Porter v. Pittsburg Bessemer Steel Company/Opinion of the Court

The appellees in this case petition for a rehearing. The case was decided at the present term, and is reported in 120 U.S. 649, ante, 741. The application for a rehearing covers all the grounds discussed in the opinion of this court, and others which, though not touched upon in the opinion, were fully considered by the court in arriving at its judgment. Upon all the questions covered by the opinion we adhere to our conclusions, and we see nothing in the special grounds taken in regard to the cases of some of the appellees to warrant a different result from that arrived at on the former hearing. It is proper, however, to notice two of the grouns urged in respect to two of the appellees.

The appellee Irwin claims that, by virtue of the lien laws of the state of Indiana, he recovered a judgment for the amount of his claim against the railway company, which became a lien prior to the lien of the mortgages; and that, notwithstanding an attempted redemption by John C. New, the trustee in the mortgages, the lien of the judgment remained good (1) because the redemption laws of the state of Indiana did not apply to the case; and (2) because New did not comply with such laws in regard to redemption in such manner as to destroy the lien of the judgment. It is contended on the part of Irwin that the Indiana statute does not authorize a redemption from a sale of railroad property; that New had no lien on the property sold; and that a redemption redeems simply from the sale, and does not discharge the property from the lien, but only postpones any balance remaining due on the lien to the amount paid for redemption.

The decree of the circuit court of Warren county, made in April, 1884, in the suit to foreclose the lien, brought by Irwin, forecloses the lien for $11,815.70, as a lien on the line of the railway for a certain distance in Warren county. In June, 1884, execution was issued for a sale, and on the twelfth of July, 1884, the property was sold by the sheriff to Irwin for $500, and a certificate of purchase was issued to Irwin; stating that he would be entitled to a deed of the property in fee-simple in one year from the twelfth of July, 1884, if the same should not be redeemed by the defendant, or any other person entitled thereto, paying the purchase money, with interest at 8 per cent. per annum before the expiration of the one year. On the tenth of July, 1885, and within the year, New, as trustee in the mortgages, paid to the clerk of the circuit court $539.78, in redemption of the property so sold, that being the amount necessary at that date to redeem the property.

It is very clear that, by the sale of the property on the execution, the lien of Irwin upon the property was exhausted, as a lien superior to the mortgages, upon that part of the railway which was covered by such superior lien. The property redeemed by New was the property sold under the decree in favor of Irwin. The redemption by New did not have the effect to restore the lien of the decree upon the property sold and redeemed. The redemption was not made by the judgment debtor, so as to vacate the sale and reinstate the lien for the balance of the judgment which the purchase money of the sale did not pay. The redemption was made by another and a subsequent lienholder, who redeemed for his own benefit, and the benefit of those for whom he was trustee, and not for the benefit of Irwin.

This we understand to be the meaning and effect of the statute of Indiana in regard to redemption. Rev. St. Ind. 1881, §§ 770-776. We are not referred to any decisions of the courts of Indiana, giving any other construction to these provisions. Section 774 gives the right to redeem to a person having a lien otherwise than by judgment. The statute gives no right to Irwin to redeem from New. The sale of the property on the foreclosure of the mortgages given to New, subsequently to the redemption by New, conveyed the redeemed property to its purchaser on the sale, free and discharged from the lien under the decree in favor of Irwin, on which the sale redeemed from was made, and none of the proceeds, of the sale on the foreclosure of the mort gages given to New can be applied to pay the unpaid portion of Irwin's decree. If the grading, embankment, and excavation done by Irwin was subject to a sale on execution under his judgment, the redemption law applies to the case, and was complied with by New.

It is claimed on behalf of the Smith Bridge Company that the contracts between it and the railway company, for the construction of the bridges, provided that the bridges should remain the property of the Smith Bridge Company until the contract prc e for them should have been fully paid, and that, in default of such payment, the Smith Bridge Company should have the right to remove the bridges and bridge material; that the mortgages became a lien on the bridges only as the bridges became the rightful and legal property of the railway company; that Porter, before he purchased the bonds, had notice of the equities of the Smith Bridge Company growing out of their contracts; and that the First National Bank of Chicago had like notice before it acquired any interest in the bonds. The contracts of the Smith Bridge Company were made in October, 1882, and in July, 1883. The bonds were pledged to Dull & McCormick in January, 1882, and passed from them to Drexel, Morgan & Co., in January, 1883. The bridges became a part of the permanent structure of the railroad, as much so as the rails laid upon the bridges, or upon the railroad outside of the bridges. Whatever is the rule applicable to locomotives and cars, and loose property susceptible of separate ownership and of separate liens, and to real estate not used for railroad purposes, as to their being unaffected by a prior mortgage given by a railroad company, covering after-acquired property, it is well settled, in the decisions of this court, that rails and other articles which become affixed to and a part of a railroad covered by a prior mortgage will be held by the lien of such mortgage in favor of bona fide creditors, as against any contract between the furnisher of the property and the railroad company containing stipulations like those in the contracts in the present case. Dunham v. Railway Co., 1 Wall. 254; Galveston R. R. v. Cowdrey, 11 Wall. 459, 480, 482; U.S. v. New Orleans R. R., 12 Wall. 362, 365; Dillon v. Barnard, 21 Wall. 430, 440; Fosdick v. Schall, 99 U.S. 235, 251.

In regard to the alleged notice to Porter and to the First National Bank of Chicago, no such notice was given until after Dull & McCormick and Drexel, Morgan & Co., had acquired their rights as bona fide holders of the bonds; and Porter, by purchasing the bonds from Drexel, Morgan & Co., acquired all their rights, and those of Dull & McCormick, as shown in the former opinion; and those rights were free in their hands from any notice of any claim of the Smith Bridge Company. Commissioners v. Bolles, 94 U.S. 104, 109; Montclair v. Ramsdell, 107 U.S. 147, 2 Sup. Ct. Rep. 391.

An error was committed in the former opinion (page 657) in stating that each of the five appellees knew of the pledge of the bonds to Drexel, Morgan & Co., for the loan, and knew that they were getting a part of the money loaned by Drexel, Morgan & Co. This was not true in regard to all of the five appellees, but was true in regard to only some of them. The error does not affect the result on the merits.

The application for a rehearing is denied.