Chicago & Alton R. Co. v. Union Rolling Mill Co.
109 U.S. 702 (1884)

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U.S. Supreme Court

Chicago & Alton R. Co. v. Union Rolling Mill Co., 109 U.S. 702 (1884)

Chicago & Alton Railroad Company v. Union Rolling Mill Company

Argued December 6, 1883

Decided January 7, 1884

109 U.S. 702

Syllabus

1. Where, in a suit in equity, several defendants have independent rights in the subject matter of the controversy, and one defendant, having answered setting up his particular right, files a cross-bill to enforce it, and the causes proceed together and are heard together, and an interlocutory decree is entered to protect and enforce the rights thus set up, entitled as of both suits, the complainant in the original suit cannot, unless upon consent, dismiss his bill and thus deprive the defendant of the right acquired by the decree.

2. When one defendant in a suit in equity pleads to the jurisdiction, and another defendant answers setting up independent rights in the subject matter of the controversy, and no notice is taken of the plea to the jurisdiction, and a final decree is entered sustaining the rights set up in the answer, the complainant cannot have his bill dismissed under the 38th

Page 109 U. S. 703

Rule for failure to reply to the plea, especially when appeal has been taken and the defendant pleading to the jurisdiction is not party to the appeal.

3. Under the statutes of Illinois, Rev.Stat.Ill. c. 82, § 51, a person who contracted to deliver rails to a railroad company for use in the construction of its road, the deliveries to extend over a period of time, and who complied with his contract, and who commenced proceedings within six months after the date of the last delivery to enforce a lien therefor under the statute, had a valid lien upon the property superior to that acquired by a trust created between the date of the last delivery of the rails and the commencement of the proceedings to enforce the lien, and such lien was not affected by a special agreement that the contractor should have a lien on the rails till payment, and that the possession of the railroad should be the possession of the contractor, nor by an agreement to give credit to the purchaser beyond the time within which the statutory lien should be enforced, when the purchaser failed to perform the conditions upon which that credit was agreed to be given.

4. Under the circumstances in this case, there was no error in rendering a personal decree against the Chicago & Alton Railroad Company and awarding execution against it in favor of the contractor.

The following statement of the case was prepared by the Court to precede its opinion.

The original bill in this case was filed January 8, 1876, by John B. Dumont, a citizen of the State of New Jersey, against the Chicago and Illinois River Railroad Company, the Chicago Railway Construction Company, the Chicago and Alton Railroad Company, and the Union Rolling Mill Company, which for the sake of brevity will be called respectively the Illinois River Railroad Company, the construction company, the Alton Railroad Company, and the rolling mill company, all corporations organized under the laws of the State of Illinois, and Bradford Hancock, as receiver of the construction company, and Corydon Beckwith, both citizens of the State of Illinois. The purpose of the bill was the foreclosure of a deed of trust. The bill averred in substance as follows:

On March 1, 1875, the Illinois River Railroad Company, claiming to be the owner of a railroad constructed and being constructed between Joliet, Will County, and Streator, in La Salle County, in the State of Illinois, and the construction company, claiming to be the owner of certain lands in Grundy County in the same state,

Page 109 U. S. 704

entered into an agreement with the Alton Railroad Company by which the Illinois River Railroad Company leased its right of way and its railroad constructed and to be constructed, and all its other property, except engines and cars, to the Alton Railroad Company forever upon certain terms and conditions therein mentioned. Afterwards, on the same March 1, 1875, the Illinois River Railroad Company executed and delivered its bonds of that date, with interest coupons attached, 1,000 in number, and for $1,000 each, payable thirty years after date, with interest at seven percent, payable semiannually, and on the same day, jointly with the construction company and John H. Rice, its trustees, executed a deed of trust to George Straut to secure the payment of the bonds. The deed of trust conveyed to Straut all the railroad owned or occupied by the Illinois River Railroad Company between Joliet and the Mazon River, and all the property of every kind (except engines, cars, and tools), however and whenever acquired by it, between said points, and the railroad company covenanted by said trust deed that it had a perfect title to the railroad and other property so conveyed, subject only to the lease above mentioned. By the same deed, the construction company and Rice, its trustee, conveyed to Straut its lands situate in Grundy County, Illinois, and covenanted that it had good title thereto and that the lands were free from encumbrances.

Of said one thousand bonds, only those numbered from 1 to 474 inclusive and from 701 to 1,000 inclusive were issued. The interest on these bonds had not been paid. They were all held either by bona fide purchasers or pledgees.

