Fogg v. Blair (133 U.S. 534)

On the 16th of February, 1867, the St. Louis & Keokuk Railroad Company was incorporated by the legislature of Missouri to construct and operate a railroad from some suitable point on the North Missouri Railroad, not exceeding 30 miles west of St. Charles, in St. Charles county, to some point near the mouth of the Des Moines river, on the northern boundary of the state. Under its charter the company located its road between the points designated, and constructed a portion of it, and graded other portions, and in this work expended several hundred thousand dollars. The appellant, Josiah Fogg, held a demand against this company for work and advances on its account, and on the 22d of September, 1870, an adjustment and settlement of the amount was had between them; and it was found that the company was indebted to him in the sum of $9,547.75. Afterwards, on the 13th of June, 1872, a corporation known* as the 'St. Paul, Hannibal & Keokuk Railroad Company' was formed under the general law of Missouri, to construct and operate a railroad, with one or more tracks, from the city of St. Louis to a point near the north-east corner of the state, opposite to Keokuk, in Iowa, with a branch in Lincoln county, to its coal fields, from a point near Troy, and a branch up the valley of Mill creek, from a point where the line crosses the creek. To this new corporation the old corporation, upon the request and direction of the holders and owners of a majority of its stock, on the 4th of March, 1873, sold and transferred its entire road, and all the branches, buildings, machinery, and appurtenances belonging to or connected with it. In consideration of the transfer, the new corporation, that is, the St. Louis, Hannibal & Keokuk Railroad Company,—among other things, agreed to assume, pay, and satisfy all the debts and liabilities incurred by the first company, or legally imposed upon it, for right of way, station grounds, ties, and bridging, and also to perform various contracts of that company which are specially mentioned. The new corporation was composed principally of the same persons and the same officers as the old corporation, and among the contracts assumed was one with the Missouri & Iowa Construction Company for building the road, and it stipulated that in payment of this work bonds of the company should be issued secured by a first mortgage on its property. Pursuant to this contract, the new company, on the 1st of October, 1872, executed to Dewitt C. Blair, of New Jersey, and Clarence C. Mitchell, of New York, a mortgage or deed of trust of its railroad, then constructed, or that might thereafter be constructed, with its right of way, buildings, and appurtenances then existing, or which might afterwards be acquired, its rolling stock and machinery of every kind, and all its franchises and property, to secure bonds of the company issued on that day, in sums of $1,000 each, to the amount of $4,200,000. Afterwards this mortgage was taken up and canceled, and on the 1st of August, 1877, a new mortgage or deed of trust was executed by the company to Dewitt C. Blair, of all its property situated between the cities of St. Louis and Hannibal, in Missouri, and its franchises, to secure the payment of its bonds issued of that date, amounting to $1,680,000. The interest was not paid upon these bonds, and the trustee, on the 6th of February, 1884, commenced a suitin the circuit court of the United States for the eastern district of Missouri, to foreclose the mortgage and sell the property. The bill not only made the mortgagor a party defendant, but also certain persons named, of whom Josiah Fogg was one, representing that they claimed to have liens, as judgment creditors, incumbrancers, or otherwise, upon the mortgaged premises; but alleging that their interest, if any, accrued subsequently to the lien of the mortgage, and was subordinate thereto.

As mentioned above, on the 22d of September, 1870, Josiah Fogg had a settlement with the St. Louis & Keokuk Railroad Company, by which the amount due him by the company on that date was agreed to be $9,547.75. For this amount and interest he brought suit in the circuit court of the United States in April, 1881, and on the 3d day of October, 1882, he recovered judgment for $16,439.63. Execution issued thereon having been returned unsatisfied, in May, 1883, he brought suit, on the equity side of the court, against the St. Louis, Hannibal & Keokuk Railroad Company to have that judgment declared a lien upon its property, and to compel that company to pay the judgment, and to enjoin it from selling or incumbering its property until such payment was made. The suit was brought against both the old and new company, and resulted in a decree entered on the 5th of May, 1884, adjudging that the two companies were liable jointly and severally for the judgment and interest, which He sets forth the origin of his trustee for all the creditors of the old company; that its property was thus affected with a trust, and could not be subjected to a mortgage so as to give priority to the bonds secured over the demands of creditors existing at the time of such transfer; and that the trustee, Dewitt C. Blair, took the bonds of the company for John I. Blair and the executors of Moses Taylor, deceased; and charges, upon information and belief, that he took them with full notice of the claim of the complainant against the old corporation; and that the suit to foreclose the mortgage was a scheme designed to cut him off from enforcing his demand, and to have the railroad and its appurtenances sold under a decree of foreclosure, and bought in by said John I. Blair and the executors of Moses Taylor at a price greatly under their actual value. To this cross-bill the trustee, Dewitt C. Blair, as defendant, answered, denying its allegations, some of them positively and otherw upon information and belief,-positively the allegations that the transfer of the property of the first corporation was made in fraud of the rights of the complainant, and that the second corporation took the property with knowledge and notice of the debt owing to him by the first corporation. A replication was filed to the answer, and proofs were taken. Upon the hearing, the court dismissed the cross-bill, holding that the claim of the complainant was not entitled to priority over the bonds secured by the mortgage. 25 Fed. Rep. 684, and 27 Fed. Rep. 176. From this decree the cas is brought by appeal to this court.

James Can, for appellant.

Walter C. Larned, for appellee.

Mr. Justice FIELD, after stating the facts as above, delivered the opinion of the court.