GORDON et al. v. NEWMAN, 62 F. 686

WHITE, Circuit Justice, after stating the case, delivered the opinion of the court. The claim of Gordon, Strobel & Lareau had been presented by way of intervention at the time the receiver’s certificates .were ordered to be issued. Their lien was recognized by the final decree in the suit, and was affirmed by the supreme court of the United States. To these decrees the holders of the receiver’s certificates were necessarily privies. They took the certificates subject to the lis pendens, and were therefore bound by the final decree.

The attack, therefore, on the lien is without merit, as the complainant in injunction is estopped, by the force of the thing adjudged, from assailing the lien. Like reasoning controls the contention that the receiver’s certificates are prior in rank to the mechanic’s lien.

The final decree for the foreclosure of the mortgage directed that the property be sold “subject to any and all liens covering and embracing the property or premises, or any part thereof, which constituted liens upon the said property prior to the lien of the mortgages foreclosed in this suit, and which have not been ascertained and adjudicated by this court.” This language, in unambiguous terms, recognizes the paramount nature of the mechanic’s lien.

After doing so, the decree adds, “and expressly subject to the receiver’s certificates heretofore authorized to be issued; * * * said certificates being a first and prior lien upon the said properties, as between them and the two mortgages aforesaid, or either of them.” The words, “as between them and the mortgages,” are clearly words of limitation, restricting the priority of the receiver’s certificates to rank over the mortgages, and not to rank over the mechanic’s lien which had been just previously recognized as being unqualifiedly first in rank.

Any other construction would render the words, “as between them and the mortgages,” entirely useless and nugatory. This construction of the final decree in the foreclosure suit was adopted in the judgment which disposed of the intervention of Gordon, Strobel & Lareau.

That judgment directed that “they be paid the sum of fifty-seven thousand, eight hundred and eight and twelve one-hundredths dollars ($57,808.12), with interest, and that the mechanic’s lien, as given by the laws of the state of Alabama, * * * be, and the same is hereby, fully recognized and allowed as being a subsisting first lien upon tlie property.The remedy provided in the decree for the enforcement of the claim emphasizes the priority accorded to the amount secured by the mechanic’s lien, since it directs that the sum be paid by the purchaser, and that in default of such payment within 20 days the property be sold.

That the holders of receiver’s certificates depend for their ultimate rank upon the final decree in the cause where the certificates are issued is beyond question. A text-book thus states the rule: "The holders of these securities must see to it that in the order distributing tlie purchase money tlie proper provision is incorporated for their redemption. because, if once the property is sold, and the court makes a final decree without providing for the payment of the certificates, there is an end of the matter. * * *” Beach, Ree. par. 401, p. 332. The matter was well considered in Mercantile Trust Co. v.

Kanawha & Ohio Ry. Co., 7 C. C. A. 3, 58 Fed. 11. In that case, Circuit Judge Taft, in expressing his own and the opinion of Jackson, Circuit Judge, and Barr, District Judge, said: “Does the Adams Kxpress Company, as a holder of receiver’s certificates, stand in any better position than if it liad been present by counsel in court when the final decrees of confirmation, release, and distribution were entered, objecting to the same? it is very clear that it does not.

When the Adams Kxpress Company received from Hharp the evidences of indebtedness on which it now relies for its lien, it was informed by what was written thereon that Shari) was a receiver acting under order of the district court of West Virginia, and having custody for the court of Uto Ohio Central Railroad, of which the court had taken possession in a ease then pending before it, and that the lien assured to 1he express company on the face of tlie certificates was dependent on an order and adjudication of that court.

The doctrine of lis pendens would charge any one who purchased this railroad, or acquired an interest in it, pending the litigation, with notice of the litigation, and would subject the property in bis hands to the final action of tlie court, without his bring brought into court as a party. If this be true of one acquiring an interest by deed, conveyance, or mortgage, a fortiori must it be true of one whose interest is acquired, and has its existence, only by virtue of the litigation.

The express company was j)ixt upon inquiry, then, us to all that had been done in that litigation, and was charged with notice of all the subsequent proceedings therein, as much as if it had been a party to the record. ⅝ ⅜ * in, Union Trust Co. v. Illinois M. Ry. Co., 117 U. S. 434-456, 6 Sup. Ct. 809, tlie court said: ‘The receiver, and those lending money to him on certificates issued on orders made vithorn prior notice to parties interested, take the risk of llie final action of tlie court in regard lo tlie loans.

The court always retains control of the matter, its records are accessible to lenders and subsequent holders, and the certificates are not negotiable instruments.’ ” Under these principles the holders of the receiver’s certificates depended, necessarily, for their ultimate payment, upon the rank given them in the final deem» of foreclosure, to which decree they were necessarily privies. By the terms of that final decree the priority of the mechanic’s lien was recognized.

The claim, therefore, now asserted, is an attempt to take the benefits of the final decree of foreclosure, in so far as it provides for the payment of the certificates, by stipulating that they should be assumed by the purchaser, and yet, at the same time, repudiate that decree in so far as it provides for priority of rank in favor of the holder of the mechanic’s lien. The contention, however, goes much further than this.

The injunction practically amounts to a stay of execution on the final decree of the supreme court of the United States, which not only recognized the sum secured by the lien as first in rank, but also directed that in default of its payment the property should be sold to enforce it within 20 days. To this decree the holders of the certificates were privies, since it was a decree made on an intervention in the record wherein the receiver’s certificates were ordered to be issued.

It follows, therefore, that as the injunction restrained the enforcement of the decree of the supreme court of the United States, and had the effect of setting at naught its mandate, it was improvidently granted, and should be dissolved. The injunction is therefore dissolved, and the case remanded to the court below for further proceedings in conformity with this opinion.