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4. SAME JUDGMENT IN FAVOR OF ONE OF SEVERAL CO-MORTGAGEES-RIGHTS OF OTHER MORTGAGEES.
A sale of mortgaged premises upon a judgment recovered on a part of the notes secured by the mortgage, does not preclude the holder of other notes from proceeding to foreclose it.
Appeal from the Circuit Court of the United States for the District of Colorado.
John W. Ross and Mills Dean, for appellant. A. T. Britton, J. H. M. Gowen, and A. B. Browne, for appellees.
WOODS, J. This was a bill filed on November 26, 1875, by Thomas Hau and Jonathan H. Pugh, trustees, to foreclose a mortgage executed to them. on August 22, 1870, by the Fairmount Gold & Silver Mining Company, to secure the bond of the company for $17,000. It appears from the record that at the date of the mortgage the mining company was indebted to va ious persons, who held its promissory notes or certificates of indebtedness, given and bearing date between August 4, 1868, and May 20, 1870, and amounting in the aggregate to $16,387.05, all bearing interest at the rate of 6 per cent. per annum. To secure the payment of this indebtedness to the holders of the notes, the mining company, on August 22, 1870, executed a bond of that date to Hare and Pagh in the penal sum of $34,000, conditioned for the payment to them at the expiration of one year from date of the sum of $17,000, with interest at the rate of 6 per cent. per annum, payable half-yearly in gold This bond was secured by the mortgage which the suit was brought to foreclose, bearing the same date, and conveying to Hare and Pugh certain mines, a mill-site, mill, and machinery in Clear Creek county, Colorado. Contemporaneously with the execution of the bond and mortgage, Hare and Pugh executed a declaration of trust to the effect that they held the bond and mortgage in trust for the benefit of the holders of the notes of the mining company above mentioned, and that if the mining company should pay off the notes, the bond and mortgage should be taken as paid and satisfied, and should be canceled. The bill averred that the bond was due and wholly unpaid, and prayed a foreclosure of the mortgage. *John W. Thackara, Gilbert B. Reed, and others, who, it was alleged, claimed some interest in the mortgaged premises as judgment creditors or otherwise, were made defendants to the bill
It appeared from the record that the defendant Thackara had been super intendent of the mine and general agent of the mining company in Colorado, and was a stockholder. He held by purchase some of the notes or certificates of indebtedness secured by the mortgage issued to other parties, and held other notes issued subsequent to the mortgage to himself for his salary, etc. Prior to the institution of this suit, to-wit, on the twenty-second day of March, 1873, Thackara began suit against the mining company on his notes and a book-account, caused a writ of attachment to be issued against the mining company, and on the thirteenth day of January, 1875, recovered a judgment for $23,442.12. Upon a sale under execution issued on this judgment all the real and personal property of the mining company, including that covered by the mortgage, was sold to Thackara for the sum of $24,873.01, and he assigned the certificate of purchase to the defendant Reed, to whom a sheriff's deed was executed December 15, 1875. It was conceded that Reed had succeeded to all the rights and interests of Thackara. The bill was dismissed as to Thackara, and Reed substituted as defendant in his place. Reed, by his answer, admitted the execution of the mortgage mentioned in the bill to secure the payment of notes made by the mining company, the sum secured by the mortgage not to exceed $17,000. He set up title to the mortgaged premises, claiming under the sheriff's deed executed to him under the sale made to Thackara. He averred that all the notes which had been secured by the bond and mortgage executed to Hare and Pugh, except two held by Samuel Nelson one for $25 and the other for $150, and one held by W. B. Wharton
for $100, had either been transferred to Thackara, and were included in the amount of his judgment against the mining company, or had been converted into stock of the mining company and surrendered and were thus satisfied. Neither the mining company nor any of the other defendants made any defense to the suit, and decrees pro confesso were taken against them. The answer of Reed was put in issue by replication. Upon final hearing on the pleadings and evidence the circuit court dismissed the bill, and the complainant Pugh, Hare having died pending the suit, appealed.
