Sheffield & B. Coal, Iron & Railway Co. v. Newman

• Decision Date: 15 June 1896
• Docket Number: 473.
• Citation: 77 F. 787
• Parties: SHEFFIELD & B. COAL, IRON & RAILWAY CO. et al. v. NEWMAN.
• Court: U.S. Court of Appeals — Fifth Circuit

77 F. 787

SHEFFIELD & B. COAL, IRON & RAILWAY CO. et al. v. NEWMAN.

No. 473.

United States Court of Appeals, Fifth Circuit.

June 15, 1896

W. A Gunter and H. B. Thompkins, for appellants.

John D Rouse, Wm. Grant, and John P. Tillman, for appellee.

Before McCORMICK, Circuit Judge, and SPEER and PARLANGE, District Judges.

On January 9, 1889, the Central Trust Company instituted a suit in the United States circuit court for the Northern district of Alabama, against the Sheffield & Birmingham Coal, Iron &amp Railway Company, for the foreclosure of two deeds of trust and mortgage. One of these was to secure bonds to the amount of $1,000,000, known as the 'Furnace Bonds,' on that part of the property upon which three iron blast furnaces were situated; and the other deed of trust was to secure bonds to the amount of $400,000, known as the 'Four Hundred Thousand Dollar First Mortgage Bonds,' on lands upon which coke ovens and a coal mine were located. The property was placed in the hands of a receiver appointed in the cause. Gordon, Strobel & Laureau, on February 11, 1889 intervened and claimed a mechanic's lien on the furnaces and the acre of ground upon which they were situated. Their claim was for $57,808.12, being the balance then due them for the construction of the furnaces. By order of the court, receiver's certificates were issued to the amount of $150,000, which, by said order, were declared to be secured by a first lien upon all the property described in both deeds of trust. The appellee, Newman, purchased $110,000 of said certificates. The Anniston Loan & Trust Company held $25,000 of the certificates which had been negotiated for the receiver by Charles D. Woodson, and the remainder was issued, but paid, before the institution of this suit. Decree of foreclosure was signed on December 3, 1889, and all the property covered by both deeds was ordered sold, the intervention of Gordon, Strobel and Laureau was still pending; undetermined, and the receiver's certificates were not due. Provision was consequently made for the payment of the mechanic's lien and the certificates, by a direction in the final decree that the whole property be sold subject to the lien of Gordon, Strobel & Laureau and the lien securing the receiver's certificates, and that the purchaser should pay off and satisfy the same. The receiver afterwards obtained an amendment of the decree, providing that the purchaser at the sale would not be compelled to assume the $25,000 of the certificates negotiated by Woodson, but would have the right to resist the payment of said Woodson certificates, 'and that the validity of such five certificates be adjudicated only in this court, a proper case to be made by parties in interest. ' James C. Neely, at the sale under the decree, bought the property covered by the $400,000 mortgage, on a bid of $115,000; and Napoleon Hill bought, on a bid of $350,000, the property securing the $1,000,000 of bonds and the mechanic's lien. The circuit court, in confirming the sale, on May 10, 1890, decreed again, in the following language, that the purchasers should take the property subject to, and that they assume and pay off, the indebtedness on the property, viz.: 'And it is further ordered, adjudged, and decreed that said purchasers take said property, and that it be recited in said deeds they do take said property, subject to, and that the said purchasers or their assigns assume and pay off, any and all debts, claims, and demands, of whatsoever nature, now pending and undetermined in this court, and which have been or may be allowed and adjudged by this court as prior to any right secured by either of said mortgages under foreclosure of which sale was made, and likewise subject to all debts, claims, and demands, of whatsoever nature, incurred by Jacob G. Chamberlain, as receiver, in said cause, and which may remain unpaid at the termination of said Chamberlain's receivership. ' In the deeds made to the said purchasers, they are described as Trustees,' but there is noting to show for whom they acted.

