1. Under the joint resolution of the Legislature of Pennsylvania
passed January 21, 1543, and which declares that
"It shall not be lawful for any company incorporated by the laws
of the commonwealth and empowered to construct any railroad, canal,
or other public internal improvement, while the debts thereof,
incurred by the said company to contractors, laborers, and workmen
employed in the construction or repair of said improvements remain
unpaid, to execute a general or partial mortgage, or other transfer
of the rent or personal estate of the said company, so as to
defeat, postpone, endanger, or
Page 89 U. S. 425
delay their said creditors, without the written assent of said
creditors first had and obtained, and that any such mortgage or
transfer shall be deemed fraudulent, null, and void, as against any
such contractors, &c., as aforesaid,"
an unpaid contractor, laborer, or workman, employed in the
construction of a railroad in Pennsylvania, has a lien of
indefinite duration on such road, which lien has precedence over
every right that can be acquired by or under any mortgage made
after the debt to the contractor was incurred.
2. Such lien is not merged in any judgment got by the contractor
against the company for his debt, nor by any proceedings in or
judgments in
scire facias, primary or subsequent, upon
such judgments. In whatever shape the debt may be, it has the
benefit of the privilege given it by the legislative
resolution.
3. If the company mortgage their road after the contractor has
got a judgment against it for his debt, such contractor is not
bound, on a
scire facias brought by him to revive his
original judgment, to give notice to a mortgagee as a term tenant.
A mortgagee is not a term tenant.
4. Under the Act of the Assembly of Pennsylvania of April 4,
1862, which, reciting the above-quoted joint resolution of January
21, 1843, enacts
"That whenever any incorporated company subject to the
provisions of the above resolution shall divest themselves of their
real or personal estate contrary to the provisions of said
resolution, it shall and may be lawful for any contractor, laborer,
or workman employed in the construction or repair of said company,
having obtained judgment against the said company, to
issue a
scire facias upon said judgment, with notice to
any person, or to any incorporated company, claiming to hold or own
said real or personal estate,"
all that is required to enable the contractor, etc., to proceed
by
scire facias, as contemplated by the act, is that such
contractor &c., have a judgment against the indebted company
which gave the mortgage. It is not necessary that the judgment be a
lien.
5. Where, on the intervention of a contractor having a lien such
as is given by the above-mentioned joint resolution of 1843, a
court, on proceedings in foreclosure of a mortgage of the road made
subsequently to the date of the lien, orders a sale "subject to any
lawful claims or rights which may exist prior or paramount to said
mortgage," and the sale is made accordingly, the lien is not
divested, whatever might be the case were the lien that of a
judgment.
6. Nor will such a lien be divested by a statute authorizing a
railroad company to borrow money and to pledge its income and
property to secure the payment. A repeal of the joint resolution
will not be inferred by the grant of such a power simply.
On the 21st of January, 1843, the Legislature of Pennsylvania
passed the following
Page 89 U. S. 426
"
JOINT RESOLUTION TO PROTECT LABORERS AND
CONTRACTORS"
"
Resolved that it shall not be lawful for any company
incorporated by the laws of this Commonwealth and empowered to
construct, make, and manage any railroad, canal, or other public
internal improvement, while the
debts and
liabilities, or any part thereof, incurred by the said
company to
contractors, laborers, and workmen employed in
the construction or repair of said improvement remain unpaid, to
execute a general or partial assignment, conveyance,
mortgage, or other transfer of the real or personal estate
of the said company, so as to defeat, postpone, endanger, or delay
their said creditors, without the
written assent of the
said creditors first had and obtained, and any such assignment,
conveyance,
mortgage or transfer, shall be deemed
fraudulent, null, and
void as against any such
contractors, laborers, and workmen, creditors as
aforesaid. [
Footnote 1]"
This joint resolution being in force, the legislature of the
same state, in the year 1850, incorporated the Hemphill Railroad
Company; a company authorized to make a railroad from a town called
Greensburgh, in the interior of Pennsylvania, to the western
boundary of the state.
The act of incorporation gave the company no power to borrow
money or mortgage the road. But a subsequent act -- one of April
12th, 1851 -- empowered the company to borrow money and "to pledge
the property and income of the company in order to secure the
payment thereof."
With these acts in force, the company, in 1853 (May 27th),
entered into a contract with a contractor named Fox to do the work
on the projected road, and he did it. In the following year, 1854,
the company became embarrassed and requested Fox to stop working,
which he also did.