The deed of trust provided that in case of default in the payment of any interest on the bonds or in the performance of any covenant in said deed of trust contained, to be performed by the Illinois River Company or the construction company, and in case such default should continue six months, then the trustee might take possession of the property conveyed by the deed of trust and apply the issues and profits thereof to the payment of the liabilities of the Illinois River Railroad Company and the construction company, as therein provided. The covenants of seizing for quiet enjoyment and against

Page 109 U. S. 705

encumbrances, made by the Illinois River Railroad Company and the construction company in the deed of trust contained, were broken on March 1, 1875, and such default had continued more than six months. On March 1, 1875, the Illinois River Railroad Company and the construction company were indebted to the rolling mill company in a large sum of money for materials furnished for the construction of said road, which the rolling mill company claimed to be a lien thereon, but its claim was subject to the claims of bondholders represented by the complainant.

On September 13, 1875, John F. Slater, being the holder and owner of bonds numbered from 1 to 474 inclusive applied to Straut, the trustee, to take such action in the premises as he ought to or might take for the protection of his interest. But Straut, being unable or unwilling to act, resigned his trust, and the complainant was, on September 18, 1875, in accordance with the provisions of the deed of trust, appointed trustee in his stead, and on September 20, 1875, Straut conveyed to the complainant, as such trustee, all the property, rights, and powers vested in him by the trust deed. The prayer of the bill was as follows:

"That an account may be taken of the sum due for principal and interest on said bonds, and of the sums due as liens upon said road, and that the premises described in the deed of trust to George Straut may, by order of this court, be sold for the payment of the same, and that your orator may have such other and further and different relief as to equity may seem meet."

Answers were filed by the Illinois River Railroad Company, the construction company, and the Alton Railroad Company, Corydon Beckwith, and Bradford Hancock, in which they took issue upon the averments of the bill. On January 13, 1876, the rolling mill company filed an answer, claiming to have a first lien on the railroad and property of the Illinois River Railroad Company, averring that on August 7, 1874, it made a contract in writing, of that date, with the Illinois River Railroad Company and the construction company for the sale and delivery at certain prices therein

Page 109 U. S. 706

specified, to said companies of 1,600 tons of steel and 2,500 tons of iron rails and certain named quantities of iron splices, spikes, and bolts, all to be delivered by December 1, 1874.

That contract provided that for these materials $60,000 in cash should be paid, and, for the balance of the price, the companies purchasing the same should give notes, payable in six, eight, ten, and twelve months from their dates, respectively, executed by the Illinois River Railroad Company and guaranteed in full by the construction company and by the stockholders of the construction company in proportion to their stock, and, for the further security of said notes, there should be pledged certain bonds of the construction company for an amount equal to the aggregate principal of said notes, and secured by a deed of trust, made April 1, 1874, by the Illinois River Railroad Company and the construction company, on the property therein described, constituting the first lien thereon.

It also contained this clause:

"And it is also agreed by said party of the second part that the material so furnished by the said party of the first part shall be used and laid upon the road and roadbed belonging to said Chicago and Illinois River Railroad Company, between the Cities of Joliet, in Will County, and Streator, in La Salle County, Illinois, and that until the same be fully paid for, and all the notes given in payment therefor paid and cancelled, the said party of the first part shall have a lien upon said material furnished by it, and the use and possession of the same by said party of the second part, or either of the corporations constituting the same, or the assignee or assigns of one or both of them shall be the user and possession of said party of the first part."

The answer of the rolling mill company further alleged that the company had delivered a large part of the rails, etc., under said contract; that upon the delivery of the last lot on or about November 12, 1874, the purchasing companies gave the rolling mill company notice not to deliver any more rails or other material until the spring of 1875; that the rolling mill company were always ready and willing to deliver the remainder

Page 109 U. S. 707

of said rails and other material mentioned in said contract, and that on May 7, 1875, it gave notice to said purchasing companies that the residue of the rails, etc., were ready for delivery, but the companies did not provide cars or vessels for the transportation of said materials, and that, by the terms of the contract, such notice was equivalent to a delivery thereof, and that the rolling mill company then and thereby complied with its contract, and was entitled to the consideration therein named.

It is also alleged that the rolling mill company had received in part payment of said consideration the sum of $95,000, and no more, and that the purchasing companies had wholly neglected and refused to pay the rolling mill company any further sums of money on the contract, and had neglected and refused to deliver to it any of the notes or securities for deferred payments on the rails, etc., as provided in said contract, although requested to do so, and that thereby the whole amount of the purchase money for the rails, etc., had become due and payable.

