author: Btjrket, J.

text:
    Stahl v. Van Vleck.

      Lease of land — For obtaining oil and gas— Construction of lease— Time of performance — Rights of parties.

    1. A party of the first part being- the owner of three adjoining tracts of land, each containing- forty acres, leased one acre thereof, to be designated by himself, to a party of the second part, and in the lease it was “agreed on the part of the party of the first part, that if oil or gas be obtained by the second party or assigns, in or under the provisions of this contract, upon said tract, or on lands adjoining the same premises of which the foregoing one acre described embraces a part, said second party shall have the right to operate forty acres of the balance of said premises on the same terms as above. ’ ’ Held, that the forty-acre tract out of which the one acre was thereafter selected by party of the first part, is the forty acres to be operated under the contract. Walsh v. Ringer, 2 Ohio, 328; Cunningham v. Harper, Wright, 366; Hay v. Storrs, Wright, 711, followed and approved.
    2. In said contract it was further “agreed that if second party or their assigns, do not commence a test oil or gas well at Rising- Sun or vicinity in ninety days, this lease to be void. ” Held, that a test well at that place having been commenced and completed in ninety days, whereby the existence of oil at that point was ascertained, that such performance supplied a sufficient consideration for the contract of lease, even though the test well was immediately plugged and casing withdrawn.
    3. The party of the first part having selected the one acre upon which such well was to be drilled, and the second party having acted thereon, the first party is bound thereby, and has no right to make a second selection.
    4. It being agreed that such lease should “continue and be in force for five years from the date thereof,” and the second party having commenced operations in good faith to drill for oil in ample time to complete a well within said term of five years, was wrongfully enjoined by the lessor, and the injunction kept alive until after the expiration of the term of five years; Held, that the second party is entitled at the close of the litigation, to as much time in which to perform his contract, as still remained of his term when he was first enjoined.
    (Decided June 11, 1895.)
    Error to the Circuit Court of Wood county.
    The controversy between the parties arose out of a duly acknowledged written instrument, which was recorded in the records of Wood county in the words and figures following:
    “contract.
    “Executed this 15th day of December, A. D. 1886, by and between Arie E. Stahl, of Wood county, Ohio, as first party, and C. W. Manahan, Jr., and A. K. Detwiler of Toledo, Ohio, witT nesseth: That the said first party for the consideration hereinafter stipulated and agreed upon, does hereby grant to said second parties or their successors and assigns, the right to enter upon the following lands and premises now owned by said first party, and situated in Perry township, Wood county, Ohio, to wit:
    “A tract to be designated by first party of one acre on the following described premises: The south half of the northeast quarter of section two (2), in town three north, of range twelve (12) east; also the northeast quarter of the southeast quarter of said section two, in township and range aforesaid, containing forty acres of within described premises; for the purpose and with the exclusive right in and upon said premises to drill and develop oil, gas and other valuable substances, and the exclusive right of way to said second party or their successors and assigns, to'convey over, upon and through said premises, any and all oil, gas and other valuable substances.

      “In consideration whereof it is hereby agreed: First — If oil be found’ and developed upon said premises in paying quantities, the said first party is to receive as his royalty the one-eighth part thereof of the oil in pipe lines to credit of first party, at the well. Second — Should gas be found and developed upon said premises, said first party is to have the right to use and consume for lighting and heating his dwelling, such amount as may be necessary therefor; and the additional sum of three hundred dollars per annum for each gas well, when and as soon as the same is marketed and utilized. Third — From and after the expiration of twenty-four months from the date hereof, and until second party enter upon said premises and exercise the rights and privileges hereby granted, the said second party will pay to said first party, during the continuance of this contract, the sum of fifty cents per acre per year, upon each acre herein contracted for, to be paid out of the first moneys realized or received by said second party from the development of gas or oil.
    “ It is further agreed by and between said parties, their successors and assigns, that this contract and the rights and privileges therein granted and conferred, shall continue and be in force for five years from the date hereof, or so long as oil, gas, or other valuable substances be found and developed upon said premises in paying quantities.
    “It is also agreed that the second party or their successors and assigns, shall have the right and privilege of necessary roads to and from all wells, or mines developed upon said premises, and the right to remove all machinery, fixtures and buildings placed by them upon said premises.

      “It is further agreed on the part of the party of the first part that if oil or gas be obtained by the second party or assigns, in or under the provisions of this contract upon .said tract, or on lands adjoining the same premises of which the foregoing one acre described embraces a part, said second party shall have the right to operate the balance of said premises on the same terms as above.
    “In case said second party, its successors and assigns shall not commence operations upon said premises within five years from the date hereof, then this contract shall be void.
    “It is agreed that if said second party or their assigns, do not commence a test oil or gas well at Rising Sun or vicinity in ninety days, this lease to be void.
    “Signed and executed by the parties hereto, the day and year first above written.
    “Arie E. Stahl,
    C. W. Manahan,
    A. K. Detwiler,”
    “Signed and executed in the presence of
    “G. H. Baker,
    L. C. Winchell.”
    . By the assignments duly recorded, this contract became the property of defendant in error, George EL Van Vleck.
    On the 8th day of August, 1891, plaintiff in error, also plaintiff below, filed his petition in the court of common pleas, seeking to enjoin defendant from going upon said premises, erecting any derrick, placing any timber thereon, drilling any wells or removing any oil or gas therefrom, and for a reformation of said agreement, its cancellation, and for equitable relief.

      This injunction ancl relief was sought upon the alleged ground that the conditions of said instrument had not been performed, and no rental had been paid, no test oil or gas well had been commenced at Rising Sun or vicinity within the time specified, that no consideration whs paid for said contract, that the same was without consideration, that only forty acres of land were included in the contract, but by mistake the whole one hundred and twenty acres were included .in the written instrument, that said instrument was not acknowledged, and that the same is a cloud upon his title.
    The defendant, by his answer, averred that the test well at Rising Sun was commenced and drilled to completion within ninety days from the date of said contract, that thereby it was demonstrated, at great expense, that oil does exist in said lands, that he was about to drill a well on plaintiff’s lands, and offered to pay any rental due under said contract when stopped by this suit, and asks to be protected in his rights and for other proper relief.
    After trial in the common pleas, the case was appealed, and on trial the circuit court made the following finding of facts and law:
    “That on the 15th day of December, A. D. 1886, the plaintiff, Arie E. Stahl, executed and delivered to C. "W. Manahan and A. K. Detwiler the written contract, or oil lease, a true copy of which is set forth in answer of the defendant, George H. Van Vleck, herein, except the next to the last stipulation.
    “Said stipulation being the second one above the words ‘Signed and executed, etc., when said contract was executed and delivered, read as follows, to wit:
    “ ‘It is further agreed on the part of the party of theJSLrst part that if oil or gas he obtained by the second party or assigns, in or under the provisions of this contract, upon said tract or on lands adjoining the same premises, of which the foregoing- one acre described embraces a part, said second party shall have the right to operate ‘40 acres of’ the balance of said premises on the same terms as above. ’
    “ The court finds that in the said contract as originally executed and delivered, the words ‘40 acres of’ were interlined at the place where they occurred, and that the recorder in recording said instrument overlooked the interlineation which had become somewhat blurred and obscure, so that the said contract or instrument appears upon the record precisely as set forth in defendant’s answer, or rather as set forth in the exhibit, which defendant has attached to his answer herein, but the said clause as it appears in said answer and in the record should be corrected and reformed, so as to contain the words ‘40 acres of, ’ in order to conform the same to the instrument as it was when executed and delivered.
    ‘ ‘ That said lease when executed and delivered did not confer upon the defendant the right to operate the whole of the farm in case gas or oil was found on the one acre designated in the lease, but upon only forty acres thereof, if gas or oil was so discovered, and was so interlined in the original instrument which was assigned to Van Vleck, and taken into his possession at the time of his purchase thereof.
    “And the court further find that said contract of lease, bjr written assignments duly made and acknowledged, has been transferred to, and now belong-s to the defendant, George H. Van Vleck; that by virtue of such assignment the defendant, George H. Van Vleck, has become entitled to all of the rights and privileges granted and conveyed by said lease to the original grantees, G. W. Manahan and A. K. Detwiler; that the said George H. Van Vleck was not aware when he purchased said lease that any error had intervened in the record thereof, nor did he have personal knowledge that the words ‘ 40 acres of ’ were in the said lease or instrument (although they had been interlined . therein, at the time of its execution), until the day of the trial of this cause in this court.
    “That said George H. Van Vleck purchased said lease in good faith and paid a valuable consideration therefor.
    “ And the court also find that Manahan & Detwiler, the original grantees in said lease, commenced a test well in the vicinity of Rising Sun within ninety days after the execution of said contract of lease and in accordance with the terms thereof.
    “ That said well was not situated on plaintiff’s land, and was about one and one-half miles therefrom.
    “That said Manahan & Detwiler in due time drilled said well down to the oil-bearing rock, and for a sufficient distance therein, to determine the character of the land; that oil was found in said well, and the existence of a deposit of oil at that point was ascertained.
    “ That immediately after the completion of the drilling of the well as aforesaid, the said Manahan & Detwiler plugged the said well, drew the casing and did not further operate same.
    “That said lease was assigned to and became the property of defendant, Van Vleck, on the 30th day of March, A. D. 1887.
    “That no operations were commenced by anyone, under said lease upon the lands of plaintiff, until about two weeks previous to the commencement of this action, and no rent was paid thereon.

