1. A judge of a circuit court in Illinois cannot, in vacation,
appoint a receiver of a railroad corporation. The possession of a
receiver so appointed is not that of the court.
2. Section 49 of chapter 37, Rev.Stat. Ill., 1874 (p. 332), is
to be construed as if there was no comma between the words "to hear
and determine motions" and the words "to dissolve injunctions."
Punctuation is no part of a statute.
3. The legislation of Illinois giving the right to redeem
mortgaged lands sold under decree does not embrace the real estate
of a railroad corporation mortgaged in connection with its
franchises and personal property. Its real estate, personalty, and
franchises, so mortgaged, should be sold as an entirety, and
without the right of redemption given by statute.
4. The chattel mortgage statute is inapplicable to an ordinary
railway mortgage.
To secure the payment of its bonds, aggregating the sum of
$660,000 and issued for the purpose of raising money as well for
its mining and manufacturing business as for the completion and
maintenance of its road, the Chester and Tamaroa Coal and Railroad
Company, an Illinois corporation, executed, on the twelfth day of
April, 1871, a deed of trust containing such conditions and
provisions as are usually inserted in railway mortgages. It
embraced the entire road of the grantor, then made or thereafter to
be constructed, from Chester, in Randolph County, to Tamaroa, in
Perry County, together with the right of way, and all the real and
personal property then owned or subsequently acquired, and used or
appropriated for railroad purposes; also, its privileges and
franchises for holding, operating, and maintaining the road,
together with any income derived from the property not applied to
the construction and repair of the road, the conduct of the
business of the company, its current expenses, or the purchase of
equipments, tools, and machinery. Subsequently the mortgagor
company was consolidated with the Chester and Iron Mountain
Railroad Company, the consolidated company taking the name of the
Iron Mountain, Chester, and Eastern Railroad Company.
From the first day of October, 1874, until the fifth day of
Page 105 U. S. 78
June, 1876, the railroad and other property included in the
mortgage was in the possession of D. C. Barber, as receiver, in a
creditor's suit instituted by one Maxwell in the Circuit Court of
the United States for the Southern District of Illinois. On the
last-named day, in conformity with a stipulation signed by the
attorneys in that suit, Barber was discharged as receiver without
being required to render an account of his acts, and the bill of
Maxwell was dismissed at his costs. The present transcript does not
show the grounds upon which Barber was appointed receiver, perhaps
for the reason, disclosed in an affidavit, that the bill filed by
Maxwell was not to be found among the files of his suit.
On the day succeeding Barber's discharge as receiver, Hammock,
assignee of two judgments (aggregating less than $1,000), with
returns of no property, against the Iron Mountain, Chester, and
Eastern Railroad Company, and suing in behalf of himself and such
judgment creditors as might unite with him, presented his bill in
equity to the judge of the Circuit Court of Perry County, Illinois,
in vacation, "at Chambers," in Washington County, Illinois, praying
the appointment of a receiver of the railroad company and its
effects, with authority to hold and administer the same under the
direction of the court, and out of the net income arising therefrom
to pay the judgments held by complainant and others. The only
grounds assigned in the bill for a receiver are the indebtedness of
the company, the returns against it of
nulla bona, its
insolvency, and its refusal to pay the judgments outstanding
against it. The judge, without notice to the company, appointed
Thomas M. Sams receiver and made an order requiring the railroad
company, its officers, servants, and agents to deliver to him all
of its property and effects of every kind upon his presenting the
certificate of the clerk of the court that he, Sams, had filed his
bond as receiver in the penal sum of $15,000 with certain named
sureties (Barber, then recently the receiver in Maxwell's suit,
being one of them), conditioned that he would account for all
property and effects coming to his hands, as receiver, under the
order and direction of the court. By the terms of the order, Sams
was authorized to use and operate the railroad and pay all expenses
incurred in its operation
Page 105 U. S. 79
as far back as Oct. 1, 1874, nearly two years prior to his
appointment. The bill of Hammock, with the foregoing order endorsed
thereon, was filed in the clerk's office on the 7th of June, 1876,
and Sams, having executed the required bond, took possession of the
railroad and all the property and effects of the company.
