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.
MR. JUSTICE WOODS delivered the opinion of the Court.
The appellants assign for error:
1. The refusal of the circuit court to dismiss the original
bill, and the rendition of the final decree in favor of the rolling
mill company, and the ordering of the sale of the property of the
company to satisfy the same.
2. The finding that the rolling mill company had a lien upon the
railroad and property of the Illinois River Railroad Company for
the amount found to be due it, and that such
Page 109 U. S. 713
lien was paramount to the lien of the bonds secured by the trust
deed to Straut.
3. The rendition of a personal decree against the Alton Railroad
Company for $29,796.30, and the awarding of execution thereon.
We shall consider these assignments of error in the order in
which they are stated.
The appellants contend that Dumont, the original complainant,
had the right at any stage of the case to dismiss his bill, and
that its dismissal would carry with it the cross-bill, and that
having made the motion to dismiss, which was erroneously overruled,
all the subsequent proceedings and decrees are erroneous.
It may be conceded that when an original bill is dismissed
before final hearing a cross-bill filed by a defendant falls with
it. It may also be conceded that as a general rule, a complainant
in an original bill has the right at any time upon payment of costs
to dismiss his bill. But this latter rule is subject to a distinct
and well settled exception, namely that after a decree, whether
final or interlocutory, has been made by which the rights of a
party defendant have been adjudicated or such proceedings have been
taken as entitle the defendant to a decree, the complainant will
not be allowed to dismiss his bill without the consent of
defendant.
The rule is stated as follows, in Daniell's Chancery Practice,
page 793, 5th Am. ed.:
"After a decree or decretal order, the court will not allow a
plaintiff to dismiss his own bill unless upon consent, for all
parties are interested in a decree, and any party may take such
steps as he may be advised to have the effect of it."
The same writer, page 794, says that
"after a decree has been made of such a kind that other persons
besides the parties on the record are interested in the prosecution
of it, neither the plaintiff nor defendant, on the consent of the
other, can obtain an order for the dismissal of the bill."
The rule as we have stated it is sustained by many
adjudicated
Page 109 U. S. 714
cases. It was laid down by the Lord Chancellor in
Cooper v.
Lewis, 2 Phillips Ch. 131 as follows:
"The plaintiff is allowed to dismiss his bill on the assumption
that it leaves the defendant in the same position as he would have
stood if the suit had not been instituted; it is not so where there
has been a proceeding in the cause which has given the defendant a
right against the plaintiff."
In
Bank v. Rose, 1 Rich.Eq. (S.C.) 294, it was
said:
"But whenever, in the progress of a cause, the defendant
entitles himself to a decree, either against a complainant or a
codefendant, and the dismissal would put him to the expense and
trouble of bringing a new suit or making new proofs, such dismissal
will not be permitted."
So in the case of
Connor v. Drake, 1 Ohio St. 167, the
Supreme Court of Ohio declared:
"The propriety of permitting a complainant to dismiss his bill
is a matter within the sound discretion of the court, which
discretion is to be exercised with reference to the rights of both
parties, as well the defendant as the complainant. After a
defendant has been put to trouble in making his defense, if in the
progress of the case rights have been manifested that he is
entitled to claim and which are valuable to him, it would be unjust
to deprive him of them merely because the complainant might come to
the conclusion that it would be for his interests to dismiss his
bill. Such a mode of proceeding would be trifling with the court as
well as with the rights of defendants. We think the court did not
err in its ruling in refusing to permit complainant to dismiss his
bill."
Chancellor Walworth, in the case of
Watt v. Crawford,
11 Paige 472, laid down the rule in these words:
"Before any decree or decretal order has been made in a suit in
chancery, by which a defendant therein has acquired rights, the
complainant is at liberty to dismiss his bill upon payment of
costs; but after a decree has been made by which a defendant
Page 109 U. S. 715
has acquired rights, either as against a complainant or against
a codefendant in the suit, the complainant's bill cannot be
dismissed without destroying those rights. The complainant in such
a case cannot dismiss without the consent of all parties interested
in the decree, nor even with such consent, without a rehearing, or
upon a special order to be made by the court."
See also Gilbert v. Hawles, 1 Ch.Cas. 40;
Bluck v.
Colnaghi, 9 Sim.Ch. 411;
Lashley v. Hogg, 11 Ves.Jr.
602;
Booth v. Leycester, 1 Keene's Ch. 255;
Biscoe v.
