TAYLOR 11. FRANKLIN SAV. BA.NL
189
TAYLOR et' al. 11. FRANKLIN SAV. BANL (Circuit Court, N. D. IUi7lO'll. AUgUst 10, 189L) 'l'aV8'l'l-m.ul'l' BBNBFICIA.Bms-FoRBOLOSUBE-BILL OJ' REVIEw.
Landwu conveyed to a trustee by deed of trust, which provided that no lien, Incumbrance,' or oharge should be created. The record of such trust deed having been destroyed by fire, II decree was entered in II proceeding under the burnt reoord act. establishing the trust deed without the provision aforesaid, but witb II olause authorizing the trustee to create lienl. After entry of this decree the trusiee gave a mortgage and allowed II lDechanlo's lien to be created. under which the land was IOld. BOlDe of the C68tuiB qui trustent who were infants when the decrees of foreolosure and the decree restoring the trust deed were rendered, but Who had appeared therein by guardian ad litem, filed a bill to review the foreclosure suits. Held that., as to them, the mortgages and the mechanic's lien were invalid since the record of the trust deed, though destroyed, gave the mortgagee and lieD holder DOtice of the inability of the trustee to incumber the propel1.7.
In Equity. R. B. Kenda,U and Mr. Pope, for complainants. Swift, ChmpbeU &: J&YIe8, for Franklin Sav. Bank. BLODGETT, District Judge. This is a bill to review, reverse, and eat aside a decree of foreclosure, entered in this court on the 30th of April, 1880, under which defendant claims title to lots, 1,4, and 5 of the subdivision of lot 4, in block 16, in Bushnell's addition to the city of ChicagOj and also to set aside a sale made July 15, 1881, under a decree for a mechanic's lien, in favor of Gilsdorf and others, entered in the superior court of Cook county July 20, 1874. The original bill of review was filed by Robert C., Katharine, and Margaret Taylor, children of Frank C. and Louisa Taylor. And the cross bill was filed by Frank C. Taylor, Jr., and Maria Louisa Taylor, Jr., Josephine S. Taylor, and Alexander Taylor, infants, and older children of Frank C. and Louisa Taylor, Sr. The facts, as they appear from the proof, and which are not disputed,are that on the 13th of June, 1871, Maria Louisa Tay1or, being seised in fee of all of lot 4, in block 16, Bushnell's addition to Chicago, joined with her husband, FrankC. Taylor, in the execution of a deed of said premises to Ira Scott, to hold upon certain trusts inthe deed set forth, which trusts, so far as it is necessary to state them for the purposes of this case, were that the property was to be held for the benefit of Mrs. Taylor and the children of the marriage between Frank C. Taylor, her husband, and herself, except that, in the event of the dea.th of Mrs. Taylor, and of the children, before the youngest child had reached the age of 21 years, Mr. 'l'aylor or his heirs should become entitled to the remainder of the estate. The deed of trust contained an express provision "that no lien, incumbrance, or charge shall be created on said premises," and, although there was a provision in the trust deed that the trustee might sell some portion of the premises for the purpose of improving that which was unsold, yet that provision was so guarded as to prohibit the creation of any lien, incumbrance, or charge upon the unsold portion of said premises. At the time the deed was I:Qade there v.oOF.no.4-19
was a house upon the premises, which was occupied by Mr. and Mrs. Taylor as their h9mEf, small part of the lot. When this trust was created, three children had been aoo four,have since.been, born, and this born to Mr. bill was filed by the three youngest of the seven children, the three oldest at lawful. age :sihee.'this bill.wasfiled, and'theotherfoul' flrein t.he city of Chicago: of October 8 premises was destroyed, and the and 9, public: .recoro,siof deeds in the' city were &lso destroyed, 'WaEl far'!leveral years supposed to have been <1eatroyed'Qy:tbe samefire;.althougbjt had been 'duly re'corded within a feW days'after its Mr. Taylor borrowed the sum ,of$30ilb:Q from the principal defendant in this case, for which he "gSV-8' his' own notij;paya.ble one yeara.fter date, and to secure the payment of that note he and his wife executed to Edward Brown a trust deed upon the whole of said lot. 4 in block 16. The money so bortl:hved:tJy.Taylor was used in building upon the trust premises a blockof ,five <:hveUinghb11ses, which cost about $53,700. In January, 1873, Taylor and his wife filed a petition in the superidrcourt.of Cook. county under. thep'rovisions of What is known as the'!Burnt Records Act" of this 'State, alleging the making and recordiugof the deed, of trust, the deStruction of the records, and the loss of the deed itself; .and praying llnestablishmellt and confirmation of the trust deed and its terms, as sehbut in said petition. And such proceedings were had under this petition that on the 20th of March; 1878, adecreewllis·entered .establishing 'and.