On the thirteenth day of June, 1876, the Farmers' Loan and Trust
Company -- without knowledge, as we infer from the record, of the
suit in the state court -- commenced proceedings in the court below
for the foreclosure of the beforementioned mentioned mortgage, and
to obtain a decree for the sale of all the property embraced by it,
in satisfaction of the interest and principal of the bonds thereby
secured, the whole amount of which had, under the terms of the
mortgage, become due by reason of the continued default of the
company in meeting the interest as it matured. The bill (verified
under date of June 2, 1876) and the supplemental bill charged that
the consolidated company was insolvent; that its entire property
was inadequate for the payment of the mortgage debt; that divers
persons, by defaults and collusions with Barber, late receiver, had
obtained judgments against the company, and had levied, or were
about to levy, upon its rolling stock and other movable property
with the intent to deprive the trustee and those it represented of
the benefit of their security; that the company itself was a party
to that fraudulent collusion; that the bill of Maxwell had been
dismissed and Barber, as receiver, discharged to the end that such
levies might be made; that these facts had only then come to
complainant's knowledge, and that if time was taken to give notice
of an application for an injunction and a receiver, great and
irreparable loss would ensue to the trustee and those whose
interests it represented.
Upon the filing of the original and supplemental bill, the
federal court appointed a receiver with direction to take
possession of the mortgaged property, and at the same time issued
an injunction against judgment creditors' interfering with or
taking possession of it. A few days thereafter, the Farmers' Loan
and Trust Company filed in the office of the clerk of the Perry
Circuit Court its petition to be made a party defendant in the suit
of Hammock, also its answer and cross-bill therein
Page 105 U. S. 80
and its petition, accompanied by proper bond, for the removal of
the suit into the circuit court of the United States. An
application was subsequently made by the complainant to the judge
of the state court in vacation to discharge Sams as receiver upon
the ground, among others, that he was illegally appointed in the
vacation of court. That motion was denied, and thereupon the
company made an application, based upon the before-mentioned papers
to the judge in vacation to be admitted as a party to Hammock's
suit. But in reference to that application, the judge declined to
take action upon the ground that he could not legally do so in the
vacation of his court.
On the nineteenth day of July, 1876, the Farmers' Loan and Trust
Company, having filed a certified transcript of the proceedings in
the
Hammock suit, including copies of all the foregoing
papers, moved the federal court to take jurisdiction of that suit.
That motion -- Mr. Justice Davis and the district judge concurring
-- was sustained and an order made that the
Hammock suit
proceed in that court as if originally commenced there, and be
consolidated with the mortgage suit. It was further ordered that
Sams surrender to the receiver of the federal court all property in
his hands as receiver and pay over all funds by him in that
capacity collected. That order was immediately executed, and
thenceforward the mortgaged property was in the actual and
exclusive custody of the federal court by its receiver.
At the November Term, 1876, of the state court, a motion was
made by Hammock to strike from the files of his suit the answer,
cross-bill, and the petition for the removal of the cause,
previously filed therein by the Farmers' Loan and Trust Company
upon the ground that they had been so filed without leave of court
and because that company was not a party to the suit. That motion
was sustained on the fourth day of May, 1877, and all of those
papers were stricken from the files.
Nothing occurred in the progress of the consolidated cause which
need be referred to except that the court, in response to a
suggestion by the attorney general of the state and by consent of
parties (all the judgment creditors interested in Hammock's suit
having appeared in some form in the consolidated
Page 105 U. S. 81
cause, saving, however, all questions as to the jurisdiction of
the federal court), an order was made, under which the receiver
surrendered to county collectors the rolling stock and personal
property of the company in his hands to be levied on and sold. It
was levied on and sold for state, county, school, and other taxes
assessed in Randolph and Perry Counties upon the property in the
receiver's hands for the years 1873 to 1876, inclusive. That
portion sold in Randolph County brought $6,053.92, which after
deducting costs of sale, satisfied in full the taxes due in that
county on the real and personal estate of the railroad company, and
all of the tax on its capital stock, except $999.93. The sale in
Perry County netted the sum of $5,165, which satisfied in full the
taxes due and collectible in that county on the company's real and
personal estate and all of the capital stock tax except
$852.39.