      ‘ ‘ That at the date last aforesaid the defendant, through one Graham, his agent, requested the plaintiff to designate the acre of land upon which he desired to have a well located.
    “ That plaintiff thereupon designated a location for said well upon the southwest quarter (i) of the northeast one-fourth (i) of section 2, mentioned in petition.
    “That pursuant to such designation by the plaintiff and prior to the commencement of this action, defendant in good faith and with the intent to drill for oil under said lease, commenced placing material at the point so designated for the purpose of drilling.
    “That soon afterwards the plaintiff notified the defendant’s agent that he had changed his mind, and that if any of said land was to be operated for gas and oil he desired to have the operations begun and carried on upon the tract of forty acres described as the northeast quarter of the southeast quarter of section two (2), town three (3) north, range (12) twelve east, in Wood county, Ohio.
    “That soon after receiving said notice the agent of the defendant drew other loads of derrick lumber and deposited it on the forty-acre tract so as aforesaid, first designated by the plaintiff, and was about coming on the same land with another load when the plaintiff informed him that if the defendant insisted that his said lease gave him the right to operate the whole farm, which contained 120 aches of land, in case he was successful in finding gas or oil on the premises, that he would not permit him to commence operations upon said land at all, but would enjoin him.
    “To this the agent of the defendant answered that he did not know how much land the defendant claimed a right to operate, but would write to the defendant and let the plaintiff know, and then deposited another load of lumber prepared for the purpose and intended to be used in the construction of a derrick on the land last mentioned and first designated by the plaintiff.
    “The defendant at that time claimed a right under his said lease to operate the whole farm of one hundred and twenty acres, in case he found gas or oil upon any one acre of land mentioned in the lease and designated by the plaintiff, and supposed that this right was vested in him by the terms of his lease.
    “No other work or operation had been commenced or done on said land up to the date of the commencement of this action, and nothing has been done since.
    “Upon the facts so found the court find the equity of this case to be with the defendant, George H. Van Vleck, as to the forty-acre tract, described as the southwest quarter of the northeast quarter of section two (2), town three (3) north, range twelve (12) east, in Wood county, Ohio, and with the plaintiff as to the eighty acres, constituting the balance of the tract or farm described in the petition, and that each is entitled to have his title quieted accordingly.
    ‘ ‘It is thereupon ordered, adjudged and decreed by the court that the defendant, George H. Van Vleck, have and hold the right to enter upon and operate for gas and oil upon the forty-acre tract described as the southwest quarter of the northeast quarter of section two (2), town three (3) north, of range twelve (12) east, in Wood county, Ohio, in all respects as granted and conferred b}^ the contract or oil lease set forth in defendant’s answer herein, and as claimed in said answer, free from all interference of plaintiff herein; and that as to the balance of. the tract described in plaintiff’s petition herein, the title of plaintiff thereto is quieted, and defendant is forever enjoined from asserting any rights or claims thereon by virtue of said oil lease or otherwise.
    “And it is further ordered that each party pay one-half of the costs in both courts in this case to be taxed.”
    Proper exceptions having been noted, a petition in error was filed in this court seeking to reverse the judgment of the circuit court.

      Dodge <& Canary, for plaintiff in error.

      James 0. Troup, for defendant in error.
   Btjrket, J.

Plaintiff in error urges that the contract is void as to all except the one acre, for the reason that it is said to be indefinite and ambiguous, and that there is no description of the forty acres sought to be conveyed.

In Texas it is held that a grant by the owner, of a certain number of acres in a particular tract, will authorize the grantee to locate it in any part of the tract. Wofford v. McKinna, 23 Texas, 36.

In Illinois such a description is held to be so vague and uncertain as to convey no title. Shackleford v. Bailey, 35 Ill., 391; Laflin v. Herrington, 16 Ill., 304; Hughes v. Streeter, 24 Ill., 647.

In this state at an early clay, courts undertook to carry out the intention of the parties, and. held that a deed conveying a certain number of acres out of a designated corner of a certain tract of land, was a good conveyance of that nufnber of acres in a square form out of the designated corner. And this was carried so far as to hold that a grant of fifty-one acres in the northeast part of a certain tract, was good as a conveyance of fiftjr-one acres in a square form in the northeast corner of the tract. Walsh v. Ringer, 2 Ohio, 327; Cunningham v. Harper, Wright, 366.

In Hay v. Storrs, Wright, 711, there was excepted out of a conveyance of a tract of land half an acre opposite where Mr. Harvey formerly resided. The exception was held good, and sufficiently definite to enable an officer to find and locate it. The court say: “There can be no doubt of the intention of the grantor to reserve to himself, bj^ exception from his deed, one-half an acre. Where does it lie? Find where Harvey lived- — if it be opposite the corner of the one hundred and thirty-four-acre tract, it lies in the corner, in a square form — if so far from the corner, that the lines of the half acre would not reach it in a square form, then a line from the centre of the residence of Harvey would be the centre of the half acre tract on the street, and the tract would be laid out in a square form by parallel lines, making that the base.”

Plaintiff in error owned three tracts of forty acres each, and by selecting the one acre upon which the well was to be drilled, he thereby designated that the forty-acre tract out of which the one acre was so selected should be the forty acres to be operated under said lease in case gas or oil should be obtained.

If the number of acres contracted to be operated in case gas or oil shall be found, is the same as a subdivision of a section, say 10, 20, 40, 80 or 160 acres, it will be held that the subdivision of the section upon which the well is located, is the land intended to be operated under the lease. Otherwise the land to be operated is to be taken in a square form with the well as its centre, unless the well is so near a line of the land as to make this impossible, in which case the land to be operated will be in a square form including the well, and extending- to such line.

If gas or oil is found on adjoining lands, the tract to be operated must be ascertained in the same manner in which the half acre was ascertained in Hay v. Storrs, supra.

Next, it is urged that the contract was void, and remained so to the time of the commencement of the action, for the reason that upon its face it is without consideration. The contract is expressed to be upon the consideration thereinafter stipulated and agreed upon. There are many stipulations and agreements thereinafter contained, founded however upon the contingency that oil oi-gas be found and developed upon said premises. There is also a stipulation to the effect that if operations upon said premises be not commenced within five years that the contract shall be void. There is also an agreement that if the second party shall not commence a test oil or gas well at Rising Sun or vicinity in ninety days, that the lease should be void.

So far the stipulations and agreements are contingent, but there is a further and positive agreement, to the effect that after twenty-four months' the second party will pay to the first party the sum of fifty cents per acre per year, “to be paid out of the first moneys realized or received by said second party from the development of gas or oil.” Not from the development of gas or oil on these premises, but from the development of gas or oil generally. Such a promise made by a party in the gas or oil business, is as certain as the promise of a farmer to pay out of his next year’s crops.

But aside from this agreement to pay fifty cents per acre, the contingent stipulations and agreements, with part performance and an offer of full performance before the commencement of the action, furnish ample consideration for the contract. Grant that the parties of the second part were not originally bound to commence a test oil or gas well at Rising Sun within ninety days, j^et having commenced the well within that time at that place, and in that regard performed their part of the contract, such performance is itself a sufficient and completed consideration, and thereafter the lessor cannot be heard to aver want of consideration Performance by the party not originally bound supplies the consideration, and- thereafter, the other party is as fully and firmly bound as he would have been in case there had originally been ample consideration expressed in the contract. Fishmonger's Co. v. Robertson, 5 Man. & G., 131; Phelps v. Townsend, 8 Pick., 392; Commercial Rank v. Nolan, 7 How. (Miss.), 508; 1 Parsons on Contracts, 451.

Again, it is urged that there was a lack of performance as to the drilling of the test well at Rising Sun within ninety days.

The Circuit Court found that the test well was commenced within ninety days duly drilled to completion, and the existence of oil at that point thereby ascertained, that the well was not operated, but was plugged and the casing withdrawn.

This fully complied with the terms of the contract. The lease did not stipulate for the operation of the well, and the court cannot make a better contract for the plaintiff than he made for himself. As the test well was not on plaintiff’s land, he had no interest in the profits to be derived from its operation, unless it should have been indirectly, and such indirect benefits arising from operations upon the lands of another to be available must be expressly stipulated for, as they cannot be implied.

Lastly, it is urged that under the circumstances of this case, plaintiff should have had the privilege of making a second location of the place for the drilling of the well on his land, and that as the five years had elapsed at the time of the trial, the lease had expired by its own limitation, and judgment should have been given in favor of plaintiff.

