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
MR. JUSTICE BROWN, after stating the facts in the foregoing
language, delivered the opinion of the Court.
This case raises the question whether the Keokuk and Western
Railroad Company, which is now the owner of the property and
franchises of the Missouri, Iowa and Nebraska Railroad Company, is
entitled to revive a suit originally begun by Secor and other
stockholders of the last-named company, against the officers of
three counties in Missouri to enjoin the collection of taxes upon
property formerly belonging to the Missouri, Iowa and Nebraska
Railroad Company, and now owned by the plaintiff.
(1) Upon demurrer to the original bill, the court held that the
plaintiff, deriving its title from the foreclosure of a mortgage
given before the suit which it sought to revive had been begun, did
not occupy such a relation to Secor and the other stockholders,
plaintiffs in the original suit, as entitled it to file the bill or
invoke the decree in that court as an estoppel. In the case just
decided of
Keokuk & Western Railroad Company v. State of
Missouri, ante, 152 U. S. 301, we
held the principle of that ruling to be correct. Upon the same day
that the order sustaining the demurrer was entered,
viz.,
March 25, 1890, leave was granted to amend the bill, whereupon, and
obviously for the purpose of meeting the objection raised by the
court that the only title to the property claimed by the plaintiff
was one derived from the foreclosure of the mortgage of 1870,
plaintiff, on April 18, 1890, procured a deed from Jesup and
Thatcher of their interest under the foreclosure of the mortgage of
1881 to the Mercantile Trust Company, and on April 28th filed an
amendment to its bill of revivor setting up this and other deeds as
evidence of title through the mortgage of 1881, which was given
after the original injunction proceedings were commenced by Secor,
and claiming that, by
Page 152 U. S. 323
its title through the foreclosure of this mortgage, and through
the various deeds of conveyance following the same, plaintiff was
entitled to the benefit of the injunction decreed in the Secor
suit, and to have the same revived and enforced against the
defendants.
The court, however, found from the record evidence that the
plaintiff derived its title to the property in controversy through
the mortgage of June 1, 1870, that its title to the property in
question related back to that mortgage, and hence the complainant
was not entitled to the benefit of the original decree. In this
conclusion we also concur. The facts in this connection, so far as
we gather them from the pleadings, appear to have been that a bill
to foreclose the mortgage of June 1, 1870, was filed December 30,
1879, a decree of foreclosure rendered thereon October 22, 1880,
and the property ordered to be sold. Pending this foreclosure, and
on February 12, 1880, the Missouri, Iowa and Nebraska Railroad
Company, the mortgagor, with the consent of a majority of the
bondholders under the mortgage of June 1, 1870, entered into the
contract with the Wabash Company to lease its road and to induce
the bondholders to surrender their bonds, and take in exchange
therefor bonds of the Wabash Company which were to be secured by a
new mortgage upon the Missouri, Iowa and Nebraska Company. Pursuant
to such contract, the lease was executed on September 3, 1880, for
a term of 99 years, and the Wabash Company entered into possession
of the road. On March 1, 1881, in pursuance of the contract and
lease, a mortgage was executed to the Mercantile Trust Company to
secure the payment of 2,269 bonds made by the Wabash Company, with
a provision that all the bonds that should be received by the
trustee in the course of the exchange for the bonds secured by the
mortgage of 1870 should be retained by the trustee for the
protection of the bondholders.
The Wabash Company having become insolvent in 1885, the Farmers'
Loan and Trust Company, for the purpose of enforcing their decree
of foreclosure of October 22, 1880, filed a supplemental bill
setting forth the proceedings subsequent
Page 152 U. S. 324
to the decree, and the failure of the lessee company to pay the
rental, alleging that it never was the intention of the bondholders
under the first mortgage that their bonds should be cancelled, or
the decree of October 22, 1880, vacated or annulled, or the right
to execute the same be in any way abrogated or impaired; but that
it was the design that the old bonds, having been exchanged, should
remain in the hands of the Mercantile Trust Company, to be used in
pursuance of the trust. The bill further charged that the decree of
October, 1880, was still in full force, and that the rights of the
parties interested could not be fully protected otherwise than by a
judicial sale of the road and other property covered by the first
mortgage. The bill prayed for the enforcement of the decree of
October 22, 1880, and for the same relief that the plaintiff might
have had in case the matters subsequent to the decree had not
occurred, and that the former decree might be promptly and
immediately executed.
A decree upon this supplemental bill was entered on July 8,
1866. The decree adjudged that the facts set forth in the
supplemental bill of complaint were true; that the decree of
October, 1880, was still in full force and was not reversed,
vacated, or discharged. After setting forth the subsequent
proceedings connected with the Wabash lease, the exchange of the
bonds, etc., the failure of the mortgagor to pay the bonds and
mortgages mentioned in the decree, it ordered the mortgaged
premises described in the decree of October, 1880, to be sold. The
sale was made August 19, 1886, and was subsequently confirmed, and
a deed executed by the master to Jesup and Thatcher, purchasers,
who subsequently, and on November 26, 1886, executed a deed to the
Keokuk and Western Railroad Company.
From the maze of bills, supplemental bills, bills of revivor,
decrees, and deeds involved in this case, we think the following
facts clearly appear: (1) that the decree of October 22, 1880, was
a decree for the foreclosure of the mortgage of 1870, and of that
alone; (2) that the supplemental bill of the Farmers. Loan and
Trust Company was filed to enforce
Page 152 U. S. 325
that decree; (3) that in the decree of July 8, 1886, rendered
upon such supplemental bill, 17 bonds issued under the mortgage of
1870, which had never been exchanged, were provided for as valid
liens under that mortgage, and under that alone; (4) that the bonds
held by the Mercantile Trust Company, as trustee, which had been
exchanged for the prior bonds, were also recognized as claims
secured by such mortgage; (5) that in such decree no mention was
made of the mortgage of 1881, except by way of recital, and as part
of the history of the case; (6) that the sale ordered was a sale in
pursuance of the prior decree; (7) that in the master's deed to
Jesup and Thatcher, and in their deed to the Keokuk and Western
Railroad Company, no allusion whatever was made to the mortgage of
1881.
There was, it is true, a proviso in the last decree that, by way
of a more ample protection to the purchasers, the defendants, the
Missouri, Iowa and Nebraska Railroad Company, the Humeston and
Shermandoah Railway Company, and the Mercantile Trust Company
should execute deeds of the property to the purchasers, and that in
pursuance of such order the deeds of 1890 were executed. But it is
clear that nothing in fact passed by such deeds, since the deeds of
the master to Jesup and Thatcher, and their deed to the Keokuk and
Western Railroad Company, had already conveyed all the interests of
the defendants to the property in question.
The truth is that in these proceedings the mortgage of 1881 was
treated as an abandoned security, and was practically ignored in
the foreclosure proceedings which culminated in the sale of the
road. The deeds of 1890 were evidently an afterthought for the
purpose of procuring some kind of title under the mortgage of 1881
and of meeting the decision of the court sustaining the demurrer to
the original bill of revivor.
(2) Plaintiff, however, makes a further claim that under the law
of Missouri for the taxation of railroads, the property and all
interests therein are taxed as a whole to the company, and no one
else, and that proceedings against the company by suit or otherwise
will divest the mortgagees of their rights
Page 152 U. S. 326
as well as the company itself, notwithstanding they are not made
parties to the proceedings; that the bondholders or their trustees
are privies to such tax proceedings at law, and that, inasmuch as
the Secor suit was a bill in equity to prevent a multiplicity of
tax suits, which would become necessary in the various years in
which the tax was to be collected during the limited exemption, it
follows that if the railroad company becomes the legal
representative of the bondholders, or their trustee in the tax suit
at law, the same would be true in a proceeding in equity to enjoin
such taxes.
Granting the general principles above stated to be correct, that
a lien for taxes upon the property is a lien upon all the interests
in such property, and that proceedings to enforce such lien will
oust the mortgagees of their lien, we do not think the latter part
of the proposition follows, that these bondholders or their
trustees were privies to the suit in equity to enjoin such taxes.
Indeed, it is difficult to see how the fact that the mortgagees
would be bound in a proceeding by the state to enforce its lien for
taxes would have any bearing upon the point in controversy. The
bill sought to be revived is a bill to enjoin the taxes for 1879
and prior years, and the question was whether the plaintiff was
entitled to the benefit of the decree in that case. This depended
not upon the question whether the lien of the state for taxes
overrode the mortgagees' lien, but whether, under the settled
principles of law, the purchaser under the mortgage is entitled to
the benefit of an estoppel under a decree obtained in a suit begun
after the execution of his mortgage. We hold that it would not have
been estopped by that decree if such decree had been adverse to
Secor in that suit, and hence, as estoppels must be mutual, it
cannot claim the benefit of an estoppel in this case. The Secor
bill was a bill to enjoin the collection of taxes for certain
years. If the court had decided that the plaintiffs were not
entitled to such injunction, but that the taxes were valid, we know
of no reason why the Keokuk and Western Railroad Company would
thereby be estopped to maintain a bill of its own for the same
purpose, as it derived its title to the property in question from a
mortgage long antecedent to the commencement
Page 152 U. S. 327
of the suit by Secor. This seems to have been the view taken by
the Supreme Court of Missouri in
Stafford v. Fizer, 82 Mo.
393, in which that court held that although the lien of the state
for taxes ranks all other liens, whether prior or subsequent, yet
in a suit to enforce such lien, the holder of a junior encumbrance
must be made a party if it is desired to divest him of his rights,
otherwise he will be entitled to redeem from the purchaser under
the tax lien.
See also Gritchell v. Kreidler, 84 Mo.
472.
The decree of the court below was correct, and it is
therefore
Affirmed.