Not getting paid, he brought suit February 16, 1855, in the
Circuit Court of the United States at Pittsburg against the
company, and on the 23d of November, 1860, got judgment against it
for $33,500; this
judgment constituting, by the law of
Pennsylvania, a lien against the company's real estate for five
years from its date, and no longer,
Page 89 U. S. 427
and the law of the state requiring notice to be given to terre
tenants, when there are terre tenants, and the plaintiff in the
judgment desires to revive the judgment as against them.
On the 27th of June, 1855 -- that is to say between the day when
Fox brought his suit and that when he got judgment -- the debt to
Fox being still unpaid and he having given no assent, written or
other, thereto -- the company executed a mortgage on the whole of
their road, franchises and property, real and personal, to one Seal
as trustee to secure the payment of bonds to the amount of
$1,000,000, to be issued by the company, and which were immediately
afterwards issued, the bonds having twenty years, that is to say
until 1875, to run. The mortgage was duly recorded in all the
counties through which the road ran, and Seal, the trustee, took
possession of the road and worked it until the time of the sale,
hereafter mentioned. Interest on the bonds becoming due, and not
being paid, suit was instituted in the Supreme Court of
Pennsylvania to foreclose the mortgage and to sell the road, its
franchises, and other property, real and personal. Fox hereupon
applied by petition to be allowed to intervene
pro interesse
suo in the suit for foreclosure, or if this should not be
granted, that he might be paid out of the proceeds of the sale. His
petition contained a full history of the origin, character, and
amount of his claim against the Hemphill Railroad Company. The
court rejected his petition on both its parts, and a sale was made
under the proceedings in foreclosure, the sale, however, being made
(in consequence of Fox's petition)
"subject to any lawful
claims or rights which might exist prior or paramount to the said
mortgage." The purchaser was another corporation, named the
Pittsburg, Wheeling & Baltimore Railroad Company. This sale was
made March 30, 1871.
Between the date of the above-mentioned mortgage and the sale
under it, that is to day on the 4th of April, 1862, the Legislature
of Pennsylvania passed an act to enable contractors, laborers,
workmen &c., better to get the enjoyment of the lien which the
joint resolution of January 21, 1843,
Page 89 U. S. 428
already quoted, had given them. This act was in these words:
"
Whereas it frequently happens that incorporated
companies, by assignment, conveyance, mortgage, or other transfer,
divest themselves of their real and personal estate, in
contravention of the provisions of the resolution of January 21,
1843; therefore,"
"
Be it enacted that whenever any incorporated company,
subject to provisions of the above resolution, shall divest
themselves of their real or personal estate, contrary to the
provisions of the said resolution, it shall and may be lawful for
any contractor, laborer, or workman employed in the construction or
repair of the improvements of said company, having obtained
judgment against the said company, to issue a
scire facias
upon said judgment, with notice to any person, or to any
incorporated company, claiming to hold or own said real or
personal estate, to be served in the same manner as a summons,
upon the defendant, if it can be found in the county, and upon the
person or persons, or incorporated company claiming to hold or own
such real estate; and if the defendant cannot be found, then upon
the return of one
nihil and service as aforesaid, on the
person or persons, or company claiming to hold or own as aforesaid,
the case to proceed as in
other cases of
scire
facias against terre tenants. [
Footnote 2]"
We should here mention that while some of these things were
going on -- that is to say in 1867 (January 29th) -- and while Seal
was in possession of the road as trustee, Fox had issued a
scire facias against the Hemphill Railroad Company to
revive the judgment which he had got against it in 1860; the lien
of which
judgment had, of course, under the law of
Pennsylvania as already stated, expired in 1865. To
this scire
facias no one was made a defendant but the original defendant,
the Hemphill Railroad Company. Judgment was entered on this
scire facias March 14, 1867.
He now, February 23, 1871 -- thirty-seven days before the sale
of the road, and while Seal was yet in possession of it -- issued a
scire facias to revive judgment and
quare
executio
Page 89 U. S. 429
non on the judgment just now mentioned as obtained in
1867, and in this second
scire facias he made Seal a
codefendant with the original defendant, the Hemphill Railroad
Company, and as soon as the sale of the old road to the Wheeling,
Pittsburg & Baltimore Railroad Company had been made, brought
in
that company as another codefendant this being effected
August 12, 1871, and he meaning in all which he did to act in
conformity with what was directed by the Act of the Pennsylvania
Assembly of 1862, quoted on the preceding page.