·confirming what was fonnd 'from the proof to be a substantial copy of the trust deed, but in fact omittirtg> the clauSe which provided that no Henl incumbrance, or 'charge should be created on the premises, and containing in place of thatclanse lli. clause that authorized,the trnsteeto make liens for the purpose of rebuilding;eoo; After. the entry of thjs decree, Scott, the trustee, snd and wife, made a subdivision alid plat of said lot 4, dividing sublots, numbered from 1 to 5, inclusive. On the . the ,same 1873, ,Mr'l Scott 'declined' to act longer as trustee, and Taylor and wife filedabillio: the superior court of Cook county for the appointment of another trustee, and 'asked that such new trustee be empowered to make a loan of:'lUqney sufficient for the fair value and cost of the improvements made ,onaaid lots, and a decree 'was 00 the 19th of August, '1:873, entered, appointing Charles H. Mullikin trustee, S8 successor to Mr. Scott, and authorizing him to make a loan to pay to Mr. and Mrs. Taylor.theqcost of the improvements made 011 the lots, not to exceed $53,700'; Mr. MuUikin,accepted the ti'nSt, and on the 23d of August made 1ourtrustdeeds,'covel'ing sublots 1, 2, 4, and 5 of said subdivision, :toFrancis S. Howe, trustee, to secure the payment of four notelFof '$9,OOO:eiOOh, given by Mullikin and Mr. and Mrs. Taylor to the FranklinSavi:ngsi'Bank; and on the 1st of January, 1:874, Mullikin,the trustee, and: ,Mr. and.: Mrs. Taylor joined in the execution of another trust'deed to Francis S. Howe, to secure the individ-
TAYLOIi, ''I). FBANKL1N SAV.: BAN'K.
291
mi.lllote of Taylor to the Frank1iriSavings Bank lor $2,875. The pro,ceeds of the tour first-mentioned trust deeds Were used to take up the 830,000 loan made by Taylor from the bank in June, 1872, and the last-mentioned trust deed for $2,875 wasto secure a personal indebtednees,ot IT'aylor's to the 'bank, not growing', as the proof shows, out of the rebuilding. In September, 1873, a petition fotl;1 mecha'nic's lien filed by Henry Gilsdorftor labor and materials used in the consthlction of the block of new buildings in whicnpetition other contractors intervened. Thisdase came to in July, 1874; and resulted in a decree:esmblishing liens on'the premises in lavorof. Gilsdorfand those who had intervened with him, which decreewlls afterwards affirmed by the supreme cauttof this state at the September term, 1874. 74 Ill. 354. In June, 1876, the Franklin Savings Bank filed in this court a bill to foreclose the four trust deeds of August 23, 1873, which, after default of some of the adult defendants, and answers by the guardian ad litCl1l. of the infant defendants, was in May, 1877, referred to a master to take proofS and report. In June, 1877, the original deed of trust to Scott was found, and very soon thereafter bills of review were filed in the case under the burnt records act, and in the suit brought for the appointment of a new trustee in place of Scott, and in which the decree appointed Mullikin trustee, and authorized him to make the loan to pay for building the five houses, which bills of review resulted in decrees setting aside the former decrees in those cases, but the decree in the case under- which Mullikin was appointed trustee contained a clause that nothing therein ordered or contained should deprive the Franklin Savings Bank, or Howe, the trustee in the said trust deeds, of any interest they, or either of them, might have in the trust estate, the claims of the hank and said Howe not having been heard or adjudicated. After the original trust deed was found, the bank filed a supplemental bill in the foreclosure case, which was answered. Belore a report was made by the master, terms of settlement or compromise were made between the bank and the guardian ad litem of the inlilOt defendants then in court, which included all the children then born, and all the children of the parents, except Margaret, the youngest. By this compromise the children were to have one of the sublots, and the house thereon, free and clear of all incumbrance. On the 29th of April, 1880, a decree of foreclosure was entered in the foreclosure suit in pursuance of the terms of tbis agreement, which, by its terms, was a foreclosure of the four trust deeds on sublots 1, 2, 4, and 5, respectively, and of the trust deed securing the $2,875 (Taylor's individual debt) on the whole four lots, and a sale was directed to be made by one of the masters of the court of the sublots 1, 2, 4, and 5, to pay the amount found due by said decree on the said respective trust deeds; the lien of the several trust deeds on the premises covered by them respectively being found by the decree to be subject to the prior mechanic's lien established by the decree in the Gilsdorf CU8e. A sale was made under this decree on the 16th of June, 1880, and each house and lot sold to the bank, and certificates of purchase given by the master to the hank as such purchaser; and afterwards, to
292
FEDERAL
vol. 50.
