127 Ind. 250 | Ind. | 1891
The appellant asserts a prior lien upon a fund derived from the sale of a railroad owned by the Canada and St. Louis Railway Company, and the appellees, other than the railway company, contest the claim of the appellant, asserting that they hold prior liens under the lien laws of this State.
By motion in arrest of judgment the appellant attempts to challenge the counter-claims or cross-complaints filed by the mechanics, material men and laborers. Whether this attempt can prevail depends upon the effect of a decree made during the progress of the case. The recitals of the record material to the immediate points in dispute are these: “And now comes the plaintiff and come also the defendants and cross-complainants, and, by agreement of parties, it is ordered that said complaint and each of said cross-complaints shall be heard and determined by the court without pleadings or
The decree from which we have copied is conclusive upon the parties in so far as it adjudges that they are each and all holders' of liens against the railroad. This appears in the extract we have already copied from the decree, and it is made still clearer by the recital which reads thus: “ And the court further finds that the Canada and St. Louis Railway with all of its rights of way, road-bed, depots, depot grounds, and all of its rights, franchises and property, ought to be sold to make assets to pay its indebtedness and liabilities, and that the proceeds of said sale ought to be brought into court, with leave to all parties herein, and all other lienholders who may come in and become parties to the proceedings before the final hearing thereof, to establish their several claims, demands and liens, and the respective lien of each and the priority of the same, as a lien upon the proceeds of said sale. And the court further finds that said railroad property ought to be sold free and discharged of all liens and encumbrances, and the rights of all such lienholders and creditors ought to be transferred to the fund arising from such sale.” These provisions, of themselves, make it plain that the court found that all the parties in court at the time the decree was entered were the holders of liens, but if these provisions left any doubt upon the question, it would be removed by a provision in a subsequent part of the decree which reads as follows: “And the court hereby reserves for its future consideration the consideration and determination of the amount of said claims and liens, and the
It is said that the decree is interlocutory, and, therefore, not conclusive. We are not inclined to regard it as a mere interlocutory decree, inasmuch as it was made after the submission of the cause for trial and after hearing the evidence, and is, in its nature, final rather than interlocutory. It may not, perhaps, be true that it is final in such a sense that an appeal would lie from it, but it has in many respects the qualities and effect of a final decree. But conceding, for the sake of the argument, that it is a mere interlocutory decree, still it must be held that as to this case and upon the questions submitted for trial, and after trial fully adjudicated, it is final and conclusive. Ray v. Law, 3 Cranch, 179 ; Morey v. King, 49 Vt. 304. In the case of Fleenor v. Driskill, 97 Ind. 27, this doctrine is carried much beyond the limits to which we carry it in this instance. We add, to prevent misconception, that we neither hold, nor mean to hold, that the decree in this instance was beyond change by the court while the proceedings were in fieri, nor do we hold that, it would have constituted a conclusive adjudication had no final decree been rendered; all that we can with propriety , decide is, that as to this particular case it is conclusive because rendered after trial and followed, without change, by a final decree.
