text:
Fox v. Seal/Opinion of the Court

ERROR to the Circuit Court for the Western District of Pennsylvania; the case being thus:

On the 21st of January, 1843, the legislature of Pennsylvania passed the following.

JOINT RESOLUTION TO PROTECT LABORERS AND CONTRACTORS.

'Resolved, That it shall not be lawful for any company incorporated by the laws of this Commonwealth, and empowered to construct, make, and manage any railroad, canal, or other public internal improvement, while the debts and liabilities, or any part thereof, incurred by the said company to contractors, laborers, and workmen employed in the construction or repair of said improvement remain unpaid, to execute a general or partial assignment, conveyance, mortgage, or other transfer of the real or personal estate of the said company, so as to defeat, postpone, endanger, or delay their said creditors, without the written assent of the said creditors first had and obtained; and any such assignment, conveyance, mortgage, or transfer, shall be deemed fraudulent, null, and void, as against any such contractors, laborers, and workmen, creditors as aforesaid.'

This joint resolution being in force, the legislature of the same State, in the year 1850, incorporated the Hemphill Railroad Company; a company authorized to make a railroad from a town called Greensburgh, in the interior of Pennsylvania, to the western boundary of the State.

The act of incorporation gave the company no power to borrow money or mortgage the road. But a subsequent act-one of April 12th, 1851-empowered the company to borrow money and 'to pledge the property and income of the company in order to secure the payment thereof.'

With these acts in force, the company, in 1853 (May 27th), entered into a contract with a contractor named Fox to do the work on the projected road; and he did it. In the following year, 1854, the company became embarrassed and requested Fox to stop working; which he also did.

Not getting paid, he brought suit February 16th, 1855, in the Circuit Court of the United States, at Pittsburg, against the company, and on the 23d of November, 1860, got judgment against it for $33,500; this judgment constituting, by the law of Pennsylvania, a lien against the company's real estate for five years from its date, and no longer; and the law of the State requiring notice to be given to terre-tenants, when there are terre-tenants, and the plaintiff in the judgment desires to revive the judgment as against them.

On the 27th of June, 1855-that is to say, between the day when Fox brought his suit and that when he got judgment-the debt to Fox being still unpaid, and he having given no assent, written or other, thereto,-the company executed a mortgage on the whole of their road, franchises and property, real and personal, to one Seal, as trustee, to secure the payment of bonds to the amount of $1,000,000, to be issued by the company, and which were immediately afterwards issued; the bonds having twenty years, that is to say until 1875, to run. The mortgage was duly recorded in all the counties through which the road ran, and Seal, the trustee, took possession of the road and worked it until the time of the sale, hereafter mentioned. Interest on the bonds becoming due, and not being paid, suit was instituted in the Supreme Court of Pennsylvania, to foreclose the mortgage and to sell the road, its franchises, and other property, real and personal. Fox hereupon applied by petition to be allowed to intervene pro interesse suo in the suit for foreclosure; or if this should not be granted, that he might be paid out of the proceeds of the sale. His petition contained a full history of the origin, character, and amount of his claim against the Hemphill Railroad Company. The court rejected his petition on both its parts; and a sale was made under the proceedings in foreclosure; the sale, however, being made (in consequence of Fox's petition) 'subject to any lawful claims or rights which might exist prior or paramount to the said mortgage.' The purchaser was another corporation, named the Pittsburg, Wheeling, and Baltimore Railroad Company. This sale was made March 30th, 1871.

Between the date of the above-mentioned mortgage and the sale under it, that is to day on the 4th of April, 1862, the legislature of Pennsylvania passed an act to enable contractors, laborers, workmen, &c., better to get the enjoyment of the lien which the joint resolution of January 21st, 1843, already quoted, had given them. This act was in these words:

'Whereas, it frequently happens that incorporated companies, by assignment, conveyance, mortgage, or other transfer, divest themselves of their real and personal estate, in contravention of the provisions of the resolution of January 21st, 1843; therefore,

'Be it enacted, That whenever any incorporated company, subject to provisions of the above resolution, shall divest themselves of their real or personal estate, contrary to the provisions of the said resolution, it shall and may be lawful for any contractor, laborer, or workman employed in the construction or repair of the improvements of said company, having obtained judgment against the said company, to issue a scire facias upon said judgment, with notice to any person, or to any incorporated company, claiming to hold or own said real or personal estate, to be served in the same manner as a summons, upon the defendant, if it can be found in the county, and upon the person or persons, or incorporated company claiming to hold or own such real estate; and if the defendant cannot be found, then upon the return of one nihil and service as aforesaid, on the person or persons, or company claiming to hold or own as aforesaid, the case to proceed as in other cases of scire facias against terre-tenants.'

We should here mention that while some of these things were going on, that is to say in 1867 (January 29th), and while Seal was in possession of the road as trustee, Fox had issued a scire facias against the Hemphill Railroad Company to revive the judgment which he had got against it in 1860; the lien of which judgment had of course, under the law of Pennsylvania as already stated, expired in 1865. To this scire facias no one was made a defendant but the original defendant, the Hemphill Railroad Company. Judgment was entered on this scire facias March 14th, 1867.

He now, February 23d, 1871-thirty-seven days before the sale of the road, and while Seal was yet in possession of it-issued a scire facias to revive judgment and quare executio non on the judgment just now mentioned as obtained in 1867, and in this second scire facias he made Seal a codefendant with the original defendant, the Hemphill Railroad Company, and, as soon as the sale of the old road to the Wheeling, Pittsburg, and Baltimore Railroad Company had been made, brought in that company as another codefendant; this being effected August 12th, 1871, and he meaning in all which he did to act in conformity with what was directed by the act of the Pennsylvania Assembly of 1862, quoted on the preceding page.

These two last-named parties, that is to say Seal and the Wheeling, Pittsburg, and Baltimore Railroad Company pleaded to this last scire facias.

Payment;

That the mortgage was not made in contravention of the joint resolution of 1843;

That the plaintiff was not a creditor within the scope of that joint resolution;

That any lien or claim which the plaintiff ever had, had expired prior to his bringing the present suit.

And, on issue taken, &c., the question, divested of the technicalities of pleading and evidence, was whether the real and personal estate of the old Hemphill Railroad Company, which under the proceedings in foreclosure instituted by Seal had passed to the Wheeling, Pittsburg, and Baltimore Railroad Company, was liable to the debt to Fox as ascertained by the judgment of the Circuit Court on which the scire facias to revive, &c., had issued.

The plaintiff, to establish his case was about to offer certain pieces of documentary and record evidence separately, when the court directed that he should offer the whole in a body, and in connection. He now did this; offering the record of the mortgage (the same being without any written assent by him to it); the record of the proceedings in foreclosure and sale, with the order preceding it that it should be made subject to any lawful claims or rights prior or paramount to the mortgage; the joint resolution of the Pennsylvania legislature of January 21st, and the act of Assembly of April 4th, 1862; the records of his own suit of 1855, ending in judgment in 1860; the record of the scire facias of 1867, to revive it; this to be followed up with evidence of the nature and date of origin of the claim on which the original judgment was got; to wit, that it was that of a contractor in the construction of the railroad prior to the date of the mortgage; that the mortgage, if not postponed to his claim, defeated it; that he was not a stockholder in the Hemphill Railroad Company, &c., &c.

The defendants objected to the evidence as irrelevant and incompetent, and the court rejected it; the plaintiff excepting to such action. Judgment having been given for the defendants, the plaintiff brought the case here.

