U.S. Supreme Court Fox v. Seal, 89 U.S. 22 Wall. 424 424 (1874)
Fox v. Seal
89 U.S. (22 Wall.) 424
ERROR TO THE CIRCUIT COURT FOR THE
WESTERN DISTRICT OF PENNSYLVANIA
1. Under the joint resolution of the Legislature of Pennsylvania passed January 21, 1543, and which declares that
"It shall not be lawful for any company incorporated by the laws of the commonwealth and empowered to construct any railroad, canal, or other public internal improvement, while the debts thereof, incurred by the said company to contractors, laborers, and workmen employed in the construction or repair of said improvements remain unpaid, to execute a general or partial mortgage, or other transfer of the rent or personal estate of the said company, so as to defeat, postpone, endanger, or
delay their said creditors, without the written assent of said creditors first had and obtained, and that any such mortgage or transfer shall be deemed fraudulent, null, and void, as against any such contractors, &c.;, as aforesaid,"
an unpaid contractor, laborer, or workman, employed in the construction of a railroad in Pennsylvania, has a lien of indefinite duration on such road, which lien has precedence over every right that can be acquired by or under any mortgage made after the debt to the contractor was incurred.
2. Such lien is not merged in any judgment got by the contractor against the company for his debt, nor by any proceedings in or judgments in scire facias, primary or subsequent, upon such judgments. In whatever shape the debt may be, it has the benefit of the privilege given it by the legislative resolution.
3. If the company mortgage their road after the contractor has got a judgment against it for his debt, such contractor is not bound, on a scire facias brought by him to revive his original judgment, to give notice to a mortgagee as a term tenant. A mortgagee is not a term tenant.
4. Under the Act of the Assembly of Pennsylvania of April 4, 1862, which, reciting the above-quoted joint resolution of January 21, 1843, enacts
"That whenever any incorporated company subject to the provisions of the above resolution shall divest themselves of their real or personal estate contrary to the provisions of said resolution, it shall and may be lawful for any contractor, laborer, or workman employed in the construction or repair of said company, having obtained judgment against the said company, to issue a scire facias upon said judgment, with notice to any person, or to any incorporated company, claiming to hold or own said real or personal estate,"
all that is required to enable the contractor, etc., to proceed by scire facias, as contemplated by the act, is that such contractor &c.;, have a judgment against the indebted company which gave the mortgage. It is not necessary that the judgment be a lien.
5. Where, on the intervention of a contractor having a lien such as is given by the above-mentioned joint resolution of 1843, a court, on proceedings in foreclosure of a mortgage of the road made subsequently to the date of the lien, orders a sale "subject to any lawful claims or rights which may exist prior or paramount to said mortgage," and the sale is made accordingly, the lien is not divested, whatever might be the case were the lien that of a judgment.
6. Nor will such a lien be divested by a statute authorizing a railroad company to borrow money and to pledge its income and property to secure the payment. A repeal of the joint resolution will not be inferred by the grant of such a power simply.
On the 21st of January, 1843, the Legislature of Pennsylvania passed the following
" JOINT RESOLUTION TO PROTECT LABORERS AND CONTRACTORS"
" Resolved that it shall not be lawful for any company incorporated by the laws of this Commonwealth and empowered to construct, make, and manage any railroad, canal, or other public internal improvement, while the debts and liabilities, or any part thereof, incurred by the said company to contractors, laborers, and workmen employed in the construction or repair of said improvement remain unpaid, to execute a general or partial assignment, conveyance, mortgage, or other transfer of the real or personal estate of the said company, so as to defeat, postpone, endanger, or delay their said creditors, without the written assent of the said creditors first had and obtained, and any such assignment, conveyance, mortgage or transfer, shall be deemed fraudulent, null, and void as against any such contractors, laborers, and workmen, creditors as aforesaid. [ Footnote 1 ]"
This joint resolution being in force, the legislature of the same state, in the year 1850, incorporated the Hemphill Railroad Company; a company authorized to make a railroad from a town called Greensburgh, in the interior of Pennsylvania, to the western boundary of the state.