Brett, 2 Vesey & B. 377;
Collins v. Greaves, 5
Hare 596;
Gregory v. Spencer, 11 Beavan 143;
Carrington v. Holly, 1 Dick. 280;
Anon., 11
Ves.Jr. 169;
Cozzens v. Sisson, 5 R.I. 490;
Updyke v.
Doyle, 7 R.I. 461;
Atlas Bank v. Nahant Bank, 23
Pick. 491;
Bethia v. McKay, Cheves, Eq. (S.C.) 96;
Saylor's Appeal, 39 Penn.St. 495;
Seymour v.
Jerome, Walk. Mich.Ch. 356.
The authorities cited sustain the refusal of the circuit court
to allow Dumont to dismiss his bill. The only really contested
issue in the case was between Dumont, representing the bondholders,
and the rolling mill company. The answers of all the other
defendants simply required proof of the averments of the bill,
neither admitting nor denying them. The issue raised by the
averments of the original bill and the answer of the rolling mill
company, and by the cross-bill of the rolling mill company and the
answer of Dumont, the complaint in the original bill, was whether
the rolling mill company had a lien upon the road and property of
the Illinois River Railroad Company, and whether such lien was
superior to that of the trust deed executed to Straut, which the
original bill was filed to foreclose. The issues thus raised
involved the right of all the parties to the suit. This issue was
referred to a master to take testimony and report. He filed a
report which was entitled both of the original and cross-cause. The
record shows that, "by agreement of counsel, the report of the
master in said bill and cross-bill was referred back to him," with
leave to the parties to take further proofs; that after taking a
large mass of additional evidence, covering several hundred printed
pages, the master reported that the rolling mill company had a
statutory lien
Page 109 U. S. 716
upon the property covered by the trust deed executed to Straut,
and that the same was consequently the first lien upon the
property. Joint exceptions were filed to this report by Dumont, the
original complainant, and the Alton Railroad Company and the
Illinois River Railroad Company, all of which were entitled both of
the original and cross cause. After full argument, the court
overruled the exceptions and rendered an interlocutory decree in
both the original and cross cause establishing the lien of the
rolling mill company as claimed in its answer to the original bill
and in its cross-bill. After all these proceedings, and when the
controversy between the parties was practically ended by the
interlocutory decree of the court, the motion to dismiss his
original bill was made by Dumont, the complainant therein. The
rolling mill company insisted that if the original bill, carrying
with it the cross-bill, were dismissed, its claim would be barred
by the statute of limitations. It would be hard to conceive of a
clearer case for the application of the rule laid down by the
authorities we have cited. If the court, under these circumstances,
had allowed the original bill to be dismissed without the consent
of the rolling mill company, it would have inflicted a palpable
wrong on that company and trifled with the administration of
justice.
The fact that the rolling mill company had been compelled to
file a cross-bill in order to secure complete relief only
strengthens the case against the dismissal of the original bill.
Several of the authorities cited to show that an original bill
cannot be dismissed after decree, apply to cases where a cross-bill
has been filed.
Bank v. Rose, 1 Rich.Eq., and
Watt v.
Crawford, ubi supra.
But counsel for appellants insist on the right of Dumont to
dismiss his original bill because a supplemental bill had been
filed, to which, as well as to the original bill, the Illinois
River Railroad Company had filed a plea denying the jurisdiction of
the court; that the truth and sufficiency of this plea were
admitted by the complainant, because he failed to reply thereto or
set it down for argument by the next succeeding rule day, or to
obtain further time for that purpose from the court, and
Page 109 U. S. 717
that therefore, under the 38th equity rule, the bill should have
been dismissed "as of course" by the court.
It is to be observed that the plea referred to was filed by the
Illinois River Railroad Company, which is not a party to this
appeal and which never asked the dismissal of the original bill
because its plea had not been put at issue or set down for
argument. Under these circumstances, it would be a strange
application of the 38th rule to hold that the complainant had the
right to dismiss his bill after the cause had been decided against
him.
