Keokuk & Western R. Co. v. Scotland County
152 U.S. 318 (1894)

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U.S. Supreme Court

Keokuk & Western R. Co. v. Scotland County, 152 U.S. 318 (1894)

Keokuk and Western Railroad Company v. Scotland County

No. 414

Argued December 21-22, 1893

Decided March 12, 1894

152 U.S. 318

Syllabus

A railroad company which derives its title to its road from a foreclosure of a mortgage, given before the commencement of a suit by stockholders to enjoin the collection of taxes upon the property so sold and conveyed, does not occupy a relation to the plaintiffs in that suit, which entitles it to file a bill of revivor, or to invoke the decree in the suit as an estoppel. The purchaser under a mortgage is not entitled to the benefit of an estoppel under a decree obtained in a suit begun after the execution of the mortgage.

This was a bill in equity, filed by the Keokuk and Western Railroad Company to revive a suit begun August 6, 1879, by Charles A. Secor and other stockholders of the Missouri, Iowa and Nebraska Railroad Company against the judges of the County Courts of Scotland, Schuyler, and Clarke Counties, the object of which suit was to enjoin the collection of taxes

Page 152 U. S. 319

upon such railway company for the year 1879 and several years prior thereto.

The bill of revivor, which was filed February 17, 1890, set forth the commencement of the suit by Secor against the county courts above named, and the rendition of a decree May 10, 1882, by which the defendants were enjoined from levying or collecting taxes of the railway company "until the expiration of the exemption limited in the charter of said railway company, to-wit, December 1, 1892," and that the same was in full force and effect. The bill further alleged the execution of a mortgage in 1870 by the railway company to the Farmers' Loan and Trust Company of New York, the foreclosure of the same, the purchase of the road in 1886 by Morris K. Jesup and Henry C. Thatcher, a purchasing committee of the bondholders, and the conveyance of the same to the plaintiff, the Keokuk and Western Railroad Company, in December, 1886, whereby the Missouri, Iowa and Nebraska Railroad Company became dissolved, and Secor and the other stockholders ceased to have any interest therein, and "that by virtue of said mortgage, decree, and foreclosure sale all of the title in and to said property has become vested in your orator." The bill further alleged a change in the officers of the respective defendant counties, the beginning of three suits by the collector of revenue of Scotland County to enforce, as a lien upon plaintiff's property the taxes levied upon the Missouri, Iowa and Nebraska Railroad Company for the years 1872 to 1878, 1880, 1881, 1882, and 1887, and that the same were in violation and contempt of the injunction issued in the Secor case. The bill prayed that such suit might be revived against the counties and their officers in the name of the plaintiff, as the same was at the dissolution of the Missouri, Iowa and Nebraska Railroad Company, and that the collector of revenue of Scotland County be punished for contempt in instituting the suits for the collection of the taxes in violation of the decree upon the original bill.

On March 3, 1890, defendants interposed a demurrer to the bill for the County of Scotland, which was sustained on March 25th upon the ground that the plaintiff did not occupy such a

Page 152 U. S. 320

relation to the parties to the original suit as to entitle it to file a bill of revivor, and that the decree in such original suit could not be invoked as an estoppel between the Keokuk and Western Railroad Company and the several counties which were made defendants to the bill. The court put its decision upon the ground that the plaintiff acquired its title by the foreclosure of a mortgage executed in 1870, and that it did not appear that the mortgagee or any representative of the mortgagee was made a party to the suit of Secor et al. against the railway company and the several counties. Coupled with the order sustaining the demurrer was a general order granting plaintiff leave to amend its bill.

Plaintiff thereupon, and on April 28, 1890, filed an amended bill setting up that in September, 1880, the Missouri, Iowa and Nebraska Railroad Company leased its road for a term of years to the Wabash Railway Company, the lease containing an agreement that the Missouri, Iowa and Nebraska Company should execute a mortgage to the Mercantile Trust Company of New York to secure certain bonds which were to be guarantied by the Wabash Company, and covenanting that it would cause the holders of the bonds of 1870 to accept the bonds so guarantied by the Wabash Company in lieu of the prior bonds, and averring that the decree of foreclosure of the bonds of 1870 was not executed or the railroad property sold thereunder; that in pursuance of such lease, the mortgage to the Mercantile Trust Company was executed March 1, 1881, and 2,269 bonds were issued and guarantied by the Wabash Company; that all of the 1870 bonds were exchanged for the guarantied bonds, with the exception of 17; that the Wabash Company paid interest upon the same until June, 1884, the decree of foreclosure remaining unexecuted, when the Wabash Company became insolvent; that in 1886, the Farmers' Loan and Trust Company filed a supplemental bill of foreclosure against the Missouri, Iowa and Nebraska Railroad Company, the Mercantile Trust Company, the Wabash Company, and the Humeston and Shermandoah Railway Company, upon which a final decree of foreclosure was entered, and the property ordered to be sold; that upon the confirmation of such

Page 152 U. S. 321

sale, the Missouri, Iowa and Nebraska Company, the Humeston and Shermandoah Company, and the Mercantile Trust Company were each ordered to execute and deliver to the purchaser deeds of the property; that in pursuance of such decree, the property was sold in 1886, and Jesup and Thatcher became the purchasers; that, these purchasers having conveyed the property to the plaintiff, the same was turned over to it in December, 1886; that subsequently, in pursuance of such decree, the Missouri, Iowa and Nebraska Company and the Mercantile Trust Company executed to Jesup and Thatcher their respective deeds of Conveyance of all their interest in the railway property, and that Jesup and Thatcher afterwards, for a valuable consideration and in further execution of their said trust, conveyed the same to the plaintiff. Plaintiff further averred that the mortgage of the Mercantile Trust Company was made after the original injunction proceedings were commenced; that by the title acquired through the foreclosure of the same, and the several deeds of conveyance to it, plaintiff became entitled to all the rights and privileges of the injunction decree in the original suit, and to have the same revived against the defendants. To this amended bill the officers of Scotland County filed an answer, denying that any title was acquired by the plaintiff through the lease of 1880 or the mortgage of 1881, but that all such title was acquired through the foreclosure of the mortgage of 1870, and the sale thereunder in 1886. The answer further averred that the whole of the contract, lease, and mortgage of 1880 and 1881 was an abortive attempt to provide against a foreclosure and sale under the mortgage of 1870, and, having failed, the whole of said proceeding were practically rescinded by order of the court in which the foreclosure proceedings were carried on.

On January 10, 1891, upon the supplemental bill, the answers, replication, and proofs, a final decree was entered dismissing the bill of revivor upon the ground that plaintiff's title to the property related back to the mortgage of 1870, and that it acquired no title under the mortgage of 1881.

From this decree an appeal was taken to this Court.

Page 152 U. S. 322

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