A final decree was made on the eleventh day of January, 1878,
for the sale of the mortgaged property, including the franchises of
the company, as an entirety, to satisfy the principal and interest
due on the bonds, then amounting to $940,625.40. The sale was
directed to be made "without appraisement and without reference,
and not subject to any law or laws of Illinois allowing redemption
from mortgage sales, but absolutely without redemption." Henry C.
Cole became the purchaser of the entire property at the sum of
$50,000. The sale was subsequently confirmed and a deed made to the
purchaser, who was let into possession on the twenty-sixth day of
April, 1878.
On the seventeenth day of October, 1878, the Wabash, Chester,
and Western Railroad Company, an Illinois corporation, to which had
been conveyed by Cole, after the confirmation of his purchase, the
railroad and other property sold under the foregoing decree,
represented to the court below, by petition, that Hammock and other
judgment creditors, parties to the consolidated cause, had then
recently caused Sams, still pretending to be the legal receiver of
the property sold in the foreclosure suit, to advertise the same
for sale, without redemption, under an order or decree of the Perry
Circuit Court, made in Mammock's suit after the execution of the
final decree in the foreclosure suit, to-wit, on the eleventh day
of May, 1878, and
Page 105 U. S. 82
that unless restrained, such sale would be had in disregard of
the decree of the federal court. Upon this petition, a temporary
injunction was issued, and Hammock, Sams, and others were required
to show cause why they should not be attached for contempt of
court.
Upon final hearing, the temporary injunction of Oct. 17, 1878,
was, by an order entered on the seventeenth day of January, 1879,
perpetuated, and Sams, Hammock, and their associates were enjoined
from taking any steps in execution of the decree of the Circuit
Court of Perry County, from selling any part of the railroad
property theretofore sold under the decree of the court below, and
from interfering with it in any manner.
The present transcript embraces two appeals, one from the
several orders and the final decree under which the mortgaged
property was sold and the other from the final order or decree of
Jan. 17, 1879.
MR. JUSTICE HARLAN, after stating the facts, delivered the
opinion of the Court.
Whether the state court or the circuit court of the United
States first acquired control and possession of the property
conveyed in trust by the Chester and Tamaroa Coal and Railroad
Company is the first question to which our attention will be
directed. If, when seized under the order of the federal court, it
was in the custody of the state court by its receiver, then it is
claimed that all the proceedings in the former, so far at least as
their regularity and validity depended upon possession of the
property, were in violation of the established principles governing
courts of concurrent jurisdiction in their relations to each other.
Peck v.
Jenness, 7 How. 612;
Taylor v.
Carryl, 20 How. 583;
Freeman v.
Howe, 24 How. 450;
Hagan v.
Lucas, 10 Pet. 400.
The solution of this question, it must be conceded, depends upon
the authority which the judge of the state could lawfully exercise
in vacation, for if under the laws of the state he had no power in
vacation to appoint a receiver of the property
Page 105 U. S. 83
and effects of a railroad company, the order under which Sams
took possession was a nullity, and his custody was not that of the
court which he assumed to represent. Counsel for appellants admits
that except to the extent expressly permitted by statute, the judge
of the state court could not exercise any judicial functions in
vacation. Such, beyond question, is the established doctrine of the
Supreme Court of Illinois. In
Blair v. Reading, 99 Ill.
600, the court said:
"It is a fundamental principle that courts can exercise judicial
functions only at such times and places as are fixed by law, and
that the judges of courts can enter no orders in vacation except
such as are expressly authorized by statute."
In
Devine v. People, 100 Ill. 290, the language of the
court was that "judges can exercise no judicial functions in
vacation except such as they are especially authorized to do by
statute."
Keith v. Kellogg, 97 Ill. 147.
It is stated by counsel, and our examination verifies the
correctness of the statement, that in the few cases in which the
statutes of Illinois make special provision for the appointment of
a receiver, the power is conferred upon the court, and not upon the
judge thereof. Rev.Stat. Ill., 1874, sec. 25, p. 290;
id.
sec. 24, p. 553;
id. sec. 88, p. 613.