As a general rule, only one location is permitted, and we see nothing in this case to warrant a departure from this rule. The defendant had commenced acting upon the selection made, and he had a right to insist that there should be no change. If a second selection had been granted, a third might have been demanded. The Circuit Court was right in holding him to his first location.

A s to the expiration of the five years, the rule is that where a party is prevented from performing his contract by injunction wrongfully obtained, he shall at the end of the litigation have as much time in which to perform as still remained at the date of the injunction, the rights thereafter to be the same as they .would have been in case no injunction had been issued. In short, the time between the issuing of the wrongful injunction, and the ending of the litigation, is not regarded,- and cannot be counted to the detriment of the enjoined party. To hold otherwise would permit a man to profit by his own wrong. This principle has been carried so far as to estop a party from availing himself of the statute of limitations. Treasurer v. Martin, 50 Ohio St., 197.

But it is urged that as defendant in error claimed the right to operate all of the three forty acre tracts in case oil or ga.s should be found, when in fact he was entitled to operate only one of them, .that he was in the wrong in his claim, and that for aught that appears, the injunction would not have been applied for, or granted in case he had claimed only forty aeres.

The findings of fact show ¡that defendant in error did not know of this interlineation as to the forty acres, and supposed that he was entitled to the whole one hundred and twenty acres, as shown by the record. Plaintiff in error had full knowledge of the fact that only forty acres were granted, and he was first in the wrong by making his claim for an injunction too broad. Had he truly stated the facts in his petition as to the forty acres, and thus called the attention of defendant to the error in the record, it is not likely that any defense would have been made, and the well would have been drilled within the five years. The litigation and consequent delay, were therefore caused by plaintiff, in knowingly and wrongfully covering too much territory by his injunction, and not by the defense thus made without knowledge of the mistake in the record. There is therefore nothing to take the case out of the general rule in such cases.

Judgment affirmed.


source: Caselaw Access Project

author: Williams, J.

license: Public Domain

text:
    Stewart, Adm’r, v. Railway Co. et al.

      jurisdiction — Actio7i in county other tha,7i that, in which subject property is situated — Section 5056, Revised Statutes, construed— How suit Í71 federal cozirt to foreclose mortgage on railroad property operates as 7iotice — Effect of jiidgment in state court prior to foreclosure — What such judgment lein includes — How judg77ie7it creditor may proceed to e7iforce lein — Subrogation of joreclostire purchaser to rights of motgagee — Application of proceeds of sale.

    1. Section 5056 of the Revised Statutes, which provides that: “ When any part of the real property, the subject matter of an action, is situate in any county or counties other than the one in which the action is brought, a certified copy of the judgment in such action must be recorded in the recorder’s office of such other county or counties, before it shall operate therein as notice so as to charge third persons,” or affect interests acquired by them in the property not situated in the county where the action was brought, relates to actions and judgments in the state courts, andjud^to those in courts of the UnitedJSJiatss,
    2. A suit brought in a federal court to foreclose a mortgage on the property of a railroad corporation, operates as constructive notice throughout the district, and all persons acquiring an interest in, or lien on any part of the property rlnri-ng the pendency of the suit, will be bound by the decree, and sale made thereunder; the purchaser will take the property discharged from all such liens and interests, though the persons obtaining- them be not parties to the suit; they must seek satisfaction from the proceeds of the sale, to reach which they should become parties, and bring' their claims to the attention of the court by appropriate pleadings.
    3. But a judgment recovered in a state court against the railroad company prior to the commencement of the foreclosure suit, by a creditor who was not made a party, remains unaffected by. the decree and sale; such judgment becomes a lien on the real property owned by the company at the time of its recovery, in the county where rendered, including lands acquired for the roadway, right of way, depots and other purposes of the company, and continues to be so against the property in the hands of the purchaser at the foreclosure sale.
    4. While, in such case, the judgment creditor may not, except as authorized by statute, sell on execution the property to which his lien attached, either where it is part only of the corporate property and is necessary in connection with the balance of the jn’operty to enable the corporation to accomplish the purposes of its creation, and discharge the duties it has assumed toward the public, or, where the sale would materially impair the uses and value of the balance of the property, he may, by a proceeding in equity to which all persons in interest are made parties, enforce his lien by subjecting the whole of the property to resale, and obtaining a proper application of the proceeds.
    . 5. In a proceeding for that purpose, the purchaser at the foreclosure sale may, if necessary for his protection, be subrogated to the rights of the mortgagee, to the extent of the purchase-money paid; and the proceeds of the resale must first be applied to the satisfaction of incumbrances superior to the lien of the judgment creditor, if any there be, including those set up in the foreclosure suit, and if nothing then remains for the judgment creditor, he cannot recover costs.
    (Decided June 11, 1895.)
    Error to the Circuit Court of Huron county.
    On the 20th day of May, 1889, Charles H. Stewart, as the-administrator of the estate of Hugh B. Wilson deceased, commenced his action in the court of common pleas of Huron county, against the Wheeling and Lake Erie Railroad Company, The Wheeling and Lake Erie Railway Company, The Central Trust Company of New York, The Mercantile Trust Company of New York, as trustee, John W. Cassell, William S. Fox and Cyrus McNeely.
    The petition, after stating the due appointment and qualification of plaintiff as administrator, and the corporate character of the several companies defendants, alleges that the defendant Railroad company, prior to, and during the year 1885, was the owner, and in possession of, and operating -a line of railroad in and through Huron, and other counties of the state, and was the legal owner, and in possession of certain real estate situated in the county of Huron, consisting of its roadway, and lands adjoining the same, depot grounds, and grounds occupied by its machine shops, station houses, car houses, engine houses and other buildings; that at the October term, 1885, of the court of common pleas of that county, the plaintiff recovered a judgment ag’ainst the said Railroad company for the sum of $4,049.84, and costs, which became a lien on the property of the company, and remain's in full force, and unsatisfied; that afterward, on the 6th day of March, 1886, the plaintiff caused an execution to be issued on his judgment which was returned unsatisfied for want of goods and chattels, dr unincumbered lands whereon to levy, the property of the company then being encumbered to an amount exceeding its value; but the encumbrances having1 been subsequently discharged the plaintiff caused another execution to issue, which was, on the 19th day of April, 1889, levied on the property of the company in Huron county. The petition then alleges that the other defendants each claim to have some lien on, or right in the property, by reason of which a sale under the execution cannot be affected, and prays thej^ may be required to set up their claims, or be barred, and for an adjustment of whatever liens may be set up, and a sale of the property and for general relief.
    The defendants Cassell, Fox and McNeely, and J. L. Ames who was made a party, each filed an answer and cross petition setting up judgments recovered by them respectively in the court of common pleas of Huron county, against the company, and the levy of executions issued upon them; the judgment of Fox was recovered on the 4th day of February, 1884, and was for the sum of $739.50; that of Ames on the 14th day of September, 1885, for $1,427.18; that of Cassell, on the 25th day of October, 1885, for $1,84.6.18; and McNeely recovered two judgments — one on the 24th day of May, 1886, for $590.70, and the other on the 21st day of February, 1887, for $285.35. The executions issued on the judgments were all levied at the same time the plaintiff’s execution was levied, and upon the same property; and the cross petitions contain substantially the same prayer as the petition. The Railroad company filed no answer. The answer of the Railway company to the petition, and to the several cross petitions, denies generally their allegations, and avers, that on the 1st day of November, 1879, the Railroad company executed its first mortgage bonds, thirty-five hundred in number, each for the sum of one thousand dollars, payable on the 1st day of November, 1909, bearing’ interest at the rate of six per- cent per "annum, payable semi-annually on the 1st day of May, and November, in each year, and sold and delivered twenty-eight hundred of the bonds to bona fide purchasers ; that to secure the payment of the principal and interest of the bonds, the Railroad company executed and delivered its mortg’ag’e, or deed of trust, to the Farmers’Loan and Trust Company, as trustee, and thereby conveyed to the Trust Company, its successors and assigns, all the Railroad company’s property, real and personal of every description, including the real es-state in Huron county, in said petition described, “in trust for the benefit and security of the several persons, copartnership firms and corporate bodies who should at any time be or become holders of any of the above mentioned bonds, to secure the due and punctual payment of the principal and interest of said bonds according to the tenor and effect thereof. The mortgage or deed of trust, contained a provision that in case default should be made in the payment of any of the installments of interest upon any of said bonds and such default should continue for the period of six months, the principal of all the bonds secured thereby should become immediately due and payable ; and it was duly recorded during the year 1880, in the office of the recorder of deeds of Hu: ron county, Ohio, and in each of the other counties in which any real property of said Railroad company was situate. That company failed to pay the interest which became due on the 1st day of November, A. D. 1883, and on the 8th' day of July, A. D. 1884 The Farmers’ Loan and Trust Company filed its bill of complaint in the Circuit Court of the United States for the Northern District of Ohio, Eastern Division, against the Wheeling and Lake Erie Railroad Company, praying that all of the property and franchises hereinbefore described be sold under a decree of said • court to satisfy the conditions of said mortgage or deed of trust; and on the same day said company duly entered its appearance in said suit. That on the 13th day of January, A. D. 1886, a decree was rendered in said suit by said Circuit Court of the United States, finding the sum of three million two hundred and forty-two thousand seven hundred and sixty ($3,242,760) dollars, due upon said bonds hereinbefore described* and adjudging and declaring that if the said, The Wheeling and Lake Erie Railroad Company, should fail within the period of ten days thereafter to pay into said court said last mentioned sum, all equity of redemption of said The Wheeling and Lake Erie Railroad Company, in and to said mortgaged property and franchises should be barred and foreclosed, and said mortgaged property and franchises should be sold by Wilbur F. Goodspeed, special master commissioner, who, thereafter, for the sum of five hundred and five thousand dollars, sold said railroad property and franchises, including the property in the petition described, to George J. Forrest, Melville C. Day and Daniel E. Garrison, trustees; and on the 22d day of June, A. D. 1886, said Circuit Court of the United States duly confirmed said sale and ordered said Wilbur F. Goodspeed, as special master commissioner, to execute and deliver to said trustees a deed of conveyance for said railroad property and franchises. That in pursuance of the aforesaid order of said Circuit Court of the United States, said Wilbur F. Goodspeed, special master commissioner, on said 22d da3'_of June, A. D. 1886, executed and delivered to said George J. Forrest, MelvilleC. Day and Daniel E. Garrison, trustees a deed conveying to said trustees the railroad property and franchises hereinafter specifically described, being the property described in said mortgage or deed of trust and the same property described in said petition; said deed was duly recorded by the recorder of deeds for the county of Huron, on the-day of--, A. D. 1886, in volume-of deeds, at page —. That on the 25th day of June, A. D. 1886, for a valuable consideration, the said George J. Forrest, Melville C. Day and Daniel E. Garrison, trustees, executed and delivered to this defendant, The Wheeling and Lake Erie Railway Company7, their certain deed, whereby they conveyed to this defendant all their right, title and interest in said railroad and property so sold and conveyed to them by said Wilbur P. Goodspeed, special master commissioner, being the property described in said mortgage or. deed of trust as well as in said petition; that said last mentioned deed was recorded in the office of the recorder of deeds for the county of Huron, Ohio, on the-day of --, A. D. 1886, in volume-of deeds, at page -. This defendant, therefore, denies that the judgments mentioned in the petition and cross-petitions ever became a lien on the real estate in the petition described, or on any7 part thereof. ”
    The answer of the Mercantile Trust Company sets up bonds to the amount of three millions of dollars, and a mortgage securing the same, executed by7 the Railway Company on the 6th day of July7, 1886, which bonds, it is alleged, are in the hands of holders for value, and the mortgage embraces all the property7 purchased by the Railway Company7, including that described in the plaintiff’s petition. The mortgage was recorded in Huron county7, and in each of the other counties in w7hich any7 of the property7 is situated, in August, 1886. The defendant prays that its mortgage lien, and the interests of the holders of the bonds secured by7 it, may7 be protected. The Central Trust Company7, in its answer, sets up a subsequent mortgage executed by the Railway7 Company7, on the same property7, to secure bonds to the amount of one million five hundred thousand dollars, in the hands of holders for value, which mortgage was recorded in the several counties where the property is located, in May, 1888, and prays 'that its rights and those of the bondholders • may be protected. Demurrers to these several answers, were filed by the plaintiff and cross petitioning judgment creditors, which were overruled, and replies were then filed controverting their allegations, and alleging that, “if said defendants or either of them obtained the title or liens, or any of them, in their said answers pretended, the same were procured with full knowledge and notice of the prior rights, lien and interest of the plaintiff, ” and' the other judgment creditors of the Railroad Company.
    After trial and judgment in the court of common pleas, the cause was taken to the circuit court on appeal, where it was submitted upon an agreed statement of facts; and that court also made and entered its findings of fact, upon the issues joined, from which it appears, that the allegations of the petition, and of the several cross petitions filed by those having- judgments against the Railroad Company, as they have already been stated, are true, and the averments, as they have been stated, in the answers of the 'Railway Company, The Central Trust Company, and the Mercantile Trust Company are also true; and, upon that state of facts the court held that neither the plaintiff, nor either of the other judgment creditors was entitled to any relief, and rendered judgment against them for costs. A motion for a new trial, filed by them was overruled, and a bill of exceptions, at their request was duly signed and allowed, and they are each asking the reversal of the judgment rendered against them.

