Mercantile Trust Co. v. Chicago, P. & St. L. Ry. Co.

U.S. Court of Appeals for the Seventh Circuit April 14, 1903

Mercantile Trust Co. v. Chicago, P. & St. L. Ry. Co., 123 F. 393 (7th Cir. 1903)

59 C.C.A. 349; 1903 U.S. App. LEXIS 4006

Opinion of the Court

JENKINS, Circuit Judge,

after stating the facts, delivered the opinion of the court.

By the law of the state of Illinois the vendor’s lien reserved in the unrecorded deed to Hook was potential against the world, except. *395creditors and purchasers in good faith. The property was, without the knowledge of the vendor, removed by Hook, the president of each of the roads and the common manager of them all, to a locality in fact owned by the Chicago, Peoria & St. Louis Railway Company, but for the use of the several constituent companies composing the Jacksonville Southeastern Line, and was so used until taken possession of by the receiver in this suit. He could only justify his title and possession by showing that the Chicago, Peoria & St. Louis Railway Company was a bona fide holder of the property for value and without notice of the vendor’s lien. This is not shown by the mere fact of removal and the placing of machinery upon premises owned by that company, and in fact used for the common benefit of the constituent companies; nor by the fact, if it be a fact, that that company was the only member of the association which through the earnings of its line and the sale of its bonds was able to maintain itself and its associates; nor by the fact that the other companies would in an accounting be shown to be indebted to it. There was no transfer of the title of the property by Hook to any one, so far as the record discloses. If purchased by him with the funds of the Jacksonville Southeastern Line, the property .belonged to all the companies, and was subject to an equitable accounting between the constituent members of the association; but in that event, being so purchased for the association by Hook, its head, who was also the president and manager of each company, knowledge of the vendor’s lien reserved in the unrecorded deed to Hook is clearly chargeable to each constituent member of the association. No one member of the partnership or association under such circumstances could be heard to say that it acquired the property without knowledge of the lien. There is no evidence of a sale of the property to the Chicago, Peoria & St. Louis Railway Company, or of any payment by it therefor. The presumption which attaches to commercial paper transferred before maturity does not apply to the transfer of chattels. A bona fide purchase for value without notice must be proven as a fact by the possessor, and is not to be presumed, particularly under the circumstances surrounding this transaction.

The objection that the realty is not shown to be insufficient security for the payment of the debt cannot be sustained. There was no sale of this property. The equitable principle which requires a sale in the inverse order of alienation is not applicable here. The principle invoked is applied “where there are two creditors standing in equal equity, one of whom has security upon two funds and the other only upon one.” Iglehart v. Crane, 42 Ill. 261. The entire -property belonged in equity to the association, and not to Hook. The Chicago, Peoria & St. Louis Railway Company—as claimed by counsel—has in equity the right to the entire property, but that right is subject to the lien of the vendor. The company stands in no better plight than Hook, and its possession was in fact Hook’s possession.

The objection that the court and the master erred in finding that the tools and machinery could not be restored in specie is equally fallacious. The petition was in the alternative, either for a restoration of that which had been detached from the realty, if it could be done, •or for the value. This machinery had been stripped from the realty, *396converted to the use of wrongdoers, and used for nearly eight years. The appellee’s right thereto was denied. The property manifestly could not have been restored in specie. It must have suffered much depreciation in its value. Under these circumstances the appellants cannot complain that the value is awarded, and not a specific return of the property ordered, particularly as the amount awarded by the decree, being the amount of the debt, is less than the value of the property taken, with interest from the taking.

The decree is affirmed.

Reference

Full Case Name: MERCANTILE TRUST CO. v. CHICAGO, P. & ST. L. RY. CO. SAME v. TRUSTEES OF ILLINOIS COLLEGE
Cited By: 1 case
Status: Published
Syllabus: 1. Vendor’s Lien—Removal op Machinery prom Building—Liability op Receiver. The president of four different railroad companies, whose roads were operated together as one line under an arrangement in the nature of a partnership and a common management, purchased in his own name, but for the use of such line, certain shops containing machinery, which were used as machine shops by the consolidated lines. He took a deed, which was not recorded, but which reserved a vendor’s lien for an unpaid portion of the purchase money. Subsequently the machinery from the shops was removed to another location, which was owned by one of the constituent companies, where it was used in the same way, and later passed into the hands of a receiver for such company. Heidi, that such company was not a purchaser for value, but was chargeable with notice of the vendor’s lien, and the receiver should be required to pay to the holder of the purchase-money notes the value of the machinery so taken to the extent of such notes. 2. Same. In such case there was no sale or transfer of the machinery, such as required the lienholder to first exhaust the real estate, it being at all times in equity the property of the associated lines, nor was the receiver entitled to replace it, after it had been used for a number of years since its removal.