But the action of the judge of the state court is attempted to
be sustained under the forty-ninth section of chapter 37 of the
Revised Statutes of Illinois, enacted in 1874 (p. 332), which is in
these words:
"SEC. 49.
Powers of judges in vacation. The several
judges of said courts [judges of the circuit courts, and of the
Superior Court of Cook County] shall have power in vacation to hear
and determine motions, to dissolve injunctions, stay or quash
executions, to make all necessary orders to carry into effect any
decree previously rendered, including the issuance of necessary
writs therefor, to order the issuance of writs of certiorari, to
permit amendments in any process, pleading, or proceeding in law or
equity. Any order so made shall be signed by the judge making it
and filed and entered of record by the clerk of the court in which
the proceeding is had, and from the date of such filing shall have
like force and effect as if made at a regular term of such court.
The pendency of a term of court in another county than that in
which the suit is pending
Page 105 U. S. 84
or about to be commenced by the same judge shall not prevent the
granting of such order. L. 1871-72, p. 504, secs. 1, 2."
The succeeding section (sec. 50) provides that
"No such order shall be granted in vacation unless the party
applying therefor shall give the opposite party, or his attorney of
record, reasonable notice of his intended application."
We are of opinion that the authority of a judge in vacation to
appoint a receiver of a railroad corporation cannot be derived from
the foregoing section. This precise question has not, that we are
aware, been determined in the Supreme Court of Illinois. But what
fell from that learned tribunal in the cases already cited leads us
to believe that when the question is directly presented, it will be
determined in accordance with the view we have just expressed.
In the argument before us, attention was called to the fact that
between the words in sec. 49, "to hear and determine motions" and
the words "to dissolve injunctions" there appears a comma, and that
was to some extent relied on as showing that a judge in vacation
could hear and determine motions of every kind, not simply those
relating to matters specially defined in that section. While the
comma after the word "motions," if any force be attached to it,
would give the section a broader scope than it would otherwise
have, that circumstance should not have a controlling influence.
Punctuation is no part of the statute. Lord Kenyon, C.J., in
Doe v. Martin, 4 T.R. 65, said that courts in construing
acts of Parliament or deeds, should read them with such stops as
will give effect to the whole. Sedgwick's Constr.Stat. and
Const.Law (2d ed.) 223, note
a; Bouvier's Law Dic. 347,
402. The general rule is well illustrated in Barrington's Statutes
(4th ed.), 438, note
x;
Price v. Price, 10 Ohio
St. 316;
Cushing v. Worrick, 9 Gray (Mass.) 382;
Geiger's Estate, 65 Penn.St. 311, and
Hamilton v.
Steamer R. B. Hamilton, 16 Ohio St. 428. In the last case, it
was said:
"But for the punctuation, as it stands, there could be little
doubt but that this was the meaning of the legislature. Courts
will, however, in the construction of statutes, for the purpose of
arriving at the real meaning and intention of the lawmakers,
disregard the punctuation
Page 105 U. S. 85
or repunctuate, if need be, to render the true meaning of the
statute."
Apart from the general rule upon this subject, there are reasons
why the punctuation of sec. 49 should not control its
interpretation. It will be observed that at the close of that
section is a reference to the laws of Illinois passed at the
session 1871-1872 of the General Assembly, indicating that sec. 49
was, in part at least, founded upon an existing or previous
statute. One of the rules prescribed by the revision of 1874 for
the construction of statutes is that
"The provisions of any statute, so far as they are the same as
those of any previous statute, shall be construed as a continuation
of such prior provisions, and not as a new enactment."
Rev.Stat. Ill., 1874, p. 1012, sec. 2. Turning then to the
previous law -- the Act of March 7, 1872 -- we find no comma after
the word "motions," but the statute reads, "to hear and determine
motions to dissolve injunctions," &c. Sess.Laws, Ill.,
1871-1872, p. 504. We are not prepared to hold that the power of a
judge in vacation to appoint a receiver of a corporation, charged
with important public duties, was conferred by the introduction of
a comma into the Revised Statutes of a state, where the established
doctrine is that no judicial functions can be exercised by a judge
in vacation except where expressly or specially authorized by
statute.