It is clear that the complainant was entitled to a decree of foreclosure unless the grounds of defense alleged by the respondent Reed were well taken. The first of these was that the directors of the mining company, who executed the bond and mortgage, did so without authority, and the bond and mortgage were therefore null and void. It is a sufficient reply to the defense to say that no issue is taken by the answer upon the averment of the bill that the bond and mortgage were executed and delivered by the proper officers of the mining company. On the contrary, the answer admits that "the said mining company, by its officers, on the date aforesaid, made, executed, and delivered to complainants, as trustees, a certain bond," describing the bond mentioned in the bill, "and that to secure the said sum of seventeen thousand dollars mentioned in said bond, the said Fairmount Gold & Silver Mining Company, by its officers, made the mortgage in said bill mentioned and upon the property in the bill of complaint described to the complainants.' These admissions preclude the defense set up for the first time at the hearing, that the officers were not authorized to execute the bond and mortgage. The defendant having admitted the execution of the mortgage by the officers of the company, the complainant had the right to rely on the admission, and was not bound to.. prove it.
*The other defense relied on was based on the allegation that the notes which the mortgage was given to secure had been satisfied, except those held by Nelson and Wharton, and these the defendant Reed offered to pay. The facts upon which this defense rests are as follows: On February 8, 1873, the board of directors of the mining company passed the following resolution: "Resolved, that the board of directors authorize the conversion of certain outstanding and unpaid certificates of indebtedness of the Fairmount Gold & Silver Mining Company, being numbered from 1 to 87, both numbers inclusive, and Nos. 89 to 100, both numbers inclusive, into stock of the said company at the par value thereof, upon the surrender of the said certificate of indebtedness by the holders thereof: provided, that the holders of the said certificates of indebtedness convert the same into stock of the said company, at the par value thereof, within ten days from the date of the passage of this resolution, and all the holders convert." The certificates of indebtedness mentioned in this resolution were the notes which the mortgage was given to secure. It is insisted by the defendant Reed that all the notes of the company, except those held by Thackara, Nelson, and Wharton, were converted into stock under the provisions of the foregoing resolution and were thereby satisfied, and that the notes held by Thackara, being merged in the judgment recovered by him, were satisfied by the sale of the company's property under execution, and as he offers to pay the notes held by Nelson and Wharton, there should be no decree of foreclosure.
The record does not sustain the assumption of the defendant. On the contrary, it appears that there never was any conversion of notes secured by the mortgage into the stock of the company. It was a condition of the resolution passed by the directors, under which the conversion is alleged to have taken place, that none of the notes were to be converted unless all were converted. The purposes of the resolution were plain, namely, to relieve the company of its embarrassments by providing for the conversion of its debts into stock. In order that this might be done and no advantage taken by one
creditor over the others, the conversion of notes into stock was to take effect only on the condition that all the creditors consented, and that the conversion was made within 10 days. This provision in the resolution was necessary to prevent a part of the creditors, after some had converted their notes into stock, from seizing the property of the company and applying it to the payment of their own debts, to the exclusion of other creditors. A large part of the creditors surrendered their notes and took stock in their stead. But this conversion was conditional, and the notes so exchanged were not canceled, because the conditions upon which the conversion was to take place were never complied with. Other holders of notes, among whom was Thackara, refused to convert their notes into stock, and thus the whole scheme fell through. The defendant Reed, who claims under Thackara, insists that all the creditors who surrendered their notes shall lose their debts, and that the notes held by Thackara shall take the entire property of the company. He thus insists upon a result which the resolution of the directors was cautiously framed to prevent. As soon as the 10 days prescribed by this resolution had expired, and it appeared that all the holders of notes secured by the mortgage of the mining company had not converted them into stock, those who had offered to convert were remitted to their rights as creditors of the company. A mortgage creditor, who had refused to convert, could not, by assuming that the property of the company was released from the mortgage, seize it for the satisfaction of his own debt to the exclusion of all the other mortgage creditors. By refusing to convert his notes into stock, he left the notes of the other creditors, and the mortgage which secured them, in full force and effect. The contention of a creditor, who did not offer to convert, that the conditional offer of the other holders to convert is, in effect, a conversion and satisfies their notes, and leaves the property of the company unincumbered and liable to seizure, and applicable exclusively to the satisfaction of his claim, is without support in reason or justice.
