Chicago v. Union Rolling-Mill Company/Opinion of the Court

by William Burnham Woods

United States Supreme Court

109 U.S. 702

Chicago  v.  Union Rolling-Mill Company

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 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, Ch. P. (5th Amer. Ed. 793: '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 ade, 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 cases. It was laid down by the lord chancellor, in Cooper v. Lewis, 2 Phil. 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 co-defendant, 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 has acquired rights, either as against a complainant or against a co-defendant 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, Ch. 255; Biscoe v. Brett, 2 Ves. & B. 377; Collins v. Greaves, 5 Hare, 596; Gregory v. Spencer, 11 Beav. 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 Pa. 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 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 that therefore, under the thirty-eighth 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 thirty-eighth 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 grea 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 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, § 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: '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 perorm, any work or labor for such construment, 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 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 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 material-man 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 any one claim that they could not assert their lien? The lien attaches to and i cumbers 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 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 material-man 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 material-man ought not to be bound by it, but should be remitted to his rights, independently of the contract. The Highlander, 4 Blatchf. 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 indorsers, and with the bonds of the construction company secured by the deed of trust to Norton as collateral secuity. 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 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 statu ory lien, was brought before the cause of action accred, 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 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 & 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 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 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 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 deemed a chattel mortgage.' Rev. St. Ill. c. 95, § 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 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 fir t 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.

Massachusetts Mut. Life Ins. Co. v. Union Rolling-mill Co. is an appeal from the same decree affirmed in the preceding case. The insurance company, by leave, filed an intervening petition, claiming to be the owner of 45 of the bonds secured by the trust deed to George Straut. It has never proved its possession or ownership of any of said bonds, either before the master or the court. If it had it would be in the same position as any other holder of said bonds, all of whom, so far as the questions raised by this appeal are concerned, were represented by Dumont, the complainant in the original bill. These questions have all been decided in the preceding case.

In this case also the decree appealed from must therefore be affirmed.

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