But if, as the argument of counsel would imply, a judge in
vacation may, by virtue of the powers conferred by sec. 49, hear
and determine every matter presented by way of motion, and not
simply motions relating to the dissolution of injunctions, to
staying or quashing executions, to orders carrying into effect
decrees previously rendered, to writs of certiorari, or amendments
in process, pleading, or proceedings in law and in equity -- which
are the subjects specifically referred to in that section -- we are
satisfied that an application to dispossess those in control of a
railroad corporation, whose road is declared by the constitution of
the state to be a public highway, and to place its entire property
in the hands of a receiver is not, within the meaning of the
statute, a motion which may be heard and determined by the judge
out of term time. It is rather a proceeding involving the exercise
of the highest discretion, and embracing a very wide field of
judicial investigation
Page 105 U. S. 86
and inquiry. The injustice which may result from the exercise of
such a power in vacation is well illustrated in this case by the
fact that while the judge of the state court did not doubt his
power, out of term time, to oust those in the control of a public
corporation, and appoint a receiver, with authority to carry on the
business of a carrier of freight and passengers, he could not,
under his view of the statute, determine in vacation an ordinary
motion to become a party to the suit, made by the trustee in a
first mortgage or deed of trust covering the entire property and
franchises in question.
It results from what has been said that the seizure of the
property by the receiver of the federal court was not an
interference with the possession of the state court, nor in
derogation of its authority. The property was not in any legal
sense then in the custody of the state court or of any officer by
it appointed. It was, when seized by order of the federal court, in
the custody of one who assumed, without lawful authority, to
represent the state court, but who in fact proceeded under a void
order of a judge in vacation.
The circuit court of the United States, having thus lawfully
acquired possession of the property prior to any action in
reference to it by the state court, the former had the right to
retain possession for all the purposes of the suit for foreclosure
of the mortgage of the 12th of April, 1871. Under the final decree
of foreclosure, it was, as we have seen, sold in satisfaction of
the mortgage debt, leaving nothing to be applied on the claims of
Hammock and other judgment creditors.
We proceed now to inquire whether, in the orders or decrees
under which the property has been disposed of, any error has been
committed to the prejudice of the substantial rights of appellants.
On their behalf it is suggested that the decree was erroneous in
that it required the sale of the real estate covered by the
mortgage to be made absolutely and without the right of redemption
allowed by the local statutes in decretal sales of mortgaged lands.
The question is one of great importance, and has received upon our
part all the consideration which it demands.
By the statutes of Illinois in force when the mortgage was made,
real estate, taken in execution, if susceptible of division,
Page 105 U. S. 87
is required to be sold in such quantities as may be necessary to
satisfy the execution and costs. Rev.Stat. Ill., 1869 (Gross ed.),
p. 397, sec. 11. And it is made the duty of the sheriff or other
officer selling lands or tenements by virtue of an execution to
give to the purchaser or purchasers a certificate in writing
describing the lands or tenements purchased and the sum paid
therefor or, if purchased by the plaintiff in the execution, the
amount of his bid and the time when, if the property be not
redeemed, the purchaser will be entitled to a deed.
Id.,
p. 380, sec. 15.
It is further provided that the defendant, his heirs, executors,
administrators, or grantees, might, within twelve months from the
sale of his lands or tenements under execution redeem the same by
paying to the officer who sold it, for the benefit of the
purchaser, the sum of money which may have been paid on the
purchase or the amount given or bid, if purchased by the plaintiff
in the execution, together with interest thereon at the rate of ten
percent from the time of sale.
Id., sec. 16. The right was
given to any judgment creditor, after the expiration of twelve and
within fifteen months from the sale, to redeem the property, by
paying the amount paid by the purchaser, such payment entitling him
to have a resale under the execution upon his own judgment.
Id., secs. 17, 18. This right, given to judgment
creditors, could be exercised as to the whole or any part of the
lands or tenements sold, provided the redemption is made in the
like distinct quantities or parcels in which the same are sold.
Id., sec. 19.