It appears from the record that a number of the creditors of the mining company, who had surrendered their notes conditionally, required the complainants Hare and Pugh, who were the mortgagees, to proceed to enforce the mortgage by suit to foreclose, and, in compliance with this demand, the present suit was brought. There is no ground upon which their right to the relief prayed can be denied. There is no support for the contention of Reed that it was the duty of the holders of notes, who had offered to convert them into stock, to rescind, within a reasonable time, the contract of conversion, and that, by delaying to do so for three years, they had lost the right to rescind. The answer to this contention is that there never was any conversion of notes into stock, and no binding contract to convert. The most that can be claimed is that the holders of the notes secured by the mortgage offered to convert them upon the conditions expressed in the resolution. The conditions were never complied with. There was, therefore, no conversion and nothing to rescind. The conditional surrender of the notes secured by the mortgage did not cut off the right to foreclose the mortgage for their satisfaction. Howe v. Lewis, 14 Pick. 329; Davis v. Maynard, 9 Mass. 242; Stover v. Wood, 26 N. J. Eq. 417. The notes which were filed for conversion remained the property of their holders respectively, and the stock the property of the company. It does not appear that any holder of the notes had disposed of stock which he had received conditionally. If there is such a one he will be compelled to account for the stock. Those in whose names the stock still remains will be entitled to their notes and to the security for their payment afforded by the mortgage, and the mining company will be entitled to a retransfer of the stock.
It being clear that the notes held by the parties for whom the present suit to foreclose was brought have not been satisfied, the right of the complainants to maintain the suit is put beyond question. The sale upon the judg
(112 U. S. 294)
ment at law recovered by Thackara could not affect that right. It has been held by many courts that a mortgagee cannot, upon a judgment recovered for a debt secured by his mortgage, levy the execution upon the mortgaged property. Atkins v. Sawyer, 1 Pick. 351; Washburn v. Goodwin, 17 Pick. 137; Tice v. Annin, 2 Johns.*Ch. 125; Camp v. Coxe, 1 Dev. & B. 52; Waller* v. Tate, 4 B. Mon. 529; Powell v. Williams, 14 Ala. 476; Carpenter v. Bowe, 42 Miss. 28; Linville v. Bell, 47 Ind. 547. But whether this be the established rule or not, it requires no authority to show that a sale of the mortgaged premises upon a judgment recovered on a part of the notes secured by the mortgage does not preclude the holder of other notes secured by the same mortgage from proceeding to foreclose it. A sale on such a judgment could only affect the equity of redemption, and would leave the rights of the holder of other notes secured by the mortgage unaffected.
We are of opinion that the circuit court erred in dismissing the bill. Its decree must therefore be reversed, and the cause remanded for such further proceedings in conformity with this opinion as the case may require.
HEIDRITTER v. ELIZABETH OIL-CLOTH CO.1
(November 24, 1884.)
1. ACTION IN REM-CONSTRUCTIVE PROCESS-MECHANIC'S LIEN.
In a case where the owner and builder of a distillery are one person, and he is served with legal, not actual, process, by affixing a copy of the summons on the building and by publication for four weeks, according to the laws of New Jersey, he being presumably without the jurisdiction of the court, proceedings to enforce a mechanic's lien are in the nature of proceedings in rem.
2. SAME UNITED STATES COURT-Seizure by MARSHAL-JURISDICTION OF STate Court. The seizure of premises by a United States officer as forfeited for offenses against the national laws, and the taking them into possession by the United States court to enforce and declare the forfeiture judicially, is a proceeding in rem, and for the purpose of the suit the res is withdrawn from the jurisdiction of a state court.
3. SAME JURISDICTION OF STATE COURT OVER PREMISES IN POSSESSION OF UNITED STATES COURT.
Whatever may be the validity of the proceedings in a state court against premises in the possession of the United States court, so far as they are directed to declaring and establishing a mechanic's lien, such proceedings are not good for the purpose of enforcing such lien by a sale and conveyance of the premises.
4. SAME CONFLICTING JURISDICTIONS-GENERAL RULE.
In the case of conflicting jurisdictions the rule is that when the object of the action requires the control and dominion of the property involved in litigation, that court which first acquires possession, or that dominion which is equivalent, draws to itself the exclusive right to dispose of it for the purposes of its jurisdiction.
