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Opinion of the Court.
mortgage was, within a few days after its execution, duly recorded in the proper counties. In October, 1883, default having occurred in the payment of interest, the Trust Company brought suit to foreclose. There being a conflict of interest between the bondholders under this and those under a terminal trust mortgage subsequently executed by the railroad company, a committee of bondholders under the first mort gage, consisting of James M. Quigley, Charles T. Harbeck and John McNab, was appointed to represent the interest of such bondholders; and by order of the court duly made.co-complainants. Thomas H. Hamilton, appellee, intervened, and filed his petition claiming a mechanic's lien. On March 20th, May 9th and June 2d, 1883, respectively, he had entered into three several contracts with the railroad company for the erection of a dock on the Maumee River, in the city of Toledo. Under these contracts he had built the dock, and, receiving only partial payment, had filed a claim for a mechanic's lien for the balance. The lot "on which the dock was built was a part of the railroad property covered by the first mortgage above referred to. The Circuit Court sustained his claim of lien, and decreed prior payment of the amount due him out of the proceeds of the sale of the railroad property as an entirety. No question is made as to the amount due him by the railroad company for the work he did; but the contention of the appellants is that he is not entitled to priority of payment. His claim of priority depends upon either a legal right given by his mechanic's lien, or an equitable right arising from the construction of the dock and consequent improvement of the railroad property. The master, who reported upon the intervening petition, based his award of priority upon the latter ground, holding that the fact of construction, and consequent improvement of the railroad property, gave an equitable right to priority of payment, while the court, giving the same priority, rested it upon the fact of a mechanic's lien. We think that the views of neither the master nor the court can be sustained, and that it was error to give appellee priority over the mortgagee. It will be noticed, and it is a fact which lies at the foundation of this case, that the contracts for the
Opinion of the Court.
construction of the dock were not made till more than three years after the execution and record of the mortgage. The record imparted notice to Hamilton, and to all others, of the fact and terms of the mortgage; and the question is thus presented, whether a railroad company, mortgagor, can, three . years after creating by recorded mortgage an express lien upon its property, by contract with a third party displace the priority of the mortgage lien. It would seem that the question admits of but a single answer. Certainly as to ordinary real estate, no one would have the hardihood to contend that it could be done; and there is in this respect no difference between ordinary real estate and railroad property. A recorded mortgage, given by a railroad company on its road-bed and other property, creates a lien whose priority cannot be displaced thereafter, directly by a mortgage given by the company, nor indirectly by a contract between the company and a third party for the erection of buildings or other works of original construction.
It is enough to refer to the decisions of this court. In the case of Dunham v. Railway Company, 1 Wall. 254, 267, there was presented a question of priority between a mortgagee and a contractor who had expended money and labor in building a railroad, under a subsequent agreement with the company that he should have possession of the road until he was fully paid, and who had never surrendered the possession and the priority of the mortgage was sustained. Upon this point the court observed: “Counsel of respondents concede that the mortgage to the complainant was executed in due form of law, and the case also shows that it was duly recorded on the ninth day of March, 1855, more than eight months before the contract set up by the respondents was made. All of the bonds, except those subsequently delivered to the contractor, had long before that time been issued, and were in the hands of innocent holders. Contractor, under the .circumstances, could acquire no greater interest in the road than was held by the company. He did not exact any formal conveyance, but, if he had, and one had been executed and delivered, the rule would be the same. Registry of the first mortgage was notice
Opinion of the Court.
to all the world of the lien of the complainant, and in that point of view the case does not even show a hardship upon the contractor, as he must have known when he accepted the agreement that he took the road subject to the rights of the bondholders. Acting as he did with a full knowledge of all the circumstances, he has no right to complain if his agreement is less remunerative than it would have been if the bondholders had joined with the company in making the contract. No effort appears to have been made to induce them to become a party to the agreement, and it is now too late to remedy the oversight. Conceding the general rules of law to be as here laid down, still an attempt is made by the respondents to maintain that railroad mortgages made to secure the payment of bonds issued for the purpose of realizing means with which to construct the road, stand upon a different footing from the ordinary mortgages to which such general rules of law are usually applied. Authorities are cited which seem to favor the supposed distinction, and the argument in support of it was enforced at the bar with great power of illustration, but suffice it to say, that in the view of this court the argument is not sound, and we think that the weight of judicial determination is greatly the other way. Pierce v. Emery, 32 N. H. 484; Pennock v. Coe, 23 How. •130; Field v. The Mayor of New York, 2 Selden, 179; Seymour v. Canandaigua &c. Railroad, 25 Barb. 284 ; Red. on Railways, 578; Langton v. Horton, 1 Hare Ch. 549; Matter of Howe, 1 Paige, 125, 129; Winslow v. Mitchell [Mitchell v. Winslow), 2 Story, 630; Domat, 649, Art. 5; 1 Pow. on Mort. 190 ; Noel v. Bewley, 3 Sim. 103."