If the lands or tenements so sold are not redeemed by the
defendant or by a judgment creditor within fifteen months from the
sale, it is the duty of the officer making it to execute a deed to
the purchaser.
Id., sec. 25.
The provision in reference to redemption from mortgage sales is
that
"Where lands shall be sold under and by virtue of any decree of
a court of equity for the sale of mortgaged lands, it shall be
lawful for the mortgagor of such lands, his heirs, executors,
administrators, or grantees, to redeem the same in the manner
prescribed for the redemption of lands sold by virtue of executions
issued upon judgments at common law, and judgment creditors may
redeem lands sold under any such
Page 105 U. S. 88
decree in the same manner as is prescribed for the redemption of
lands in like manner sold upon executions upon judgments issued at
common law."
Id., p. 382, sec. 27.
The history of the right of redemption as given by the laws of
Illinois may be traced in Statutes of 1825, p. 151; Rev.Stat.,
1829, p. 85;
id. 1833, p. 374;
id. 1845, p. 302.
When originally conferred as to sales of land under execution,
there were no railroads in that state, and very few, if any, when
it was first (in 1845) extended to decretal sales of mortgaged
lands.
In
Brine v. Insurance Company, 96 U. S.
627, we held that the right of redemption given by the
Illinois statutes constituted a rule of property which the federal
court, sitting in equity in that state, is bound to recognize and
enforce. The property there in controversy was a lot of ground in
the City of Chicago which had been owned by a private person who
conveyed it in trust to secure a loan of money by an insurance
company.
When the mortgage by the Chester and Tamaroa Coal and Railroad
Company was made, there was in force a general statute, passed in
1855, conferring upon any railroad company organized or
incorporated under the laws of Illinois the power to mortgage all
or any portion of its property and franchises to secure the payment
of money borrowed to aid in the construction, completion, or
operation of its road. Gross ed., p. 553; Laws of Ill., 1855, p.
304.
And by the state constitution adopted in 1870, railroads
thereafter constructed were declared to be public highways, free to
all for the transportation of their persons and property thereon
under such regulations as should be prescribed by law. Art. 11,
sec. 12.
The question is therefore presented for the first time in this
Court whether the statutory provisions giving the right to redeem
as well lands or tenements sold under execution as mortgaged lands
sold under decrees of courts of equity, has any application to the
real estate of a railroad corporation, which, with its franchises
and personal property, is mortgaged as an entirety to secure the
payment of money borrowed for railroad purposes.
Page 105 U. S. 89
Undoubtedly in all such cases the chief value of the real estate
comes from the right or franchise to hold and use it, in connection
with the personal property of the corporation, for railroad
purposes. It is equally true not only that the bonds, to secure
which the mortgage is given, could not be negotiated in the markets
of the country did not the mortgage embrace as an entirety the
franchises and all the real and personal property of the
corporation used for railroad purposes, but that a sale of the real
estate, franchises and personal property separately might in every
case prove disastrous to all concerned, and defeat the ends for
which the corporation was created with authority to establish and
maintain a public highway.
It is nevertheless contended by counsel that as the statute
attaches to decretal sales of mortgaged lands the right of
redemption, that right exists as well in cases of mortgages
covering the entire property and franchises of a railroad
corporation as where the land is owned and used by private persons
for exclusively private purposes.
In other words -- for to that result the argument would lead --
the court, in decreeing the sale of the mortgaged property and
franchises of a railroad corporation, has no discretion, if the
corporation or its judgment creditors so demand, except to order
the sale of the real estate separately, in parcels when susceptible
of division, and subject to redemption, leaving the franchises and
personal property to be sold absolutely and without redemption.