<:1lDSqrnmate the settlement made with 'the guardian ad litem of the in.chiJd,en,·the certificate of purchase for lot 2 at such master's sale wltS assigned to the guardian ad litem, and by him assigned to the six children then. born, and a deed was in due time made to them by the master, and a deed was also made to the bank of lots 1, 4, and 5. After the affirmance by the supreme court of the decree in the mechanic's lien case, the bank purchased the decree in that case, and was the owner of such decree atthe time of the entry of the decree in the foreclosure case, and at the time of the alleged compromise and settlement; and on the 15th of July, 1881,.a sale was nll1de under the mechanic's lien decrees, and the. defendant, H. H. Thomas, who was then the president of the bank; beea.me the purchaser of the three sub]ots 1, 4, and 5, and it is admitted,that this ,purchase made by Mr. Thomas for the bank, and that he now holds the title solely for the bank, and has no individ... uaI interest therein. It also appears that the three oldest children were made defenClants. to the bill for the. restoration of the deed of trust under the burnt records act, and appeared and answered by guardian ad litem; that the four oldest children were mf.!,de parties to and appeared and answered by gl,lardian ad litem in the bill for the appointment of a new trustee; and that" under the mechanic'S lien suit, the four oldest children were made parties defendant, and appeared and answered by guardian ad litem. But the supreme conrt;.in the suit brought by Julia S. Tay]or against the bank to set aside the decree in the mechanic's lien suit, as far as it affected lot 3 in said subdivision, found that there was no service upon the infant defendants in the mechanic's lien case. It also apthEl child.¥argaret, who is one of the original complainaI;lts in this case, was born after the entry of the decree in the foredosure case. It also appears that all the seven children born of the mar:riage of Mr. and Mrs,. Taylor, who are parties to the original and cross bills in this case, werE,lminorj; at the time the original and cross bills were filed. Thepontention on complainants is that all the four trust deeds given by ¥ullikin"tz:ustee, with the consent of Mr. and Mrs. Ta)'lor, four and also the decree in the mechanic's lien cas,e, are all void an4 inoperative .81> against the complainants and cross complainants, ullge.r. th!'l o]tL\lse in the deed, of trust to Scott, which prohibited)he :creation .of lien,incumbrance, or charge on the trust premises; ,that they are not bound by the decree in the foreclosure case, because the ..decree wa,s.py; ;l!QIlSent, and they were not competent to give 8uchconsent,and thl'l,f ,the decree in the mechanic's lien case did not bind the infant defen.dantllth.erein, because there Was no service of process on decree waS .obtained by imposing upon fllisedee<l. established by the decree in the burnt recordsactj ofaP wj:li09",apdQf the true terms of the,genuine trust deed, it..is thepetiti9Qers in the mechanic's lien case, and the bank Mr. Tl;lOmas,were bound to take notice. While on thl;l paI;tof..t4,e·defenda,nt, Savings Bllnk,and Mr. Thomas,. it, is pontendllp.that the three, oldest of . the minor. children were made.
TAYLOR V. FRANKLIN SAV. BANX.
293
parties to the mechanic's lien case, and appeared and answered by' guardian ad litem,. and are bound by said decree, and that the proof does not show that they were not served with process in the case, and that the childrep so brought into the mechanic's lien case were of the same class, as to and interest in the property, as the after-born children, and that the after-born children were properly and sUfficiently represented in the mechanic's lien suit by their older brothers amI sisters; and that they are therefore bound by such representation of their class; that the three oldest children were parties to the proceeding under the burnt records act, which established, by the decree of the court, the power op the part of the trustees to loan money, and give the securities in question; that all the children of Frank C. and Maria L. Taylor were. made parties in the foreclosure suit, except Margaret, who was borD after the entry of tbe decree in said case, .and that they appeared in said case by their guardian ad litem, and answered; and the decree in said case is binding on them, and each of them, and on the after-born child, Margaret, as she was represented in her class. I do not deem it necessary to go into an elaborate discussion of the questions of law arising upon the facts, which have been so ably presented in the briefs of counsel. It is undoubtedly settled beyond ques-tion by the decisions orthe supreme court of Illinois, which controls this court in all cases involving rights to real estate in this state, that the record of the deed of trust to Mr. Scott was notice to all persons dealing with respect to the trust property that no valid lien could be created upon that property either by the trustee, or any of the beneficiaries un· der the trust, and that the destruction of the record of the deed of trust did not change the rule as to its effect as notice. Shannon v. Hall, 72 Ill. 3,155, 85 Ill. 473; Gammon v. Hodges, 73 Ill. 140; Steele v. Borme,.75 Ill. 457; Heaton v. Prather, 84 Ill. 330; CU1'yea v. Berry, ld. 600; Bank v. Taylvr, 131 Ill. 386,23 N. E. 397. It is also clear from the admit-· ted facts that the loan of $30,000, made by the bank .to Frank C. Taylorin January, 1872, was made upon the credH of Taylor alone, and not' upon any valid security upon the trust property; that the iour trust deed8, scouring $9,000 each, and the $2,875 trust deed,.made by Mullikin, trustee, with the consent of Mr. and Mrs. Taylor, did not create: a valid lien the trust property, as such transaction would have in express contravention of the deed of trust under .which Mullikin: held the property. His insisted on the part of the defendants that the; decrees in the burnt records act,case, and in the case appointing a DeW; trustee, fully empowered the making of the five trust deeds involved; ihl the ioreclosure suit; that fourof the children were parties to those suits, and bound by the terms thereof, and the other unborn children were bound by representation, and that those decrees remained in full force at the time such trust deeds were made. It may be, and probably is, true that, so long as those decrees, as well as the decree in the mechanic's lien case, are allowed to stand, they are binding by their terms upon the infant defendants as well as upon the adult parties; but the essential question is, can these infants attack those decrees, and have them set aside as
lt1ill)EML R1j;POIl.TE'R I
vol. 50.'
against'.parties.whoact:eilunder thmnwhile tbeywere in r conaidertbe .· 1JLw; to be' that infants can, by an original bill iri:theinature ofa bili1ofreview, attack any decree entered against them dmingtheir infancy, Bnd have it set aside for fraud Or error of fact. Danien, Oh. Prd69,170; ·Rogers '\7. Smith, 4 Pa.St. 93; MUl8 v. Denni$, 3Johnll.Oh. 367; Ml:t8m'v. DOMldson,8 Ohio, 377; lI{athea v. Dobschuetz, 72 IlL 438 j Gooch v. Green,102 IlL' 509; Lloyd v. Kirkwood, 112 Ill. 337; Kucherd>eiser v. Beckert, 41 Ill. 172; Ki?tgsbury v. Buckner, 134 U. S. 650, 10: SUl>. Ot. Rep. 638. 'It is also well established, I think, by the authorities, that any CCinsenting decree entered against a minor is not biniling, and can be attacked by original bill for the purpose of setting it8lJiilejand in supporfofthis practice no other authority need be cited than that of Kingsbury VI Buckner, above cited. Assuming, as I do, the right 'of these minors to attack this: bill of foreclosure by their bill, I think: the court must now assume that, had all the facts touching the the securities· involved in that suit been presented to the court, the court must have held that the securities sought to be foreolOsed and enforced in that proceeding were invalid, and have dismissed that suit, for want of equity as against the infant defendants; and, as the court was prevented from doing so, and was led into making an inequitable decree by the unauthorized agreement of the guardian ad litem, it will in this suit, IlOW brought by the minors themselves,enter such decree as ehould have been entered in the original foreclosure case. As totheGHsdorf decree, and the lIale under it, I can see no reason why it is notp"operly the subject of attack by this bill. Undoubtedly, at the time that decree was rendered, the court properly assumed that it was justified by the deed of trust,. as restored by the decree of March 29,1873, under the burnt records act, but that decree was based upon a most palpable error of fact, of which the bank and its president were charged with notice, and it seems to me the right of these infants to set aside that· decree, and all that has been done under it, is palpable. To set aside these sales under the foreclosure and mechanic's lien decrees will, without dOUbt, work a hardship upon the bank, that has invested a large sum of money on the faith that the four 89,000 mortgages were valid; but the court cannot escape the conclusion that there was ample constructivt;l·notice that the trustees had no power to make those'mortgages,as weU as that no valid mechanic's lien coUld be created on thelrust estate, and to hold that these incumbrances are valid as against these children would make a precedent for defeating the rights of many more minor children.
