJe,48 Tex. 140; McDoJll1ld v. Johnson, 48 Iowa, 77. Decree for complainant according to prayer of bill, with costs. HARLAN, J., who heard the case with the district judge, concurring.
Looms and others v. D.\VEN:'ORT & ST. P. R. Co. and others. PRICE
v.
SAME.
{Circuit ('ourt, D. IOloa. 1. VENDOR'S LTEN-EQUTTARLE OWNER.
January, 1882.)
Although general rille is that a vendor's lien on estate for tIle purchase mo:\ey is given to the per.-on wh ) owns the title and conveys, it is .ot iudispensahle that the legal title should have vested in the party who claims the lien, nor Ih:lt the dped or conveyance should h·we been actually executed hy him. if he is the owner of tIw land in "quitl', ami controls the leg-al title, and causes the lonvcyance to be made by the h ,I IeI' of the legal title to a third party, and is entitled to the purellase illJUey. he is entitled to a ven lor's lien therefor. SAME-COLI,ATF:RAL SRCURTTy-WATVER.
2.
A vendor's l.en is dcfealeJ by any act upon the part of the vendor m,\.,ifesting an intentIOn not to rely upun tIw land for as, for ex:unp e, ing a d,st,nct, s,"p Ir,lte secllnty, as a mortgage or bond, or note, with security; hut the mere acceptan,·e of the vendee's dr,lft, not as security, hilt as payment of the purchase money, when sllch draft is not paid by the drawee, will not he considered a wai.er of the lil'n.
3.
SAllF:-lIloRTGAGE ON
PROPRRTY OF VE:<iDEE.
'Vhere land is conveyed to a railroad company, which Ius givcn a covering aftet'-acquirell property. such m .rtgage docs not become a ti",t 'ien on the bnd, but is to the v'o'ndor's lien for un'>aid purchase an:!, as to snch land, the mortgagee is not a purchaser for value. ·
4.
SAllE-LIS PE'OD"Ns-BoNA FIDE PUBCIIASER.
'Vhere one of the acf'n tants, in a to a railroa.l mortgage in a clrcu.t t;ourt of the Unittod Hlate" uy leave of the conrt, p,·oc.·e,Lcl in the state court to e,tabllsh d vendor's lien on the road, a pnrcha,er of the prope!'t)' at t:l; foreclo,nrc salcl is chargeable with notice of the prvc. in tile state and Ullited ::).ules cuurts, and lie is put upon. inquiry as to the vendor's lkn.
In Equity. MCCRARY, J. Tile original nction was brought to foreclose a m"lrtgage upon the property atHi franchises of the Davenport & St. l'aul
302
FEDERAL REPORTER.
Railroarl Company, and, muong others, the present complainant, Hiram Price, was made a defendant; the bill alleging that he had or claimed some interest in the premises mortgaged. There was a decree of foreclosure on the twenty-tlurd day of October, 1875, and a sale of the mortgaged property was ordered, subject, however, to the following reservation contained in said decree, to-wit: "And said sale is to be made subject to any prior liens which may hereafter be established against said property in this court het'eafter by an,}' uf the parties defendant claiming such hen." At the time this decree was rendered the said Price had not appeared and answered. At the November rules, 1879, the canse still being undisposed of, default· was taken at rules against said Price, but the same was subsequently, upon a showing, set aside by the court, and he was permitted to file the cross-bill now under consideration. Prior to the order setting aside said default, the said Price had, with the leave of this court, commenced suit in the circuit court of Scott county, Iowa, to enforce his vendor's lien against the Davenport t£ Northwestern Raillcay Company v. Davenport (t: St. Paltl Railway Company and John E.· Henry, who had been by the court appointed receiver of the mortgaged property. In that suit there was service of process and an answer by the Davenport & Northwestern Railway Company, and by Henry as receiver. Upon permission' being granted to said Price to appear lweI file his cross-bill in this case, he dismissed the proceeding in the state court without prejudice. The facts upon whicll the .vendor's lien is claimed, as we find them from the evidence, are as follows: (1) That in the summer of I8i3 the said Davenport 8;;; St. Paul Railroad Company, being desirous of securing the right of way oyer the land in troversy, applied to said Price to procure it for them. The company desired that :\Ir.Price should obtain the right of way, because they believed he could contract for it at lower prices than would be demanded of the com pany, and for a less sum than would be assessed as damnges if the right of way shuuld be condclilnell. (2) The s:lid Price acceded to said request, and undertook to secure the: right of way for the said railroall company as a matter of ac"ummodation, and not with a view to any pecuniary reward of profit. He was to be paid for the land what it cost him. (3) At that time the land through which the right of way was to be obtained belonged part to Andrew .J. Preston, part to Price, Hornby 8;;; Kehoe; ariel p'lrt to a street rail way company. . (4) For the ptupose of carrying out the agreement, the said Price bought the necessary land from all these partius, alid pail! for it out of his individual funds the sum of 82,500. As' a con \"enient mode of conveying titlil to .the railroailcompany; he'secl.Jred 'a convey'ance from Pre,ton ,ind.the street railway company to Price, Hornby 8;;; Kehoe, and from the latter to the railroad company. . (5) There was nI? agreement that Price should receive anything but cash, or its equivalent, in payment for' hisexpenelitures, i10r that lie shQuid·accept any ';<: <." .···.·· : · . : .' · · · . · :. : ·· :: · .