For the reader's convenience, the dates of some of the important facts occurring in the history of the case are here set forth chronologically:

1843, January 21st, joint resolution of the legislature.

1850, May 15th, Hemphill Railroad Company incorporated.

1851, April 12th, act of legislature authorizing a mortgage by it.

1853, May 27th, Fox's contract made.

1855, February 16th, Fox's suit brought.

1855, June 27th, mortgage made to trustees, and trustees take possession.

1860, November 23d, Fox obtains judgment.

1862, April 4th, act of the legislature.

1867, January 29th, scire facias to revive, against the Hemphill Railroad Company only.

1867, March 14th, judgment on this scire facias.

1871, Februaly 23d, scire facias to revive judgment, ''et qu. ex. non'' against the Hemphill Railroad Company and the trustees also; the present suit.

1871, March 30th, sale of the railroad.

1871, August 12th, the Pittsburg, Wheeling and Baltimore Railroad Company brought in on motion as codefendants.

Mr. J. W. Kirker, for Fox, the contractor, the plaintiff in error:

The record and documentary evidence offered by the plaintiff, and rejected by the court, was the only competent evidence to prove the facts which were the obvious purpose of the offer. They were relevant and competent evidence, and were put in issue by the defendant's pleas. They tended to prove facts which were material and necessary for plaintiff to establish to entitle him to a verdict.

Divesting the matter of the technicalities of pleading, and evidence under pleadings, it is obvious that the questions were—

1. What was the effect of the joint resolution of 1843? We assert that it gave to Fox, the contractor, a lien, indefinite in point of time, on the railroad's estate, and prior to that of the mortgage to Seal. The purpose of the resolution is plain; its language explicit and incapable of any meaning but one. So far as the Hemphill Railroad Company was concerned, this lien was independent of any sci. fas. or other proceedings. It was a lien created by the sovereign will of the legislature; a body which could make liens of perpetual duration though no line of record should indicate their existence. And this sort of lien it meant to make, and made.

2. It was only after the company originally owning the road had divested itself of its estate, in contravention of the joint resolution, and when the lien creditor, after such divestiture, desired to have fruition of his lien, that he was bound to bring in anybody as a new party. In the present case, after the road passed to the Pittsburg, Wheeling, and Baltimore Railroad Company, then that company had to be brought in under the act of April 4th, 1862, and it was brought in.

Mr. Hill Burgwin, for the trustees of the bondholders and both railroad companies, contra:

1. The joint resolution of 1843 does not protect the plaintiff's claim as against the mortgage now in controversy.

At the time when the joint resolution of 1843 was passed, a railroad company had no power to execute such a mortgage as this, covering its franchises and all the property essential to their exercise. Therefore this mortgage was not within the provision of the resolution. But if it were, the supplement of 1851 to the charter of the Hemphill Railroad Company expressly authorized this mortgage, and so operated as a repeal pro tanto of the resolution of 1843.

The supplementary act of 1851 provides that the said company shall have power to borrow money on the credit of the corporation, and may execute bonds or promissory notes therefor, and to secure payments thereof may pledge the property and income of said company. The railroad itself was certainly a part of the property of the company, and so was their franchise of using and enjoying it. The income of the company was derived from such franchise, and an authority to mortgage the income was an authority to mortgage the subject from which it is derived. A grant of the profit of land passes the land itself, for what is the land but the profits thereof? The manifest object of the act was to enable the company, by a pledge of their road and its income, to secure the principal and interest of the bonds, which they were by the same section authorized to issue. To hold otherwise would render the power conferred entirely nugatory. The words are few, but pregnant, and were evidently meant to confer the fullest power to pledge the entire property and income of the corporation to accomplish the prupose in view.

The contract of Fox was made in 1853, two years after the execution of this mortgage had been authorized by special law.

The joint resolution of 1843 could never, we submit, have been intended to avoid transfers made in good faith, and for a valuable consideration. If we assume that it was intended to avoid them, its effect would be that no one could make any purchase from a railroad company of real or personal property, without taking it subject to a secret lien which by no reasonable diligence could be ascertained or defined. Nor only so, but such lien is unlimited as to time. Such far-reaching and inequitable results will not be allowed to obtain if any other reasonable one presents itself. It would be against both the letter and the whole spirit of adjudged law that they should obtain.

In Cincinnati City v. Morgan, it is said by this court:

'To acquire as against all mortgages and incumbrances, a lien by statute upon the corpus of a railroad, in virtue of credit advanced, it is necessary that the statute express in terms not doubtful the intention to give a lien.'

In Commonwealth's Appeal it is said by the Supreme Court of Pennsylvania, from a district in which State this case comes:

'Our legislature discountenances all liens and incumbrances from transactions that do not appear of record.'

'The law abhors all secret liens.'

And in Kauffelt v. Bower, in the same State, a well-considered case, Gibson, J., says:

'We cannot intend that latent incumbrances were designed to be tolerated, when we find even those which appear of record considered in some measure as clogs on the freedom of alienation so congenial to our habits.'

We rather suppose that the joint resolution of 1843 was really meant by the legislature of Pennsylvania to be no more than a re-enactment pro tanto of the statute of 13 Elizabeth and to invalidate a subsequent transfer only when there was an actual or constructive intent to hinder, delay, or defraud a creditor.

Perhaps it was to meet the just objection to parol liens, now asserted on the other side as legitimately coming from the resolution of 1843, that the legislature, by its act of April, 1872, provided in effect that in order to a contractor's availing himself of the benefit of that resolution, as against a terre-tenant, he must obtain a judgment against the company, and then revive by scire facias against the terre-tenant. And this brings us to our next ground of the defence.

2. Any rights which the plaintiff may have had originally, have been lost by failure to pursue them in the proper mode and within the proper time.

It is evident that it was intended by the act of 1862, to assimilate the proceedings to enforce a claim under the resolution of 1843, to those under the laws limiting the lien of judgments and providing for their revival against terre-tenants. The resolution of 1843, seeming to give a secret parol lien with no means to enforce it, the act of 1862 provided first, that the claim be made of record by judgment against the company, and thereby (and as we assert, then first) become a lien; and second, that such judgment having the properties of other judgments, expire as to its lien against terre-tenants, unless revived by scire facias against them within five years.

Testing the claim of the plaintiff by these principles, it is to be observed, that his original judgment agaisnt the Hemphill Railroad Company was entered November 23d, 1860, more than five years after suit brought; that the scire facias was not issued till 29th January, 1867; that no one was made party defendant but the Hemphill Railroad Company, although the trustees had been in actual possession of the road under the mortgage for ten years, and not until February 23d, 1871, more than eleven years after the original judgment obtained, fifteen years after the trustees had taken actual possession of the road for the mortgage bondholders, was any notice given to them, or attempt made to revive the judgment or enforce this claim as against them.

Now, it is settled in Pennsylvania, that 'a scire facias, to revive a judgment against a terre-tenant cannot be maintained on a judgment on a scire facias against the original lien debtor alone, obtained after the title of the terre-tenant had accrued.' This proposition in itself presents a complete bar to the plaintiff's present action.

