this :afteetithe'tlgMsloflhol'ders ;{)f bonds covered by separaw th0rtgttgHoIl l tMi.:tl8everaJ. roads,' who exchange theirr!bondl'l'fol' the new! bonds.,· .All' that is! now decided is, that the mortgage'setup;in:theori:gihaJ bill Central Trust Company of New')York, npoxfthe franchises,propertY,atld assets of the<'Port Royal & Western'Cal'olina Raifway' GOIllpany, is a good mOrtgage, and that :the rights of bona fide holders ,of the bonds isand without ,notice, will be protected rand kis so ordered.: The crossbill will be retained for further:p,rl)ceedings in this,c81'use, and will not be diSmissed.
.'fr " ,

,GORDON et al. v.,NEWMAN., i(Clrcult Court (jf Appeals, Fifth! Circuit. June 25, 1894.) 'I ' , ,No. 243.
'I'

,f9r foreclos'];Ire of raHroad mortga&,es qirected that the' ,p,ropei:ty be any .and ,!ill' liens .t>ri8f to the lien' of the.r' mortgages and had Mt been' and" adjudicated, and .sjlbjeqt· to (:el'ijficMes authorized, declaring said 'f: afirsj:llnd 011 them ll;nd ·.. the ,4.fter the s\lle. a made. Qn an 1 "'clMnii'of it mecHanic's llei:l,onp:l,rtoHheprop$rty;presented before the certmdtes Were; authotlzed. allOWed such lien as a sllPslstJngflrst llellon thepl'operty.8Jid payb:l'ent of· the amount "., bY, tb ill U .. .. ..rchase,r, . . l1!l.'QIl(l,efa.u.lt., .a .... the. ,p.r9pe.rty:. an.d this ,d.ecree' . aft)rmed,?u appeal; ):Iy thesuprerpe court", that.lti;l enforce'ment't!otiId pot by of certificates claim't'1hg,ptloritY'0'\tell 1'such' Hen. as they"were bouij(lll 'by: the decree as and: because an inllunction fpr:such ptJrpose,' in effect, stayed of ,final de<;1;ee or the, supl'emecour:t. ,

CERTIFIC,ATES-PIUORITY OF.

,i:TWs'!was a suit. by ,for .an injunction t(l

Strobel & of a decree.

0Ilfue.,9tb of Januaw, :theGenulI.I'r!:pst COlOPiuW of New York filed a.gainst the ShefIield& Birlphigham coat;, troll & RailWaY 'Company, in the clrCUitcourt of the UnltedStates for' the \tiorthern dlstI'icfof Alabama, its bill WfQreClose two certain mo,r1:gages, ,iOn the 12th . of Janual'Y a receiver 'Was appointed" and took of tbe. mortgagep w,-opero/. On the 11th Febr;l,1R17, Gordol1,. .Lareau, a lien 'me three furnaces 'and one acrll .of land which were alsocovijted by the ,mortgages sought to be foreclosed in t1iesuit just referred to. a request 'Was filed by' the receiver, asking authority to, issue amount of$l50,OOO tor tPe purpose of raising mOJ;lei, to. pay 1;a;x:es on a P\?l'tl0n. of the land,a,ndfor other objects stated in the prayer. This petition was granted on the 11th otJuly, 1889. The issue .of receivet"scertificates was consented .' \:1> by the trustee under the mortgage, and the interlocutory order: authorizing the certificates::llltatedthat they were 1 ·, a fir,s.t..lien. R,n t4.e w h Q.,.le:.:J?l.'O.pertiV.i.· . n ()lJ,th . .. Of. .. . .. .. ...· 188'J., . a final decree .. of forec1psure waseJ,ltered ,on bill .of .· the Central 'J.1rust Company, the decree;am6ng as follows: 'It is ,further ordered" ndjudged, mil' :that' Bttill 'snle· shall·; be made BUPjeet to any and all .-UeIlft 1:eo'lfe11ing or etlilbl'acing said,pr.ol!lerty:;,:or premises, or ally part thereof, e. u.ppn. '.!il.'14;P,rope..rt.. r.l:Qr'. to. the lie.u .Of t1l e mortga.gas. . .. .. ,this .S:Uitl uAt,Dee.n ascertained. ,anll adjudicated 'b:V: this'· ¢blfrt,!IDd su,bject, to ,ilie receiver's cettiflcates heretofore autl1M'ifJMhtlj he Issued by saitl i J. '0;1,dl1ldnberlain, receiveri. to an amount
t.

·GORDON,

687

not exceeding one hundred and fifty thousand· doUars, said receiver's certificates being a first and prior lien upon the said properties, as between them and the two mortgages aforesaid, or either of them; and the amount of said receiver's certificates issued and constituting such lien as set forth in Schedule B, annexed, and made part of this decree." This decree was subsequently modified in the following particular: "That there be stricken from said decree these words, 'and expressly subject to the receiver's certificates heretofore authorized to be issued by said J. G. Chamberlain, receiver, to .an amount not exceeding one hundred and fifty thousand dollars,' and that in the place and stead of said words there be inserted these words, 'and expressly subject to the receiver's certificates heretofore authorized to be issued by said J. G. Chamberlain, receiver, to an amount not exceeding one hundred and twenty-five thousand dollars,' and that the twenty-five thousand dollars .of said certificates disposed of by Charles D. Woodson-the same being five certificates of five thousand dollars each, and numbered 8, 9, 10, 11, and 12, dated October 10, 1892, and set forth in the Schedule B of said decree-be not included in said amount of one htmdred and twenty-five thousand dollars; but that the purchasers of said property at the sale upon said decree take the same subject to the right to resisf the payment of said five certificates as disposed of by said Woodson, and that the validity of said five certificates be adjudicated only in this court, and proper case to be made by the parties in intereElt" On the 3d day of December, 1889, under the original and modifieddecree, the property was sold. The sale was dUly confirmed, and a deed made to the purchasers. On the 24th day of June, 1890, a decree was entered, "On the intervention of Gordon, Strobel & Lareau, as follows: "It is further ordered, adjudged, and decreed that the interveners, Gordon, Strobel & Lareau, dO have and recover of the claimant, the Sheffield & Birmingham Coal Iron & Railway Company, as recommended in said master's report, the sum of fifty-seven thousand, eight hundred and eight and twelve one-hundredths dollars ($57,808.12), with interest thereon at six per centum (6%) per annum f.rom the 18th day of December, 1888, untiJ paid, and all costs of this intervention be taxed, and that the mechanic's lien, as given by the laws of the state of Alabama, and claimed as set forth in the intervention on file, be, and the same is hereby, fully recognized and allowed as being a subsisting first lien upon the property· specifically described in said intervention and exhibits. And whereas, the said property, Which, at the filing of the intervention in this case, was in the possession of the court, has been since sold, conveyed, and delivered under the decree rendered in tIns cause, but subject to whatever lien or claim which may be allowed in this case, it is further ordered, :adjudged, and decreed that the said purchasers of the said property do pay the aforesaid judgment of fifty-seven thousand eight hundred and eight and twelve one-hundredths dollars ($57,808.12), with interest as aforesaid, and all costs as aforesaid, within twenty days after the filing of this decree, and that in default thereof an order for the resale of. said property for the satisfaction ()f the judgment aforesaid may issue." From this decree, an appeal, operating as asupersedens, was prosecuted to the supreme court of the United States. In the meanwhile the holders of the receiver's certificates enumerated in the modification of the decree of foreclosure filed their petition of intervention ln the foreclosure suit to enforce against the purchasers at the sale the said ·receiver's certificates. The court below having adjudged in their favor, an .appeal was prosecuted to this court, and the judgment below was affirmed. Alabama Iron & Ry. Co. v. Anniston Loan & Trust Co., 6 C. C. A. 243, 57 Fed. 25. After the affirmance of this judgment to enforce the payment of the $25,000 of certificates, an order for the sale of the property was entered, and on the 22d day of January the property was sold. Thereafter, the judgment rendered in favor of Gordon, Strobel & Lareau was affirmed by the supreme court of the United States, and upon the filing of the mandate of that court a. decree was entered recognizing the claim of Gordon, Strobel & Lareau, as llbove stated, and directing the sale of the property to enforce their lien. Thereupon, Isidore Newman, Sr., averring himself to be the ho:der of $110,000 of the receiver's certificates, tiled a bill for an injunction, In which he sub· stantially set out (1) that Gordon, Strobel & Lareau. had no mechanic's lien upon the' property, beclluse their claim for a lieu had not been properly reo

688

FEDDALBEPOBTER,:vol.

62.

corded ,undet':the laws. of Ala1iama;(2) that the'receiver's certificates held by complainant ranked the claim of Gordon, Strobel & Lareau, and were to be paid from the proceeds {If the property in preference to .the lien' 'Which. had been adjudged in favor of QQrdon, Strobel & Lareau; (3) that the whole property, consisting of the furnaces, appurtenances, and seventy thousa)1d acres of coal land, was one concern; that the separate sale of the portion on which lien of QQrdon, Strobel & Lareau was asserted would materially injure his (Newman's) rights, An injunction issued, restraining the enforcement of the decree in favor of Gordon, Strobel & Lareau, and from the order so issuing the injunction an appeal was prosecuted to this court.

W. A. Gunter, for appellants. J. D. Ronse and Wm. Grant, for appellee. Before WIDTE, Circuit Justice, and LOCKE and PARLANGE, District. Judges. WHITE; Circuit Justice, after stating the case, delivered the opinion of the court. . The claim of Gordou, Strobel & Lareau had been presented by way ·of intervention at the time the receiver's certificates were ol'dered' to be issued. Their .lien was recognized by the final dein the suit, and was· affirmed by the supreme court of the United States. To these decrees the holders of the receiver's certificates were necessarily privies. They took the certificates SUbject to the lis pendens, and were therefore bound by the final decree. The attack, therefore, on the lien is without merit, as the complainant in injunction is estopped, by the force of the thing .adjudged, from assaHing the lien. Like reasoning controls the contention that the receiver's certificates are prior in rank to mechanic's lien. The final decree for the foreclosure of the mortgage directed that the property be sold "subject to any and all liens covering and embracing the property or premises, or any part thereof, which constituted liens upon the said property to the lien of the mortgages foreclosed in this suit, and which have not been ascertained and adjudicated by this court." This language, in unambiguous terms, recognizes the paramount nature of the mechanic's lien., ,After doing so, the decree adds, "and expressly subject to the receiver's certificates heretofore authorized to be issued; * * * said certificates being a first and prior lien upon the said properties, as between them and the two mortgages aforesaid, or eitb,erof them." . The words, "as between them and the mortgages," are clearly words of limitation, restricting the priority. of the receiver's certificates to rank over the mortgages, and not to rank over the mechanic's,lien which had been just previouslyi'ecognized as being unquali1iedly first in rank. Any other construction would render the words, "as between them and the mortgages," entirely useless and nugatory. This construction of the final decree in the foreclosure suit was adopted in the judgment which disposed of the intervention of Gordon,Strobel & Lareau. That judgment directed tl:\at "they be paid the sum of fifty-seven thousand, eight hundred and eight and twelve one--hundredt'hs dollars ($57,808.12), with interest, and that the mechanic's lien, as given by the laws of theliltateof Alabama, * * * be, and the

the

GORDON V. NEWMAN.

689

same is hereby, fully recognized and allowed as being a subsisting first lien upon the property." The remedy provided in the decree for the enforcement of the claim emphasizes the priority accorded to the amount secured by the mechanic's lien, since it directs that the sum be paid by the purchaser, and that in default of such payment within 20 days the property be sold. That the holders of receiver's certificates depend for their ultimate rank upon the final decree in the cause where the certificates are issued is beyond question. A text-book thus states the rule:
"'l'he holders of these securities must see to it that in the order distributing the purchase money the proper provision is incorporated for their redemption, because, if once the property is sold, and the court makes a final decree without providing for the payment of the certificates, there is an end of the matter. * * *" Beach, Rec. par. 401, p. 332.

The matter was well considered in Mercantile Trust Co. v. Kanawha & Ohio Ry. Co., 7 C. C. A. 3, 58 Fed. '11. In that case, Circuit Judge Taft, in expressing his own and the opinion of Jackson, Circuit Judge, and Barr, District Judge, said:
"Does the Adams Express Company, as a holder of receiver's certificates, stand in any better position than if it bad been present by counsel in court when the final decrees of confirmation, release, and distribution were entered, objecting to the same? It is very clear that it does not. When the Adams Express Company received from Sharp the evidences of indebtedness on which it now relies for its lien, it was informed by what was written thereon that Sharp was a receiver acting under order of the district court of West Virginia, and having custody for the court of the Ohio Central Railroad, 'of which the court had taken possession in a case then pending before it, and that the lien assured to the express company on the face of the certificates was dependent on an order and adjudication of that court. The doctrine of lis pendens would charge anyone who purchased this railroad, or acquired an interest in it, pending the litigation, with notice of the litigation, and would subject the property in his hands to the final action of the court, without his being brought into court as a party. If this be true of one acquiring an interest by deed, conveyance, or mortgage, a fortiori must it be true of one whose interest is acquired, and has its existence, only by virtue of the litigation. The express company was put upon inquiry, then, as to all that had been done in that litigation, and was charged with notice of all the subsequent proceedings therein, as much as if it had been a party to the record. * * * In Union Trust Co. v. Illinois 1\1. Ry. Co., 117 U. S. 434-456, 6 Sup. Ct. 809, the court said: 'The receiver, and those lending money to him on certificates issued on orders made without prior notice to parties interested, take the risk of the final action of the court in regard to the loans. The court always retains control of the matter, its records are accessible to lenders and subsequent holders, and the certificates are not l.egotiable instruments.' "

Under these principles the holders of the receiver's certificates depended, necessarily, for their ultimate payment, upon the rank given them in the final decree of foreclosure, to which decree they were necessarily privies. By the terms of that final decree the priority of the mechanic's lien was recognized. The claim, therefore, now asserted, is an attempt to take the benefits of the final decree of foreclosure, in so far as it provides for the payment of the certificates, by stipulating that they should be assumed by the purchaser, and yet, at the same time, repudiate that decree in so far as it provides for priority of rank in favor of the holder of the mechanic's lien. The contention, however, goes much furv.62F.no.8-44

.690

FEDERAL REPORTER,

v.ol. 62.

thlYl The injunction practically amounts' toa stay of .execution 9nthe ,final deeree of the supreme court of the United .statel!l"whi4h not only recognized the sum secured by the lien as ranlt, ibut also directed that in default of its payment thepropeJ;'tY'should be solddo enforce it within 20 days; To this it;he holders of the certificates were privies, since it was a decree.:roade on an intervention in the record wherein the receiver's certificates were. ordered to be issued. It follows, therefore, that as the injunction restrained' the enforcement of the decree of the suprellle:court of the .States, :lUll, had the effect' of setting at naug1J.tits mandate, it was improvidently granted,and should be dissolved; The injunction is therefore dissolved,and the case remanded' 'to the court below for further proceedingij inconform-ity with this opinion. .
,

-.'

"

SHINKLm, WILSON & KREIS CO. et aI. v. LOUISVILLE: &N. R. CO. et al. (Circuit Court, S.
:,.: ,":1 ,-' -

D.

Ohio, W. D.

-,

July 30, 1894.)

.:'

PreJ»1linary injunction to compel a carrier. to obey an order of the Incommerce ,commlssiQD. in reference. to fJ;eightrates '1IJ14 lPtp,luJ;actures sb.0:u1,d denIed Where the !hat the rates. clJ.a,rges and. Which were passed on by thecommlssuon were or unjust.

.4

1'0 OBEY. ORDERS OF

COMMJ8SIOl' ·

Wilson & Kreis ,CO. and othe:rs obtained ,a preliminary irijunctiQu :against the Louisville & Nashville Railroad Company, without :notice to it, compelling it to obey an order of the interstate commeree>commission. to, the granting of the order defendaut.ffied lIn ,answer putting in .issue the material facts alleged ip. the petition. Defendant moves to discharge the order. Order dissolved. for complainants. Ed. Bader,> for defendants. .. The only matter now for consideration LURTON, (!ircuit is as to the. continuance of a restraining order granted without notice to the 1Iottisville &' Nashville Railroad Company, upon a petitionflled bya number ,of manufacturers and merchants of Oincinnati, hi behalf of themselves and all other shippers in like situation, to obtain such injuuctions or other process as will compel the Louisville & Nashville RailroadOompany to obey an ord,er· made by the. interstate' commerce commissiou in reference to Qn merchandise and manufactures shipped from Georgia, Cincinnati to. a, number of junction points in Alabama,.an<lddJssissippL On complaint of tlieFreight Bureau ()f theOin6iUllati chamberOfcomtnerce that certain railroad and' steamlfhip eompaniesl'QSsociated together under the n'ame of· the "Southern Railroad! & Steamship' Association," were violating,certain provisions of the interstate commerce act, entitled "An act to regulate commerce,"approved February 4, 1887, and