It plainly appears from the record that after such plea was
filed by the Illinois Railroad Company, no notice was taken of it
by any of the parties, the cause was allowed to proceed as if it
had never been filed, and was decided upon the issues raised by the
answer and cross-bill of the rolling mill company. The complainant
now insists that his bill should have been dismissed, carrying with
it the decree of the court in favor of the rolling mill company,
the cross-bill, and the issues raised upon it, and the great mass
of testimony in the case, in the taking of which he had
participated, because of his own neglect to reply to a plea filed
by another party, which itself never insisted upon the dismissal of
the bill by reason of that neglect. The only party which could
assign for error the refusal of the court to dismiss the bill on
account of the default of the original complainant in not replying
to or setting down the plea is the Illinois River Railroad Company,
by which the plea was filed. But it has never taken any exception
to the refusal of the court to dismiss the bill, and is not a party
to this appeal. For the reason stated, we think the circuit did
right in overruling the application of Dumont for leave to dismiss
his bill.
It is next insisted that the court erred in entering a final
decree in favor of the rolling mill company and ordering a sale of
the property of the railroad company to satisfy the same.
The ground of this contention is that the final decree was
rendered upon the cross-bill only, and not upon the original bill,
and that if the cross-bill only were considered, the court had no
jurisdiction thereof by reason of want of the requisite citizenship
of the parties thereto, and that no decree could be rendered
Page 109 U. S. 718
upon the cross-bill except as consequent upon a decree in the
original cause. This objection proceeds upon an assumption not
sustained by the record. The cause was heard at the same time upon
both the original and cross-bills. The issue was whether or not the
lien of the rolling mill company was prior to the bonds secured by
the deed of trust. This was raised both by the original and
cross-bills. The prayer of the original bill was that an account
might be taken of the sums due for principal and interest on the
bonds secured by the trust deed to Straut, and of the sums due as
liens upon the railroad, and that it might be sold for the payment
of the same. The issues raised by the original bill and the answer
of the rolling mill company, and upon the cross-bill of the rolling
mill company, were found by the court in favor of the company upon
a hearing of both the original and cross-bills. The court decided
in favor of the rolling mill company, granting it the relief prayed
in its cross-bill. It is true the complainant, in his original
bill, did not ask for a decree upon the final hearing in his favor.
But the cause heaving been heard on both the original and
cross-bills, he could not prevent the granting of the relief prayed
by the cross-bill, either by dismissing his bill or by not asking
for a decree.
The original bill was not dismissed, but is still pending, and
the complainant in that bill may still apply in behalf of the
holders of bonds secured by the trust deed to Straut for such part
of the proceeds of the sale as the final decree orders to be paid
to the clerk of the court. Our conclusion is therefore that it was
competent for the court to render the final decree made in this
case.
The next question presented by the assignments of error is
whether the rolling mill company had a lien upon the railroad and
other property of the Illinois River Railroad Company superior to
the deed of trust to Straut and the lease to the Alton Railroad
Company. The matter of liens upon railroads is regulated by the
Revised Statutes of Illinois, c. 82, sec. 51, in force when the
contract of August 7, 1874, for the delivery of iron rails was
made, and on March 1, 1875, when the trust deed to Straut was
executed, which declares:
Page 109 U. S. 719
"That all persons who may have furnished, or who shall hereafter
furnish, to any railroad corporation now existing or hereafter to
be organized under the laws of this state, any fuel, ties,
materials, supplies, or any other articles or thing necessary for
the construction, maintenance, operation, or repair of such roads
by contract with said corporation, or who shall have done and
performed, or shall hereafter do and perform, any work or labor for
such construction, maintenance, operation, or repair by like
contract, shall be entitled to be paid for the same as part of the
current expenses of said road, and in order to secure the same
shall have a lien upon all the property, real, personal, and mixed,
of said railroad corporation as against such railroad, and as
against all mortgages or other liens which shall accrue after the
commencement of the delivery of said articles, or the commencement
of said work or labor, provided suit shall be commenced within six
months after such contractor or laborer shall have completed his
contract with said railroad corporation, or after such labor shall
have been performed, or material furnished."
The rolling mill company began to deliver to the Illinois River
Railroad Company on September 1, 1874, iron rails and other
material to be used in the construction of its road, and continued
such delivery until November 11, 1874. The material so furnished,
of the value of $107,785.09, was used in the construction of the
railroad. Within less than six months from November 12, 1874, the
date when the last material was delivered, the rolling mill company
filed in the proper court its bill of complaint to enforce its lien
under said statute. The lease of its road made by the Illinois
River Railroad Company to the Alton Railroad Company and its deed
of trust to George Straut were not executed until March 1, 1875,
long after the delivery of said material had been commenced. The
lien of the rolling mill company under the statute would therefore
seem to be complete and superior to that of the trust deed and
lease.