The act of incorporation gave the company no power to borrow money or mortgage the road. But a subsequent act -- one of April 12th, 1851 -- empowered the company to borrow money and "to pledge the property and income of the company in order to secure the payment thereof."
With these acts in force, the company, in 1853 (May 27th), entered into a contract with a contractor named Fox to do the work on the projected road, and he did it. In the following year, 1854, the company became embarrassed and requested Fox to stop working, which he also did.
Not getting paid, he brought suit February 16, 1855, in the Circuit Court of the United States at Pittsburg against the company, and on the 23d of November, 1860, got judgment against it for $33,500; this judgment constituting, by the law of Pennsylvania, a lien against the company's real estate for five years from its date, and no longer,
and the law of the state requiring notice to be given to terre tenants, when there are terre tenants, and the plaintiff in the judgment desires to revive the judgment as against them.
On the 27th of June, 1855 -- that is to say between the day when Fox brought his suit and that when he got judgment -- the debt to Fox being still unpaid and he having given no assent, written or other, thereto -- the company executed a mortgage on the whole of their road, franchises and property, real and personal, to one Seal as trustee to secure the payment of bonds to the amount of $1,000,000, to be issued by the company, and which were immediately afterwards issued, the bonds having twenty years, that is to say until 1875, to run. The mortgage was duly recorded in all the counties through which the road ran, and Seal, the trustee, took possession of the road and worked it until the time of the sale, hereafter mentioned. Interest on the bonds becoming due, and not being paid, suit was instituted in the Supreme Court of Pennsylvania to foreclose the mortgage and to sell the road, its franchises, and other property, real and personal. Fox hereupon applied by petition to be allowed to intervene pro interesse suo in the suit for foreclosure, or if this should not be granted, that he might be paid out of the proceeds of the sale. His petition contained a full history of the origin, character, and amount of his claim against the Hemphill Railroad Company. The court rejected his petition on both its parts, and a sale was made under the proceedings in foreclosure, the sale, however, being made (in consequence of Fox's petition) "subject to any lawful claims or rights which might exist prior or paramount to the said mortgage." The purchaser was another corporation, named the Pittsburg, Wheeling & Baltimore Railroad Company. This sale was made March 30, 1871.
Between the date of the above-mentioned mortgage and the sale under it, that is to day on the 4th of April, 1862, the Legislature of Pennsylvania passed an act to enable contractors, laborers, workmen &c.;, better to get the enjoyment of the lien which the joint resolution of January 21, 1843,
already quoted, had given them. This act was in these words:
" Whereas it frequently happens that incorporated companies, by assignment, conveyance, mortgage, or other transfer, divest themselves of their real and personal estate, in contravention of the provisions of the resolution of January 21, 1843; therefore,"
" Be it enacted that whenever any incorporated company, subject to provisions of the above resolution, shall divest themselves of their real or personal estate, contrary to the provisions of the said resolution, it shall and may be lawful for any contractor, laborer, or workman employed in the construction or repair of the improvements of said company, having obtained judgment against the said company, to issue a scire facias upon said judgment, with notice to any person, or to any incorporated company, claiming to hold or own said real or personal estate, to be served in the same manner as a summons, upon the defendant, if it can be found in the county, and upon the person or persons, or incorporated company claiming to hold or own such real estate; and if the defendant cannot be found, then upon the return of one nihil and service as aforesaid, on the person or persons, or company claiming to hold or own as aforesaid, the case to proceed as in other cases of scire facias against terre tenants. [ Footnote 2 ]"
We should here mention that while some of these things were going on -- that is to say in 1867 (January 29th) -- and while Seal was in possession of the road as trustee, Fox had issued a scire facias against the Hemphill Railroad Company to revive the judgment which he had got against it in 1860; the lien of which judgment had, of course, under the law of Pennsylvania as already stated, expired in 1865. To this scire facias no one was made a defendant but the original defendant, the Hemphill Railroad Company. Judgment was entered on this scire facias March 14, 1867.