It further alleged that on May 10, 1875, the rolling mill company, within the time prescribed by law, filed its bill in the circuit court of Will County, Illinois, for the purpose of enforcing its lien, under the statutes of Illinois, upon the railroad and its appurtenances, and that the bill was still pending and undetermined.

The answer still further alleged that the rolling mill company not only had a statutory lien upon all the materials furnished under said contract, but by the contract it had an express contract lien upon the same, and that by virtue of the contract and the facts set forth, it had a lien upon the Illinois River Railroad and its appurtenances paramount to the lien of the bondholders under said deed of trust and all other liens upon the road.

On the same day on which its answer was filed, the rolling mill company obtained leave to file and did file a cross-bill in the cause setting up the same matters stated in its answer and praying that upon the final hearing a decree might be entered requiring payment of the amount due to it within a certain

Page 109 U. S. 708

time to be fixed by the decree, and that in default thereof, the railroad of the Illinois River Railroad Company and all its appurtenances might be sold, and out of the proceeds its claim might be paid in preference to the bondholders or any other persons. The answers to the cross-bill of the rolling mill company denied that said company had any lien for the materials furnished by it under said contract, either by virtue of the contract or the statutes of Illinois.

Afterwards, on May 31, 1976, the master to whom the cause had been referred filed his report upon the claims of the rolling mill company, with the testimony in support thereof, by which he found due to the complainant in a cross-bill from the Illinois River Railroad Company and the construction company, for iron rails, etc., furnished under said contract, with interest, etc., the sum of $186,783.49, and for which he reported the rolling mill company had a lien binding on all the defendants.

On June 27, 1876, the report of the master was referred back to him by the following order, which was entitled both of the original and the cross-cause:

"By agreement of counsel, the report of the master in said bill and cross-bill is referred back to Henry W. Bishop, the master in chancery of this Court, with leave for the complainant in said bill and the defendants to take further proofs within eight (8) days from this date, and for the Union Rolling mill to take further proofs, if desired, within twelve(12) days from this date, said master to report at the expiration of said twelve days."

On July 1, 1876, Dumont, the complainant in the original bill, filed his supplemental bill, in which he averred that since the filing of the original bill, coupons, attached to the bonds mentioned, falling due on March 1, 1876, had become due and remained unpaid, although presented for payment; that he had paid out certain sums for right of way, for laying down side tracks, and switches, and for taxes, and prayed that an account might be taken of the sums due on said coupons so fallen due, and of the sums paid out by complainant as aforesaid,

Page 109 U. S. 709

and that the latter might be declared a lien on the mortgaged premises.

On August 3, 1876, the Illinois River Railroad Company filed its plea to the original and supplemental bills in which it averred that at the date of the mortgage set forth in the original and supplemental bills and at the beginning of this suit, the said George Straut, the trustee named in the deed of mortgage, was, and ever since had been and still continued to be, a citizen of the State of Illinois; that he was such citizen on September 13, 1875, when he was applied to to foreclose the deed of trust, and on September 13, 1875, when he resigned said trust; that from and after March 1, 1875, until the commencement of this suit, all the defendants to the original and supplemental bills had been citizens of the State of Illinois and had continuously remained such citizens until the filing of the plea. Wherefore the said company averred that Dumont, as assignee of said chose in action, namely, said deed of trust, had no standing to prosecute the said suit, and set up the facts aforesaid in bar of the jurisdiction of the court.

No other plea, answer, or demurrer was ever filed to this supplemental bill by any of the defendants in the cause, nor was said plea to the original and supplemental bill ever replied to or set down for argument.

On June 26, 1877, one year after the report first filed by him had been recommitted, the master, after reexamining the former testimony, and taking additional testimony, covering in all several hundred printed pages, and hearing the arguments of counsel, filed his second report, affirming his former findings and sustaining the allegations of the cross-bill.

On July 16, 1877, exceptions to this report were filed by Dumont, the complainant in the original bill, the main ground of the exceptions being that the master had erred in reporting that the rolling mill company was entitled to a first lien on the mortgaged premises for the amount found to be due it.