These two last-named parties -- that is to say Seal and the
Wheeling, Pittsburg & Baltimore Railroad Company -- pleaded to
this last
scire facias.
The pleas were:
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 & 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
Page 89 U. S. 430
Legislature of January 21, and the Act of Assembly of April 4,
1862; the records of his own suit of 1855, ending in judgment in
1860; the record of the
scire facias of 1867, to revive
it; this to be followed up with evidence of the nature and date of
origin of the claim on which the original judgment was got, to-wit
that it was that of a contractor in the construction of the
railroad prior to the date of the mortgage; that the mortgage, if
not postponed to his claim, defeated it; that he was not a
stockholder in the Hemphill Railroad Company &c.
The defendants objected to the evidence as irrelevant and
incompetent, and the court rejected it, the plaintiff excepting to
such action. Judgment having been given for the defendants, the
plaintiff brought the case here.
For the reader's convenience, the dates of some of the important
facts occurring in the history of the case are here set forth
chronologically:
1843, January 21, joint resolution of the legislature.
1850, May 15, Hemphill Railroad Company incorporated.
1851, April 12, act of legislature authorizing a mortgage by
it.
1853, May 27, Fox's contract made.
1855, February 16, Fox's suit brought.
1855, June 27, mortgage made to trustees, and trustees take
possession.
1860, November 23, Fox obtains judgment.
1862, April 4, act of the legislature.
1867, January 29,
scire facias to revive, against the
Hemphill Railroad Company only.
1867, March 14, judgment on this
scire facias.
1871, February 23,
scire facias to revive judgment,
et qu. ex. non against the Hemphill Railroad Company and
the trustees also; the present suit.
1871, March 30, sale of the railroad.
1871, August 12, the Pittsburg, Wheeling and Baltimore Railroad
Company brought in on motion as codefendants.
Page 89 U. S. 437
MR. JUSTICE STRONG delivered the opinion of the Court.
We think there was error in the rejection of the evidence
offered by the plaintiff. Some of it may have been immaterial to
the issues pending, but the court directed that all the record and
documentary evidence be embraced in one offer, and then rejected it
all. In effect, the objections urged by the defendants were treated
as a demurrer, and the offer was overruled because the evidence was
regarded as insufficient in law to sustain the action.
If the rights of the plaintiff have not been lost by failure to
prosecute them in the proper mode and in due time, the joint
resolution of 1843, in our opinion, protects him against the
mortgage, and all persons claiming thereunder. [
Footnote 3]
That the plaintiff's testator was a contractor with the Hemphill
Railroad Company, and that the debt due to him was incurred by the
company for the construction of their railroad it was the direct
tendency of the evidence offered to prove, and these facts are
uncontroverted now. That debt therefore was within the protection,
whatever that may be, of the resolution. What then was the nature
and extent of that protection? It is unnecessary to assert that the
company was rendered incapable of making a mortgage or any transfer
of its property so long as the debt due to its contractor remained
unpaid. But the language of the resolution is too clear to admit of
question that the legislature intended to give to an unpaid
contractor a priority of claim
Page 89 U. S. 438
to the company's property over every right that could be
acquired by a mortgagee or acquired under a mortgage if the
mortgage was made after the debt to the contractor was incurred. It
was at least intended that the property, into whosesoever hands it
might come, should remain subject to a paramount claim of the
contractor so long as the debt due to him remained unpaid. That
this was substantially giving to him a lien of indefinite duration
seems quite plain. It was not a
"jus in re" nor a
"jus
ad rem," but it was a charge upon the property, a right to
prevent any disposition of it by which it could be withdrawn from
the creditor's reach, and therefore in a very legitimate sense an
equitable lien. The resolution in effect declared that while his
claim against the company exists, a subsequent mortgage or transfer
cannot be set up to defeat the contractor's resort to the property
and his superior right to have it applied to the payment of the
debt due him. It is true the mode of that resort is not prescribed.