He now, February 23, 1871 -- thirty-seven days before the sale of the road, and while Seal was yet in possession of it -- issued a scire facias to revive judgment and quare executio
non on the judgment just now mentioned as obtained in 1867, and in this second scire facias he made Seal a codefendant with the original defendant, the Hemphill Railroad Company, and as soon as the sale of the old road to the Wheeling, Pittsburg & Baltimore Railroad Company had been made, brought in that company as another codefendant this being effected August 12, 1871, and he meaning in all which he did to act in conformity with what was directed by the Act of the Pennsylvania Assembly of 1862, quoted on the preceding page.
These two last-named parties -- that is to say Seal and the Wheeling, Pittsburg & Baltimore Railroad Company -- pleaded to this last scire facias .
The pleas were:
That the mortgage was not made in contravention of the joint resolution of 1843;
That the plaintiff was not a creditor within the scope of that joint resolution;
That any lien or claim which the plaintiff ever had, had expired prior to his bringing the present suit.
And, on issue taken &c.;, the question, divested of the technicalities of pleading and evidence, was whether the real and personal estate of the old Hemphill Railroad Company, which under the proceedings in foreclosure instituted by Seal had passed to the Wheeling, Pittsburg & Baltimore Railroad Company, was liable to the debt to Fox as ascertained by the judgment of the circuit court on which the scire facias to revive &c.;, had issued.
The plaintiff, to establish his case was about to offer certain pieces of documentary and record evidence separately, when the court directed that he should offer the whole in a body, and in connection. He now did this, offering the record of the mortgage (the same being without any written assent by him to it); the record of the proceedings in foreclosure and sale, with the order preceding it that it should be made subject to any lawful claims or rights prior or paramount to the mortgage; the joint resolution of the Pennsylvania
Legislature of January 21, and the Act of Assembly of April 4, 1862; the records of his own suit of 1855, ending in judgment in 1860; the record of the scire facias of 1867, to revive it; this to be followed up with evidence of the nature and date of origin of the claim on which the original judgment was got, to-wit that it was that of a contractor in the construction of the railroad prior to the date of the mortgage; that the mortgage, if not postponed to his claim, defeated it; that he was not a stockholder in the Hemphill Railroad Company &c.;
The defendants objected to the evidence as irrelevant and incompetent, and the court rejected it, the plaintiff excepting to such action. Judgment having been given for the defendants, the plaintiff brought the case here.
For the reader's convenience, the dates of some of the important facts occurring in the history of the case are here set forth chronologically:
1843, January 21, joint resolution of the legislature.
1850, May 15, Hemphill Railroad Company incorporated.
1851, April 12, act of legislature authorizing a mortgage by it.
1853, May 27, Fox's contract made.
1855, February 16, Fox's suit brought.
1855, June 27, mortgage made to trustees, and trustees take possession.
1860, November 23, Fox obtains judgment.
1862, April 4, act of the legislature.
1867, January 29, scire facias to revive, against the Hemphill Railroad Company only.
1867, March 14, judgment on this scire facias .
1871, February 23, scire facias to revive judgment, et qu. ex. non against the Hemphill Railroad Company and the trustees also; the present suit.
1871, March 30, sale of the railroad.
1871, August 12, the Pittsburg, Wheeling and Baltimore Railroad Company brought in on motion as codefendants.
MR. JUSTICE STRONG delivered the opinion of the Court.
We think there was error in the rejection of the evidence offered by the plaintiff. Some of it may have been immaterial to the issues pending, but the court directed that all the record and documentary evidence be embraced in one offer, and then rejected it all. In effect, the objections urged by the defendants were treated as a demurrer, and the offer was overruled because the evidence was regarded as insufficient in law to sustain the action.