If, then, the plaintiff had intended to avail himself of the act of 1862, against bon a fide terre-tenants in actual possession, with their mortgage for $1,000,000 on record in every county through which the road extended, it was his duty within the period limited by law to revive as against them the judgment he had obtained. Having failed to do so, they and every person proposing to purchase one of these bonds had a right to presume that his claim as against the property described in the mortgage had been abandoned. For instance, the bonds-twenty-year bonds, issued in 1865-being, of course, in the market, say in 1870, the purchaser ascertains that the trustees have been in possession of the road fourteen years, working and maintaining it for the bondholders, that no proceedings have been had under the act of 1862, to charge the property of the company in their hands, with the claims of contractors, and yet if the plaintiff's claim can be enforced, he is to find that the bonds which he purchases in good faith, on the foregoing facts of the case, are to be postponed to a claim which originated about eighteen years before. Such liens are infinitely removed from every sort of lien which the law of Pennsylvania, and indeed of any State in this Union, tolerates.

The real parties in interest here are the bondholders under the mortgage. Bonds such as these form a large part of the commercial securities in the stock exchange. They pass from hand to hand by delivery, upon the faith of the mortgage which secures them. They have been protected and guarded in the hands of bon a fide holders for value by many decisions of this court, and those of the different States. It is of the greatest importance that their circulation be not checked by the fear of secret liens not to be discovered by any reasoanble diligence.

The petition of Fox to intervene in the proceedings in the Supreme Court of Pennsylvania, and have the order of sale modified so as to protect his alleged claim was dismissed. The court, however, suo motu, modified the order. But this order thus made provided nothing more nor less than the law of itself would have provided, viz., that if there were any paramount liens which such a sale would not divest, then the purchaser would hold subject to such. If it meant more than this, then the court had no right to make it. The claim of plaintiff either was or was not a prior and paramount lien to that of the bondholders. If it was, and not liable to be divested by sale under the mortgage, then the order of court was unnecessary, except as a notice or precaution to bidders. If it was not, then the court could not make it so by this order to the prejudice of the bondholders. Their rights as against the plaintiff's claim were fixed and defined in law, and if the latter was either invalid or lapsed, the court could not validate or revive it as against them. And also, if the legal effect of the proposed judicial sale under decree of foreclosure would be to divest the plaintiff's supposed lien, the court could not, by such order, interfere with and prevent such legal effect. The duty of Fox was to look to the proceeds of the sale, and he had no right to look to anything else.

The resolution of 1843 has not been repealed by the charter of incorporation of the Hemphill Railroad Company and the supplemental act of 1851. Because the intention to repeal—

1st. Is not expressed.

2d. Cannot be inferred by necessary implication.

An ancient statute will be impliedly repealed by a more modern one, only when the latter is couched in negative terms, or when the matter is so clearly repugnant that it necessarily implies a negative.

The exercise of the power to mortgage, conferred upon the Hemphill Railroad Company, is limited and regulated by the general laws of the State of Pennsylvania relating to mortgages made by railroad companies and other corporations. Both of these acts are affirmative, and the substance is such that both may stand together. The charter and supplement of 1851 confer on the company the mere power to mortgage. The resolution of January 21st, 1843, regulates and limits the exercise of that power.

The whole argument about secret liens and ab inconvenienti generally, comes to nothing in the face of a plain expression of legislative will, such as we have described the joint resolution of 1843 as being, and as it truly is.

Mr. Justice STRONG delivered the opinion of the court.

We think there was error in the rejection of the evidence offered by the plaintiff. Some of it may have been immaterial to the issues pending, but the court directed that all the record and documentary evidence be embraced in one offer, and then rejected it all. In effect the objections urged by the defendants were treated as a demurrer, and the offer was overruled because the evidence was regarded as insufficient in law to sustain the action.

If the rights of the plaintiff have not been lost by failure to prosecute them in the proper mode, and in due time, the joint resolution of 1843, in our opinion, protects him against the mortgage, and all persons claiming thereunder.

That the plaintiff's testator was a contractor with the Hemphill Railroad Company, and that the debt due to him was incurred by the company for the construction of their railroad, it was the direct tendency of the evidence offered to prove, and these facts are uncontroverted now. That debt, therefore, was within the protection, whatever that may be, of the resolution. What, then, was the nature and extent of that protection? It is unnecessary to assert that the company was rendered incapable of making a mortgage, or any transfer of its property, so long as the debt due to its contractor remained unpaid. But the language of the resolution is too clear to admit of question that the legislature intended to give to an unpaid contractor a priority of claim to the company's property, over every right that could be acquired by a mortgagee, or acquired under a mortgage, if the mortgage was made after the debt to the contractor was incurred. It was at least intended that the property, into whosesoever hands it might come, should remain subject to a paramount claim of the contractor so long as the debt due to him remained unpaid. That this was substantially giving to him a lien of indefinite duration seems quite plain. It was not a jus in re,' nor a jus ad rem,' but it was a charge upon the property, a right to prevent any disposition of it, by which it could be withdrawn from the creditor's reach, and therefore in a very legitimate sense an equitable lien. The resolution in effect declared that while his claim against the company exists, a subsequent mortgage or transfer cannot be set up to defeat the contractor's resort to the property and his superior right to have it applied to the payment of the debt due him. It is true the mode of that resort is not prescribed. It can only be by suit, judgment, and execution, but whenever judgment and execution are obtained, the lien is made to precede the lien of any mortgage or the effect of any conveyance; more accurately, it has the effect it would have were there no mortgage or conveyance in existence. The property may be levied upon and sold, and the proceeds of the sale may be applied to the satisfaction of the debt due the contractor, without possible interference by the mortgagee, though the mortgage preceded the judgment in time. We cannot regard the resolution as no more than a partial re-enactment of the statute of 13th Elizabeth invalidating mortgages and transfers only when there is an actual or constructive intent to hinder, delay, or defraud creditors. If that was all the resolution intended it was unnecessary and unmeaning. But it declares null and void every mortgage the effect of which is to defeat, postpone, endanger, or delay contractors, laborers, and workmen. The mortgage may be good as against other creditors, but it is a nullity as to them.

It has been argued that it is against the policy of Pennsylvania to allow secret liens, or liens not of record, or liens on land created by parol, and undoubtedly there are evils attendant upon the allowance of such incumbrances. But that is a matter for legislative consideration. The supposed policy of the State cannot, in a judicial tribunal, prevail over a plain statute. And notwithstanding the disinclination judges have manifested to sustain liens not of record, there are many such liens known to the statute laws of that State and upheld by the courts. A mechanic, or materialman, is given a lien, and he is not required to put his claim on record until within six months after his work has been done, or his materials have been furnished. Yet his lien has priority over every lien (other than a mechanic's) which attached to the building or curtilage subsequent to the commencement of such building. So liens are given by statutes to laborers, miners, and clerks, and they are valid against subsequent mortgages, though the liens do not appear upon any record. It is not, then, against the policy of the State to create a statutory lien in favor of laborers or workmen.

And if we have correctly interpreted the legislative resolution of 1843, if the debt due from the Hemphill Railroad Company to the plaintiff's testator was a lien upon the property of the company from the time it was created, so far, at least, as to have priority over any subsequent mortgage or conveyance, it is plain the lien would have continued a prior incumbrance, so long as the debt it was given to secure remained, had there been no such subsequent mortgage. But the express declaration of the resolution is that the mortgage shall have no effect as against such a debt or claim. And this must mean that neither the mortgage itself nor any sale made under it shall have the effect of defeating, postponing, endangering, or delaying the contractor; for if a sale made under the mortgage discharges the contractor's lien and removes the property from his reach, effect is given to the mortgage itself, and precisely the effect which the statute denied to it.

