Minnesota Company v. Chamberlain Graham Scott

THESE were appeals from decrees of the Circuit Court for Wisconsin, sustaining demurrers to two bills of complaint. Both bills and the essential question in each were the same; certain small differences between the bills being noted further on. The case was this:

In September, 1857, the La Crosse and Milwaukie Railroad Company, a company organized to build a railroad from Milwaukie to La Crosse, across the State of Wisconsin, but whose road was not then completed, entered into articles of agreement with Chamberlain, for the double purpose of insuring the completion of the road and securing to him a large debt, alleged to be due from the company. By this contract the road was leased to Chamberlain, in consideration that he would apply the income to the working and extension of the road, to the payment of interest on debts of the company, and to the payment of Chamberlain's own debt, on satisfaction of which, either by application of the income or otherwise, the road was to be restored to the company. After the execution of this contract, and in the following month, the company confessed a judgment in his favor for $629,089.72. Afterwards, and in the same month, Cleveland obtained a judgment against the company for $111,700.71.

To enforce the satisfaction of this judgment, by sale of the road and other property of the La Crosse Company, as for brevity the corporation was usually styled, Cleveland filed his bill in the District Court of the United States for the District of Wisconsin, against that company and Chamberlain, with whom were joined some other defendants.

In this bill, according to the account given of it by the complainants in the present cases, Cleveland insisted that the lease to Chamberlain and the judgment confessed in his favor were without consideration and in fraud of creditors, and that they hindered the collection of his judgment, and he prayed that they might be declared void. The La Crosse Company and Chamberlain answered, denying all fraud, and Cleveland took issue by replication.

The court found against the respondents, and at January Term, 1859, decreed that the articles of agreement between the La Crosse Company and Chamberlain 'be and hereby are vacated, annulled, and made void, so that the same shall not be of any force and effect whatever,' and that 'the judgment and all executions and proceedings thereon be and hereby are vacated, annulled, made void, and set aside, so that the same shall have no effect whatever.' The decree also 'perpetually enjoined and restrained' Chamberlain from 'controlling or meddling with the railroad or anything belonging to it under the articles of agreement.'

In 1860, a company-called for brevity the Minnesota Company succeeded, through a purchase, and through a subsequent organization, such as is allowed by the statutes of Wisconsin, as a railroad company, in order to take and manage the property acquired by the purchase, to all the property, franchises, and rights of the La Crosse Company; subject, however, to prior incumbrances.

This Minnesota Company being thus interested in the matter, alleged by their bill below (the first of the two cases now under review), that by this decree the agreement and the confessed judgment were made absolutely void, not only against Cleveland, the judgment creditor, but also as between Chamberlain and the La Crosse Company, and that Chamberlain, notwithstanding this decree, having purchased the Cleveland judgment, remained in possession of the road, receiving large sums of money, amounting altogether to more than $200,000, for which he was bound to account. They prayed, therefore, that Chamberlain might be ordered to apply to the payment of the Cleveland judgment, from the money so received, a sum sufficient for that purpose; that he might be ordered to account; that he might be credited with the sum applied to the Cleveland judgment; that the balance be ascertained; that the Cleveland judgment be ordered to be cancelled; and that the ascertained balance, if against Chamberlain, be paid to the Minnesota Company, or, if in his favor, by the Minnesota Company to him. They also prayed further relief.

The bill of Scott & Graham-the second of the two bills below and now here for review-was, as already signified, essentially like the first, that of the Minnesota Company. Like it, it did not seek specifically to set aside Chamberlain's lease; but while prominently making its alleged frandulent nature inducement in this case, went on the assumption that the lease and judgment were already vacated as to everybody and for all purposes by the decree of January, 1859. The bill, however, in this second case, did allege, also, that the lease was ultra vires, and void, therefore, on its face; as also void, because, by its terms, hindering creditors; but its general tenor was, as already mentioned; and as in the first bill the Minnesota Company asked that the fund arising from the working of the road should be applied in satisfaction of the Cleveland judgment, for an account, &c., so the only prayer of Graham & Scott was that the same money might be applied in payment of their debt.

The essential question in both cases, therefore, considered by the court, was this: whether the lease made to Chamberlain, and the judgment confessed in his favor by the La Crosse Company, in 1857, was annulled as between the parties to the lease and judgment, by the decree of the District Court of the United States for the District of Wisconsin, at the January Term, 1859, or only as against Cleveland, the judgment creditor, in whose suit against the company and Chamberlain the decree was rendered?