If the rights of the plaintiff have not been lost by failure to prosecute them in the proper mode and in due time, the joint resolution of 1843, in our opinion, protects him against the mortgage, and all persons claiming thereunder. [ Footnote 3 ]
That the plaintiff's testator was a contractor with the Hemphill Railroad Company, and that the debt due to him was incurred by the company for the construction of their railroad it was the direct tendency of the evidence offered to prove, and these facts are uncontroverted now. That debt therefore was within the protection, whatever that may be, of the resolution. What then was the nature and extent of that protection? It is unnecessary to assert that the company was rendered incapable of making a mortgage or any transfer of its property so long as the debt due to its contractor remained unpaid. But the language of the resolution is too clear to admit of question that the legislature intended to give to an unpaid contractor a priority of claim
to the company's property over every right that could be acquired by a mortgagee or acquired under a mortgage if the mortgage was made after the debt to the contractor was incurred. It was at least intended that the property, into whosesoever hands it might come, should remain subject to a paramount claim of the contractor so long as the debt due to him remained unpaid. That this was substantially giving to him a lien of indefinite duration seems quite plain. It was not a "jus in re" nor a "jus ad rem," but it was a charge upon the property, a right to prevent any disposition of it by which it could be withdrawn from the creditor's reach, and therefore in a very legitimate sense an equitable lien. The resolution in effect declared that while his claim against the company exists, a subsequent mortgage or transfer cannot be set up to defeat the contractor's resort to the property and his superior right to have it applied to the payment of the debt due him. It is true the mode of that resort is not prescribed. It can only be by suit, judgment, and execution, but whenever judgment and execution are obtained, the lien is made to precede the lien of any mortgage or the effect of any conveyance; more accurately, it has the effect it would have were there no mortgage or conveyance in existence. The property may be levied upon and sold, and the proceeds of the sale may be applied to the satisfaction of the debt due the contractor, without possible interference by the mortgagee, though the mortgage preceded the judgment in time. We cannot regard the resolution as no more than a partial reenactment of the statute of 13th Elizabeth invalidating mortgages and transfers only when there is an actual or constructive intent to hinder, delay, or defraud creditors. If that was all the resolution intended, it was unnecessary and unmeaning. But it declares null and void every mortgage the effect of which is to defeat, postpone, endanger, or delay contractors, laborers, and workmen. The mortgage may be good as against other creditors, but it is a nullity as to them.
It has been argued that it is against the policy of Pennsylvania to allow secret liens, or liens not of record, or liens
on land created by parol, and undoubtedly there are evils attendant upon the allowance of such encumbrances. But that is a matter for legislative consideration. The supposed policy of the state cannot, in a judicial tribunal, prevail over a plain statute. And notwithstanding the disinclination judges have manifested to sustain liens not of record, there are many such liens known to the statute laws of that state and upheld by the courts. A mechanic or materialman is given a lien, and he is not required to put his claim on record until within six months after his work has been done or his materials have been furnished. Yet his lien has priority over every lien (other than a mechanic's) which attached to the building or curtilage subsequent to the commencement of such building. So liens are given by statutes to laborers, miners, and clerks, and they are valid against subsequent mortgages, though the liens do not appear upon any record. [ Footnote 4 ] It is not, then, against the policy of the state to create a statutory lien in favor of laborers or workmen.
And if we have correctly interpreted the legislative resolution of 1843, if the debt due from the Hemphill Railroad Company to the plaintiff's testator was a lien upon the property of the company from the time it was created, so far, at least, as to have priority over any subsequent mortgage or conveyance, it is plain the lien would have continued a prior encumbrance, so long as the debt it was given to secure remained, had there been no such subsequent mortgage. But the express declaration of the resolution is that the mortgage shall have no effect as against such a debt or claim. And this must mean that neither the mortgage itself nor any sale made under it shall have the effect of defeating, postponing, endangering, or delaying the contractor, for if a sale made under the mortgage discharges the contractor's lien and removes the property from his reach, effect is given to the mortgage itself, and precisely the effect which the statute denied to it.