The appellants, however, contend that the rolling mill company
waived its lien by the contract between it and the construction
company and the Alton Railroad Company of August 7, 1874, by which
it was stipulated that the rails and other materials furnished by
the rolling mill company should be used
Page 109 U. S. 720
in the construction of the railroad of the Illinois River
Railroad Company, and that until fully paid for the rolling mill
company should have a lien thereon, and that the possession thereof
by the railroad company should be the possession of the rolling
mill company.
We do not think that this stipulation shows any purpose on the
part of the rolling mill company to waive its statutory lien. When
the contract was made, the railroad for which the materials were to
be furnished was in contemplation only. The survey of its route had
not been completed, nor had the right of way been obtained. The
evident purpose of the stipulation was to secure a specific lien on
the materials furnished, and to require them to be used in the
construction of the railroad where they would be subject to the
statutory lien, and the facts of this case show that this was a
wise precaution. The contract therefore, so far from showing a
waiver of the statutory lien, shows a purpose on the part of the
rolling mill company to retain it. The statutory lien was therefore
not lost. On this question, the case of
Clark v. Moore, 64
Ill. 279, is in point. In that case, the Supreme Court of Illinois
says:
"It is also insisted that appellees waived their rights when
they sold the property, by reserving a lien upon it in a written
contract; that they thereby received and held additional security
that operated to destroy any lien that would otherwise have
attached. It is true that where a laborer or materialman receives
security collateral to the property improved, whether the security
be personal or a mortgage on or a pledge of other property or chose
in action, the law presumes that it was intended to waive or
release the lien upon the premises. In their effort to retain a
lien on the machinery furnished by appellees, they took no
collateral or independent security. It was but a futile effort to
retain a superior lien on the property furnished over and above
other lienholders. Had these parties taken a mortgage on these lots
and the building, which the law would have adjudged void, would
anyone claim that they could not assert their lien? The lien
attaches to and encumbers the property to improve which the
material is furnished, and the effort to acquire a more specified
and exclusive lien in nowise manifests intention to release the
property from all
Page 109 U. S. 721
liens and look to other security for payment, but it shows the
very opposite intention, and intention to hold, if possible, the
property liable for the payment of their claim."
This authority decides the question in hand against the
appellants, and is entitled to great if not conclusive weight in
this Court.
The appellants further contend that the rolling mill company, by
the contract of August 7, 1874, gave credit for the materials to be
purchased by it which extended beyond the time within which suit
would have to be brought to fix and enforce the statutory lien, and
that this fact shows conclusively that the statutory lien was
waived.
It is well settled that an agreement for the extension of credit
by receiving a note of the party, or the independent security of a
third person, falling due at a day beyond the period within which
the lien must be asserted, will be no waiver when the agreement to
give the note or security has not been performed by the promisor.
To hold otherwise would be to say that the builder or materialman
must have intended to waive his lien in the event of a refusal to
comply with the agreement. On the debtor's refusal to keep the
agreement, the builder or materialman ought not to be bound by it,
but should be remitted to his rights, independently of the
contract.
The Highlander, 4 Blatchford 55.
It is clear from the terms of the contract that the rolling mill
company never agreed to extend credit for the materials furnished
unless notes were given therefor, with the stockholders of the
construction company as endorsers, and with the bonds of the
construction company secured by the deed of trust to Norton as
collateral security. The contract to give credit was clearly
conditional upon the delivery of the notes and bonds. It would be
absurd to hold that on the failure to deliver them the rolling mill
company had nothing to show for its iron rails and other materials
but the promise of an insolvent railroad company and an insolvent
construction company to deliver the notes and bonds. They were as
impotent to deliver the notes and bonds as they were to
Page 109 U. S. 722
pay cash. Such could not have been the intention of the parties
to the contract. On the failure of the companies to deliver the
notes and bonds according to the contract, the rolling mill company
was entitled to immediate payment and to its statutory lien to
secure it, because the credit was conditioned upon the giving of
security, and the security was not given. It has been so held by
the Supreme Court of Illinois in the case of
Gardner v.
