Tod v. Kentucky Union Ry. Co.

• Decision Date: 04 October 1892
• Docket Number: 29.,22
• Citation: 52 F. 241
• Parties: TOD et al. v. KENTUCKY UNION RY. CO. et al., (ROSSER et al. INTERVENERS.)
• Court: U.S. Court of Appeals — Sixth Circuit

52 F. 241

TOD et al. v. KENTUCKY UNION RY. CO. et al., (ROSSER et al. INTERVENERS.)

Nos. 22, 29.

United States Court of Appeals, Sixth Circuit.

October 4, 1892

Stone &amp Sudduth, Dodd & Dodd, A. Barnett, and Thos. C. Bell, for appellants.

Humphrey & Davie and St. John Boyle, for appellees.

Before BROWN, Circuit Justice, and JACKSON and TAFT, Circuit Judges.

JACKSON Circuit Judge.

The questions presented for decision in these cases relate to the respective rights and priorities of different lien claimants upon the property of the Kentucky Union Railway Company which was chartered under the laws of Kentucky to construct own, and operate a designated line of railway in said state about 100 miles in length. Prior to 1883 about 15 miles of its road was completed and in operation. In order to raise funds with which to extend its line eastwardly and westwardly from the completed portion, said railway company, on July 2, 1888, executed a mortgage or trust deed upon its property then owned and thereafter to be acquired to the Central Trust Company of New York, to secure an issue of $3,000,000 first mortgage bonds. Said mortgage was executed under authority duly conferred, and was properly recorded. The bonds secured thereby were issued and used for the purposes of the company. Thereafter, on July 1, 1890, said railway company executed a second mortgage on the same properties to the Columbia Finance & Trust Company to secure a further issue of $1,300,000 of its bonds. This mortgage was also duly executed and recorded, and the bonds thereby secured were issued and used by the company. J. Kennedy Tod & Co. subsequently advanced the company $72,500, under an agreement that said sum should be secured by $140,000 of said second mortgage bonds, which were to be delivered to said firm as collateral security for said advance, with interest from January 6, 1891. The company failed to comply with its promise to deliver said collateral security, and in February, 1891, said J. Kennedy Tod & Co., in connection with said mortgagees, the Central Trust Company of New York and Columbia Finance & Trust Company, filed their bill in the circuit court for the district of Kentucky against said railway company, alleging that it had become and was entirely insolvent; that divers persons, whose names were unknown to complainants, claimed mechanics' liens upon all or a portion of the company's property, which they threatened to enforce, and which, if enforced in separate proceedings, would cause a severance and disintegration of the railroad line, etc.; and praying that the court would appoint a receiver of said company's railway, property, assets, etc.; that it would foreclose said mortgages, and sell said railway, with its properties and franchises, as an entirety, and apply the proceeds to the satisfaction of the debt due complainants, J. Kennedy Tod & Co., and the debts secured by said mortgages, together with other lien debts, according to their respective priorities. A receiver was appointed, and a reference was directed to a special master to take proof and report upon 'claims against said railway company incurred for materials and supplies furnished it for its ordinary operation. ' There was also a general order made in relation to intervening petitions.