We are thus brought to the question whether the lien or
claim which the plaintiff's testator had upon the property, real and personal, of the Hemphill Railroad Company as a security for the debt due him, and which was paramount to the mortgage made to the company, has been lost or extinguished. And we think it has not. The debt remains due and unpaid. In 1855, Fox, the contractor, commenced a suit for its recovery, and he obtained a judgment in 1860. That judgment did not extinguish the right which he had from the time the debt was incurred to have the property of his debtors first applied to the satisfaction of the debt. It did not cause to be merged in itself the original lien, any more than a judgment obtained upon a bond secured by a mortgage absorbs the lien of the mortgage. In whatever shape the debt was, it had the benefit of the statutory privilege. It matters not, then, that more than five years elapsed after the judgment was recovered before it was revived, for if it be conceded that the lien of the judgment expired, that of the debt remained.
And if the lien of the judgment recovered in 1860 ceased at the end of five years from the time of its rendition, still it is undeniable that the revived judgment of 1867 gave a new lien which followed the property into whosesoever hands it came, until the present scire facias was sued out in February, 1871. The only possible answer to this is that before the revived judgment of 1867 was obtained, the property of the Hemphill Railroad Company had passed from its ownership, had become vested in its mortgagees, and that the trustees of the mortgage were not notified of the scire facias or made parties to it. To this there are two replications, each of which, in our opinion, is quite sufficient. The first is that the company was, by the resolution of 1843, deprived of the power to make a mortgage or any conveyance by which its property could be withdrawn from the reach of the plaintiff, and the mortgagees or trustees could acquire no rights which the mortgagors were unable to confer. The second replication is that the mortgage to Seal and others was not a grant of the ownership of the property described in it. It was but the creation of a lien for the security of
the bonds issued under it. True, the trustees of the bondholders, pursuant to its provisions, took possession of the mortgaged property in 1857 and carried on the business of the company until 1871, but even as against them the company remained the owners of the road, subject only to a lien to secure the payment of the mortgage debt. The trustees were not terre tenants. They were mere occupants. Terre tenants against whom, by the laws of Pennsylvania, it is necessary that a scire facias to revive a judgment be sued out in order to preserve its lien are those who have seizin of the land, those who are owners, or claim to be owners by title derived from the defendant in the judgment. There can be no terre tenant such as intended by the Act of 1798 [ Footnote 5 ] who is not a purchaser, mediately or immediately, from the debtor while the land was bound by the judgment. [ Footnote 6 ] Such has always been held to be the law in Pennsylvania, and such are terre tenants in England. [ Footnote 7 ] A mortgagee has never been regarded as a terre tenant entitled to notice of the revival of a judgment. There has therefore been no failure or neglect in this case to make the necessary parties to all the judicial proceedings commenced by the plaintiff or his testator. The law did not require notice of the scire facias sued out to revive the judgment of 1860 to be given to the trustees of the mortgage, and if the lien of that judgment had expired, the revived judgment fastened a new lien upon the property. That lien was a security for the debt which, by the resolution of 1843, was made paramount to the mortgage, and against which, while it remains unpaid, the mortgage cannot be set up.