It can only be by suit, judgment, and execution, but whenever
judgment and execution are obtained, the lien is made to precede
the lien of any mortgage or the effect of any conveyance; more
accurately, it has the effect it would have were there no mortgage
or conveyance in existence. The property may be levied upon and
sold, and the proceeds of the sale may be applied to the
satisfaction of the debt due the contractor, without possible
interference by the mortgagee, though the mortgage preceded the
judgment in time. We cannot regard the resolution as no more than a
partial reenactment of the statute of 13th Elizabeth invalidating
mortgages and transfers only when there is an actual or
constructive intent to hinder, delay, or defraud creditors. If that
was all the resolution intended, it was unnecessary and unmeaning.
But it declares null and void every mortgage
the effect of
which is to defeat, postpone, endanger, or delay contractors,
laborers, and workmen. The mortgage may be good as against other
creditors, but it is a nullity as to them.
It has been argued that it is against the policy of Pennsylvania
to allow secret liens, or liens not of record, or liens
Page 89 U. S. 439
on land created by parol, and undoubtedly there are evils
attendant upon the allowance of such encumbrances. But that is a
matter for legislative consideration. The supposed policy of the
state cannot, in a judicial tribunal, prevail over a plain statute.
And notwithstanding the disinclination judges have manifested to
sustain liens not of record, there are many such liens known to the
statute laws of that state and upheld by the courts. A mechanic or
materialman is given a lien, and he is not required to put his
claim on record until within six months after his work has been
done or his materials have been furnished. Yet his lien has
priority over every lien (other than a mechanic's) which attached
to the building or curtilage subsequent to the commencement of such
building. So liens are given by statutes to laborers, miners, and
clerks, and they are valid against subsequent mortgages, though the
liens do not appear upon any record. [
Footnote 4] It is not, then, against the policy of the
state to create a statutory lien in favor of laborers or
workmen.
And if we have correctly interpreted the legislative resolution
of 1843, if the debt due from the Hemphill Railroad Company to the
plaintiff's testator was a lien upon the property of the company
from the time it was created, so far, at least, as to have priority
over any subsequent mortgage or conveyance, it is plain the lien
would have continued a prior encumbrance, so long as the debt it
was given to secure remained, had there been no such subsequent
mortgage. But the express declaration of the resolution is that the
mortgage shall have no effect as against such a debt or claim. And
this must mean that neither the mortgage itself nor any sale made
under it shall have the effect of defeating, postponing,
endangering, or delaying the contractor, for if a sale made under
the mortgage discharges the contractor's lien and removes the
property from his reach, effect is given to the mortgage itself,
and precisely the effect which the statute denied to it.
We are thus brought to the question whether the lien or
Page 89 U. S. 440
claim which the plaintiff's testator had upon the property, real
and personal, of the Hemphill Railroad Company as a security for
the debt due him, and which was paramount to the mortgage made to
the company, has been lost or extinguished. And we think it has
not. The debt remains due and unpaid. In 1855, Fox, the contractor,
commenced a suit for its recovery, and he obtained a judgment in
1860. That judgment did not extinguish the right which he had from
the time the debt was incurred to have the property of his debtors
first applied to the satisfaction of the debt. It did not cause to
be merged in itself the original lien, any more than a judgment
obtained upon a bond secured by a mortgage absorbs the lien of the
mortgage. In whatever shape the debt was, it had the benefit of the
statutory privilege. It matters not, then, that more than five
years elapsed after the judgment was recovered before it was
revived, for if it be conceded that the lien of the judgment
expired, that of the debt remained.
And if the lien of the judgment recovered in 1860 ceased at the
end of five years from the time of its rendition, still it is
undeniable that the revived judgment of 1867 gave a new lien which
followed the property into whosesoever hands it came, until the
present
scire facias was sued out in February, 1871. The
only possible answer to this is that before the revived judgment of
1867 was obtained, the property of the Hemphill Railroad Company
had passed from its ownership, had become vested in its mortgagees,
and that the trustees of the mortgage were not notified of the
scire facias or made parties to it. To this there are two
replications, each of which, in our opinion, is quite sufficient.
The first is that the company was, by the resolution of 1843,
deprived of the power to make a mortgage or any conveyance by which
its property could be withdrawn from the reach of the plaintiff,
and the mortgagees or trustees could acquire no rights which the
mortgagors were unable to confer. The second replication is that
the mortgage to Seal and others was not a grant of the ownership of
the property described in it. It was but the creation of a lien for
the security of
Page 89 U. S. 441
the bonds issued under it. True, the trustees of the
bondholders, pursuant to its provisions, took possession of the
mortgaged property in 1857 and carried on the business of the
company until 1871, but even as against them the company remained
the owners of the road, subject only to a lien to secure the
payment of the mortgage debt. The trustees were not terre tenants.