We are thus brought to the question whether the lien or claim which the plaintiff's testator had upon the property, real and personal, of the Hemphill Railroad Company, as a security for the debt due him, and which was paramount to the mortgage made to the company, has been lost or extinguished. And we think it has not. The debt remains due and unpaid. In 1855, Fox, the contractor, commenced a suit for its recovery, and he obtained a judgment in 1860. That judgment did not extinguish the right which he had from the time the debt was incurred to have the property of his debtors first applied to the satisfaction of the debt. It did not cause to be merged in itself the original lien, any more than a judgment obtained upon a bond secured by a mortgage absorbs the lien of the mortgage. In whatever shape the debt was it had the benefit of the statutory privilege. It matters no then that more than five years elapsed after the judgment was recovered before it was revived, for if it be conceded that the lien of the judgment expired, that of the debt remained.

And if the lien of the judgment recovered in 1860 ceased at the end of five years from the time of its rendition, still it is undeniable that the revived judgment of 1867 gave a new lien which followed the property into whosesoever hands it came, until the present scire facias was sued out in February, 1871. The only possible answer to this is that before the revived judgment of 1867 was obtained, the property of the Hemphill Railroad Company had passed from its ownership, had become vested in its mortgagees, and that the trustees of the mortgage were not notified of the scire facias, or made parties to it. To this there are two replications, each of which, in our opinion, is quite sufficient. The first is that the company was, by the resolution of 1843, deprived of the power to make a mortgage or any conveyance by which its property could be withdrawn from the reach of the plaintiff, and the mortgagees or trustees could acquire no rights which the mortgagors were unable to confer. The second replication is that the mortgage to Seal and others was not a grant of the ownership of the property described in it. It was but the creation of a lien for the security of the bonds issued under it. True, the trustees of the bondholders, pursuant to its provisions, took possession of the mortgaged property in 1857, and carried on the business of the company until 1871, but even as against them the company remained the owners of the road, subject only to a lien to secure the payment of the mortgage debt. The trustees were not terre-tenants. They were mere occupants. Terre-tenants, against whom, by the laws of Pennsylvania, it is necessary that a scire facias to revive a judgment be sued out, in order to preserve its lien, are those who have seizin of the land, those who are owners, or claim to be owners by title derived from the defendant in the judgment. There can be no terre-tenant, such as intended by the act of 1798, who is not a purchaser, mediately or immediately, from the debtor while the land was bound by the judgment. Such has always been held to be the law in Pennsylvania, and such are terre-tenants in England. A mortgagee has never been regarded as a terre-tenant entitled to notice of the revival of a judgment. There has therefore been no failure or neglect in this case to make the necessary parties to all the judicial proceedings commenced by the plaintiff or his testator. The law did not require notice of the scire facias sued out to revive the judgment of 1860, to be given to the trustees of the mortgage, and if the lien of that judgment had expired, the revived judgment fastened a new lien upon the property. That lien was a security for the debt which, by the resolution of 1843, was made paramount to the mortgage, and against which, while it remains unpaid, the mortgage cannot be set up.

This, however, relates to the ordinary judgment lien, but it is not essential to the plaintiff's case, as exhibited by the evidence he offered, that the judgment which he now seeks to enforce is a lien upon the property claimed and held by the trustees of the mortgage and by the Wheeling, Pittsburg, and Baltimore Railroad Company. It would be were it not for the legislative resolution of 1843, and for the enactment of April 4th, 1862. But the first of these, as we have seen, made the debt due to the contractor, itself a lien without a judgment, and prescribed no limits to its duration. The second (the act of April 4th, 1862), manifestly recognized the existence of such a lien, and pointed out a mode for making it available to the creditor. This will be seen by reference to the act itself.

This act makes special provision for such cases as the present. Under it all that is necessary to enable a contractor, laborer, or workman to proceed by scire facias against a person or company claiming to hold or own the real or personal estate of the debtor to such contractor, laborer, or workman, by virtue of a mortgage made in contravention of the resolution of 1843, is that he has obtained a judgment against the indebted company which gave the mortgage. It is not required that his judgment shall be a lien on the property. And plainly it was not intended that such a lien must exist. The resolution of 1843 prohibited transfers, assignments, and mortgages of personalty as well as of realty, and a judgment creates no lien upon personalty. But the resolution recognizes the right of a contractor to follow both into the hands of a claimant or owner holding under such an assignment, transfer, or mortgage, without regard to the question whether the property is real or personal. It, therefore, recognizes the existence of a lien in favor of those protected by it, independent of the lien of any judgment they may recover. This must be so, for if it is essential to a right to proceed by scire facias against the property in the hands of a grantee of the indebted company that the judgment of the creditor shall be a lien upon that property, what is to be said of the case where the indebted company has conveyed before the recovery of any judgment? In such a case the judgment can be no lien. Yet it will not be claimed the property could not be followed by scire facias against the grantee. And if it could, it must be, not because of the lien of the judgment, but because of the lien of the debt, a lien which, as there is no statutory limitation to it, remains so long as the debt remains unsatisfied.

Such being, in our opinion, the true meaning of the joint resolution of 1843, and of the act of the legislature of 1862, the evidence offered by the plaintiff and rejected by the court should have been received. It tended to prove, inter alia, that the plaintiff's claim was within the protection of the joint resolution; that the mortgage under which the defendants hold was invalid as against him; that his case was embraced in the remedial act of 1862, and that the defendants had bought under a decree of foreclosure of the mortgage, which expressly directed that the property should, notwithstanding the sale, remain subject to the claim of the plaintiff.

It has been contended, however, in support of the ruling of the court below, that the sale which was made of the property in March, 1871, under a decree of the Supreme Court of Pennsylvania in the suit to foreclose the mortgage, divested the plaintiff's lien, and that thereafter his only remedy was a resort to the proceeds of that sale. This might be so if the only lien he had was that of his judgment. But, as we have endeavored to show, he had a lien independent of his judgment and prior to the mortgage. The decree of the Supreme Court ordered the property to be sold subject to that. The plaintiff petitioned to be allowed to intervene pro interesse suo in the suit for foreclosure, or, if that was not allowed, that he might be paid out of the proceeds of sale, but his petition was refused, and the court ordered that the purchaser at the sale should hold the whole of the estate and property, real, personal, and mixed, of the Hemphill Railroad Company, 'subject to any lawful claims or rights which may exist prior or paramount to said mortgage.' The plaintiff's lien, therefore, was undisturbed by the sale, and, hence, he had no right to look to the proceeds of the sale for payment.

This disposes of the case.

It is hardly necessary to add that the act of the legislature of April 12th, 1851, empowering the Hemphill Railroad Company to borrow money and pledge its property and income to secure the payment thereof, cannot be regarded as exempting that company from the operation of the resolution of 1843.

VENIRE DE NOVO AWARDED.

title: Fox v. Seal/Opinion of the Court


text: Talk:Fox v. Seal/Opinion of the Court

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title: Talk:Fox v. Seal/Opinion of the Court


text: Union Pacific Railway Company v. McShane


text: Talk:Union Pacific Railway Company v. McShane


text:
Union Pacific Railway Company v. McShane/Opinion of the Court

APPEALS from the Circuit Court of the United States for the District of Nebraska; in which court the Union Pacific Railroad Company filed a bill to enjoin one McShane and other persons, severally treasurers of different counties in the said State, through which the road ran, and in which it had lands, from the collection of taxes assessed upon them. There were also cross-bills.