INTERSTATE COM. COM'N.
v.
ATCltrSON, T. & s. F. B. CO.
295
INTERSTATE COMMERCE CoMMISSION V.ATCHISON,
T. &S. F. R. CO.et al.
(Circuit Court,S. D. CaUjomia. April ,25, 1899.)
1.
INTERSTATE COMMERCE ACT-LONG AND SHORT HAULS-COMMISSION.
To render lawful a greater cbarge for a shorter than'foralonger haul, under section 4 of the interstate commerce act, (24 St. p. 879,) it is not necessary to first obtain autbority from the commission. Such chargeis lawful if the circumstances and conditions are not in fa,ct "SUbstantially similar." and the carrier may determine the question for himself, subject to a liability for violating the act, if,on in· vestigation, the fact be found against him.
S. 'SAME-PROCEEDING TO ENFORCE ORDERS OF COMMISSION. On a proceeding in the circuit court, under section 16, to enforce an order of the commissioners directing certain carriers to desist from charging 8 greater rate for a shorter than for a haul, the facts found by the commission are not con· clusive, but are merely prima facie evidence, SUbject' to be overcome by other evidence Pfoduced befpre the court. 8. SAME-COMPETITIVE POlNTS. Los Angeles, Cal., is a point to which there 'is active competition in certain kinds of freight, between several transcontinental railway lines, direct,or by water, via Va,ncouver and San Francillco. also by ocean freights, via and the straits 'of Magellan, from points east of tbe Missouri river; and a through rate on the same kind of freight, lower than that to San Bernardino, an intermediate nODCjlmpetitivepoint, 60 miles from Los Angeles, on one of the oompeting rail lines, is not prohibited by the aot, since the circumstances and conditions are substantially dissimilar.
In Equity. Petition filed by the Interstate Commerce Commission to enforce an order requiring certain railroad companies to desist from charging a greater rate for a shorter than for a longer haul. Dismissed. M. T. Allen. U. S. Atty., and Harris Gregg, for petitioner. A. BrtIIIl80n and C. No Sterry, for defendants. Ross, District Judge. This proceeding was instituted by virtue of the section of the act of congress entitled"An act to regulate commerce," as amended March 2, 1889, (25 St. at Large, p. 855,) to enforce an order by the Interstate Commerce Commission on the 19th day of July, 1890, directing that, from and after September 1, 1890, the deflmdants, the Atchison, Topeka & Santa Fe Railroad Company, the Atlantic & Pacific Railroad Company, the Burlington & Missouri River Railroad Company, the Califomia Central Railway Company, Kansas &; the Calilornia Southern Railroad Company, the Nebraska Railway Company. the Missouri Pacific Railway Company, and the St. Louis & San Francisco Railway Company, cease and desist from charging or receiving any greater compensation, in the aggregate, for the transportation in car-load lots of certain enumerated commodities over their several lines or the routes formed by them, from Kansas City» St. Louj", Detroit, 'Cincinnati, or New York, or from corresponding points, for the shorter distance to San Bernardino, in the state of Oalifornia. than for the longer distance over the same line. in the same directior., to Los Angeles, in the state of Califomia. The order of the commission here sought to be enforced was made in aproceedinp; instituted before that body by a complaint on the part of the San Bernardino Board of Trade, setting forth that the railroad companies above men-