The appellants Rosser & Coleman intervened by petition, and asserted claims as laborers and employes of said company to the amount of $2,806.86, which they contended constituted a lien upon the company's property prior and superior to that of the debts due to and represented by the complainants. They allege in their original petition and the amendments thereto that from about March 5, 1890, until about April 14, 1890, they performed work and labor in construction and repair of the railway company's road, on sections 74, 75, and 76 thereof, in Lee county, Ky., under a contract which was in substance as follows: That, having in their employ certain laborers, and owning carts, teams, and tools suitable for the purpose, the railway company agreed to employ them, with their said laborers, tools, and teams, by the day, to do work on the aforesaid sections of its road, under the direction and control of its engineer; that they were to be paid certain sums per day for foremen, for laborers, and for teams, consisting of carts and mules, and 10 per cent, additional on the amount of said daily sums for the use of their tools, and for their superintendence of the work and hands, and be reimbursed the cost of powder necessary to be used in the work; that either party had the right to stop said work at the end of any day; that while the employment continued petitioners paid their said hands or laborers. It is then alleged that under this contract the railway company became indebted to petitioners in the sum of $2,806.66, for which it on October 15, 1890, executed to them its promissory note due at four months, which petitioners thereafter indorsed and negotiated to the Clay City National Bank, and at its maturity were required to take up, the maker having failed to pay the same. Petitioners claimed that under said contract they were laborers and employes of the railway company, and as such were entitled to a lien upon its property and the proceeds thereof for the amount due them, which was prior and superior to complainants'. Their petition was demurred to on the ground that it presented no case entitled them to the lien claimed. This demurrer was sustained, and the petition dismissed. From this judgment said petitioners have appealed.

Their contention for a lien is based on an act of the legislature of Kentucky approved March 20, 1876, entitled 'An act to provide for liens for laboring men and supply men,' which provided (section 1) that 'when the property or effects of any railroad company, or of any owner or operator of any rolling mill, foundry, or other manufacturing establishment, whether incorporated or not, shall be assigned for the benefit of creditors, or shall come into the hands of any executor, administrator, commissioners, receiver of a court, trustee, assignee for the benefit of creditors, or shall in any wise come to be distributed among creditors, whether by operation of law or by the act of said company, owner, or operator, the employes of said company, owner, or operator in such business, and the persons who shall have supplied material or supplies for the carrying on of such business, shall have a lien upon so much of such property and effects as may have been embarked in such business, and all the accessories connected therewith, including the interest of said company, owner, or operator in the real estate used in carrying on said business. ' By section 2 it is declared that 'the said lien shall be superior to the lien of any mortgage or other incumbrance heretofore or hereafter created, and shall be for the whole amount due such employes as such, or due for such materials or supplies,' etc. The third section provides for the pro rata distribution of the net earnings at the end of each calendar month among lien holders, when the trustees or other persons having the administration of such property 'shall continue the operation of the business. ' The fourth section provides that when the company, owner, or operator shall suspend, sell, or transfer such business, or when the property or effects engaged in such business shall be taken in attachment or execution, so that the business shall be stopped or suspended, the said lien shall attach as fully as is provided by section 1, and in such case may be enforced by proceedings in equity. The fifth section directs how the suit shall be brought, and provides 'that such suit shall be begun within sixty days after the right of action shall accrue.'

When this act was passed there was in force the prior statute of 1858, now chapter 70, Gen. St. Ky., which gives a person who performs labor or furnishes material in the erection, altering, or repairing a house, building, or other structure, or for the improvement in any manner of real estate by contract with or by written consent of the owner, a lien thereon and upon the land on which such improvement may have been made: provided, the claimant, within 60 days after he ceases to labor or furnish material, files in the office of the clerk of the county court of the county in which such building or improvement is situated, a statement of the amount due him, with a description of the property intended to be covered by the lien, sufficiently accurate to identify it, and the name of the owner, and stating whether the materials were furnished or the labor performed by contract with the owner: and provided, further, that action shall have been brought to enforce the lien claimed within six months from the day of filing the account in the clerk's office as aforesaid.

By an act of the Kentucky legislature approved March 27, 1888 entitled 'An act to create a lien on canals, railroads, and other public improvements in favor of persons furnishing labor or materials for the construction or improvement thereof,' called the 'Contractors' Act,' it is provided (section 1) 'that all persons who perform labor, or who furnish labor, materials, or teams for the construction or improvement of any canal, railroad, turnpike, or other public improvement in this commonwealth by contract, express or implied, with the owner or owners thereof, shall have a lien thereon and upon the property and franchises of the owner or owners thereof for the full contract price of such labor, material, and teams so furnished or performed, which said lien shall be prior and superior to all other liens theretofore or thereafter created thereon. ' The third section declares that no lien provided for by the act shall attach unless the person who...