      G. T. Stewart, for plaintiff in error.
    By the settled law of Ohio, junior lien holders have peculiar rights not accorded to them in some other states. As against all other interests, if there was no fraud in the purchase, the present Wheeling and Lake Erie Railway Company owns this entire railroad; but as against the junior lien holders, holding their liens on it before the sale of April 23, 1886, this company owns it only to the extent of the $505,000 purchase price, with interest from April 23, 1886, subject to reduction by an account of profits since that date, for the occupancy and use of the railroad. The new mortgages given since the purchase, to the defendants, The Mercantile Trust Company and The Central Trust Company of New York, are liens only on that purchase title, and cannot exceed in value the purchase price of $505,000 and interest, as against these junior judgment lien holders, and on resale of the railroad, could only claim the $505,000 and interest out of.the proceeds leaving these judgment lien holders next in order in the marshaling of liens.
    The junior lien holders not having been made parties to the foreclosure suit in which the railroad was caused to be sold, are not affected by the proceeding, but hold their rights intact. Stewart v. Johnson, 30 Ohio St., 24; Besser v. Hawthorn, 3 Oreg., 129.
    The railroad being in full operation, public policy forbids the sale of part of it to pay these judgments; but the court, after finding that the judgments, are unsatisfied liens on the road, will order their payment or the resale of the road, to pay these and the otlier liens, if any, found and marshaled upon it. For that purpose a receiver will be appointed if the court deems it necessary.
    It is claimed here, that the'pendency of the foreclosure suit of the Farmers’ Loan and Trust Company, in the circuit court of the United States, for the northern district of Ohio, (eastern division) from the 8th day of July, 1884, affected the plaintiff and other judgment creditors of the Wheeling and Lake Erie Railroad Company with notice which deprived them of their statutory judgment liens on its real estate.
    There are, at least, two good reasons which negative this claim.

      First — The law of Us pendens is statutory in Ohio, and limits the notice to the county in which the judgment is rendered, or in which a transcript of the judgment is recorded in the office of the county recorder, or a full entry .is made on the foreign execution docket of the sheriff. The rule of lis pendens is of equity origin. It was first announced by Lord Bacon in his famous ordinances for controlling the practice of Courts of Chancery in England. .Judge McLean called it constructive notice.
    The court takes judicial notice of the fact that the-foreclosure suit of the Farmers’Loan and Trust Company, was brought in a United States court, holding- its sessions in the county of Cuyahoga, and not in the county of Huron. It certainly takes judicial notice of the fact that no such court is held in the county of Huron; and that fact devolves it on the W. & L. E. Railway Co., and the Trust companies, to show in their answers, that they have complied with the requirements of the statute as to Us pendens, before they can claim the rule here.

      Second — The rule of lis pendens in the Ohio courts, does not apply to actions pending in courts of other states, or of the United States. Mutual Life Insurance Co. v. Harris, 96 U. S., 739.
    Holders of liens were not necessary or proper parties to suits in which judgments in personam were obtained, as held by the Superior Court of Cincinnati in Farmers' Loan and Trust Company v. The C. W. & B. Ry. Co. et al., 21 Cin. Law Bulletin, 275; Wallace v. McConnell, 13 Peters, 136.
    Under the laws of Ohio, such a judgment cannot take a lien on land. Myers et al. v. Hewitt et al., 16 Ohio, 449.
    In all respects the statute of the state defines what judgments take lien and how lien is lost, preserved or enforced. Lessee of Sellers v. Corwin et al., 5 Ohio, 398; Lawrence et al. v. Belger, 31 Ohio St., 175. Unless the terms of the state statute are strictly complied with, neither can exist or continue, in the view of any court, state or federal. The judgment of foreclosure was nothing but a final decree in equity and that gives no lien or notice to charge a subsequent purchaser. Its mere pendency cduld not affect a creditor pursuing his remedy in another court of another jurisdiction. Turner v. Crebill et al., 1 Ohio, 372.

      Swayne, Swayne, Ilayes 3 Tyler, for defendant in error.
    The real property of corporations classed as public agencies (such as railroads, turnpikes, bridge companies and a few others) which is essential to the exercise of their corporate franchise, and the discharge of the duties they have assumed to the general public, can not, without statutory authority, be sold on execution to satisfy a personal money judgment. 33 Neb., 857; 51 N. W. Rep., 240; 24 Howl. 257; 114 U. S., 340; 9 Watts and Sergents, 27 ; 105 U. S., 77; 10 Ohio, 476; 10 Ohio St., 372; 17 Ohio St., 642.
    The lien of a judgment, followed by levy of execution on land, recovered pending proceedings for the foreclosure of a mortgage on the land, is divested by the sale of the land under an order of the court in the suit for foreclosure. 20 W. L. B., 397; 8 Ohio St., 646; 22 Ohio St., 615; Stewart v. Johnson, 30 Ohio St., 24; Frische v. Kramer's Lessee, 16 Ohio, 125; Childs v. Childs, 10 Ohio St., 339; Anderson v. Lanterman, 27 Ohio St., 104; Meyers v. Hewitt, 16 Ohio, 449; Holliger v. Bates, 43 Ohio St., 437; 31 Ohio St., 175; 1 Curtis, 494; 2 Curtis, 559; Brown v. National Bank, 44 Ohio St., 269.
    The title of the railway company includes that of the Farmers’ Loan and Trust Company, and if the judgment creditors set up no claim against the latter they have none against the former.
   Williams, J.

