CASES ADJUDGED

IN THE

SUPREME COURT OF THE UNITED STATES,

AT

OCTOBER TERM, 1896.

COMPTON v. JESUP.

CERTIFICATE FROM THE COURT OF APPEALS FOR THE SIXTH

CIRCUIT.

No. 314. Argued December 4, 1896. — Decided May 10, 1897.

In the course of the various proceedings, referred to in the Statement of the Case, below, for the foreclosure of mortgages in different States upon different railroads which constituted a part of what was known as the Wabash system, and for its reorganization, the claim of the appellant which forms the subject of this appeal was considered. His claim was for equipment bonds for equipment furnished the Ohio division. Among the proceedings was a suit in Indiana, involving the question of the lien of such bonds upon the portion of the road in Indiana, in which it was decreed that there was no lien. The various proceedings resulted on the 23d of March, 1889, in a decree of foreclosure in the several Circuit Courts in Ohio, Indiana and Illinois, by which the entire line was to be sold as a unit, and further it was provided that the rendering of that decree in advance of the trial and determination of the appellant's claim should not affect the rights of the appellant, but that they should be preserved and enforced in the manner provided for by the decree. The sale under the decree was made and confirmed. August 17, 1889, it was ordered "that the issues presented in this cause as to the lien and claim of James Compton, made by the various pleadings herein upon and concerning said claim and lien, and reserved in the former decree herein saving the rights of said Compton, be and the same are hereby referred to Bluford Wilson as special master," etc. The special master

VOL. CLXVn-1

1

Statement of the Case.

reported that Compton's lien was a valid one, and that he was entitled by the saving clause of the decree to have the Ohio division resold if the purchaser did not pay off his bonds, principal and interest, in full. The Circuit Court sustained the master in holding Compton's lien valid, but decided that his only remedy was to redeem the four divisional mortgages, two in Ohio and two in Indiana. Appeal was taken to the Circuit Court of Appeals. That court, after making a full statement, requested the instructions of this court upon the following questions: First. Had Compton the right under the saving clause of the decree for sale to a decree for the redemption of the Ohio division only? Second. In fixing the amount to be paid in redemption, is he entitled to have the principal and interest of the mortgages to be redeemed reduced by the net earnings received by the purchaser? Third. Is the decree of the Circuit Court of the United States for the District of Indiana between the same parties and unappealed from, res judicata upon the foregoing questions in this court? Held,

(1) That the decree of sale of March 23, 1889, conferred upon Compton,

in event that his claim should not be paid by the purchaser, the right to a decree of resale of the property situated in Ohio and covered and affected by his lien;

(2) That, in event of such sale, and in applying the proceeds thereof, Compton would be entitled to an account of the net earnings of the Ohio division over and above all operating expenses, taxes paid, and cash paid, if any, in redemption of receiver's certificates and other expenses properly chargeable against the Ohio division, which net earnings should be deducted from the amount due on the two prior mortgages on said division;

(3) That the decree rendered in the Circuit Court of the United States for Indiana was not res judicata upon the foregoing questions.

THIS case comes to this court on a certificate from the United States Circuit Court of Appeals for the Sixth Circuit, propounding questions concerning which instructions are asked, in accordance with section 6 of the act to establish Circuit Courts of Appeals, approved March 3, 1891.

The statement of facts and questions are as follows:

This is an appeal from that part of a decree in a railroad mortgage foreclosure suit, rendered by the Circuit Court of the United States for the Northern District of Ohio, which fixes the priority of a lien of the appellant and prescribes the remedy for its enforcement. James Compton, the appellant, was a citizen of the District of Columbia. Holding equipment bonds issued by the Toledo and Wabash Railway Company, which subsequently became one of the constituent

Statement of the Case.

companies of the Wabash system, he obtained a decree from the Ohio Supreme Court, declaring them to be a valid lien on that part of the main line of the Wabash system reaching from Toledo west to the Illinois line, and awarding to him, as a means of enforcing the lien, an order for sale of the portion of the line lying in Ohio. 45 Ohio St. 592. Shortly after the entry of this decree by the Ohio Supreme Court and before it was executed, upon the prayer of the complainant and a cross-complainant in the foreclosure proceedings in the court below and after the filing of the necessary affidavit, the court entered an order based on section 8 of the act of Congress of March 3, 1875, directing that Compton be served with subpoena in the District of Columbia, and required to appear and set up his lien in this cause. The order was complied with and Compton, appearing only for the purpose of objecting to the validity of the service, moved the court to set the service aside and to dismiss him from the case. The motion was overruled. He then demurred to the jurisdiction on the ground that citizens of the same State appeared on both sides of the controversy. His demurrer was overruled. The amendments to the bill and cross-bills concerning Compton denied the validity of his lien, and asserted that he was estopped by matter of record to claim a lien because of a decree of the Supreme Court of the United States to which he was in law privy, in the case of Wabash, St. Louis & Pacific Railway Company v. Ham, denying the existence of a lien in favor of the equipment bondholders. Compton in his answers which he filed after his demurrer was overruled set up his lien as declared by the Ohio Supreme Court decree and his right thereunder to have the Ohio division sold to satisfy it. Compton also claimed in his answer that his bonds. were a first lien upon certain terminals of the defendant company at Toledo on the ground that the Ohio divisional mortgage did not cover this property. The court below adjudged that Compton had a valid lien on the Ohio and Indiana lines. by virtue of the Ohio decree, but denied his right to a first lien on the Toledo terminals or to a separate sale of the Ohio line, and declined to afford him any relief but that of redeem

Statement of the Case.

ing the four divisional mortgages, two on the Ohio line and two on the Indiana line, by the payment of about $8,000,000. The sale under the decrees of foreclosure in the court below, against Compton's objection, took place before the validity and character of his lien were determined, and a provision. was inserted in the decree saving his rights. Compton contended that the language of this saving clause entitled him to the payment of his lien by the purchaser or in default thereof a resale of the Ohio part of the railroad. At the hearing of the appeal, a motion was made to dismiss on the ground that the same decree as that here appealed from was entered by the United States Circuit Court for Indiana in a case between the same parties.

This appeal presents the questions:

1st. Had the court jurisdiction of the original bill?

2d. Had it power to make Compton party by substituted service?

3d. Was Compton estopped to assert a lien for his bonds by a decree of the United States Circuit Court for Indiana denying it for bonds of the same kind in what was claimed to be a representative suit?

4th. Did the Ohio divisional mortgages not cover certain after-acquired terminal property at Toledo so that Compton had a first lien thereon?

5th. What was the effect of the proviso in the decree of sale upon Compton's rights and remedy?

6th. What relief was he entitled to under the Ohio decree? 7th. Is Compton estopped to prosecute this appeal by the fact that a decree identical in terms with the one here appealed from was entered in the United States Circuit Court for Indiana, and has not been appealed from?

The facts of the case are quite complicated, and many of them must be stated for a clear understanding of the issues. The Wabash, St. Louis and Pacific Railway Company, usually known as the Wabash system, comprised as its main line, a railroad which ran from Toledo, Ohio, west through Ohio, Indiana, Illinois and Missouri to Kansas City. It was the result of a consolidation of separate railroads, one in Ohio,