In the Matters of Howard

THESE were two motions which were heard together, as they involved a consideration of similar questions, and grew out of the same facts. The first motion was for a peremptory mandamus to the judges of the Circuit Court of the United States for the District of Iowa (the alternative writ having been heretofore issued and returned), commanding them to execute a decree of that court rendered in the case of Howard and others v. The City of Davenport and others, by distributing certain funds in its custody. The second motion was to dismiss the appeal from the final decree, rendered in a subsequent suit, affecting the distribution of those funds.

The facts out of which these cases arose, were substantially as follows:

In 1854 the legislature of Iowa incorporated a company, styled the Mississippi and Missouri Railroad Company, to construct a railroad from Davenport to Council Bluffs, in that State, with a branch to Oskaloosa. To raise the necessary funds for the construction of the road the company executed, previous to 1861, several mortgages upon its property to secure its bonds, issued at different times, amounting to over six millions of dollars. The company also received, previous to 1861, in payment of subscriptions of stock, bonds to a large amount of certain cities and counties in the State, through which the road was located, the payment of which bonds was guaranteed by a special indorsement upon each. With the guaranty of this indorsement it disposed of the bonds to different parties.

In 1865 the company became embarrassed and insolvent, and in February, 1866, a suit was brought in the Circuit Court of the United States for the District of Iowa for the foreclosure of the mortgages upon its property. In May following the suit resulted in a decree for the sale of the property, and in July of the same year a sale was made under the decree, by a master in chancery, to the Chicago, Rock Island, and Pacific Railroad Company, a corporation created by the State of Iowa. The foreclosure and sale were made pursuant to an arrangement entered into between the stockholders and the greater number, but not all, of the bondholders, and other creditors of the company, by which it was agreed that the sum of $5,500,000 in bonds of the purchasing company should be given for the property, and applied to the payment of the bonds secured by the different mortgages of the insolvent company, in conformity with a specified scale, with the exception of an amount equal to sixteen per cent. on the capital stock of that company, namely, $552,400, which should go to its stockholders.

Previous to this time Mark Howard and John Weber had severally recovered judgments against the city of Davenport, and also against the Mississippi and Missouri Railroad Company, upon certain bonds issued by that city to aid in the construction of the railroad, and guaranteed by that company. In the distribution of the proceeds to be received upon the sale of the property of the insolvent company no provision was made for the payment of these judgments, and on the 9th of July, 1866, the day on which the sale mentioned under the decree of foreclosure was made, Howard and Weber brought a suit in equity in the same court against the parties to the foreclosure suit to obtain payment of their demands out of the proceeds, which, by the arrangement mentioned, were to go to the stockholders. In their bill they set forth the judgments recovered by them against the Mississippi and Missouri Railroad Company; that the company was insolvent; that all its property had been sold under the decree of foreclosure; and that there was no other property out of which these judgments could be made than the $552,400 which was to be received by the stockholders out of the proceeds of the sale.

During the progress of the suit fourteen other persons appeared and presented claims of a similar character, to an amount exceeding seven hundred thousand dollars, against the same fund. These parties are designated in the proceedings as 'intervening claimants joining in the bill.' On application of the complainants and these intervening claimants a receiver was appointed by the court to collect and hold the fund which they were seeking to subject to the payment of their claims. This officer subsequently received from the Chicago, Rock Island, and Pacific Railroad Company, the purchasing company, in its first mortgage bonds, with interest coupons attached, the amount which was to go to the stockholders of the insolvent company, and has ever since held that same in his custody, subject to the order of the court.

In May, 1868, a final decree was rendered in the suit, adjudging that the complainants and intervening claimants were entitled, as creditors of the Mississippi and Missouri Railroad Company, to so much of the purchase-money of its property as was agreed to be reserved for the stockholders; and directing the purchasing company to pay the same, less a small sum allowed for over-payment, in cash or its bonds, to the receiver; and directing the receiver, if paid in bonds, to convert the bonds into money, and, after satisfying certain costs, distribute the proceeds to the complainants and intervening claimants pro rata, in proportion to the amounts of their respective claims, which were stated. On appeal to this court this decree was affirmed, and the mandate to the Circuit Court, issued in pursuance of the judgment of affirmance, commanded 'that such execution and proceedings be had in said cause, as according to right and justice, and the laws of the United States, ought to be had, the said appeal notwithstanding.'

Whilst the appeal was pending Frederick A. Foster presented a petition to the Circuit Court, setting forth that he was a holder of certain bonds of the Mississippi and Missouri Railroad Company, secured by a mortgage on its property, which had never been paid; that he was not a party to the arrangement by which, upon a sale of the property, as already mentioned, a certain portion of the proceeds received were to be paid to the stockholders, and insisting that the fund thus realized was applicable to the payment of these bonds, and praying for an order restraining the distribution of the fund in the hands of the receiver, and directing that upon proper pleadings an issue be joined between the petitioner and other holders of bonds who never assented to the arrangement mentioned, and the complainants and intervenors, to settle the priorities of the parties in an application of the fund.