An act of July 1st, 1862, creating the Union Pacific Railroad, enacted --

'SECTION 3. That there is hereby granted to the said company for the purpose of aiding in the construction of said railroad. . . and to secure the safe and speedy transportation of the mails, troops, munitions of war, and public stores thereon, every alternate section of public land. . . designated by odd numbers, to the amount of five alternate sections per mile on each side of said railroad, on the line thereof and within the limit of ten miles on said road, not sold, reserved, or otherwise disposed of by the United States, and to which a pre-emption or homestead claim may not have attached at the time the line of said road is definitely fixed. . ..

'''And all such lands so granted. . . which shall not be sold or disposed of by said company within three years after the entire road shall have been completed, shall be subject to settlement and pre-emption, like other lands, at a price not exceeding $1.25 per acre, to be paid to said company''.'

The statute went on to enact that whenever the company should have completed forty consecutive miles of any portion of its road, ready for the service contemplated by the act, and supplied with all the appurtenances of a first-class road, the President of the United States should appoint three commissioners to examine it and report to him in relation thereto; and if it should appear that forty consecutive miles had been properly completed, then, patents were to issue 'conveying the right and title' to the lands to the company on each side of the road as far as the same should be completed to the amount aforesaid; and patents in like manner were to issue as each forty miles of road were completed.

An act of July 2d, 1864, amendatory of this act, after authorizing the company, on the completion of each section of its road, to issue first mortgage bonds on the same to an amount designated, and extending the grant for twenty miles on each side of said road, enacted:

'SECTION 21. That before any land granted by this act shall be conveyed to the said company or party entitled thereto. . . there shall first be paid into the Treasury of the United States, the cost of surveying, selecting, and conveying the same, by the said company or party in interest, as the titles shall be required by said company.'In the case of Railway Company v. Prescott, this act was interpreted by this court, upon some clauses not necessary to be here quoted, as making the costs of surveying attach to all the lands granted to the road, whether by the original act of 1862, or by the amendatory act, just quoted, of 1864.

The work of constructing the road was begun in 1865. In 1867 the company, 'for the purpose of raising money to aid in the construction,' mortgaged its lands to secure the payment of $10,000,000. The terms of the mortgage required the trustees, upon payment of the bonds, to reconvey the residue of the unsold lands to the company. It reserved to the company the exclusive control and management of the lands, with power to sell the same; the purchase-money, however, to be paid to the trustees before a conveyance was made. The holder of bonds under the mortgage might purchase lands and pay for them in bonds. Both company and trustees were to join in any conveyance in order to make a title.

By the 1st of April, 1869, a road capable of being safely and speedily travelled on, though susceptible still of many obviously desirable improvements, was practically completed.

On the 10th of that same month, some allegations having been made, that certain subsidies granted by the United States to the company in government bonds, to aid in building the road, had not been applied in the exact way designed by Congress, in the acts granting them, and so as to make the road one absolutely of the 'first class,' a joint resolution was passed, by which it was resolved that to ascertain the condition of the road, the President should appoint a commission of five eminent citizens to examine into the matter and report upon the condition of the road, and to report also what sum, if any, would be required to complete it as a first-class road, such as was contemplated by the acts of Congress. A commission of five eminent citizens was accordingly appointed.

However, the commissioners whom the act of 1862 had directed to decide whether the road was properly built and in pursuance of the acts authorizing it, having certified that it was so built, the President accepted it May 10th, 1869.

The commission of eminent citizens afterwards reported that while the road was in its then state a good and reliable means of communication, well equipped and prepared to carry passengers and freight with safety and dispatch, yet to make it a first-class road within their construction of the act of Congress, would in their judgment require an expenditure of $1,500,000 more than had as yet been laid out on it.

The joint resolution, just above mentioned, by its third section had

'Resolved, That the President is hereby authorized to withhold from said company an amount of subsidy bonds, sufficient to secure the full completion as a first-class road, of all sections of such road, 'or in lieu of such bonds he may receive as such security an equal amount of the first mortgage bonds of such company."

The section enacted further, that in case it appeared to the President that the amount of subsidy bonds yet to be issued was insufficient to secure the full completion of the road, requisition should be made on the company for enough subsidy bonds, or enough of its own first mortgage bonds, to secure full completion, and in default of obtaining such security, that measures should be taken 'to compel the giving of it, and thereby, or in any manner otherwise, to protect the interest of the United States in said road, and to insure the completion thereof as a first-class road, as required by law and the statutes in that case made.'

As to the status of the lands now assessed, it appeared that at the date of the levy and assessment of the tax in question, the company had dealt with the lands, and was now dealing with them as if they were in all respects their absolute property. They had mortgaged them, as we have already stated; were now advertising and selling them. They did not recognize the right of the public to settle upon or pre-empt, and to buy them at $1.25 per acre. On the other hand, neither Congress nor the Interior Department had taken any steps to subject the lands to settlement and pre-emption.

Upon the report of the committee of 'eminent citizens,' under the joint resolution, already mentioned, of April 10th, 1869, that $1,500,000 would be required for supplying deficiencies in the road, the Secretary of the Interior, November 3d, 1869, to indemnify the government, ordered that only one-half the lands to which the company would otherwise be entitled should be patented, and that patents for the rest be suspended until further direction from the Department. Accordingly, in February, 1871, a patent issued to the company under this order for about 640,000 acres of land, half the quantity of the land; the Department refusing to issue a patent for the other half. And so the matter now stood; that is to say, patents for one-half of the company's land were still withheld as security for the completion of its road in matters reported as not up to the required standard.

It also appeared that of the lands situated within the tenmile limit, every alternate odd section which the company claimed had been patented previous to the assessment and levy of the tax, that the residue of the grants within like limits was unpatented, and that the costs of surveying had not been paid on any lands situated within the ten-mile limit, whether patented or unpatented, because (as was stated by the land agent of the company) not required by the Interior Department.

In respect to the lands situated between the ten and twenty-mile limits, it appeared that they had all been selected, listed, certified, and that the land-office fees and costs of surveying had been paid, and every alternate odd section of those claimed by the company patented, the residue being unpatented.

In this state of things, the company, in July, 1873, filed the present bill. It alleged that in 1872 the assessors of the several counties where the lands were situated (which lands were described in lists filed as exhibits with the bill), assessed them, and that the boards of commissioners of the same counties levied taxes for State, school, and local municipal purposes upon them, and that the defendants, the treasurers of these counties, were about to proceed to the collection of those taxes by seizing and selling the locomotives, cars, and rolling stock generally of the company, with other personal property. The bill alleged further, that the lands were not liable to any State taxation at the time of the assessment or levy, and it prayed that these treasurers might be enjoined from further proceedings for the collection of them.

The grounds on which this exemption was claimed may be divided into three distinct propositions, some of which were applicable to all the lands and others to only part of them.

1. That by the third section of the act of 1862, under which the company was organized, and by which the lands within the ten-mile limit were granted in aid of the construction of the road, it was provided that all such lands as should not be sold within three years after the entire road shall have been completed, shall be subject to settlement and pre-emption like other lands, at a price not to exceed $1.25 per acre, to be paid to the company. And it was alleged that these lands were liable to this pre-emption, which would be defeated by a sale of them for the taxes.

2. That by the amendatory act of 1864, which extended the grant to twenty miles on each side of the road, it was provided that before any of the land granted should be conveyed to the company, there should first be paid into the Treasury of the United States the cost of surveying, selecting, and conveying the same by the said company, and that these costs not having been paid, a sale for taxes would defeat the right of the United States to enforce this claim and recover their expenses out of the lands.