They were mere occupants. Terre tenants against whom, by the laws
of Pennsylvania, it is necessary that a
scire facias to
revive a judgment be sued out in order to preserve its lien are
those who have seizin of the land, those who are owners, or claim
to be owners by title derived from the defendant in the judgment.
There can be no terre tenant such as intended by the Act of 1798
[
Footnote 5] who is not a
purchaser, mediately or immediately, from the debtor while the land
was bound by the judgment. [
Footnote 6] Such has always been held to be the law in
Pennsylvania, and such are terre tenants in England. [
Footnote 7] A mortgagee has never been
regarded as a terre tenant entitled to notice of the revival of a
judgment. There has therefore been no failure or neglect in this
case to make the necessary parties to all the judicial proceedings
commenced by the plaintiff or his testator. The law did not require
notice of the
scire facias sued out to revive the judgment
of 1860 to be given to the trustees of the mortgage, and if the
lien of that judgment had expired, the revived judgment fastened a
new lien upon the property. That lien was a security for the debt
which, by the resolution of 1843, was made paramount to the
mortgage, and against which, while it remains unpaid, the mortgage
cannot be set up.
This, however, relates to the ordinary judgment lien, but it is
not essential to the plaintiff's case, as exhibited by the evidence
he offered, that the judgment which he now seeks to enforce is a
lien upon the property claimed and held by the trustees of the
mortgage and by the Wheeling, Pittsburg &
Page 89 U. S. 442
and Baltimore Railroad Company. It would be were it not for the
legislative resolution of 1843, and for the enactment of April 4,
1862. But the first of these, as we have seen, made the debt due to
the contractor, itself a lien without a judgment, and prescribed no
limits to its duration. The second (the Act of April 4, 1862),
manifestly recognized the existence of such a lien, and pointed out
a mode for making it available to the creditor. This will be seen
by reference to the act itself. [
Footnote 8]
This act makes special provision for such cases as the present.
Under it, all that is necessary to enable a contractor, laborer, or
workman to proceed by
scire facias against a person or
company claiming to hold or own the real or personal estate of the
debtor to such contractor, laborer, or workman by virtue of a
mortgage made in contravention of the resolution of 1843 is that he
has obtained a judgment against the indebted company which gave the
mortgage. It is not required that his judgment shall be a lien on
the property. And plainly it was not intended that such a lien must
exist. The resolution of 1843 prohibited transfers, assignments,
and mortgages of personalty as well as of realty, and a judgment
creates no lien upon personalty. But the resolution recognizes the
right of a contractor to follow both into the hands of a claimant
or owner holding under such an assignment, transfer, or mortgage,
without regard to the question whether the property is real or
personal. It therefore recognizes the existence of a lien in favor
of those protected by it, independent of the lien of any judgment
they may recover. This must be so, for if it is essential to a
right to proceed by
scire facias against the property in
the hands of a grantee of the indebted company that the judgment of
the creditor shall be a lien upon that property, what is to be said
of the case where the indebted company has conveyed before the
recovery of any judgment? In such a case, the judgment can be no
lien. Yet it will not be claimed the property could not be followed
by
scire facias against
Page 89 U. S. 443
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.
Page 89 U. S. 444
It is hardly necessary to add that the Act of the legislature of
April 12th, 1851, empowering the Hemphill Railroad Company to
borrow money and pledge its property and income to secure the
payment thereof, cannot be regarded as exempting that company from
the operation of the resolution of 1843.
Judgment reversed and a venire de novo awarded.
[
Footnote 1]
Pamphlet Laws of 1843, p. 367.
[
Footnote 2]
Pamphlet Laws of 1862, p. 235, ยง 1.
[
Footnote 3]
See the joint resolution set out
supra, p.
89 U. S. 426 --
REP.
[
Footnote 4]
Act of March 30, 1859, Pamphlet Laws 318.
[
Footnote 5]
3 Smith's Laws 331.
[
Footnote 6]
Dengler v. Kiehner, 13 Pa.St. 41;
Chahoon v.
Hollenback, 16 S, & R. 432;
In re Dohner's
Assignees, 1 Pa.St. 104.
[
Footnote 7]
2 Saunders 9, note 8.
[
Footnote 8]
See it set out
supra, p.
89 U. S. 428 --
REP.