LOUMIS
V.
DAVENPORT
&
ST. P. R. CO.
803
(6) Afterwards 1\11'. French, president of said railroad company, gave Price as payment for said rig:lt of way a ilraft, as follows: "$2,::;00. DAVENPORT, IOWA, July 15, 1873. "On January 1, 1874. In," to the order of George H. French, president. twenty-five hundreu dollars, value received, and charge the same to account of DAVENPORT & ST. PAUL R. Co. "By GEORGE H. FRE"CH, Pt. "To Davenport Railway Construr;tion Co., 57 Broadway, New Y.rk· .. Indorsed: 'Accepted;' payaule at Gilman, Son & Co., New York. "DVPT. Rwy. CONSTIWC. Co. "By B. T. S:mTH, Pt. It customary at that time for the company to pay debts by drafts upon said construction company, and the parties understood that the draft was given and received as equivalent to cash, and as payment and no' as secllrity. (7) Said draft not being paid at maturity, was several times renewed, and finally put in judgment against the construction company, but the judgment was never collected, and the construction company has become insolvent. (8) In July, 1877, the said Price commenced suit in the circuit court of Scott county, Iowa, to foreclose his vendor's lien. Due service was made in the same month upon the defendants therein, the &; Northwestern Railroad Company, the Davenport &0 St. Paul Hailroad Company, and John E. Henry, receiver; and on the twenty-sixth <hyof November, 1877, the answer of the first-named company (the real party in interest) and of the receiver was filed. That snit remained pelilling nntil the order of this court was made allowing said Price to file his cross-bill herein. (9) The suit was bronght in the state court against the receiver by permission of this court, anrI the counsel for the railroad company in that case obtained the default in this court in order to set the same up as a bar to action there. (10) Upon applying for leave to file his answer and cross-bill in this case, s:,icl Price offered to dismiss his case in the state court upon the granting of !>nch leave, and accordingly did so.
Upon these facts, the counsel for the Chicago, :,Iilwaukee & St. Paul Railway Company, the present owner of the railroad, submits an able and exhaustive argument, in which he insists that the said Price has not shown himself entitled to a vendor's lien. I will consider the propositions relied upon by the counsel in the order in which they are presented in the brief. 1. It is said that complainant was never the owner of said premises, and never sold or con veyed them to the railroad company. \Ve think, however, that in equity he was the mvner.. He had certainly purchased the land and paid for it, and had a perfect right to a deed in his own name. If he chose to consummate his contract with the railroad company, with its assent, by causing the conveyance to be made direct to the company by the parties from whom he had purchased, it certainly cannot follow, as a matter of equity, that he thereby lost his right to a vendor's lien for the purchase money. No doubt the general rule is that the lien is given to thevendor,-the person who owns the title and cOlweys it; but a court of equity must look to substance, and not to the mere form, of the transaction.