In Error to the Circuit Court of the United States for the District of New Jersey.
E. A. Day and John R. Emery, for plaintiff in error. John F. Dillon and J. T. Richards, for defendant in error.
MATTHEWS, J. This is an action of ejectment for the recovery of certain real estate and the improvements thereon, situated in the City of Elizabeth, in* New Jersey, brought by the plaintiff in error against the defendant in error in the supreme court of that state, and removed thence into the circuit court of the United States on the ground that the case was one arising under the constitution and laws of the United States. The cause was submitted to the court, the intervention of a jury having been waived, and a judgment rendered for the defendant below. The facts appear by special findings of the court and bills of exception duly taken to its rulings. So far as material, they are as follows: Both parties claim title under Charles L. Sicher, who, being the owner
1S. C. 6 Fed. Rep. 138.
of the premises, commenced the erection thereon of a building which he subsequently used as a distillery. The plaintiff claims under a deed from the sheriff of Union county, in which the premises are situated, dated September 24, 1873, made to him as purchaser at a sale under two special writs of fieri facias, issued upon two judgments against Sicher: one in favor of August Heidritter for $1,711.22, signed June 14, 1873; the other in favor of Ferdinand Blancke for $272.95, signed June 18, 1873. The actions in which these judgments were severally rendered were commenced, one on February 21, 1873, the other on March 15, 1873. They were, in form, actions of assumpsit, the declarations in each, however, containing additional averments, showing that they were brought to enforce mechanics' liens upon the building and lot constituting the premises in controversy, according to the provisions of an act of the legislature of New Jersey of March 11, 1853, and the supplements thereto, the premises being specifically described and the accounts for labor and materials on which the actions were founded being set out, in the one case beginning June 21, 1872, in the other, September 7, 1872. The respective claims for these liens had been filed, pursuant to the statute, in the office of the clerk of the county: one on February 21, 1873; the other on March 13, 1873.
This statute of New Jersey-Nixon, Dig. (4th Ed.) 571; Rev. N. J. 668— provided for the enforcement of the claim filed agreeably to its provisions upon any lien created thereby by suit in a court of the county where such building is situated, to be commenced by summons, in a prescribed form, against the builder and owner of the land and building,*containing a statement that the plaintiff claims a building lien for the amount set forth on the building and lands of the defendant described as in the claim on file. Two modes of service of this summons are specifically described in the act: one is called actual service, meaning thereby personal service on the defendant, or, if he cannot be found in the state, by affixing a copy thereof on such building, "and also by serving a copy on such defendant personally, or by leaving it at his residence ten days before its return." The other is styled legal service, which is, in case the defendant resides out of the state, by affixing a copy on such building and sending a copy by mail, directed to him at the post-office nearest his residence, or, in case his residence is not known to the plaintiff, then by affixing a copy to such building, and publishing it for four weeks in a newspaper circulating in the county. The judgment in the action, if for the plaintiff, in case the defendant has been actually served with the summons, shall be general, with costs, as in other cases; but when only legal service of the summons has been made, judgment against the owner and also against the builder "shall be specially for the debt and cost to be made of the building and lands in the declaration described; and in case no general judgment is given against the builder, such proceedings or recovery shall be no bar to any suit for the debt, except for the part thereof actually made under such recovery." When the builder and owner are distinct persons, they may make separate defenses,—the former that he does not owe the money, the latter that the building and land are not liable to the debt; "and, in such case, it shall be necessary for the plaintiff, to entitle him to judgment against the house and lands, to prove that the provisions of this act requisite to constitute such lien have been complied with." "When judgment is entered generally against the builder, a writ of fieri facias may issue thereon as in other cases; and when judgment shall be against the building and lands, a special writ of fieri facias may issue to make the amount recovered by sale of the building and lands; and when both a general and special judgment shall be given, both writs may be issued, either separately or combined in one writ." It is further provided that under such special fieri facias the sheriff shall advertise, sell, and convey said building and lot in the same manner as directed by law in case of lands levied upon for debt, and that the sheriff's deed shall