The mortgage executed by the defendant Railroad Company, to The Farmers’Loan and Trust Company, November 1, 1879, embraced all of the property of the mortgagor, including that which the plaintiff, in the action below, sought to hav.e subjected to sale for the payment of his judgment. The mortgage was duly recorded in 1880, in each of the counties where any of the property was situated. The suit to foreclose that mortgage was commenced in the United States Circuit Court, of the proper district, on the 8th day of July, 1884, and the appearance of the defendants duly entered on the same day. That suit, which was regularly and continuously prosecuted, resulted in a decree of foreclosure, rendered on the 13th day of January, 1886, under which all. of the property was sold, and the sale confirmed on the 22d day of June, 1886. The purchasers, after receiving their deed for the property, conveyed it in due form to the defendant Railway Company, on the 25th day of June,'1886. These conveyances were properly recorded. The plaintiff below, and the several cross petitioners except Fox, recovered their judgments against the Railroad Company, after the commencement, and during the pendency of the foreclosure suit, and none of them were made parties thereto. Fox recovered his judgment before the commencement of that suit, but was not made a party. It is claimed by the defendants in error, that all of these judgment creditors, except Fox, are bound by the decree in the foreclosure suit, and whatever lien or right they acquired against the property, by their judgments, was divested by its sale under the decree, and the purchasers took the title discharged therefrom.

That the court in that suit had jurisdiction of the parties, and of the property included in the mortgage, is not questioned; nor is it, that the prosecution of the suit was close and continuous; and it is well settled that all persons who, in such ease, purchase or otherwise acquire an interest in the subject of the litigation, take with constructive notice of the pendency of the suit, and will be bound by its result, though not made a party. The rule as formulated by Lord Chancellor Bacon, and generally adhered to since is, that “ no decree bindeth any that cometh in dona fide by conveyance from the defendant before bill exhibited, and is made no party, neither bjr bill nor the order; but, where he comes in pendente lite, and while the suit is in full prosecution, and without any color of allowance or privity of the court, there regularly the decree bindeth.” The rule is founded in necessity, as well as upon public policy, as, without it, the judgment of the court could in all cases be frustrated, or rendered ineffectual by conveyance or incumbrance made or suffered during the pend-ency of the suit; new suits would then become necessary against those so obtaining an interest in the subject of the action, who might, in the same way, compel still further suits, and so on, until there would be no end to the litigation. As was said by Chancellor Kent, in Murray v. Ballou, 1 Johns Ch., 566, “no doubt the rule sometimes operates with hardship upon a purchaser without notice, but this seems to be one of the cases in which private mischief must yield to the general convenience.” , In general, a suit is to be determined upon the state of case existing when it was instituted; and persons who procure an interest in its subject matter during its pendency, should, if the}7 wish to assert any claim founded upon that interest, become parties, and bring it to the attention of the court by appropriate pleadings. The rule is quite as applicable to judgment creditors as it is to purchasers, or other incumbrancers, and ihere is no reason why it should not be; the lien of the judgment attaches only to the right or title which the debtor had at the time of its rendition, and the position of the creditor is not more meritorious than that of a mortgagee or bona ficle purchaser.

It is contended, however, by counsel for the ■ plaintiff in error, that section 5056, of the Revised Statutes,- forbids the application of the rule in this case, and prevents the foreclosure suit brought in the United States court from operating as a lis pendens affecting the liens of the judgments recovered in Hurón county. That section provides that: “When any part of real property, the subject matter of -an action, is situated in any county or counties other than the one in which the action is brought, a certified copy of the judgment in such action must be recorded in the recorder’s office of such other county or . counties, before it shall operate therein as notice so as to charge third persons, as provided in the preceding-section; but it shall operate as such notice, without record, in the county where it is rendered; but this section shall- not apply to actions or proceedings under any statute which does not require such record.” The preceding- section provides that: “When the summons has been served or publication made, the action is pending so as to charge third persons with notice of its pendency; and while pending no interest can be acquired by third persons in the subject matter thereof as against the plaintiff’s title. ” These sections belong to the code of civil precedure; and it is obvious they relate to actions brought, and judgments rendered in the state courts, and not to those in the courts of the United States. Section 5056, is, by its terms, limited to judgments recovered in one county, concerning real property partly situated in another county; and actions of that nature are authorized by a preceding section of the code, section 5022. In the federal courts, actions are not brought in counties, but in the district or circuit where 'jurisdiction of the parties and subject matter may be properly obtained; and, throughout the territorial limits of that jurisdiction their judgments operate as liens, and actions pending as constructive notice, like those of state courts within their appropriate jurisdiction. Similar statutes have received like construction elsewhere. A statute of the state of Virginia provided that: “no lis pendens, or attachment against the estate of a nonresident, shall bind or affect a purchaser of real estate, without actual notice thereof, unless and until a memorandum setting forth the title of the cause, the general object thereof, the court in which it is pending-, a description of the land and the name of the person whose estate is intended to be affected thereby shall be left with the clerk of the court of the county or corporation in which the land is situated, who shall forthwith record the said memorandum in the deed book, and index the same by the name of the person aforesaid.” When that statute was in force, an assignee in bankruptcy brought suit in the Federal court at Richmond, to set aside, as fraudulent, a deed for certain real property in Petersburgh. Pending the suit, a third person, • in good faith, purchased the property from a defendant, and paid full value for it, without notice of the fraud or pending suit. The court held he took nothing by his purchase as against the decree in the Federal court, notwithstanding no lis pend-ens was filed or recorded as required by the Virginia statute. Rutherglen v. Wolf, 1 Hughes (U. S.), 78. In the case of Wilson v. Hefflin, 81 Ind., 35, it appeared, that during the pendency of a suit in the Federal court to reform a mortgage so as to embrace a tract of land not described in it, and foreclose the mortgage when so reformed, Wilson purchased the land, which was situated in a county where the Federal court did not sit, and' where, upon the records, the title was in the name of his grantor, and no encumbrance of the land appeared of record. His purchase was made in good faith, for value, and without actual notice of the mistake in the mortgage, or the pendency of the suit to reform and foreclose it. Subsequently, the court decreed reformation of the mortgage, and sale of the property. In an action brought by Wilson, who was in possession of the land, to quiet his title as against the decree of the federal court, he relied on a statute of Indiana which had not been complied with, similar in its provisions to that of Virginia, heretofore mentioned; but the court decided against him, holding that the statute had “no effect upon suits in the United States courts. ” And in Majors v. Cowell, 51 Cal., 478, it was held, that the clause of the practice act of that state, “relating to the filing of a Us pendens does not apply to suitors except in the state courts.”

It follows that the judgements recovered against the defendant Railroad Company, while the suit was pending in the Federal court to foreclose 'the mortgage embracing- the property which it is sought to subject to their payment, created no lien, nor gave any right or remedy to those creditors that can now be enforced or be made effectual ag-ainst the property. But Fox, whose judgment was recovered prior to the commencement of that suit, and who was not made a party to it, occupies a different position, and is not without remedy, unless it is to be denied upon some other ground. The nature, as well as the existence of that remedy, is well settled. It is the duty of a mortgagee to make all persons who appear of record to have a lien upon or interest in the mortgaged premises parties to his action of foreclosure, arid if he does not, their lien or interest remains unaffected thereby; and any such encumbrancer, whether prior or subsequent to the mortgage, who has not been made a party, may maintain an action to enforce his lien, and have a resale of the property for that purpose; if a subsequent encumbrancer, he is only entitled to have applied to the payment of his claim such part of the proceeds of the resale as may be necessary, which remains after the payment of the prior encumbrance and costs, and if nothing so remains he cannot recover costs ; but he is not required, as a condition of his right of resale, to first pay such prior encumbrance. The purchaser at the first sale takes the title of the mortgagor and mortgagee, and may, for his protection, be subrogated to the rights of the latter to the extent of the purchase money paid. Frische v. Kramer, 16 Ohio, 126, 139; Myers v. Hewitt, Ibid, 449; Childs v. Childs, 10 Ohio St., 339; Stewart v. Johnson, 30 Ohio St., 24; Holliger v. Bates, 43 Ohio St., 437; Vanderkemp v. Shelton, 11 Paige, 28.