3. That under the joint resolution of April 10th, 1869, authorizing the President to appoint a commission to inquire into the manner in which the road had been constructed, and, if the report was unfavorable, to take steps to secure its proper construction, the secretary had refused to issue patents for these lands, withholding the title as security for the performance of what was required in that respect.

The first two of the above grounds on which an injunction against the taxing was sought, were based upon what the complainants conceived was adjudged in Railway Company v. Prescott, it having been there adjudged as they argued:

1st. That, whether patented or not patented, the lands were not subject to taxation of the contingent right in the United States of offering them to actual settlers at $1.25 per acre, in case the company did not sell the same within three years from the completion of the road; this objection being based upon the closing part (italicized) of section three of the act of 1862, supra, p. 445.

2d. That the right of the State did not, according to the language of the syllabus in that case, attach 'until the right to the patent was complete and the requisite title was fully vested in the party without anything more to be paid, or any act to be done going to the foundation of the right,' and accordingly that prepayment by the company of the cost of surveying, selecting, and conveying the lands granted, being required by statute making the grant, before any of the lands 'shall be conveyed,' no title vested, even to the patented tracts, unless the required prepayment had been made.

It was contended on the other side, and in behalf of the right to tax, that Railway Company v. Prescott was unlike this case, since here—

1. The company had mortgaged the lands in anticipation of a completion of the road; and applied the money received to building the road; that this was a 'disposition' of the lands within the act of 1862, though it might not be a 'sale' within the meaning of the same act.

2. The company had received patents for half of the land.

3. The company had paid surveying fees on all unpatented lands in the grant of 1864, and were ready to pay them on the grant of 1862, and had not paid them on it only because they were not asked for.

The court below, while it confessed to some difficulty in distinguishing the case of Railway Company v. Prescott, on either of the two points just stated, from the one now before the court, was still of opinion that the authority of that case might, as to the first point above mentioned, be escaped from, so far at least as regarded the lands which the company held by patent. After observing that it would not say whether a mortgage of the land was such a 'disposition' as would prevent the right of settlement or pre-emption, it remarked that in Railway Company v. Prescott the taxes were assessed before any patent was issued, and, in addition, that the cost of surveying had not been paid. The learned judge, in this connection said:

'I am inclined to consider the true meaning and effect of the provision in question to be this: While the road is being constructed and for a period of three years after the completion of the entire line, the company may sell or dispose of the lands at their own price, and they are subject during this period to no right of settlement or pre-emption; after the three years have elapsed, the company may still sell or dispose of their lands in good faith, but as to any lands not thus sold or disposed of, there is a right on the part of the public to settle upon and pre-empt them in the same manner as if they were part of the public domain; the price, not exceeding $1.25 per acre, being payable to the company instead of the government.

'If this be a correct view of section three of the act of 1862, it results that the lands of the company, so far as they are patented, are subject to taxation by the authority of the State, and this privilege reserved in favor of the actual settler, and of which he may never wish to avail himself, which is contingent in its nature and subject to be defeated by a sale of the lands by the company, is not inconsistent with, and will not defeat, the rightful authority of the State to tax the lands.'

On the second ground of exemption set up, he said:

'This ground of exemption, in view of the decision in the Prescott case, may be disposed of briefly. Upon the proofs in this case, I am of opinion that lands which have not been patented, either because the costs of surveying required by section twenty-one of the act of 1864 have not been paid, or because patents have been withheld by the Interior Department as indemnity to make good the deficiencies in the construction of the road, are not taxable, and to this extent the injunction will be continued in force. But as to all lands which have actually been patented to the company, the injunction will the dissolved. It is true that, as respects the patented lands within the ten-mile limits, the land agent of the company states that the surveying fees have not been paid, but he also states that the reason why they were not paid was that the Interior Department did not require it.

'It does not appear that there are any lands not patented which have been fully earned and set apart to the company upon which all fees have been paid, and for which the patents are not retained by the government for its own security, and therefore, for all practical purposes, I hold that the lands in this case may, upon the proofs before the court, be divided into two classes: 1st, those which are patented and which are taxable; 2d, those which have not been patented and which are not shown to be taxable.'

The court below accordingly decreed a dismissal of the bill as to all lands embraced in the company's patent of February 23d, 1871, and an injunction as to the lands which had not been patented to the company.

From that decree both parties appealed; the company, because any of its lands were allowed to be taxed; the county treasurer, McShane, because they were not all taxed.

Mr. A. J. Poppleton, for the railroad company:

The lands which have been taxed in this case are situated in the same way as were those in Railway Company v. Prescott. Both bodies of lands were granted under the same acts of Congress, to be used in the same way, to be held by the same tenure, and upon similar conditions. The rule laid down in the case just mentioned must, therefore, govern this case.

That all lands in this case which are unpatented, and upon which the costs of surveying have not been paid, or patents to which are withheld by the government as security for a completion of the road, according to the standard fixed by its charter, are within the rule laid down in the case just quoted, and, therefore, are not subject to State taxation, seems to us too plain for argument. They are clearly within the first ground assigned in that case for non-taxability.

In respect to all the patented lands in this case, the exemption rests solely, we admit, upon the second ground laid down in the same case, to wit, upon 'the contingent right (in the government) of offering the land to actual settlers at the minimum price asked by the government for its lands.' But we insist that this ground, in the present case, is sufficient and conclusive. It also operates upon both classes of lands.

Does this ground of exemption operate upon the patented lands? The court below, though laboring hard to come to such a conclusion, held that in respect to patented lands, the case of Railway Company v. Prescott did not, of necessity, control this.

The real question is, therefore, what is the principle of exemption thus laid down by this court in the case of Railway Company v. Prescott, and from which the court below sought to extricate the present case? Does it apply less to patented than unpatented lands? As to one part, failure of the company to perform all conditions precedent to a perfect right to a patent, exempts from taxation; in the other, an interest or a right of the United States in the lands, operates as an exemption. The first is referable to the conduct and interests of the company; the second to the rights of the government.

Is this right of the United States any less worthy of preservation after patent issued than before? Is it cut off by the issue of a patent? If worthy of preservation at any stage, what limit can be assigned except the limit of its existence in the United States. Unless the interest of the United States was erroneously protected in the Railway Company v. Prescott (a matter not to be supposed), these lands must be held exempt, on the ground of the contingent right in the government of offering the lands at a minimum price. This contingent right of the United States cannot be cut off by the issue of a patent, for the following reasons:

1. No patent issued under the act could convey a greater or better title than is authorized by it. The patent being merely the evidence of the title granted by the acts of Congress, nothing inserted in it by the officers charged with the administration of the grant could enlarge it.

2. To hold that this 'contingent right of offering the land to actual settlers at the minimum price asked by the government for its lands,' is extinguished by the issue of the patent, is to nullify the right which this provision was framed to create and protect.

Nothing can defeat the operation of the second ground of exemption upon both classes of lands, except proof that the lands have been 'sold or disposed of,' by the company, as provided in section third, act July 1st, 1862. It does not relieve the question to show that the road was completed in 1869. For, in that case, the right of the United States to require the sale of the lands at $1.25 per acre, has ceased to be contingent, and become absolute.

Messrs. Clinton Briggs and J. C. Cowin, for the treasurer, McShane:

I. The company insists that the three years pre-emption clause, contained in the third section of the act of 1862, defeats the right to tax, and relies on Railway Company v. Prescott. But, assuming-and this is but for the sake of argument-that the court below did not put the right construction on that rather unintelligible section, still the case relied on by the other side does not control this one.

By the terms of the act of 1862, the right to settlement and pre-emption is to exist only in case that the lands are not 'sold or disposed of' within three years after the entire road shall have been completed. The lands need not be sold within the three years. It is enough that they be 'disposed of.' When they were mortgaged they were 'disposed of,' even if they were not 'sold.' The road was completed, really, in May, 1869. These lands were mortgaged in 1867. The were, in fact, already disposed of when the road was completed. They were disposed of in 1867, two years before a title to them existed in the company. When, however, a title was obtained by the company in virtue of the completion of their road, that title inured to the mortgagees, on the well-known principle of 'estoppel.' The mortgagees, therefore, immediately on the completion of the road and, of course, within the required three years-held a valid mortgage.

This mortgage was for an immense amount, $10,000,000. The bill does not allege that the lands had any value above the mortgage. This $10,000,000 accomplished the same purpose that a like sum would have done if paid by purchases of the fee, and the purposes of the grant were just as well accomplished in one mode of disposition of the lands as the other. Congress gave the lands such is the language of the law-'for the purpose of aiding in the construction' of the road. The mortgagees have furnished the aid $10,000,000. Their money has enabled the company to build the road and earn the lands. The mortgagees knew that the money paid was for the precise purposes for which the grant was made; they taking only the risk of the ability of the company to earn the lands with the aid of this money.

The mortgage provides that the bondholder may purchase lands and pay for them in bonds. He has the option to sustain the relation of a mortgagee or that of a purchaser. He has the right to refuse money and demand land in payment at the appraised value. Thus the instrument is more than a mortgage.

Then, in addition, the company in this case has received patents for half its lands, and has paid surveying fees, &c., on those unpatented. It has advertised its lands for sale and sold them; assuming thus and otherwise by its acts an absolute ownership. In these particulars, as in the one just mentioned, the case is distinguished from Railway Company v. Prescott, so far as that case rests on the obligation to give pre-emption.

II. It is distinguishable also as respects the fees for surveying, &c.:

1. As respects the grant of 1864, the fees for surveying, &c., have been paid in all cases, and whether patent has issued or has not issued.

2. As respects the grant of 1862, these fees are not asked until after patent issues. The land department apparently does not construe as does this court the twenty-first section of the act of 1864, as applying to lands granted by the act of 1862. At all events it does not require prepayment of the fees for surveying as to lands granted by the act of 1862; lands within the ten-mile limit. The non-payment of these costs, therefore is no impediment to the company's getting a patent. It is now the equitable owner of these unpatented lands, and so has a taxable interest in them. It is unimportant whether the patent was actually issued or not. The company had earned the lands.

The land department of the United States, indeed, refuses to give a patent for some of the lands, not because the surveying fees are not paid, as is required in regard to the lands granted by the act of 1864, undoubtedly (and as this court has decided as to those granted in 1862 also), but because the joint resolution of 1869 required that security should be got for the making of a certain sort of perfect road. But the joint resolution is not aimed at the lands. It requires that subsidy or other bonds shall be held as security for the expenditure, and, if they are not voluntarily given by the company, the Attorney-General is required to institute suits 'to compel the giving such security.' There is no intimation in the act that lands or patents are to be withheld as such security. The act of the land department in withholding patents is without authority. The commissioners had certified the road. The President had accepted it. Anything further between the company and the United States was matter for the courts.

The contingent rights in the United States, which in Railway Company v. Prescott was held sufficient to exempt lands must whether coming from the 'pre-emption' cause, or from the right to retain for payment of costs of surveying, &c.-to the eye of a practical man, appear as applied to the present case but rights of a dim and shadowy sort.

How does the case stand?

1. As respects the United States.

It 'granted' the lands to the company in 1862. It accepted the road as completed in 1869, thus declaring that the company had paid for-earned the lands. It issued patent for 640,000 acres in 1871; and received from the company the surveying, &c., on the lands not patented.

2. As respects the acts and declarations of the company.

It accepts the grants made by the United States. It declared, in 1869, that it had completed its entire road; thereby asserting it had earned and was entitled to the lands. It receives patents for a part of them, and pays the surveying fees, &c., on the residue. It mortgaged its grant for $10,000,000, and received the money and applied it to building the road. It exercised exclusive acts of ownership, by selecting, classifying, advertising them for sale and selling portions of its grant. It now asks the court to interfere by injunction to prevent, of course, a cloud being cast upon its titles.

Thus, both the United States and the company say that the lands belong to the company. Is not Nebraska then justified in so regarding them and in seeking to make them, as private property, bear a just proportion of the public burdens.

We submit that every consideration of equity and justice is in favor of the tax. How long, indeed, shall these immense bodies of land remain in the situation in which this company would place them? not under the control of the United States, so as to be open to settlement and cultivation, not owned by the company, so as to be subject to State taxation; but owned by it when it wants lenders on mortgage, or when it wants purchasers; owned by it for every beneficial purpose, but not owned for the purpose of bearing any share of the public burdens.

Even if the United States has some claim against the lands for surveying fees or anything else, it is difficult to see how it could be prejudiced by a sale of them for taxes. This court said in the case of Carroll v. Safford,

'The sale for taxes is made on the presumption that the purchase from the government has been bon a fide, and if not so made the purchaser at the tax sale acquires no title, and consequently no embarrassment can arise in the future disposition of the same land by the government.'

A different view seems to have been taken in Railway Company v. Prescott. But this question is not involved here.

The position of the other side is that the contingent pre-emption right in favor of settlers of the United States, protected by Railway Company v. Prescott, has been destroyed because the company has mortgaged the lands, and so 'disposed of' them. But both the legal and the ordinary signification of these words import an absolute parting with all control over or reversionary interest in the lands. Neither a mortgage nor a contract of sale accomplishes such an alienation of interest and control. In both cases the company retain an interest in the thing mortgaged or contracted to be sold which may, upon the happening of certain events, revest a complete title in a part or of all the property. Suppose, after the execution of the mortgage, the company had got money, from subsidy bonds or from some other source, and had discharged the mortgage, not an acre of the land having been yet sold. Could it be contended that the simple making of the instrument of mortgage was such 'disposition of' the land as would defeat the operation of the third section of the act of 1862?

If such an interpretation be accepted, then a mortgage, however inconsiderable, a contract to convey, with however irresponsible a party-and each with an absolute certainty of reversion to the company of a title in fee-would operate to defeat the intent of Congress.

If, therefore, the purpose and object of Congress in framing the section under consideration, was that authoritatively declared by this court in the case of Railway Company v. Prescott, it is submitted with confidence that no form of conveyance, and no species of alienation of granted lands, which falls short of an unconditional parting with the control of and title to the same, either present or reversionary, legal or equitable, can operate to defeat the condition imposed by the section in question.

Therefore, certainly all the lands in controversy, patented or unpatented, not having been either 'sold or disposed of' by the company, whether the three years from the date of the completion of the road have elapsed or not, are subject to the contingent right reserved by Congress in the section under consideration; and are, therefore, not subject to taxation.