304
We do not think that it is in all cases indispensable that the legal title shall have been vested in the party who claims the lien, nor that the deed or conveyance should have been actually executed by him. If he is the owner of the land in equity, and controls the legal title, and if he causes the conveyance to be made, and is entitled to the purchase money, he is entitled to the :vendor's lien therefor. Corey v. Boyle, Sup. Ct. Wis. 1881,21 Amer. Law Reg. 208; [So O. 11 N. W. Rep. 47.] 2. It is insisted that complainant is not entitled to a vendor's lien, because he accepted the draft of the DaVe"IJort (\j St. Paul Railroad Oompany, drawn upon and accepted by the construction company for the amount of the consideration, and thereby waived his right to such lien. It is true that a vendor's lien is defeated by any act upon the part of tile vendor manifesting an intention not to rely upon the land for sc;curity; as, for exam pIe, accepting a distinct and separate security, such as a mortgage or a bond, or note, with security. 2 Washb. Real Prop. b. 1, p. 1107; 1 Jones, Mo,:tg. § et seq.; Boynton v. Ghampli.ll, 42 Ill. 57; Gilman V. BI'OWIl, 1 Mason, 190; Vail V. Foster,4 N. Y. 312; Fish V. Howland, 1 Paige, Oh. 20; Kirkham v. BostOil, 67 Ill. 5!l9. The question in every case is whether the vendor intended to waive his right to a lien upon the land, and to rely upon other collateral or independent security. In this case, as already sta.eel, we find that such was not the intention of the complainant. The draft was taken as p'lyment. The complainant had not agreed to accept anything besides cash or its equi valent. The construction company held the funds out of which the railroad company undertook to make payment. The draft was given as a mode of pnymfJnt, aTHI not for the purpose of securing the payment of the debt. The cornphtiO'lllt did not agree to, nor intend to, loan tue purchase money to the railroad company. 3. It is insisted that a vendor's lien in this case cannot 'be sustaill!)!l, because the convey'lnce of the lands to the Davenport & St. Panl Railroad Company brought the same under the mortgage forein this case, wllich thereupon hecame a valid and legal lien thereon prior and paramount to any claim for such vendor's lien. It is true that the mortgage cO\'ered aft8r-acquired property, and it attacheel to tho land in ql1e..;tion as soon as it was conveyed to the c )mpany; but whether snch mJrtgage, as to this arter-acquired property, became a lien prior and paramonnt to that of the complainlwt, for the purchase money. is a question now to be considered. ,'lle vendor's lien exists to the extent of the purchase money, not ally the vendee and his heirs, but all;lo against his privies in e"ntte, and against subsequent purchasers who have notice of it, e.ttier actual or constructi\"e. It also exists against those who take a conveyance of the estate without advancing any new consideration, L.:cause such persons are not, witl1in tl1e meauing of equity, purchas-
LOOMIS V. DAVENPORT & ST. P. R. CO.
305
ers for value. 1 Jones, Uortg. § lDD, and cases cited. A mortgagee who takes a mortgage as security for a debt contracted at the time, is, for the purp0ses of this doctrine, to be regarded as a purchaser for value, and the vendor's lien is not goqd as against him unless he have notice. Id. § 200, and cases cited. "If the mortgage be given merely to secure a pre-existing debt, it will not prevail against the lien. The mortgagee is not then a purchaser in good faith for value." In the present case the property in controversy is not described in the mortgage; it is included with the mortgaged property only by virtue of the clause in the mortgage covering property subsequelJtly acquired by the mortgagor. As to such after-acquired property, is the mortgagor to be regarded as a bonn jicle purchaser for value, or as taking the property CUll, onere? The decisions of the supreme court of the United States seem to settle this question. U. S. v. Ncw Orleans U. n. 12 Wall. 362; Fosdick v. Sehall, D9 U. S. 235; Mycr v. Car Co. 102 U. S. 1. In all these cases the rule is laid down, without qualification, that "a mOltgage intended to cover after-acquired property can oilly attach itself to sur,h property in the condition in which it corned into the mortgagor's hands." "If," says Mr. Justice BRADLEY, in the case first cited, "that property is already suhject to mortgages or other liens, the general mortgage does not displace them, though they may be prior in point of time. It only attaches to such interest as the mortgagor acquires." And in Fosdick v. Schall the court say; "The attaches to the cars, if it at at all, because they are 'after-acquired' property of the compan.v; uut. a-; to that class of property, it is well settled that the lien attaches subject. to 1 h . with which it is illcullluereti when it comes into the hanos of til", m Irtgagor. The morrgage!'s take just such an il1terest in the property as tlu mortgagor aequireu; no more, nu less." And in l1fyer v. Car Co. the court SlY, construing tho same mortgagtl now before us: "In V. Schall we held that a wl10se mortgage emlml('p'l property to be acquired in the futnre, was iu uo sense a purchaser of such property. His rights wel'f' not granted after the property was honlrht uy tile mortgagor. lie got nuthing hy this pruvision ill his mortgage except what the mortgagor himself had acquired. He paid nothing for his new TIe touk, as murtgagee, just such title as the llwrtgagur had; no 11Iure, 110 100s."
It is insisted by counsel for the rail way company tllat these ca"es lay down a rule applicable only to after-acqUired per.wnwl property; but the language of the court admits of no such limitation; nor does the principle upon which the court proceeds. That principle is that, as to after-acquired property, the is not a pnrchasl'r for value; and it applies with tue same force wllether such after-acquired v.17,1l0.1-:W
306
property be personal or real. The character of the property can make no difference. 1 Jones, Mortg, §§ 157, 158, and cases cited. The cases cited by counsel may, we think, all be harmonized with these decisions of the supreme court. They are, for the most part, cases where the question was between the holder of a vendor's lien, on the one hand, and a purchaser or mortgagee who had paid a present consideration in good faith and without notice, on the other. 'rhe case of Pierce v. Railraod Co. 24 Wis. 551, is the only one cited in which the property in controversy was acquired by the mortgagor after the execution of the mort'-jage, and in that case the contest was between the vendor and the purchaser at the sale under the decree of foreclosure, who was not charged with notice. Doubtless such a purchaser, who pays the amount of his bid without notice of the vendor's lien, would be regarded as a purchaser for value and entitled to priority; and so it was held in the case just cited, the court saying: "It appears that Hunt and Sage purchased the property at the foreclosuro sale and have conveyeu it, without notice of any equities of the plaintiff in the premises, to the defendant company; ... ... Ole and that it would be a violation of all principle to permit lhe plaintiff, after lhe foreclosure sale and at this late day, to enforce a vendor's lien for the consideration named in the deed given in June, 1856, really seems to us too plain for argument."
There is in the present case a question of notice to the purchaser at the foreclosure sale which will be considered prescntly. This quotation is here made to show that the decision in the Wisconsin case was placed mainly upon the ground that purchaser at the foreclosure sale was an innocent bona fide purchaser for value, and is, so far, quite consistent with the rlliings of the supreme court of the United States above cited. If it contains anything inconsistent with those rulings, we cannot, of course, follow it. 4. It is next insisted that the Chicago, Milwaukee & St. Paul Railway Company is a bonafide purchaser of said premises for value, and without notice of the claim of complainant for a vendor's lien thereon. The title of the said company to the premises was derived under the foreclosure proceedings and the foreclosure sale of July, 1879. At that date the present complainant had not answered in this court, hut had appeared here and obtained leave to prosecute his claim for a vendor's lien in the state court, and his suit in the state court was then pending against the parties representing the control and ownership of all the mortgaged property. The record shows that on the sixteenth of August, 1877, Mr. Price presented his petition to this court, asking leave to sue the railroad company and the receiver in the district court of Scott county, to enforce his vendor's lien, and that on the same dav that leave was granted. The record of the state court shows on the twentyseventh of the same month suit was brought in that court, and that it was prosec'uted with reasonable diligence. The effort, at a later
LOO:.uIS V. DAVENPORT & ST. P.
n..
CO.
