Chicago St. Railway Company v. Third National Bank

In 1865, by a special act of the legislature of Illinois, the Chicago & Pacific Railroad Company was organized as a body corporate, with authority to construct and operate a railroad from the city of Chicago to the Mississippi river, at a point near Savanna, both points being within the state of Illinois. In 1872 it executed a trust-beed upon its property to secure $3,000,000 of bonds. On March 9, 1876, judgment was rendered against it in the United States circuit court for the northern district of Illinois for the sum of $3,499.73, in favor of Horace Tabor. Execution was first issued upon this judgment September 9, 1876. On May 27, 1876, suit was brought to foreclose the deed of trust. After a decree in such foreclosure, and on May 1, 1879, the property was sold on an order of sale, for $916,100, to John I. Blair and others. Subsequent to April 2, 1880, but within the year prescribed by statute, the Chicago & Pacific Railroad Company redeemed the property from the sale under the foreclosure decree; the Chicago, Milwaukee & St. Paul Railway Company having advanced the money therefor. On the 19th of February, 1880, which was after the foreclosure sale, but before the redemption, the Third National Bank of Chicago brought suit in the same court against the Chicago & Pacific Railroad Company upon notes given by the company to the bank for money loaned. On the 3d of April, 1882, judgment was rendered in that suit, in favor of the bank, for $36,165.36; and on the 15th of July of the same year execution was issued thereon. On the 25th day of June, 1881, which was after the redemption from the foreclosure sale, the property of the Chicago & Pacific Railroad Company was sold, under an execution issued upon the Tabor judgment, to Albert Keep, to whom the certificate of sale was executed. The property so sold was described as follows: 'All and singular, the railroad of the Chicago and Pacific Railroad Company, as the same is now surveyed, laid out, constructed, and located in the counties of Cook, Du Page, Kane, De Kalb, Ogle, and Carroll, in the state of Illinois, including the road-bed, stations, or station-houses, depot grounds, rails, ties, fences, bridges, viaducts, and culverts, and all other buildings and structures, as well as engine-houses, machine and other shops, used in connection with said railroad.' On June 4, 1882, Albert Keep, the purchaser, assigned the certificate of sale to Alexander Mitchell, the president of the Chicago, Milwaukee & St. Paul Railway Company. The judgment debtor not redeeming within the year, the bank, as judgment creditor, on September 25, 1882. redeemed from the execution sale by the payment to the marshal of the necessary sum, $5,304.20; and this redemption money was paid to and received by Alexander Mitchell. The statute of Illinois, with reference to such redemption, provides as follows: 'Par. 20. If such redemption is not made, any decree or judgment creditor, his executors, administrators, or assigns, judgment creditor, on September 25, 1882. and within fifteen months after the sale, redeem the premises in the following manner: Such creditor, his executors, administrators, or assigns, may sue out an execution upon his judgment or decree, and place the same in the hands of the sheriff, or other proper officer, to execute the same, who shall indorse upon the back thereof a levy of the premises desired to be redeemed; and the person desiring to make such redemption shall pay to such officer the amount for which the premises to be redeemed were sold, with interest thereon at the rate of eight per centum per annum from the date of the sale, for the use of the purchaser of such premises, his executors, administrators, or assigns; whereupon such officer shall make and file in the office of the recorder of the county in which the premises are situated a certificate of such redemption, and shall advertise and offer the premises for sale under said execution as in other cases of sale on execution.' Starr & C. Ill. St. c. 77.

The proceedings had were in conformity with this section, and the marshal advertised the sale accordingly, on October 24, 1882. As heretofore stated, the redemption by the Chicago & Pacific Railroad Company was with money advanced by the Chicago, Milwaukee & St. Paul Railway Company. This advancement was made in pursuance of these proceedings, On April 1, 1880, which was subsequent to the commencement of the suit by the bank, resolutions were passed by the stockholders of the Chicago & Pacific Railroad Company, authorizing the leasing of its property and franchises to the Chicago, Milwaukee & St. Paul Railway Company, and also the execution of a new mortgage; and on the next day the first-named company executed its lease to the lastnamed company, and the two companies executed a joint trust-deed upon the same property to secure the payment of $3,000,000 of bonds, payable in 30 years. By the lease, which was for 999 years, the lessor (which will, for convenience, be called the 'Pacific Company') not only disabled itself from performing the functions and discharging the duties of its incorporation, but also transferred all its property and franchises to the lessee, (hereafter called the 'Milwaukee Company.') The consideration of the lease was one dollar, and the performance of the covenants of the lease by the lessee. The Pacific Company was largely indebted outside of the amount secured by the trust-deed. It therefore surrendered to the Milwaukee Company all the means it had of discharging its indebtedness. Among the recitals in the lease are these: 'Whereas, certain other parties to whom the said party of the second part was so as aforesaid indebted have prosecuted their several demands in the superior and circuit courts of Cook county, and other courts of the state of Illinois, and have procured divers judgments thereon, which now remain unpaid and unsatisfied of record, and are a lien upon the property of the said party of the first part, and other of said demands still remain unliquidated; and whereas, the said party of the second part, at the request of the said party of the first part, now proposes to aid the party of the first part in procuring a sufficient sum of money to redeem said property from the aforesaid sale, and to protect said property from all the aforesaid valid judgment liens, and also to extend and construct the road of said party of the first part to the Mississippi river, * * * and also to pay all taxes, charges, or assessments imposed or assessed, or which may be hereafter imposed or assessed, upon the property or premises of the party of the first part.' And among the covenants of the lessee are these. 'The said party of the second part, in consideration of the said demise and lease so as aforesaid made by the said party of the first part, hereby covenants and agrees that it will take up, pay, cancel, satisfy, and discharge the said three thousand bonds of one thousand dollars each at maturity thereof, and will pay, cancel, and discharge each and every of the coupons or interest warrants attached to the said bonds, and each of them, as the same shall become due and payable, so as aforesaid to be made and issued to the parties of the first and second parts, and will, during the continuance of this lease, at all times save the said party of the first par free and harmless therefrom, and from the mortgage so as aforesaid to be executed by the said parties of the first and second parts to the Farmers' La n and Trust Company, on the second day of April, 1880, * * * and the said party of the second part shall and will, at its own proper cost and expense, preserve and keep the railway and premises hereby demised, and every part of the same, in thorough repair, working order, and condition, and supplied with rolling stock and equipment, so that the business of the said demised railway shall be preserved, encouraged, and developed. * * * The said party of the second part hereby covenants, promises, and agrees to and with said party of the first part that at the end of said term, or other sooner determination of this said lease, the said party of the second part shall redeliver and surrender up to the party of the first part, its successors or assigns, the said demised railway and premises in as good order and condition as the same shall be delivered to the said party of the second part under this lease, and with such additions, betterments, and improvements as shall have been made thereto.'

The bonds were sold at 97 cents, and the amount necessary to redeem from the foreclosure sale was about $1,100,000. Out of the proceeds of these bonds the Milwaukee Company not only completed the construction of the entire road authorized by the charter of the Pacific Company, from Chicago to the Mississippi river, but also constructed a bridge over the Mississippi river, so as to connect this road with its own line in Iowa.

[Statement of Case from pages 281-283 intentionally omitted]

E. Walker, for appellant.

[Argument of Counsel from pages 283-285 intentionally omitted]

Huntington W. Jackson and J. H. Thompson, for appellee.

BREWER, J.