And the same thing is true of all lands, whether patented or unpatented, upon which the costs of surveying, &c., have not yet been paid. The language of the statute of 1864 is absolute, and has been held by this court, in one part of the same case of Railway Company v. Prescott, to apply to the ten-mile grant of 1862 as well as to the twenty-mile grant of 1864. Otherwise, by a colorable conveyance, or by a contract of sale, the onerous terms of which would provide for and make sure a forfeiture, or by a mortgage for a sum so inconsiderable as to render redemption morally certain, the whole object of the provision would be easily defeated. Nor is the question modified by the circumstance that the mortgage is for a large sum; especially when it appears that the proceeds of the sales of the lands which are being made are pleaded, and are being applied to the payment of the mortgage debt.

The mode adopted by the company for rendering the grant available for the purpose for which it was made must have been anticipated by Congress when passing the act. Sales of the lands before the road is built, and in quantities such as to realize sums of much use in carrying forward the work, are known to be impossible. By means of a mortgage upon them, with a pledge to its redemption of the proceeds of the sales of the lands after their value has been greatly increased by the building of the road, the funds for the purpose can be raised, and they have never been raised by other means. With this knowledge, it is impossible to think that Congress, in the terms of the third section, intended to include a mortgage of the lands, and defeat the very important object of the clause, almost at the very moment of enacting it.

The construction contended for on the other side involves the matter in infinite confusion. This company is selling the lands and applying the proceeds to pay off the mortgage. If, by the sale of one-fourth thereof, the whole mortgage debt is paid, is there a disposition of the remaining three-quarters?

Mr. Justice MILLER delivered the opinion of the court.

We will take up, without restating them, the three several propositions which present the grounds on which the exemption from State taxation is claimed, and in examining their legal bearing on the case will at the same time, where it is necessary, inquire how far they are supported by the facts of the case, and will then look into the other matters set up by way of defence.

The first and second of the propositions relied on by the railroad company are supposed to find sufficient support in the case of Railway Company v. Prescott.

That was a suit by the Kansas Branch of the Union Pacific Railroad Company to have declared void a sale of some of its land for taxes, made under State authority, and this court granted the relief on the ground that the land was not liable to taxation at the time it was assessed for the taxes under which it had been sold. No patent had been issued to the company when the taxes were assessed, and the costs of surveying the land had not been paid to the government by any one. This court reaffirmed the doctrine that lands which had constituted a part of the public domain might be taxed by the States before the government had parted with the legal title by issuing a patent, but that this could only be done when the right to the patent was complete, and the equitable title fully vested in the party, without anything more to be paid, or any act to be done going to the foundation of his right. And it said that in that case the United States had a right to retain the patent until the costs of surveying the land had been paid, which had not been done, and that the right of pre-emption in lands unsold by the company within three years after completion of the road, would be defeated if a sale for State taxes could be made which would be valid.

This latter ground was not necessary to the judgment of the court, as it rested as well on the failure to pay the costs of surveying the land. And we are now of opinion, on a fuller argument and more mature consideration, that the proposition is not tenable.

The road was completed and accepted by the President in May, 1869, and these lands have been subject to such pre-emption since three years from that date, if this right can be exercised by the settler without further legislation by Congress, or action by the Interior Department. We do not now propose to decide whether any such legislation or other action is necessary, or whether any one, having the proper qualification, has the right to settle on these lands and, tendering to the company the dollar and a quarter per acre, enforce his demand for a title. It is not known that any such attempt has been made, or ever will be, or that Congress or the department has taken, or intends to take, any steps to invite or aid the exercise of this right. It would seem that if it exists, it would not be defeated by the issue of the patent to the company, and it may, therefore, remain the undefined and uncertain right, vested in no particular person or persons, which it now is, for an indefinite period of time. The company, meantime, obtains the title, sells the lands when a good offer is made, and exercises all the other acts of full ownership over them, without the liability to pay taxes.

We are of opinion, therefore, that this right confers no exemption from taxation, whether the land be patented or not; and so far as the opinion in the case of Railway Company v. Prescott asserts a different doctrine, it is overruled.

But the proposition that that State cannot tax these lands while the cost of surveying them is unpaid, and the United States retains the legal title, stands upon a different ground.

The act of 1864, section twenty-one, declares that before any of the lands granted by this act shall be conveyed to the company, there shall first be paid into the treasury of the United States the cost of surveying, selecting, and conveying the same.

That the payment of these costs of surveying the land is a condition precedent to the right to receive the title from the government, can admit of no doubt. Until this is done, the equitable title of the company is incomplete. There remains a payment to be made to perfect it. There is something to be done without which the company is not entitled to a patent. The case, clearly, is not within the rule which authorizes State taxation of lands the title of which is in the United States.

The reason of this rule is also fully applicable to this case. The United States retains the legal title by withholding the patent, for the purpose of securing the payment of these expenses, and it cannot be permitted to the States to defeat or embarrass this right by a sale of the lands for taxes. If such a sale could be made, it must be valid if the land is subject to taxation, and the title would pass to the purchaser. If no such title could pass, then it is because the land is not liable to the tax; and the treasurers of the counties have no right to assess it for that purpose.

But when the United States part with her title, she has parted with the only means which that section of the statute gives for securing the payment of these costs.

It is by retaining the title that the payment of costs of survey is to be enforced. And so far as the right of the State to tax the land is concerned, we are of opinion that when the original grant has been perfected by the issue of the patent, the right of the State to tax, like the right of the company to sell the lands, has become perfect.

It is admitted that part of the lands in dispute have been patented, and part of them have not. And the circuit judge in his opinion and decree divides them into the patented and the unpatented lands, and we concur in his opinion that there is no reason why the patented lands should not be taxed.

As to those which are not patented, it may be assumed from the evidence in the case that on none of them have the costs of survey been paid or tendered to the United States, and if they are all subject to that provision of the act of 1864 they are not liable, on the principle we have stated, to be taxed. It is said, however, by counsel for the State, that the Interior Department has never demanded the costs of surveying the lands within the original ten-mile limit, in cases in which they have issued patents, and do not claim them in those for which no patent has been issued; that as the non-payment of these costs, therefore, is no impediment to demanding and receiving the patents, the equitable title is complete, and they should be held subject to taxation.

We held, however, in the case of Railway Company v. Prescott, that these costs of survey attached to all the lands granted to the road, whether by the original act or by the amendatory act of 1864, and we have no sufficient evidence before us that the Department of the Interior has acted on a different principle. If, however, they have done so heretofore, it is not for us to say that they will grant patents hereafter without payment of these costs; and in a case where we are called on to decide whether such costs are lawfully demandable before the legal title of the company is perfect, we must abide by our own construction of the statute.

It is said, however, that these lands have been mortgaged by the company under sanction of the act of Congress on that subject, and that the mortgage conveys the legal title out of the United States, so that her rights can no longer be interposed to protect them from taxation.

It is not necessary to go into the merely technical question whether the legal title passed from the United States by virtue of that mortgage and the act of Congress which authorized it, nor whether, if it ever becomes necessary to foreclose that mortgage, the rights of the United States in the land would be divested by the proceeding, because we are satisfied that the United States, until she conveys them by patent or otherwise, has an interest, whether it be legal or equitable, which the State of Nebraska is not at liberty to divest by the exercise of the right of taxation.

Under these views we are of opinion that the State had no right to tax the lands for which the cost of surveying had not been paid, and for which no patent had been issued; and as the decree of the Circuit Court was made in conformity with these principles, it is


text: Talk:Union Pacific Railway Company v. McShane/Opinion of the Court


text: Hunnewell v. Cass County

title: Hunnewell v. Cass County


text: Talk:Hunnewell v. Cass County

title: Talk:Hunnewell v. Cass County