Subsequently three other parties, McCollum, Bardwell, and McComb, presented similar petitions to the Circuit Court, setting forth that they were also holders of bonds of the insolvent railroad company, which had never been paid, and asking that the proceeds derived from a sale of its property, in the hands of the receiver, be applied to the payment of these bonds, in preference to the claims of any parties to the suit of Howard and others.

In May, 1869, the court denied the prayer of the petitioners, but allowed them to file their petitions, and required them to file a consolidated bill at the next term of the court against all the parties to the suit, setting up their respective claims with greater particularity than in the petitions.

In July following, the petitioners, Foster, McCollum, Bardwell, and McComb, filed their consolidated bill against Howard and all the other parties to the original suit, asserting their claims as mortgage bond holders to the fund in the hands of the receiver. The bonds amounted to about seventy-two thousand dollars, with large arrears of interest, for which they claimed a lien upon the fund in preference to the claims of Howard and others, and if that was not allowed, then they claimed the right, as general creditors, to share with them in the distribution of the fund.

All the defendants answered the bill, denying that the complainants had any lien on the fund as mortgages, or any right to the fund as general creditors, and contending that if they were such creditors, the defendants were entitled, as a reward of their superior diligence, to be first paid out of the fund. No objection was made by them that after a final decree, affirmed by this court, directing a distribution of the fund, it was too late for the complainants to file their bill to reach the fund, or to share in its distribution.

In November, 1869, the Circuit Court heard the case and rendered a final decree, rejecting the claim of McCollum, and allowing the claims of the other three complainants, Foster, Bardwell, and McComb, to a limited amount as general creditors.

From this decree the complainants appealed: McCollum, because his claim was entirely rejected; Foster, Bardwell, and McComb, because they were allowed to come in only as general creditors. The appeal was now pending in this court.

After this appeal was perfected, Howard and others, the complainants and intervening claimants in the original suit, applied to the Circuit Court for a rule on the receiver to proceed to execute the decree rendered therein by the distribution of the fund in his hands, as provided by the decree in that case, notwithstanding the appeal of Foster and his associates, or of any of them; or in case the court should be of opinion that the motion could not be granted in full, that then the receiver should be ordered to proceed to execute the decree, except as to such portion of the fund as to which execution was suspended by order of the court made at the May Term. This motion the Circuit Court denied.

The same parties then applied to this court for a writ of mandamus to the judges of that court, commanding them forthwith to execute the decree rendered at the May Term, 1868, and affirmed by this court, or to execute the decree by distributing all the fund, excepting sufficient to cover the claims of the appellants. This court, as is usual in applications for a mandamus, on a prim a facie showing, allowed the alternative writ, which being returned, the parties now asked for the peremptory writ. The parties at the same time moved to dismiss the appeal from the final decree in the above suit of Foster and his associates.

Messrs. Grant and Rogers, in support of the motions:

1. A judgment or decree affirmed by this court cannot be altered by new pleadings or evidence in the court below, but must be executed in the exact manner in which it is affirmed. Such is the rule in the State courts.

The question has been conclusively settled in this court by a series of decisions. In Sibbald's case this court said that 'no principle is better settled, or of more universal application, than that no court can reverse or annul its final decrees or judgments, for errors of fact or law, after the term at which they have been rendered, unless for clerical mistakes, or to reinstate a cause dismissed by mistake; from which it follows, that no change or modification can be made which may substantially vary or affect it in any material thing. Bills of review in cases of equity, and writs of error coram nobis, at law,' they say, 'are exceptions, which cannot affect the present motion.' They add:

'When the Supreme Court have executed their power in a cause before them, and it requires further action, it sends a mandate to the court below. Whatever is before this court, and is disposed of, is considered finally settled. The inferior court is bound by the law of the case, and must carry it into execution according to the mandate. They cannot vary or examine it for any other purpose than execution, or give any other or further relief, or review it upon any matter decided on appeal for error apparent, or intermeddle with it further than to settle so much as has been remanded. After a mandate, no rehearing will be granted. It is never done in the House of Lords. And on a subsequent appeal nothing is brought up but the proceedings subsequent to the mandate.'

2. If it be argued that Foster and others were not parties to the decree and not bound by it, we answer, that if all the necessary parties were not before the court when the case was originally heard, it was the duty of the court to require the plaintiffs to bring them in, and a failure to do so was ground of error in that cause.

But this court, in affirming the decree, decided that neither the bondholders nor stockholders were necessary parties, and they held, by implication at least, that no other parties were necessary, and the plaintiffs in Howard's suit had a right to file a bill as general creditors for themselves alone, and thus gain as at law a preference by the judgment in their favor over other creditors of the same degree who may not have used equal diligence. No right to intervene in this cause.

Messrs. F. Withrow and S. W. Fuller, contra, citing Gillespie v. Alexander, Williams v. Gibbs, and other English and American cases.

Mr. Justice FIELD, after stating the case, delivered the opinion of the court, as follows: