Gross v. United States Mortgage Co

Decision Date07 May 1883
Citation27 L.Ed. 795,108 U.S. 477,2 S.Ct. 940
CourtU.S. Supreme Court

Benjamin Lombard negotiated with the United States Mortgage Company—a corporation of the state of New York, having its principal office and place of business in the city of New York—a loan of $50,000 in gold coin, to be used in the erection of buildings upon certain unimproved lots in the city of Chicago, of which he was the owner in fee. To secure the payment of that sum, with interest at the rate of 9 per cent. per annum, payable semi-annually in gold coin, he executed—his wife joining him August 22, 1872, to that company, a mortgage upon the said premises, covenanting therein to pay the debt and interest; that the premises were clear of all incumbrances; that he would warrant and defend the same, suffering no impairment of the mortgage security; and that the mortgage should stand as security for any money paid for taxes or insurance. The mortgage provided that, if default was made in the payment of any interest installment, or there was a failure to pay the taxes or assessments on the premises, or keep any other covenant contained in the mortgage, that the whole of the debt should become at once due at the option of the mortgage company, with the right in the latter to sell the property to the highest bidder after 30 days' advertisement in some paper published in Chicago. The mortgage also contained this clause:

'It is understood and agreed that this mortgage is to be subject to the right of the city to take so much of said lots as shall be necessary for the opening of and extension of Dearborn street, being 36 feet, more or less, off the west end of said premises; in which event any benefit which may accrue to the said party of the first part herein may be paid by the city to said party of the first part direct.'

The mortgage, upon the day of its execution, was filed and recorded in the proper office.

On the tenth day of December, 1872, Lombard sold and conveyed with warranty the whole of the mortgaged premises, together with the buildings which had been erected thereon with the money borrowed from the United States Mortgage Company, to the National Life Insurance Company of Chicago, of which he was president and a principal stockholder. That conveyance was made expressly subject to the before-mentioned mortgage. The consideration was $100,173, a part of which was in the assumption of the debt due to the United States Mortgage Company. In part payment also of the purchase money, the insurance company executed and delivered to Lombard its promissory note for $12,273, drawn to its own order and by it indorsed in blank, payable three years after date, with interest payable semi-annually at the rate of 10 per cent. per annum. To secure the payment of the note, the insurance company, on the same day, executed and delivered to one J. L. Lombard, as trustee, a trust deed, with covenants of warranty, conveying the whole of said premises. That deed was duly recorded. Of that note and trust deed Gross subsequently became the owner, the note coming into his possession with the indorsement only of the insurance company. On or about March 17, 1873, by proper legal proceedings, 35 feet off the west end of said lots were condemned by the city for the purposes of a street. The sum of $10,952.73 was awarded as compensation for the ground so taken, and $15,897.84 were afterwards assessed as the value of the benefits to the remaining portion of the premises not taken for the purposes of the street. Benjamin Lombard made default in the payment of interest due, on and after October 1, 1873, and failed to pay any taxes or assessments on the property after 1872. On the first day of January, 1874, the mortgage company elected to declare the whole debt due. On or about June 1, 1874, the insurance company was duly adjudged a bankrupt, and an assignee thereof was appointed. Lombard was also declared a bankrupt. Neither he nor the insurance company left any known assets to meet their obligations.

By an act of the general assembly of Illinois, in force July 1, 1875, entitled 'An act to enable corporations in other states and countries to lend money in Illinois, and to enforce their securities and to acquire title to real estate as security,' it was declared, among other things:

'That any corporation formed under the laws of any other state or county, and authorized by its charter to invest or loan money, may invest or loan money in this state. And any such corporation that may have invested or lent money, as aforesaid, may have the same rights and powers for the recovery thereof, subject to the same penalties for usury, as private persons, citizens of this state; and when a sale is made under any judgment, decree, or power in a mortgage or deed, such corporation may purchase, in its corporate name, the property offered for sale, and become vested with the title whereever a natural person might do so in like cases: provided, however, that all real estate so purchased by any such corporation, in satisfaction of any such liability or indebtedness, shall be offered at public auction, at least once every year, at the door of the court-house of the county wherein the same may be situated, or on the premises so to be sold; * * * and said real estate shall be sold whenever the price offered for it is not less than the claim of such corporation, including all interest, cost, and other expenses: and provided further, that in case such corporation shall not, within such period of five years, sell such lands, either at public or private sale, as aforesaid, it shall be the duty of the state's attorney to proceed by information, in the name of the people of the state of Illinois, against such corporation, in the circuit court of the county within which such land, so neglected to be sold, shall be situated, and such court shall have jurisdiction to hear and determine the fact, and to order the sale of such land or real estate, at such time and place, subject to such rules as the court shall establish,' etc.

For the purpose of settling several conflicting claims in reference to this property, the assignee in bankrutcy of the insurance company brought this suit in the superior court of Cook county, Illinois, making the United States Mortgage Company, Gross, and others defendants.

The principal questions in dispute between Gross and the mortgage company were: (1) Whether the latter acquired any valid interest or lien upon the premises as against Gross; and the court of original jurisdiction held that it did. (2) Whether Gross, as the owner and holder of the note for $12,273, was entitled to receive the sum awarded as damages for that part of the property taken by the city, or whether the mortgage company was entitled to it by reason of the terms of the mortgage. That question was ruled in favor of Gross.

Upon appeal to the highest court of Illinois the judgment of the inferior state court was reversed and set aside, and the cause remanded 'for such other and further proceedings as unto law and justice shall appertain, with directions to the superior court to enter a decree giving to appellants [the mortgage company] exclusively the amount found against the city as damages, and to Gross no part thereof.' It was further adjudged that the mortgage company recover its costs. From that decree this writ of error has been prosecuted.

Thos. S. McClelland, for plaintiff in error.

[Argument of Counsel from pages 481-484 intentionally omitted] Wirt Dexter, for defendant in error.


The first point to be considered relates to the jurisdiction of this court. In behalf of the defendant in error it is insisted that it does not appear from the record that the decision of the supreme court of Illinois was adverse to any asserted right under the constitution, laws, or treaties of the United States, nor that the judgment or decree complained of could not have been passed without the determination of any such federal question. Dugger v. Bocock, 104 U.S. 603; Murdock v. City of Memphis, 20 Wall. 590. This proposition depends upon the inquiry whether the opinion of the state court, which is made part of the transcript, can be examined for the purpose of ascertaining the grounds upon which that court based its final decree.

In Gibson v. Chouteau, 8 Wall. 317; Rector v. Ashley, 6 Wall. 142; and Williams v. Norris, 12 Wheat. 117, it was ruled that the opinion of the state court constituted no part of the record, for the purpose of determining whether this court will re-examine the final judgment or decree. And in Parmelee v. Lawrence, 11 Wall. 38,—where the question arose as to the effect to be given to the certificate of the chief justice of the state court, showing that a federal question was raised and decided adversely to the party who brought the case here for review,—it was said: 'If this court should entertain jurisdiction upon a certificate alone, in the absence of any evidence of the question in the record, then the supreme court of the state can give the jurisdiction in every case where the question is made by counsel in argument.' To the same effect are Lawler v. Walker, 14 How. 149, and Railroad v. Rock, 4 Wall. 180. But in Murdock v. City of Memphis, 20 Wall. 633, the subject was again under consideration, by reason of the omission from the act of 1867 of that provision in the twenty-fifth section of the act of 1789 which restricted this court, when reviewing the final judgment or decree...

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