See, also, on this general proposition, the cases of Galveston Railroad v. Cowdrey, 11 Wall. 459'; Dillon v. Barnard, 21 Wall. 430, 440; Porter v. Pittsburg Steel Co., 120 U. S. 649, and 122 U. S. 267; Thompson v. Whitewater Valley Railroad, 132 U. S. 68. Reference may be had to a decision of the Supreme Court of Ohio, the State in which this lien was attempted to be created and enforced, Choteau v. Thompson, 2 Ohio St. 114, 126, 127, in which the .court, speaking of a mechanic's lien, says: “The lien does not override or interfere
Opinion of the Court.
with prior bona fide liens. The idea that the builder, or mate rial man, may have a lien upon the house to the exclusion of a mortgagee, or judgment creditor, whose lien attached before the house was erected, altered or repaired, is inadmissible, and could not, in practice, be carried out.” And again : “We do not suppose that the law relating to mortgages, or to judgments and executions, was in any way affected by the enactment of the lien law. And we are of opinion, as before stated, that liens under this law do not, in any case or in any manner, interfere with prior bona fide liens.” So that if a mechanic's lien could have been placed upon the railroad, or any part thereof, under the Ohio statute, and by the proceedings taken was in fact perfected, it would not operate to displace the priority of the earlier mortgage.
To what extent, if at all, a mechanic's lien could, under the statutes of Ohio in force at the time Hamilton attempted to file his lien, be placed upon a railroad, or any part of it, may be a matter of doubt. Rutherfoord v. Cincinnati & Portsmouth Railroad, 35 Ohio St. 559; Smith Bridge Company v. Bowman, 41 Ohio St. 37; Revised Statutes of Ohio, 1880, sections 3184 and 3185 and sections 3207 to 3211 inclusive; also Laws of 1883, amended sections 3207 to 3211, inclusive, and Laws of 1884, page 126. It is unnecessary in this case to express any opinion about the matter, for if a mechanic's lien was effected, it was subordinate to the lien of the prior mortgage. There was no statute in force at the time the mortgage was executed, giving any priority to subsequent mechanic's liens; and by the mortgage the mortgagee took its vested priority, beyond the power of the mortgagor or the legislature thereafter to disturb.
Neither did the fact of the construction of the dock, and the consequent improvement of the mortgaged property, give, as reported by the master, to Hamilton an equitable lien prior in right to the lien of the mortgage, or furnish equitable reasons why the legal priority belonging to the mortgage should be displaced. It is true cases have arisen in which, upon equitable reasons, the priority of a mortgage debt has been displaced in favor of even unsecured subsequent creditors.
Opinion of the Court.
See St. Louis, Alton &c. Railroad v. Cleveland, Columbus &c.
c Railway, 125 U. S. 658, 673, in which many of these cases are collected and the equitable principles underlying them stated. But those principles have no application here. The work which Hamilton did was in original construction, and not in keeping up, as a going concern, a railroad already built. The amount due him was no part of the current expenses of operating the road. There was, as to him, no diversion of current earnings to the payment of current expenses. · The distinction is so well expressed by Mr. Justice Blatchford, in giving the opinion of the court in the case of Porter v. Pittsburg Steel Co., 120 U. S. 649, 671, that it is sufficient to quote his language: “ The claims of the appellees are for the original construction of the railroad. This is not a case where the proceeds of the sale of the property of a railroad, as a completed structure, open for travel and transportation, are to be applied to restore earnings which, instead of having been applied to pay operating expenses and necessary repairs, have been diverted to pay. interest on mortgage bonds and the improvement of the mortgaged property, the debts due for the operating expenses and repairs having remained unpaid when a receiver was appointed. The equitable principles upon which the decisions rest, applying to the payment, out of the proceeds of the sale of railroad property, of such debts for operating expenses and necessary repairs, are not applicable to claims such as the present, accrued for the original construction of a railroad while there was a subsisting mortgage upon it. These five appellees gave credit to the company for their work. It was construction work, and none of it was for operating expenses or repairs, and none of it went towards keeping a completed road in operation, either in the way of labor or material. When these claims accrued, the road of the company had not been opened for use. The claims accrued, after the mortgage had been executed and recorded, and after $1,000,000 of the bonds secured by it had been issued and pledged to innocent bona fide holders for value. We are not aware of any well-considered adjudged case, which, in the absence of a statutory provision, holds that unsecured floating