Thus one person might become the purchaser of the real estate,
another of the franchise, and still others of the personal
property. If the railroad company should redeem the real estate, it
could not employ it to any valuable end, for its franchise to be a
corporation and to use its real estate for railroad purposes will
have been sold to another, and there is no right under the statute
to redeem the franchise, it not being real estate, but rather a
power or privilege, partaking more or less of sovereignty, and
which may not be exercised without a special grant. 1 Redfield on
Law of Railways 94. Consequences equally injurious would flow even
from the sale as an entirety of the real and personal property and
franchises of the corporation if the right was reserved to the
company or its creditors to redeem the realty. Individuals or
associations
Page 105 U. S. 90
desiring railroad property would not purchase when they could
not know until the expiration of fifteen months from the
confirmation of the sale whether they were to have all for which
they might bid. During that period of uncertainty, the property
would necessarily depreciate in value for the want of repairs and
betterments essential to its preservation. A construction of the
statute which leads to such results ought not to be adopted if it
can be avoided. And we think it can be without contravening the
spirit of the statute or the public policy which suggested its
enactment.
We are of opinion that mortgaged real estate to which is
attached the right of redemption is such and such only as could at
law be levied upon and sold on execution. The right does not extend
to real estate of a public corporation, mortgaged with its
franchise to acquire, hold, and use property for public purposes,
and whose chief value depends upon its being so used and
appropriated. The difference between real estate so acquired, held,
and used and real estate which may at law be sold under execution
is well illustrated in
Gue v. Tide Water Canal
Co., 24 How. 257. In that case, it appeared that an
execution was levied upon a house and lot, sundry canal locks, a
wharf boat, and several lots, the property of the canal company,
chartered under the laws of Maryland for the construction of a
canal from Havre de Grace in that state to the Pennsylvania line.
The property so levied upon was admitted to be necessary to the
uses and working of the canal, which was a public improvement and a
great thoroughfare of trade. It was of little value apart from the
franchise to take tolls, and if sold separately under execution,
the franchise to take tolls, said Mr. Chief Justice Taney, speaking
for the Court, would not have passed to the purchaser. It was
consequently ruled that the real estate there in controversy could
not be seized and sold under
fieri facias, and,
consistently with the rights of stockholders and creditors, could
not be sold separately from the franchise from which was derived
its chief value.
The laws of the Illinois having permitted the Chester and
Tamaroa Coal and Railroad Company to mortgage its franchises and
property as an entirety, it was, we think, the duty of the court to
decree the sale as an entirety of the
Page 105 U. S. 91
whole property, so mortgaged, without reference to the local
statutes upon the subject of redemption. Real estate thus mortgaged
with the franchises of the company is of necessity relieved from
the operation of that statute. There may possibly be cases in which
real estate of an ordinary kind owned and mortgaged by a railroad
corporation cannot be sold by decree of court except subject to the
right of redemption, as when it is not used for necessary railroad
purposes or when it is mortgaged separately from its franchises and
other property. What may be the operation of the statute in such
cases we do not now decide. All that we do decide is that by the
laws of Illinois, the real estate, franchises, and other property
of a railroad corporation, mortgaged as an entirety, may be sold as
an entirety under the decree of a court of equity without any right
of redemption in the mortgagor or in judgment creditors as to such
real estate.
The construction we have given to the statute is not
inconsistent with the provision of the state constitution which
declares that
"The rolling stock and all other movable property belonging to
any railroad company or corporation in Illinois shall be considered
personal property, and shall be liable to execution and sale in the
same manner as personal property of individuals, and the General
Assembly shall pass no law exempting any such property from
execution and sale."
Art. 11, sec. 10.
When the mortgage of April 12, 1871, was executed, there was no
levy upon the movable property of the company, and consequently the
rights of the mortgagee were superior to the lien arising from a
subsequent levy, by execution, upon the movable property. The state
constitution did not forbid the creation, by mortgage, of such
superior lien.
So far from that section's militating against the construction
we have given the statute, it rather fortifies it. It furnishes a
strong implication that the right to levy an execution upon the
movable property of a railroad corporation was intended to be
restricted to that kind of corporate property. It is a partial
modification of the general rule that the property of a railroad
corporation used for necessary railroad purposes cannot be seized
and sold under an execution at law.
Page 105 U. S. 92
The next question to be considered relates to the distribution
of the proceeds of the sale of the mortgaged property. The argument
upon this branch of the case in behalf of the appellants, briefly
stated, is this:
That by the laws of the state in force when the mortgage of
April 12, 1871, was executed, a mortgage of personal property,
certified by a justice of the peace in the justice's district in
which the mortgagor resides and recorded in the recorder's office
of the county where the mortgagor resides shall,
"if
bona fide, be good and valid from the time it is so
recorded for a space of not exceeding two years, notwithstanding
the property mortgaged or conveyed by deed of trust may be left in
possession of the mortgagor, provided that such conveyance shall
provide for the possession of the property so to remain with the
mortgagor."