Hall, 29 Ill. 277. Gardner filed his petition to enforce a
mechanic's lien on a contract for doing certain work. The contract
provided that payment of a certain installment, due upon a day
named, should be postponed for a period extending more than a year
after the completion of the work, in case a mortgage in the
premises should be given to secure said installment. The petition
was demurred to, and the demurrer was sustained. On appeal, this
decree was reversed, and the supreme court said:
"An agreement was made to give a mortgage which would have
destroyed the lien, but no mortgage was given, and hence the lien
remained. So was an agreement made to extend the time of payment
which would destroy the lien. But the mortgage was not executed,
hence the time was never extended and the lien never waived
thereby."
See also The Highander, ubi supra.
We are of opinion, therefore, that as the purchasing companies
did not perform the condition upon which credit was to be given, no
credit at all was given, much less a credit extending beyond the
time for the enforcement of the statutory lien.
It follows from these views that the contention of appellant
that the suit begun May 10, 1875, by the rolling mill company to
fix and foreclose its statutory lien was brought before the cause
of action accrued, and cannot therefore be treated as a compliance
with the statute, cannot be sustained, for at that date the debt
was due and the lien in force.
In our opinion, the rolling mill company had, under the statute
of Illinois, a lien upon the railroad and its appurtenances of the
Illinois River Railroad Company for the value of the materials
furnished by it and used in the construction of
Page 109 U. S. 723
the railroad superior to the lien of the trust deed executed to
George Straut on March 1, 1875, and to the lease of said railroad,
executed on the same day, to the Chicago and Alton Railroad
Company, and that the decree of the circuit court ordering the
railroad to be sold to pay the sum due for said materials so used
was just and right.
It is lastly assigned for error that the circuit court rendered
a personal decree against the Alton Railroad Company in favor of
the rolling mill company and awarded execution thereon.
The personal decree complained of was for $29,796.30. This sum
was the value, with interest, of certain iron rails, etc., sold and
delivered by the rolling mill company to the Illinois River
Railroad Company and the construction company under the contract of
August 7, 1874, which were not used in the construction of the
railroad, but were sold by the purchasing companies to the Alton
Railroad Company, and by it converted to its own use.
The circuit court found that the rolling mill company had a lien
upon said materials; that the Alton Railroad Company bought said
materials with notice thereof, and had never paid for the same, and
had alleged as a reason for its failure to pay the want of title in
the companies from which it purchased. The facts so found are
clearly shown by the record, and do not seem to be disputed. The
Alton Railroad Company, however, insists that there was no lien on
said materials under the contract of August 7, 1874, because the
contract was not acknowledged and recorded as required by the law
of Illinois relating to chattel mortgages.
That act provided as follows:
"That no mortgage, trust deed, or other conveyance of personal
property, having the effect of a mortgage or lien upon such
property, shall be valid as against the rights and interests of any
third person unless possession thereof shall be delivered to and
remain with the grantee or the instrument shall provide for the
possession of the property to remain with the grantor, and the
instrument is acknowledged and recorded, as hereinafter directed,
and every such instrument shall, for the purposes of this act,
be
Page 109 U. S. 724
deemed a chattel mortgage."
Rev.Stat. Ill. c. 95, section 1.
The theory of the appellants is that the Illinois River Railroad
Company and the construction company, being the owners by purchase
of the iron rails, retained possession of the same, and by the
contract of August 7, 1874, gave to the rolling mill company a
chattel mortgage thereon, which was never acknowledged and
recorded, and that consequently the lien fails. But the facts of
the case are not in accord with this theory. When the contract
referred to was made, the iron rails were not the property of the
purchasing companies. It does not appear that the rails were at
that time in existence, and they were certainly not in possession
of the purchasing companies. So that this is not the case
contemplated by the Illinois statute, which clearly refers to a
mortgage on personal property, of which the mortgagor is owner, and
of which he is in possession, and of which he wishes to retain
possession. The case is that of the owner -- namely the rolling
mill company -- of personal property who sells it and delivers the
physical possession to its vendee, and by the bill of sale retains
a contract lien thereon. In such a case, it is clear that the
original vendor can enforce the lien against a subsequent purchaser
who had actual notice of the lien and had not paid for the
property, and refuse to pay for it on the ground that the first
vendee from whom he bought had no title thereto. The chattel
mortgage law above quoted can have no reference to such a case.
Such an application of it would be unjust, inequitable, and
unreasonable. The law has never been so applied by the courts of
Illinois.
We find no error in the proceedings and decrees of the circuit
court. They are therefore
Affirmed.