date, to obtain a decree by default in this court: while the parties were in good faith, and with our assent, litigating the qnestion of the vendor's lien in the state court, never met with the approval of . this court, and the default obtained at rules was promptly set aside when the facts were bronght to our notice. The court, however, thought that Mr. Price should select one or' the other forum, and therefore allowed him to appear and file his answer and cross-bill only upon condition that he should dismiss the suit in the state court without prejudice, which he did. It will be seen, therefore, that at the time of the master's sale under the decree in this case, the record of this court showed (1) that Hiram Price had been made a party; (2) that he had appeared here, and stated on the record that he claimed a vendor's lien on the property now in . controversy; (3) that he asked and obtained leave to prosecute a suit to enforce. that lien in the state court. And this record was clearly sufficient to charge such purchaser with notice of the suit in the state court. It is said, however, that the suit in the state court was dismissed, and that, therefore, the notice was not sufficient. Ordinarily this would be so; but it must be observed that this case is very peculiar in its facts and circumstances. No suit could be brought in the state court after the appointment of the receiver without the permission of this court. After such permission was granted, as shown by the record in this case, there was sufficient of record to require the purchaser to take notice of the proceedings in both courts. When the case in the state court was dismissed, it was expressly stated in the record that the dismissal was without prejudice to the right ofaaid Price to bring another suit or to prosecute said claim in the United States circuit court for Iowa. Immediately upon the dismissal of said suit the complainant filed his answer and cross-bill in this suit. The record of the state court· was of itself notice that this might or would be done. Besides, the purchaser at the foreclosure sale, under the peculiar language of the decree, was bound to take notice of all subsequent proceedings in the case in this court. The decree ordering a sale of the mortgaged property was entered at an early stage of the proceedings, and expressly directed that said sale should be made subject to any prior: liens which might thereafter be established againbt the Illortgaged property in this court. But few of the parties defendant had formally claimed snch prior liens at the time that decree was· entered. No defaults had been entered against any of the defendants', and it was clearly the intention of the court to retain jurisdiction of tile case: for the purpose of determining what. if any, prior in favOl; of any of parties defendant. be enforced against fheIllortgaged p r o p e r t y . ' : ,J The reservation in the decree cannot, with any propriety, beH'con-\ as applying only to such defendants as' had itt "time for--. . . . _.. · __ ' ·· ' . __ · ·.... _ -,-__---- · · · ,.- · .,...J>' · -1. · ·- . - . . . . - .... ·· _.-.
C
308
mally claimed n. prior lien. It was intended by the clause of reservation to save and protect the rights and equities of all the parties to the suit as they might thereafter appear. We hold, therefore, that enough appeared upon the record in this court, and in the state court, to put the purchaser upon inquiry concerning the claim of the present complainant of a vendor's lien upon the mortgaged property, and that, therefore, the Chicago, Mil waukee & St. Paul Rail way Company is not a purchaser without notice of said claim. The conveyance by the marshal to Rutten & BonD, and hy them to the Davenport & Northwestern Bailway Company, and by the latter company to the Chicago, Milwaukee & St. Paul Railway Company, the present owner, were all made pending this suit, and each of the purchasers must, upon the principles already stated, be held to notice of the present complainant's rights. He is not estopped by lapse of time, and has been guilty of no laches. He brought his suit in due time, and has prosecuted it ever since with due diligence, eitiler in this court or in the state court, with our consent and approval. Upon the whole case, we are constrained to hold that the de'ree hereinbefore rendered in favor of the complainant was strictly in accordance with equity, and should not be set aside. LovE, J 0, concurs.
Ex'r, etc., and others v. CAGO
"MANUFACTURERS'
NAT. BANK OF
em-
and others. 1883.) ACT OF JUNE
(Circuit Court, N. D. Illinois. 1.
NATIONAL BANKS- INDIVIDUAL LIABILITY OF STOCKHOLDERS -
30, 1876. The bill eonte'1lplated ·fly the second section of the act of June :l0, 1876, to enlorce the individual liability of stockholders in a natIOnal banKing associat·on that has gone into liquidation, need not purport expressly on its face to be tiled hy complainant on behalf of himsl'lf and all other ere litors, for the law wonld give it th:lt effect and the court would so treat it; but, jf this was necessary, the hill might be amended in that respect byle:we of the court.
BtLL-OBTAIN1SG PrnOUITY.
The manifest intention of the national banking act isa distrihution of its assets, in case a hank bel;omes insolvent, equally among all the unsecured ·creditors; and the dil,gence of a creditor who fiies a ereditor's hill can gin: him no greater r.g .Is than are given any 0'11<'1' creditor to s:mre in the distribution of the assets. and a prayer in the bill that such creditur be given priority over other creditors will not be I!ranted.
Where the original bill filed before the of the aet of Jnne 30, 1876, was amenrled alter the pas"age of that act so as to makl' the indiv,dual sharehulders defe:1dants, and suhject them to liability, such bill will not be considcred on that account multifarious. 4. SAME-EFFECT OF ACT OF JUNE 30,1876. The act of June 30. 1876, did not create any new liahility on the part of the stockholders, or provide for enforcing such liability against them under circum-