Subsequently to the purchase by Neely and Hill, and their going into possession of the property, the Anniston Loan & trust Company, holder of the $25,000 of certificates which the purchaser had been allowed to contest by the amendment to the foreclosure decree, filed an intervention in the main cause against Neely and Hill, and two corporations to whom Neely and Hill had conveyed the property. To these proceedings, the appellee, Newman, was not made a party; nor were to proceedings on behalf of the other certificate holders. the Anniston Loan & Trust Company's intervention did not seek to have the property sold free from incumbrance, nor to displace or affect the lien of the other holders of certificates. The Anniston Company afterwards obtained a decree determining the validity of the Woodson certificates. The decree ordered that the property be sold to satisfy the certificates, but the decree did not purport to affect the other certificates. The appellee, Newman, learning of the order of sale, and of the advertisement for the sale on January 22, 1894, employed counsel, who prepared a bill enjoining the sale until his right as a holder of certificates could be settled; and his counsel gave notice that they would apply to the circuit judge in New Orleans for a preliminary injunction. The circuit judge heard the application for a preliminary injunction; but, before the matter was decided, the Anniston Loan & Trust Company, through its counsel, offered Newman to enter into an agreement by which the sale was to be allowed to proceed, without prejudice to Newman's claims. The proposition was accepted; the application for an injunction was withdrawn the sale took place; and the Anniston Loan & Trust Company became the purchaser on bidding a sum equal to the Woodson certificates. The master received these certificates in satisfaction and discharge of the bid, and the purchasers received their deed, and took possession of all the property.

In the meantime the supreme court of the United States (14 Sup.Ct 343) had affirmed the decree of the circuit court which ordered the foreclosure of the mechanic's lien of Gordon, Strobel & Laureau. The furnaces and the acre of ground on which they were located were advertised to be sold on May 20, 1894, to satisfy the mechanic's lien. Newman then brought this suit, alleging the facts hereinabove stated, and claiming a preference and priority for the receiver's certificates over the mechanic's lien. Gordon, Strobel & Laureau, Neely, Hill, and the Anniston Loan & Trust Company were made defendants. The circuit court granted Newman an injunction, staying the sale until the rank of the liens could be adjudged. Gordon, Strobel, & Laureau appealed to this court, and the injunction obtained by Newman was set aside, and this court held that the mechanic's lien outranked the certificates. 10 C.C.A. 587, 62 F. 686. The furnaces were then sold, Gordon, Strobel & Laureau becoming the purchasers on a bid for a sum less than the amount due them. This sale took place on August 22, 1894. Gordon, Strobel & Laureau shortly afterwards conveyed the furnaces to Neely, Hill, and Cole, and the Anniston Loan & Trust Company conveyed all the other property to the same purchasers, the consideration of the purchases being the amounts due the sellers on their claims. Newman's original bill was then amended, and the agreement entered into between the Anniston Loan & Trust Company and Newman was alleged. A supplemental bill was also filed by Newman, averring that the original purchase by Neely and Hill, under the decree of foreclosure, was for themselves and as trustees of E. W. Cole. The supplemental bill prayed that the payment by Neely, Hill, and Cole of the claims of Gordon, Strobel & Laureau and of the Anniston Loan & Trust Company, and the reacquisition of the property by Neely, Hill, and Cole, be considered as an equitable redemption for Newman's benefit. The Anniston Loan & Trust Company admitted in its answer that it had conveyed the property to Neely, Hill, and Cole after the filing of the original bill, and asked that the bill be dismissed as to them. Neely, Hill, and Cole demurred to the original and supplemental bills and the amendment. Their special grounds of demurrer were as follows: 'As to such parts of the bill as seek and pray for the condemnation and sale of that portion of said mortgaged property as is and was embraced in and covered by the mechanic's lien of said Gordon, Strobel& Laureau, Ltd., doth demur, and, for cause of demurrer, showeth: (1) That the complainant's bill disclosed and shows that the said mechanic's lien was and is a prior charge on the portion of said property covered by it, and that said lien has been foreclosed, and the property purchased, by the said Gordon, Strobel & Laureau, Ltd., and does not disclose or show that they have parted with their right, or been paid for said property. (2) That it appears in and by said bill that the said complainant had not, at the commencement of his said suit, any equity against the said Gordon, Strobel & Laureau, Ltd., as the holders of said mechanic's lien on said portion of said property, and has not any equity imparted to it by the matter supplemental in its nature alleged in said bill, against this defendant, as a successor to the interest of said Gordon, Strobel & Laureau, Ltd., in said property embraced in and covered by said lien. And, as to so much and such parts of said bill as seek to charge this respondent personally for the said complainant's demand, this defendant doth demure, and, for cause of demurrer, showeth: (1)That it appears in any by said bill that this court has no jurisdiction of the person of this defendant to charge him on a...