But, it is contended the remedy cannot properly be enforced in this case, because the Railroad Company, when the judgment was recovered against it, was a public agency whose property was essential to the exercise of its franchise, and the discharge of those duties it had assumed toward the public; and the Railway Company holds the property, it is claimed, impressed with the same public trust, and secured by the same right of exemption. There are authorities which maintain the general proposition, that the real property of corporations classed as public agencies, such as railroad companies, which is essential to the exercise of their corporate franchise, and the performance of their duties to the general public, cannot be sold on execution, without statutory authority; and, further, that a part only of the property of such a corporation cannot be sold, when the sale would practically destroy, or seriously impair the uses and value of the remainder. Conceding, however, that considerations of public policy, or the peculiar nature, uses and incidents of property owned by such quasi public corporations, forbid the sale, upon execution of the whole or parts of the property, with, or without the corporate franchise, it does not follow that a lien upon it may not be created by the recovery of a judgment against the the corporation, which may be preserved in some mode, and enforced by some appropriate proceeding. If it could not be, it is evident the purposes of the corporation would generally, if not always fail; for ordinarily, in conducting its business, it becomes necessary to contract debts and incur obligations, and it being understood the creditor has no means of enforcing' payment, the corporation could obtain no credit. As said by Gholson, J., in Coe v. Railroad Co., 10 Ohio St., 372: “It may be true that a railroad corporation holds its property, in a certain sense, as a public trust, to answer the purposes of a public highwajy the transportation of persons and property. But it is consistent with that public trust to contract obligations. Indeed, the very exercise of the trust necessarily involves obligations to individuals, and to meet those obligations, the property of the corporation must in some form be liable. The question is, in what form ? Shall it be in the ordinary legal form applicable to the property of individuals, or shall peculiar rules be introduced, which may have the effect to delay creditors, and operate as a shield to protect property from their just demands?” The court, in that case, distinguishes between the franchise of being a corporation, which, it is said, properly speaking, is a franchise of the incorporators, and the franchise to operate the road and make profits therefrom; and holds _ that the former cannot be conveyed or sold, while the latter may be. And with respect to the property of the corporation, after it has been mortgaged, and the respective rights of the mortgagee, and subsequent lien holders, it is said: “The property must be subject in some form to the just claims against the party subsequently arising, and this will frequently and necessarily lead to interruption and disappointment in a prior arrangement as to the time within which it is to be performed;” and, further,that thecompany “could not by its own act exempt from the claims of its creditors any part of its property, ’ ’ nor could the mortgagee “object to the creation of other legal liens upon the property embraced in the mortgage. ’ ’ In Lane v. Baughman, 17 Ohio St., 642, it is held, that “the remedy of a judgment creditor of a railroad company, where its property is encumbered by mortgage, is in equity to subject the interest of the mortgagor to the payment of the judgment, except where his claim is such as to entitle him to have it paid out of the earnings of the company, when his appropriate remedy is to subject the earnings to its payment.” And this court held in Railroad v. Lewton, 20 Ohio St., 401, that a party who has a lien on a specific part only of the property of a railroad corporation, is not entitled to a sale of such part, where the sale will have the effect to break the continuity of the road and interfere with the public interests. The lien asserted in that case was in the nature of a vendor’s lien on a piece of land used for the company’s roadway. Speaking of the lien holders remedy in such case, Mcllvain J., says: “The public has and can have no right which spring’s from an act of injustice to the defendant in error. Its only right is to preserve the continuity of the road, of the line of public travel and transportation. And this right is as well subserved, if the ownership and management of the highway be in the hands of one party as another. Hence, the public has no interest impaired by a sale of the whole line. ’ ’ And, “because a part may not be sold on account of the ■paramount right of the public to keep the highway intact, a necessity arises, in order that justice may be done to the defendant in error, to decree a sale of the whole line of the road to satisfy his lien. And this is the only mode in which the rights and interests of other parties, either as owners or lien holders upon the road, can be protected, and their property or security saved from absolute destruction. ”

In general, the liability of property for the owners’ debts, except in so far as there are express legal exemptions, is as unlimited as the power of disposition, which is an inseparable incident of ownership when there is no legal disability; for the incurring of indebtedness for the payment of which the property may be taken, is but a mode of disposition by the owner. Under our laws railroad companies are authorized to appropriate lands for their roadways, depots, workshops, and for various other uses, and to acquire by purchase or donation any lands in the vicinity of the line of the road, or through which it passes, deemed necessary or convenient for the right of way, or that may be granted to aid in the construction of the road; and to hold and convey the same in such manner as the directors may prescribe. Revised Statutes, 3281, 3282. And, that the lien of a judgment may attach to such propertjq as it does to that of an individual, is distinctly recognized in the legislation of this state. Thus, it is provided by section 3398, of the Revised Statutes, that the lien of certain mortgages and deeds of trust executed bjr the company, shall be postponed to the lien of judgments recovered against the company for labor thereafter performed for it, or material or supplies thereafter furnished to it, or for damages, or losses, thereafter sustained by the misconduct of its agents, or in actions founded on its contracts or liability as a common carrier thereafter made or incurred. And the subsequent and supplemental sections point out the mode of enforcing- the lien of the judgment and preserving its priority. Section 8516-35, declares that if one company owning a railroad jointly with another company, shall refuse to pay its part of the costs of making necessary additions and improvements as directed by the statute, judgment may be recovered therefor, which ‘ shall be a valid lien upon the interests of the party so in default in said railroad or part of railroad owned jointly as aforesaid, and such interest may be sold at public sale as in other cases upon execution,” and the purchaser shall enjoy “all the rights, privileges, and franchises which were exercised or enjoyed by the company owning- the same at the time of the sale. ’ ’ .Other instances may be found in sections 3299, 5866, 6449. By section 5375, of the Revised Statutes, a judgment is made a lien on all the lands of the debtor, and any vested interest he may have in lands, situated in the county where the judgment is rendered, either from the first day of the term of the court at which it is rendered, or from the day of its rendition. And we are of the opinion, that judgments recovered against railroad corporations become liens upon their real property situated in the county where rendered, and that lands owned by such corporations for their roadways, rights of way, depots, and other purposes must be regarded as property of that character, and subject to such liens. We are also of the opinion, that while the judgment creditor may not, except as authorized by statute, sell on execution the property to which his lien attaches, separate from the franchise of the company, nor, when it is part only of the corporate property and is necessary in connection with the balance of the property to enable the company to accomplish the purposes of its organization, and perform the duties it owes to the public, or' its sale will materially impair the uses and value of the balance of the property, he may, by a proceeding in equity, to which all persons interested are made parties, enforce his lien by subjecting the whole of the property and franchises of the corporation to sale.

The pleading’s do not seem to have been drawn with this view of the case; the property is not adequately described in the petition, or cross petition of Pox; but such description is supplied by the answer of the Railway Company. Then, the recover}’' of Fox’s judgment was subsequent to the record of the mortgage under which the former sale was had, and it appears the proceeds were insufficient to pay the indebtedness secured by it; and as it is not shown that the claim on which the judgment was rendered was such as to entitle it to priority over the mortgage, the latter must be treated as the superior lien, and entitled to receive the unpaid balance, out of the proceeds of any sale of the property that may be had at the instance of Fox, before any part can be properly applied on his judgment. The holder of the mortgage, or of the indebtedness secured by it, is therefore a necessary party, but as he can only be interested in the distribution of the proceeds of the sale, it will be sufficient if the party is brought in before that takes place. The presence of the party is not necessary before the decree of sale. It may turn out that the resale will produce no more, nor even enough to pay the balance of the mortgage debt; but, whether a suitor’s remedy promises to be productive of beneficial results, or not, is for his consideration; the court is concerned only with his rights. The judgment rendered by the circuit court against Fox is reversed, and the cause will be remanded for a decree in Ms favor in accordance■ with this opinion. In other respects the judgment is affirmed.


author: Minshall, C. J.

text:
    Eversmann, Receiver v. Schmitt.

      Building association — Mutual interest of members — When borrowing member ~is entitled to cancellation of mortgage.

    1. The members of a building association, whether borrowers or non-borrowers, have a mutual interest in its affairs; and, sharing alike in its earnings, must assist alike in bearing its losses.
    2. A borrowing member is one who receives in advance the par value of his shares, and agrees in consideration of such advance, to pay the weekly dues on the shares and the interest on the loan, until the dues paid and the dividend declared ■ and not paid, are equal to the par value of his shares. He then ceases to be a member and is entitled to a ’cancellation of the mortgage given to secure the obligations arising from the loan.