This, however, relates to the ordinary judgment lien, but it is not essential to the plaintiff's case, as exhibited by the evidence he offered, that the judgment which he now seeks to enforce is a lien upon the property claimed and held by the trustees of the mortgage and by the Wheeling, Pittsburg &
and Baltimore Railroad Company. It would be were it not for the legislative resolution of 1843, and for the enactment of April 4, 1862. But the first of these, as we have seen, made the debt due to the contractor, itself a lien without a judgment, and prescribed no limits to its duration. The second (the Act of April 4, 1862), manifestly recognized the existence of such a lien, and pointed out a mode for making it available to the creditor. This will be seen by reference to the act itself. [ Footnote 8 ]
This act makes special provision for such cases as the present. Under it, all that is necessary to enable a contractor, laborer, or workman to proceed by scire facias against a person or company claiming to hold or own the real or personal estate of the debtor to such contractor, laborer, or workman by virtue of a mortgage made in contravention of the resolution of 1843 is that he has obtained a judgment against the indebted company which gave the mortgage. It is not required that his judgment shall be a lien on the property. And plainly it was not intended that such a lien must exist. The resolution of 1843 prohibited transfers, assignments, and mortgages of personalty as well as of realty, and a judgment creates no lien upon personalty. But the resolution recognizes the right of a contractor to follow both into the hands of a claimant or owner holding under such an assignment, transfer, or mortgage, without regard to the question whether the property is real or personal. It therefore recognizes the existence of a lien in favor of those protected by it, independent of the lien of any judgment they may recover. This must be so, for if it is essential to a right to proceed by scire facias against the property in the hands of a grantee of the indebted company that the judgment of the creditor shall be a lien upon that property, what is to be said of the case where the indebted company has conveyed before the recovery of any judgment? In such a case, the judgment can be no lien. Yet it will not be claimed the property could not be followed by scire facias against
the grantee. And if it could, it must be, not because of the lien of the judgment, but because of the lien of the debt, a lien which, as there is no statutory limitation to it, remains so long as the debt remains unsatisfied.
Such being, in our opinion, the true meaning of the joint resolution of 1843, and of the act of the legislature of 1862, the evidence offered by the plaintiff and rejected by the court should have been received. It tended to prove, inter alia, that the plaintiff's claim was within the protection of the joint resolution; that the mortgage under which the defendants hold was invalid as against him; that his case was embraced in the remedial act of 1862, and that the defendants had bought under a decree of foreclosure of the mortgage, which expressly directed that the property should, notwithstanding the sale, remain subject to the claim of the plaintiff.
It has been contended, however, in support of the ruling of the court below, that the sale which was made of the property in March, 1871, under a decree of the Supreme Court of Pennsylvania in the suit to foreclose the mortgage, divested the plaintiff's lien, and that thereafter his only remedy was a resort to the proceeds of that sale. This might be so if the only lien he had was that of his judgment. But, as we have endeavored to show, he had a lien independent of his judgment and prior to the mortgage. The decree of the supreme court ordered the property to be sold subject to that. The plaintiff petitioned to be allowed to intervene "pro interesse suo" in the suit for foreclosure, or, if that was not allowed, that he might be paid out of the proceeds of sale, but his petition was refused, and the court ordered that the purchaser at the sale should hold the whole of the estate and property, real, personal, and mixed, of the Hemphill Railroad Company, "subject to any lawful claims or rights which may exist prior or paramount to said mortgage." The plaintiff's lien, therefore, was undisturbed by the sale, and hence he had no right to look to the proceeds of the sale for payment.
This disposes of the case.
It is hardly necessary to add that the Act of the legislature of April 12th, 1851, empowering the Hemphill Railroad Company to borrow money and pledge its property and income to secure the payment thereof, cannot be regarded as exempting that company from the operation of the resolution of 1843.
Judgment reversed and a venire de novo awarded.
[ Footnote 1 ]
Pamphlet Laws of 1843, p. 367.
[ Footnote 2 ]
Pamphlet Laws of 1862, p. 235, § 1.
[ Footnote 3 ]
See the joint resolution set out supra, p. 89 U. S. 426 -- REP.
[ Footnote 4 ]
Act of March 30, 1859, Pamphlet Laws 318.
[ Footnote 5 ]
3 Smith's Laws 331.
[ Footnote 6 ]
Dengler v. Kiehner, 13 Pa.St. 41; Chahoon v. Hollenback, 16 S, & R. 432; In re Dohner's Assignees, 1 Pa.St. 104.
[ Footnote 7 ]
2 Saunders 9, note 8.
[ Footnote 8 ]
See it set out supra, p. 89 U. S. 428 -- REP.