Gross ed., 1869, p. 67; that more than two years having expired,
after the execution of the mortgage of April 12, 1871, and before
the suit for foreclosure, the property mortgaged remaining in the
possession of the railroad company until seized in Hammock's suit,
the judgment creditors, by virtue of their suit in the state court,
acquired a lien at least upon the rolling stock and other movable
property covered by the mortgage superior to any claim on the part
of the mortgagee and those it represented, and that since the
personal property was surrendered and the proceeds of its sale
applied in discharge of taxes upon the real and personal property
and capital stock of the corporation, the court, upon principles of
equity, should have appropriated to the judgment creditors so much
of the proceeds of the decretal sale as was equal to the taxes on
real estate paid from the proceeds of the sale of personal property
by the collectors.
We are of opinion that the statutory provisions in regard to
chattel mortgages (Gross ed., p. 66) do not embrace mortgages by a
railroad corporation, in connection with its real estate and
franchises, of its personal property used and appropriated for
railroad purposes. The statute provides a mode by which possession
of the mortgagor of personal property should not defeat the
mortgage --
viz., the acknowledgment and record of the
mortgage. The acknowledgment is required to be made before a
justice of the justice's district in which the mortgagor
Page 105 U. S. 93
resides, and recorded in the recorder's office of the county
where he resides. These directions are wholly inapplicable to a
railroad company, whose line of road might pass through several
justices' districts and extend through several counties. And if the
construction contended for be sound, a railway mortgage security,
so far as the personalty of the corporation is concerned, would
cease to be of any value after the expiration of two years from its
execution unless the mortgagor, before the expiration of that time,
takes possession of it -- the authority to do which, in advance of
the maturity of the mortgage debt and when there has been no
default of the corporation in meeting its interest, would render
the negotiation of the mortgage bonds difficult, if not impossible.
Clearly the chattel mortgage statute has nothing to do with the
present case.
What we have said renders it unnecessary to consider the other
branches of the proposition last stated and disposes of all
questions of importance upon the merits arising on the appeal from
the final decree ordering a sale of the mortgaged property and
directing a disposition of the proceeds arising therefrom.
We have seen that the Farmers' Loan and Trust Company, in
vacation, filed in the clerk's office of the state court a petition
to be made a party to the creditor's suit of Hammock, with an
answer and cross-bill and also a petition for the removal of that
suit into the federal court, accompanied by the required bond, and
that the judge of the state court, in vacation, declined to act
upon the petition to be made a party or to recognize the right of
removal. Whether the cause was under these circumstances properly
docketed in the court below as one legally removed under the act of
Congress, or whether the federal court exceeded its authority in
the final order of injunction, made on the seventeenth day of
January, 1879, upon the petition of the Wabash, Chester, and
Western Railroad Company are questions about which there is a
difference of views among those members of the court who heard the
cause and participated in its decision. We therefore forbear to
make any expression of opinion upon them. And it is not at all
important to the parties that we should do so. The object of the
suit in the state court was to reach the property
Page 105 U. S. 94
of the railroad company, and from it, or from the income to be
derived therefrom, obtain satisfaction of the judgments against the
corporation. Whether that suit was or not, under the act of
Congress, legally removed into the federal court, the entire
property, we have seen, passed lawfully into the custody of the
latter court, and by proceedings therein, to which the judgment
creditors were parties, and by which they are concluded, it has
been all sold and the proceeds adjudged to be rightfully
distributed in satisfaction of the mortgage debt. It would
consequently serve no valuable purpose for the appellants were it
now decided that the suit commenced in the state court was not
legally removed into the federal court or that the order of Jan.
17, 1879, was beyond the power of that court to make.
The decrees appealed from are therefore
Affirmed.
MR. JUSTICE GRAY did not sit in this case nor take any part in
deciding it.