      3. The mortgage executed by a borrowing member of a building association, contained among other conditions, a stipulation for the payment of such “assessments” as might be levied on him as a member. Losses occurred and the association became insolvent, whereupon a receiver was appointed to wind up its affairs, who ascertained the “ shortage ” in the assets, and made a pro rata assessment on the members to meet the same. Held: That an assessment for such purpose is within the above stipulation of the mortgage, and that the member is not entitled to its cancellation until paid. Held, further, that, in such case, the receiver is the proper person to ascertain the amount of the losses 'and make an assessment on the members to meet the same.
    (Decided June 11, 1895.)
    Error to the Circuit Court of Hamilton county.
    George H. Eversmann, receiver of the New Ohio Building Association, an insolvent corporation, on March 10, 1890, brought suit in the Hamilton common pleas to foreclose a mortgage that had been given it by the defendant below, Maria T. Schmitt. The defendant being a member of the association, and the owner of twelve shares of the aggregate value of $3,000, when paid up, on May 1, 1880, had received an advanced loan of that amount, bidding therefor $240.00. To secure the obligation to the association arising from the loan, she executed and delivered a mortgage to it, on definitely described property. The defeasance clause of the mortgage is contained in the finding of facts, hereinafter inserted. Among other conditions, it stipulates for the payment of the dues on the stock and interest on the loan “until such time as the weekly dues paid and dividends declared and unpaid, shall amount to the said sum of three thousand dollars,” and the payment of such, assessments as may be levied upon her as a member of the association.

      The petition avers that by reason of the payment of dividends that had not been earned and the misappropriation of funds by its treasurer, the capital of the association had become impaired to the extent of thirty-one and a fraction per cent.; that the defendant had participated in the receipt of these unearned dividends, that the plaintiff had been appointed as a receiver to wind up the affairs of the association; and, as such receiver, had made an assessment on the stock of the members to meet the losses, that against the defendant amounting to the sum of $934.17, which she refused to pay. The defendant claimed to have paid in dues the full amount of her loan, $3,000, and all the interest thereon, and had performed all the requirements of the mortgage according to the constitution and by-laws and was entitled to its cancellation and prayed accordingly.
    Issues having’ been made up, the case was tried in the common pleas, and both parties appealed from the judgment to the circuit court.
    The circuit court made a finding of facts which is as follows:
    “The New Ohio Building’ Association is an insol- • vent corporation. Its insolvency is due partly to the over-payment of dividends by its secretary, George R. Topp, and partly to a misapplication of its moneys by its treasurer, William Peters.
    “The amount of the shortage, as determined by the receiver, is about thirty-one per cent.
    “Georg’e H. Eversmann is the receiver of the company, and is engaged in winding up its affairs. The receiver was appointed December 5, 1889.
    “ Maria Theresa Schmitt became a member of the corporation May 5, 1880, and subscribed for twelve shares of its stock ($250.00 each), and bid for a loan of money for the amount of her shares, three thousand ($3,000.00) dollars.”
    This sum was advanced to her, and she gave to the company her mortgage on certain real estate in Cincinnati, described in the petition in this case. This mortgage was duly recorded May 6, 1880. The clause of defeasance provided: “That if said Maria Theresa Schmitt,, who has become a member of said building association, and subscribed to twelve shares therein, and received in advance from said association said sum of three thousand ($3,000.00) dollars, the par value of said shares, shall pay or cause to be paid to the building association, without demand therefor, according to its constitution and by laws, until such time as the weekly dues paid and dividends declared and unpaid, shall amount to said sum of three thousand ($3,000.00) dollars, or, in case of the dissolution of said association, until within the meaning of the constitution and by-laws of said association, she shall be released therefrom:
    “1st. The sum of six dollars per week from the date hereof, the same being the dues on said twelve shares;
    “2d.' The sum of six per cent, interest upon said three thousand ($3,000.00) dollars, payable pro rata in weekly payments, subject to rebatement every corporate year;
    “3d. The sum of six ($6.00) dollars per week from the date hereof, for a period of forty (40) weeks, the same being' in payment of the premium of two hundred and forty dollars bid on said twelve shares;
    ‘ ‘ 4th. All fines, assessments'and penalties which the said Maria Theresa Schmitt shall incur, and which may be levied upon her as a member of said association, and in accordance with its constitution and by-laws;
    “5th. All rents, taxes, assessments, and premiums of insurance upon the said mortgaged premises, in accordance with the constitution and bjMaws of said association; then this instrument to be null and void.”
    The constitution of said association contains the following sections:
    “ARTICLE XI.
    “1. All members shall pay for every share fifty (50) cents initiation fee, and an installment of fifty (50) cents per week.
    “ARTICLE XII.
    “1. Every shareholder shall be entitled to a sum equal to the amount of $250.00 for each share.'
    ‘ ‘ 3. Every share for which the money has been drawn shall be considered >as a ‘paid out’ share, and shall bear six per cent, interest (6 per cent.) annually, and the premium must be paid in weekly rates. The interests and premiums shall be payable 'pro rata, ’ as soon as any part of the money is ready to be paid out. Interest will only be charged on the amount remaining due at the beginning of each year.
    “4. Every member, who wishes to draw the amount of his or her shares, shall secure the payment by the executing’ of an acceptable mortgage on real estate, and this mortgage shall remain in force until the weekly dues and undrawn dividends make up the sum of $250.00 on each share, the mortgage shall then be canceled, and such a member shall then cease, on the ground of such shares, to be a member.
    “Those members who have not yet drawn money can have their dividend paid to them; they may also draw their money before six months without the dividends.
    “Maria Theresa Schmitt was a stockholder, and shared equally with the others in the profits of the company, and withdrew the same from time to time. She withdrew dividends from time to time as they were declared, amounting to nine hundred and ninety-five and 92-100 ($995.92) dollars, with the consent of the association.
    ‘ ‘Maria Theresa Schmitt made the last payments in her book on November 27, 1889, which was the last regular meeting night but one before the receiver was appointed, and demanded cancellation of her mortgage, which was refused.
    “ The last payment of dues with the other payments of dues made the entire amount paid in by her, as dues, the sum of $3,000.00. In addition to the dues, defendant paid interest and premium in fuli. The losses occurred during her membership. The assets of the company are mortgages. The liabilities are to members only.
    “ The entire premium of $240.00 due under said mortgage was paid by Maria Theresa Schmitt, at the time she became a member of the association, to-wit, May 5, 1880. The dues and interest called for by the mortgage were paid regularly and according to the terms of the mortg-age.
    “The court finds that the proceedings in the Superior Court of Cincinnati, in which plaintiff was appointed receiver, were for the dissolution of the association; and that the assessment set up in the petition herein was made by the said receiver; that there are a g'reat number of members of said association, both borrowing and nonborrowing, and that none of said members, including- the defendant, were parties to said case in which the receiver was appointed, nor were they, or this defendant, given an opportunity to be heard in reference to said assesment; that there were a large number of members of said association, both borrowing and nonborrowing-, who were members thereof during-‘the time said losses set up in the petition occurred, and who withdrew from said association prior to the time said association went into the hands of the receiver, and that none of said parties have been brought into said suit in the Superior Court of Cincinnati, nor have the liabilities of said parties been considered in making- said assessment. ’ ’
    The court found and adjudged that the defendant was liable as a member for her proportion of the losses, but held that the condition of the mortgage had been performed and that she was entitled to have it cancelled, and decreed accordingly.
    The plaintiff in error claims that the judgment, ordering a cancellation of the mortgage is not sustained by the findings, and asks to have it reversed.

      Huntington <& Hol?nes, for plaintiff in error.
    Maria Theresa Schmitt made the last payment 'in her book ($6.00) on November 27, 1889, which ’was the night before the receiver was appointed. This sum, with the other payments made, would have made her stock amount to the sum of $3,000.00, the exact amount of the loan had there been no losses. But the losses had already occurred during the time of her membership. The assets of the com-

      pany are mortgages. The liabilities are to haem' bers only.
    We hold that the payments are payments on, stock and not on the mortgage and that the whole amount of the mortgage is due until a settlement is made by using the amount paid in on the stock to cancel the mortgage. The weekly payments made by the stockholders are payments on “stock or shares subscribed.” They are not payments on the mortgage. Where they share equally in the profits they must share equally in the losses. Seibel v. Building Association, 43 Ohio St., 373.
    Being equally entitled with all the others in the direct ratio of his interest in the society to share in the common gains of the enterprise every member is liable to contribute, in the same proportion in which he expects to profit, to the losses and expenses incident to its management.. Endlich Law of Building Associations, section 104; McGrath v. Building Association, 44 Pa. St., 383. He can not evade such liability by a transfer of his stock without the consent of the corporation, nor can he be allowed to withdraw from the association for the purpose of escaping his proportion of the common burden. Everhart v. Building Association., 29 Pa. St., 339.
    The association has the right to deduct a members proportionate share of the expenses, losses and debts of the association from the amount otherwise coming to him. The society may assess the loss on each share pro rata. U. S. Building and Loan Association v. Silberman, 85 Pa. St., 394; 4 W. N. C., 546; 35 Leg. Int., 51; Wittman v. Building Association, 7 W. N. C. (Pa.) 80; Knoblauch v. Robert Blum, Building Association, No. 2, 8 Pittsburg, Leg. Four, N. S., 39.