The court, it may here be said, had been informed by the counsel for the Minnesota Company and for Graham & Scott, as well as by the counsel for Chamberlain, that there was now pending in the Circuit Court of the United States for the District of Wisconsin a suit, brought by the company against Chamberlain, for the specific purpose of setting aside the contract between Chamberlain and the La Crosse Company.

Messrs. Carpenter and Cushing, for the appellant: The decree was not one merely postopening the lease and judgment of Chamberlain as to other creditors, but one which annulled the lease and vacated the judgment. The language of it is of that kind, in regard to which it is impossible to attempt to give it strength; as impossible as to prove an axiom; or to reason into force a seal plainly set upon a bond. No illustration can make the decree plainer; for no language can be more specific, complete, or absolute, than that of the decree itself. When a lease is 'vacated, annulled, and made void, so that the same shall not hereafter be of any force or effect whatever; and the lessee is perpetually enjoined and restrained' from claiming or doing anything under or by virtue of the lease; can anything more be done to complete its destruction? When a judgment is 'vacated, annulled, made void, set aside, so that the same shall have no further effect whatever,' can it be asserted that the judgment is good as between the parties to it, and remains a lien upon the debtor's property against all the world, except one? If this lease and judgment have any existence after the sweeping decree above quoted, then it is not in the power of any court to destroy either of them. By nothing, in short, but by violence upon language, can this decree be read otherwise than as it is written,-a clear, complete, absolute annihilation of both lease and judgment, to all intents and purposes, and as to all persons and parties.

But three parties, it will be remembered, were before the court.

1. Cleveland, a judgment creditor.

2. The Railroad Company.

3. Chamberlain.

It is certain Chamberlain could not thereafter manage the road under his lease, for he was 'perpetually enjoined and restrained.' The decree did not authorize Cleveland to work it, or in any way interfere with it, by appointing a receiver or otherwise. Who was to work it? Manifestly the railroad company and no one else. In the nature of things, the court must have intended that the company should resume control of the road after Chamberlain was enjoined. The court could not have intended that a great public enterprise like the one in question should be abandoned, its franchises become forfeited, and creditors, and everybody else connected with it, be ruined outright. It is impossible to say that this decree did not change the relations of Chamberlain and the company, inter se, as to this great property. It bound Chamberlain hand and foot, not for a time, nor for a purpose, but absolutely, perpetually, forever. It manifestly proceeded upon the ground, that the lease was an unauthorized act of the company, ultra vires, void as between the parties, and as between the parties and the public; and so it extirpated the lease, trampled it under foot and out of existence. It was no longer to be any protection to Chamberlain in his usurpation of great corporate franchises; no longer to protect the company in its evasion of its duty to work this road itself. And the moment the decree was enrolled, it became the right and the duty of the company to resume its abdicated franchises, and exercise them for the public benefit, according to its charter obligations to the State, and neither Chamberlain nor any one else could interfere.

It is the boast of a court of equity, that it does complete justice, and not by halves; that its decrees not only settle rights as between plaintiff and defendants, but as between the defendants themselves. The reason given for making all persons interested in the subject-matter parties defendant is, that the court may by one decree accomplish what would otherwise require many suits, and may at once adjust the rights of all parties interested. This its decrees would not do, if they were not as binding among defendants in subsequent litigation, between themselves, as between the plaintiff and the defendants. Cases establish this quality of decrees in equity. Farquharson v. Seaton is a strong authority to show that this decree would be conclusive in any subsequent litigation upon the subject between Chamberlain and the company. So is Chamley v. Lord Dunsany, in Irish chancery; a case decided by Lord Redesdale, as able a chancellor as ever sat.

The counsel also argued extensively on a comparison of the charter-powers of the La Crosse Company, which were exhibited in the record, with those exercised in the lease to Chamberlain, also shown, that the lease made by the company was beyond their charter-powers, and was void as ultra vires; that it was void, therefore, absolutely and irrespective of intent. They argued also that independently of this, it and the judgment were, in fact, made to defraud creditors, and that both were void on that score also.

After full argument by Messrs. Cary and Carlisle, contra--

The CHIEF JUSTICE delivered the opinion of the court.