The questions which remain for decision are those not adjudicated by the decree which we have considered and to which we have given a construction. The first of these questions arises upon the contention of the appellant that the ap
If, however, we are wrong in holding that laborers and material men are not sub-contractors within the meaning of our statute, still the appellant can not succeed upon the point under immediate discussion. To entitle it to succeed, even
The next question open to discussion, and requiring decision, is as to the extent of the lien of the laborers and material men. In order to properly consider this question it is necessary to state the facts 'from which it emerges. The laborers and material men did work upon and furnished material for a part of the railroad, and filed notices of liens. The railroad extends through several counties, and is a continuous line from a point in this State to a point in the State of Michigan. The contention of the appellant is that the railroad is an entirety, and that as notices of liens were not filed in all the counties no such lien was acquired as entitles the appellees to share in the fund derived from the sale of the entire road. We fully agree with appellant’s counsel that a continuous line of railroad is to be treated as an entirety, and we adjudge that as such it must be sold, for it would be unjust to lienholders, as well as to the railroad company, to sell a bridge, a culvert, or a few rods, or even mile, of the railroad. Midland Railway Co. v. Wilcox, 122 Ind. 84; Louisville, etc., R. W. Co. v. Boney, 117 Ind. 501; Muller v. Bows, 94 U. S. 444. But it by no means follows that because the entire road must be sold it is necessary that a lien should be acquired on every part ofit. The right to en
If we are right in what we have said, it must follow that if any valid lien at all was acquired it entitles the lien-holder to share in the fund brought into court for distribution. Whether any lien was acquired upon any part of the railroad depends upon the statute authorizing the acquisition of liens upon railroads. If that statute requires that notices be filed in every county there is no lien upon the road. If the statute requires a notice in only one county there is a lien extending to the entire fund for the reason that the railroad is an entirety and as such must be sold. This is the doctrine asserted in the case of Louisville, etc., R. W. Co. v.
We here adjudge that the general principle asserted in Midland R. W. Co. v. Wilcox, supra, applies to mortgagees as well as to owners, and that a valid lien once acquired reaches the entire railroad as a unit. In the case of Brooks v. Railway Co., 101 U. S. 443, it was held that where a mechanic files his notice within the time and in the mode prescribed by the statute, he has, as against the mortgagee, a paramount lien upon the entire road. In disposing of the argument that the lien did not extend to the entire road, the court said: “ The argument seems to us extremely technical, and at war with the principle in which liens are allowed for work done subsequently to the creation of a mortgage. That doctrine, or rather the statute which the court construed as giving a permanent lien under such circumstances, was in existence when the mortgage of the appellants was made. It entered into and became part of their contract. They knew that the road was yet to be built, and that while such building would add to the value of their security, the law gave to the men whose labor and money built it a lien superior to that of the mortgage. Now that the venture in which both embarked is to end in loss to one or the other of them, there is no judicial propriety in straining the law to limit the rights of one party rather than those of the other. If that law by its fair construction gives the mechanic a lien for a few thousand dollars on the whole road, instead of a part of it, the law should prevail.” .This reasoning clearly demonstrates the validity of the conclusion that a lien once effectually acquired fastens upon the entii’e road as a unit, and is not confined to mere detached parts of it. Any other rule would, as we have suggested, in many cases render the lien statute entirely nugatory, since it would preclude the enforcement of the lien, and in many
The remaining question may be thus stated : Is the lien of the appellant’s mortgage superior to the liens of the appellees ? In order to intelligently discuss this question it is necessary to state the material facts out of which it arises. Those facts may be thus summarized : On the 28th day of May, 1888, the railway company entered into a contract with the Burns Construction Company to build and equip its road. Burns was the president of the railway company and also the general manager of the construction company. On the 28th of August, 1888, the railway company ordered the execution of a trust deed, and the instrument was written and signed in duplicate ; one of the duplicates was delivered by Burns to the Farmers Loan and Trust Company on-the 8th day of October, 1888, the other was retained by the railway company. The bonds which the trust deed was executed to secure were retained by the company that executed the mortgage, but from time to time bonds were delivered to Burns upon estimates issued to him by the railway company’s engineer. Ten of the bonds were transferred to "William Dallin, and sixty-six were transferred to John Fitzgerald, a subcontractor. The remainder of the bonds, three hundred and sixty-four in number, were hypothecated by the Burns Con
In considering the question of priority one of the important things to be kept in mind is that the mortgage was executed upon property that had, in fact, no existence, for the railroad had not been built. That there is a material difference between a case, such as this, where the railroad has not been built and a case where the railroad has been constructed, is so evident that no one can fail to perceive it the instant his attention is directed to the matter. As held in Brooks v. Railway Co., supra, parties must, in such a case as this, be deemed to have contracted with reference to the existing condition of things, so far as they were open to observation. The mortgagee must have known that his security was valueless as long as there was no road in existence, and it must have known, also, that labor, materials and money would be required to build the road. It was bound to know, too, what the law was, for, as said in Brooks v. Railway Co., supra, “ It entered into and became a part of their contract.” This general rule has been repeatedly declared and enforced by this court. Carr v. State, ex rel., ante, p. 206; Hancock v. Yaden, supra, see p. 370; Long v. Straus, 107 Ind. 94; Bryson v. McCreary, 102 Ind. 1; Edwards v. Johnson, 105 Ind. 594; Bass v. Doerman, 112 Ind. 390. In Warren v. Sohn, 112 Ind. 213, the principle we are discussing was applied to the case of a lien asserted by a miner, and it was held that the lien was superior to a mortgage. But the present case is much stronger than the one referred to, for here there was, in fact, no property in existence when the mortgage was made; the property upon which the mortgage finally fastened was created by the labor, materials and money of the appellees. We are strongly inclined to doubt whether the mortgage lien would be paramount even if the bonds which the mortgage was executed to secure had been delivered before any notices of liens were filed. Very strongly reasoned decisions declare that the
It is true that the trust deed or mortgage was placed in the hands of the mortgagee or trustee before some of the notices were filed, but the instrument securing the bonds was a mere shadow, for had no bonds ever been delivered to bona fide holders, the instrument would never have been effective against these lien-holders. We are far within the authorities in asserting this, as they carry the doctrine much farther. Hough v. Osborne, 7 Ind. 140; Garrett v. Puckett, 15 Ind. 485; Hubbard v. Harrison, 38 Ind. 323 ; Felton v. Smith, 84 Ind. 485, see p. 495; Reeves v. Hayes, 95 Ind 521; Day v. Bowman, 109 Ind. 383; Midland R. W. Co. v. Wilcox, supra. The delivery of the mortgage or trust 'deed alone did not destroy the priority of the liens of the appellees, for the delivery of such an instrument can not, of itself, defeat equitable of legal claims, since it is essential that one who asserts a right against a legal or equitable claim should show that he parted with value before notice of such equitable or legal right. Anderson v. Hubble, 93 Ind. 570, and cases cited ; Hunsinger v. Hofer, 110 Ind. 390. This is the rule in ordinary cases, and, certainly, it must govern a
If the Burns Construction Company, the principal contractor, had become and remained the owner of the bonds in absolute good faith, it could not have defeated those from whom it purchased materials nor those whom it employed to do work upon the railroad. It is very clear that a principal contractor can not defeat the liens of those whose debtor he is for work and materials, by asserting the lien of a mortgage executed by the owner by whom he was employed to build a house, a mill or a railroad. To deny this would be to affirm that the principal contractor may leave his workmen unpaid, and, for his own benefit, exhaust the property which supplies the chief security of all. The plainest principles of equity require that the contractor shall not be allowed to defeat the liens of laborers, mechanics or material men by asserting a lien superior to theirs, no matter how that lien may be acquired. The delivery of the bonds to the Burns Construction Company did not,-therefore, vest title so as to cut out the appellees, and unless the appellant acquired the bonds as a bona fide holder, after the delivery to the Burns Company, it can not prevail against the appellees. If it is the mere assignee of the Burns Company, it can not defeat the lien-holders, for, as a mere assignee, it can hold by no better title than its assignor, hence it is evident that the only capacity in which it can by any possibility succeed is that of a bona fide holder of instruments negotiable under the law merchant.
The cases of Chotean v. Thompson, 2 Ohio St. 114, Crowell v. Gilmore, 18 Cal. 370, and Preston v. Sonora Lodge, 39 Cal. 116, are not relevant to the point in dispute. In those cases there was no question as to the creation or purchase in good faith of the debt evidenced by the mortgage under which the superior lien was asserted, so that granting (but by no means deciding) that the doctrine asserted by those cases is sound, still it does not control this case, for here the
We do not doubt that in cases where all is fair and there is no wi’ong pi’acticed, the pi’esumption is, as against’ the maker of a negotiable instrument, that the holder paid value for the instrument of which he shows himself to be the owner. Collins v. Gilbert, 94 U. S. 753; McCurdy’s Appeal, 65 Pa. St. 290; Duncan v. Gilbert, 29 N. J. L. 521; Valette v. Mason, 1 Ind. 288. But, even as against the maker of such an instrument, where there is fraud the rule is different. Giberson v. Jolley, supra; Harbison v. Bank, 28 Ind. 133. It is, however’, unnecessary to enter upon a consideration of that general subject, for the question here is, xxot as to the right of a maker of a negotiable instrument to defend, but the question with which we ax’e here concerned is, what equities shall prevail and in what order shall a fund in the hands of the court be distributed to different glasses of claimants? It is evident, therefore, that the presumption which obtains in ordinary cases can not prevail where those whose labor and materials brought the mortgaged property into existence are asserting liens against a mortgagee claixning under the principal contractor by whom the mechanics’
Cross-errors alleged by some of the appellees present questions which require consideration. The first of these questions arises on the claim put forward by counsel that the transaction between the Burns Construction Company and the railway company was a fraud upon the rights of the creditors. While there are circumstances indicative of fraud, there is no finding that there was fraud in fact, and hence the complaining appellees are not entitled to judgment, upon the ground that the transaction was a fraud upon their rights. It is settled by our decisions that fraud must be found and stated as an inferential or ultimate fact, and that it is not
The second of the questions presented by the. assignment of cross-errors arises on the order made allowing the claim of the sub-contractor, John Fitzgerald, and giving it an equal place with other claims secured by liens to the exclusion of unsecured claims. In our judgment the trial court did not err to the prejudice of the complaining unsecured creditors; for, if Fitzgerald’s claim should be cut down as they insist, still, as he was, at all events, a lien-holder, they can not have priority over him to the exclusion of the appellant. If his claim were cut down the appellant would undoubtedly be entitled to the benefit; for after the payment of the prior lien-holders it has the superior claim. If the amount realized from the sale of the railroad had been sufficient to pay the appellant, and all other lien-holders, there would be plausibility in counsels’ position; but as the amount derived from the sale was not sufficient to discharge all the liens their position is untenable. It seems quite clear that where a fund, brought into court for distribution, is insufficient to satisfy all specific li'ens, a creditor having only a general equitable lien can not complain because one of the specific lien-holders is decreed a greater part of the fund than he is entitled to as against other specific lien-holders.
The question presented by the contention of Charles Trainor must be decided against him. His contention is that, although he was allowed his claim yet there was error because it was allowed out of the general fund, and not out of the part allotted to the sub-contractor, Fitzgerald. This contention can not prevail, for the reason that where a mechanic is awarded all he is entitled to out of a fund in court he can
It is true that creditors may obtain a general equitable lien as against an insolvent corporation upon funds brought into a court of chancery for distribution. Upton v. Tribilcock, 91 U. S. 45; Sanger v. Upton, 91 U. S. 56; Wood v. Dummer, 3 Mason, 308; Rouse v. Merchants’ Nat’l Bank, 46 Ohio St. 463. But this equitable lien prevails against the corporation and its shareholders and not against lien-holders who have specific prior liens upon the corporate property created before the court received the fund. The difficulty which counsel can not here surmount grows out of the fact that specific liens existed against the property converted into the fund, for where such specific liens exist they outrank mere general equitable liens, and the order of priority is time. Paxton v. Sterne, post, p. 289. It is evident from what has been said that the rule which governs where the contest is waged between shareholders and creditors can not apply where the controversy is between the holders of specific liens acquired before the conversion of the property into an equitable fund and creditors who have a mere general equitable lien upon the fund. This principle is decisively against the appellees who assign cross-errors.
Judgment affirmed.