      Nor is. this liability in any way affected by the fact that the member has become a borrower, so long as, being such, he still continues in membership.
    Maria T. Schmitt was a borrower and made payments on her stock or shares subscribed and received full dividends on the stock. Her payments are, therefore, subject first, to the payment of expenses and losses, and only the balance remaining can be applied to the payment of the loan.
    The contract of membership and the mortgage contract are, in equity, one contract. The contract of her mortgage is so coupled with her membership that the two cannot be separated. The one is an equitable incident of the other. Maria Schmitt asks equitable relief — the cancellation of the mortgage. This should be denied until she is first placed on an equality with her fellow members, for equity is equality.
    The clause of defeasance of the mortgage contains the word “assessments” twice — once in connection with the word taxes, once in connection with the words “fines and penalties.” Assessments in the latter clause means “costs” or losses. Compare the clause of defeasance with Article XV of the constitution.

      Tugmcon c& Baker, for defendant in error.
    Said mortgage should be cancelled and defendant’s title to said premises quieted because, as shown by the finding of facts, she has fully complied with all the conditions of said mortgage.
    On November 27, 1889, therefore, when defendant made her last payment upon her mortgage, she had fully complied with all the conditions of said mortgage, and, as provided in section 4, article XII above set forth, she was entitled to have the same cancelled.
    But it is said that defendant is liable under said mortgage to an assessment for losses. To this we answer that she is not so liable unless the mortgage, or those parts of the constitution which are made part of the mortgage by reference, so provide. There is nothing upon the face of the mortgage making her liable. Is there anything creating such liability in those parts of the constitution referred to in, and made part of the mortgage? In the defeasance clause of the mortgage we first find “assessments” referred to under the “4th” head thereof.
    The assessments here referred to mean the weekly assessments the members are liable to pay while the corporation is a going concern, and is synonymous evidently with the words dues and contributions used in the same paragraph. . It will also be observed that the word “assessment” as used in this article, applies solely to nonborrowing members.
    But counsel seem to think that article XV of the constitution is intended to apply to an assessment for losses such as is attempted to be collected in this action. That they are entirely mistaken in their view will be apparent, we think, after a comparison of this article of the constitution with the requirements of the law then in force concerning the matters contained in said article.
    There being, therefore, no provision in the constitution for the payment of an assessment for losses, and none in the mortgage proper, and defendant'having fully complied with, all the conditions of said mortg-age and the constitution, she is entitled to a cancellation of the mortgage and to have her title to said premises quieted against the claims of the plaintiff and the New Ohio Building* Association.
    If the defendant is not liable to any assessment for losses, it follows that she is entitled to have plaintiff and said association and its officers enjoined from levying, or attemption to levy, any assessment upon her.
   Minshall, C. J.

Mutuality is the essential principle of a building association. Its business is confined, to its own members; its object being* to raise a fund to be loaned among themselves, or such as may desire to avail themselves of the privilege. This is done by the payment, at stated times, of small sums, in the way of dues, interest on loans and premiums for loans. Each - shareholder, whether a borrower or nonborrower, participates alike in the earnings of the association, and alike assists in bearing the burthen of losses sustained. It has what is called a capital stock. But this is only true in a modified sense. Unlike other corporations for profit, a share in a building association has, at the inception, only a nominal value. Its value is expected to increase by the lapse of time and the success of the association. It is contrary to the purpose and genius of a building association that a share in it should be paid up at the time of the subscription. The is done by the payment of small dues, and the crediting, at stated times, of the earnings in the way of dividends. When the aggregate dues with the credited earnings equal in amount the par value of a share of stock, it is paid up, and the owner, for that share, ceases to be a stockholder. He is entitied to the par value of his stock, but can no longer participate in the earning’s of the association. His relation, then, becomes simply that of a creditor, until he is paid. Of course what is here said, is subject to the qrtalification, that no losses have been sustained. Losses are incident to the most careful management of men; they cannot be wholly avoided; though it is worthy of note, that the smallness of the losses in the .management of building associations, compared with that of other. monied institutions, is remarkable. Still, agents may prove unfaithful, and bad loans be made. When this happens, the mutual character of the association prescribes that the burthen must be sustained by the stockholders according to the amount of their stock; for he who participates in the benefit of a business must assist in bearing the burthen.

As before observed, borrowers and nonborrowers participate alike in the earnings of a building-association. The difference between them is simply in the time at which each class is paid the par value of his shares. A borrower before his .stock is paid up, receives from the association the par value of his shares, in the nature of an advance loan. For this, he agrees to pay the premium, if any, for the privilege, the interest on the money advanced, subject to abatements to be made at stated times, and the dues on his stock until it matures. In other words, he agrees to keep up and pay out his stock, as if he were a nonborrower, in consideration of the amount being advanced to him before that time. Hence, the borrower remains a stockholder, and participates in all the privileges and benefits of a stockholder; has a voice in the management of the association and participates in its earnings. The latter go toward discharging his obligations arising on the loan, and to shorten the time in which he will be fully discharged therefrom. For, taking all losses into account, whenever the shares of the borrower have reached their par value by the payment of dues and the apportionment of earnings, the loan is liquidated and he ceases to be a member, as he would, if he had not borrowed at all. In other words, with his shares paid up, he discharges his obligations as a borrower. And the exact test of his right to call for a cancellation of the mortgage given to secure his obligations as a borrower, is the inquiry, whether he would have been entitled to receive from the association the par value of the shares on which the loan was made, had he not become a borrower.

In this case, Mrs. Schmitt subscribed for twelve shares, and received from the association their par value, $3,000, as an advanced loan, at a premium of $240. She paid the premium, and agreed to pay the dues thereon, $6.00 per week, and interest at the rate of six per cent., subject to an annual abatement, “until such time as the weekly' dues paid and dividends declared and unpaid shall amount to the sum of three thousand dollars,” and all “assessments” that might be levied upon her as a member of the association. She paid the premium, the dues $3,000, and the interest on the loan to the appointment of the receiver. These facts standing alone would satisfy the mortgage. But it is further found that the association is insolvent; that its capital is impaired to the extent of about thirty-one per cent., for which the receiver has made an assessment on the members including the defendant; ' that the losses occurred during her membership, were caused by the payment of dividends that had not been earned, and the misapplication of moneys by the treasurer; and that she had withdrawn $995.92 of these unearned dividends, although the right to draw earned dividends was limited by the constitution to those members who had not “drawn money.” Can then a borrower under these circumstances claim the cancellation of his mortgage? We think not. To do so would, as we have shown, undermine the principles upon which these associations are organized. By the terms of the constitution of the association, on the cancellation of the mortgage, the borrower ceases to be a member, and all liability to it is at an end. We see no reason why the remaining- members should be left to bear all the burthen, resulting from losses, for which they are no more to blame than she is. It is wholly unlike a savings society where the borrower is not a member or otherwise interested in its business. Having1 no voice in the management, nor interest in the earnings of the society, the borrower and it sustains the simple relation of debtor and creditor. Here, as shown, the borrower is also interested as a creditor. The loan is for no definite period of time. It depends upon the management of the association, in which he continues as a member and has- a voice. It is in view of the relation of the borrower to the association and the possibility of losses, that the mortgage stipulates that, in addition to the specific conditions mentioned, the borrower shall pay all ‘ ‘ assessments ’ ’ that may be levied on him. The fourth section of the twelfth article of the constitution, on which much stress is laid, simply expresses what would "be true in a safely conducted association. It does not include nor apply to the case where there are no earnings, and losses have to be met and borne. This was wisely provided for in the mortgage. It was a matter about which the parties could and have contracted. There is no suggestion of fraud or mistake in its execution, and their rights must be determined by its stipulations, conforming’ as they do to the equity and justice of the case. She has received from the association in the way of unearned dividends, a sum greater than the assessment that has been made on her.

But it is insisted that Mrs. Schmitt, and the other members were not parties to the suit in which the receiver was appointed, and that he had no power to make the assessment, and it is not binding upon them. This objection is without weight. It is not necessary that the members should, as individuals have been made parties to that suit. They are parties in. their corporate name and capacity, and, for the appointment of a receiver, that was sufficient. We will presume that the receiver was duly appointed, as-there is nothing to the contrary. As receiver, it was his duty to collect the assets and wind up the affairs of the association. This could only be done by ascertaining the loss and making- an assessment on the members to meet it. It was simply a matter of calculation; involved no matters of personal confidence, and could, therefore, be made by the receiver as well as by the members themselves or their chosen agents. Moreover these had been displaced by the appointment of the receiver, and could not a'ct in the premises.

It is, however, found that a large number of members, borrowing and nonborrowing, who were such during the time the losses occurred, had withdrawn prior to the time the association went into the hands of a receiver. This does not affect the question here. In the absence of bad faith, such persons as had, according to the constitution and by-laws of the association, withdrawn and ceased to be members, cannot again be brought into the association for the settlement of losses. Wangerien v. Aspell, 47 Ohio St., 250, 261. The withdrawal being an executed transaction, can only be recalled by the association, and a remedy had, in conformity to the rules of equity jurisdiction.

It follows, as we think, that the judgment of the circuit court, dismissing the petition of the receiver should be reversed, and judgment entered upon the findings as prayed for in the petition.

Judgment accordingly.