October 15, 1877, the following order was entered:

"Now come the parties by their solicitors, and thereupon the original, supplemental, and cross-bills were submitted to the court

Page 109 U. S. 710

on printed arguments to be furnished by Messrs. Beckwith and Smith by October 26 inst., by Messrs. Cooper and Packard and Henry Crawford by October 30 inst., by George Campbell by November 20 next, and by Messrs. Beckwith and Smith in reply by November 30 next."

On the 25th day of May, 1878, the Massachusetts Mutual Life Insurance Company, on leave of court, filed an intervening petition in the cause, stating, among other things, that it was the holder of some of the bonds secured by the trust deed to George Straut, and that the complainant, John B. Dumont, was threatening to foreclose the trust deed under the power of sale contained therein, and prayed for an injunction to prevent such sale, and, in accordance with this prayer, an order was entered in the cause on the 25th of May, 1878, restraining Dumont from selling the property included in the trust deed until the further order of the court.

Afterwards, on January 4, 1878, by agreement of the parties by their solicitors, an order was entered setting aside the order of October 15, 1877, submitting the exceptions to the master's report upon printed briefs. June 5, 1878, the exceptions came up for hearing before the court. The hearing continued until June 11, 1878, when the exceptions were taken under advisement.

On December 16, 1878, the court entered an interlocutory decree upon the report of the master and the exceptions thereto. This decree was entitled thus:

"John B. Dumont"

"vs. In Chancery"

"Chicago and Illinois River Railroad Original Bill"

"Company et al."

"and"

"Union Rolling Mill Company"

"vs."

"John B. Dumont et al. Cross-bill"

By this interlocutory decree, the court found due the rolling mill company $134,733.23 on account of rails and materials

Page 109 U. S. 711

used in the construction of the railroad and not paid for, and that this sum constituted a lien upon the railroad of the Illinois River Railroad Company, and "upon all its property, real, personal, and mixed." The court further found that the rolling mill company had delivered to said Illinois River Railroad Company and the construction company iron rails, steel rails, etc., mentioned in the contracts with said rolling mill company to a large amount, which had been sold by the Illinois River Railroad Company and the construction company to the Alton Railroad Company, with full knowledge of the lien of said rolling mill company thereon; that the Alton Railroad Company had never specially paid for such material, but had converted the same to its own use, and that such rails and other materials were then of the value of $24,464.92. This sum the court found the rolling mill company was entitled to have and recover from the Illinois River Railroad Company, the construction company, and the Alton Railroad Company, together with interest thereon, amounting at the date of the decree to the sum of $29,796.30, and the court reserved for further consideration all questions relative to the enforcement of the lien declared for the sum of $134,733.23, and relative to the sum of $29,796.30, found due from the Alton Railroad Company, the construction company, and the Illinois River Railroad Company.

Afterwards, on April 15, 1879, the complainant in the original bill moved for leave to dismiss the same at his own costs, and on September 2 following, the consent of the Massachusetts Mutual Life Insurance Company and other defendants to the dismissal of the original bill was filed in the cause. On March 29, 1880, John B. Dumont filed his disclaimer to further prosecute said cause, for the reason, as stated by him, that his interest in the same had ceased and terminated by a proceeding had in the circuit court of Will County, Illinois. On the same day the court rendered a final decree in the cause, which was entitled both of the original and cross cause, and which began as follows:

"This day came the several parties to the said cause and cross cause, by their respective solicitors."

The decree then

Page 109 U. S. 712

proceeded to overrule the motion of the complainant Dumont for leave to dismiss the bill and ordered the payment of the sum of $134,733.23 to the rolling mill company, found due it by the interlocutory decree theretofore entered, with interest, and, in default thereof, that all of the railroad, with its appurtenances, of the Illinois River Railroad Company be sold free and clear of all encumbrances in favor of any of the parties to the suit; the proceeds to be applied first to the payment of costs, second to the payment of the sum so found due the rolling mill company, and the surplus, if any, to be paid to the clerk of the court. The court further decreed that the rolling mill company have execution against the Alton Railroad Company, the Illinois River Railroad Company, and the construction company, for the sum of $29,796.30, together with interest thereon from the sixteenth day of December, 1878, found due to it by the interlocutory decree theretofore entered.

The Massachusetts Mutual Life Insurance Company, as an intervener in the cause, on June 10, 1880, took and perfected an appeal from the said decree, and on the next day Dumont and the Alton Railroad Company appealed from the same decree; the Illinois River Railroad Company, the construction company, Hancock and Beckwith, having refused to join in such appeal. By the appeal last mentioned, the final decree of the circuit court is brought under review.

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