87 F. 288 -

288

87 FEDERAL REPORTER. , . :.}'.'IJ,' ".

quite voluminous, intricate, and involved. An exhaustive review of them is not and no, partial them would be whether or not a techsatisfactory. ", It iS,llot necessary' to nical partnerShip was·created;aEi is"alleged in the'bilI,between Henry S. Louchheim and the plaintiff. It is sufficient to say that out of their dealings with respect to the property in question there arose a liability, Qn the, part' of HenryS:Louchheim to account. This he has conceded by annexing an account to his answ;er, which,however, the plaintiff insists is not correct, and to which, in the course of his examination as a witness, he has indicated-at least to some extent-his objections. This he did not do with certainty or precision, but it was not: then reqUisite that he should. The account is fOr settlement after, and not before, decree; and a reference to a be made; but it master to take and state anaccmillt will, if will, of course, be understood that the proceedings in the master's office are not to be so extended as to' reopen any of the questions now decided. K. LouchAs to the, defendants Josepb., J.ouchheim heim, the bill is dismissed,withcosts. As to the defendant Henry S. Louchheim, the bill is retained for the purpose, only of an accounting, and an order otreference to th&t:end will be made, if applied for; but, in default of such application within 10 days, the bill will, on motion, be dismissed a$ to Henry S. Louchheim also.

=

CENTRAL TRUST CO. NEW YORK v. GEORGIA PAC. RY. CO. April 12, 1898.) BROOKS et al. v. CENTRAL ,TRUST CO. OF NEW YORK et al. (Circuit Court of Appeals, Fifth Oircuit. No. 644.
CONTRACTOR'S LIEN ON RAILROAD PR()PERTy":"'FoRECLOSURE SALE SUBJECT TO LIEN-RIGHTS AND LIABILITIES OF PURCHASER.

Interveners recovered judgment for $10,000 in a court, and a decree that it be a lien on that part of the railroad and rIght of way embraced in their construction contract, which lien they seek to enforce in the foreclosure case. The decree of fdreclosure in' the main case provided that the purchaser should take the property upon the express condition that he would pay all claims which, should be adjudged by the court to be prior In lien to the Ijlortgage foreclosure, and this provision was preserved In the decree confirming the s1l1e. The master found and reported, after the sale, that interveners have a lien, as established by the decree of said state court, which is superior to the lien of the mortgage foreclosure, only as to the improvements placed by them on the railroad right of way; that It would be destructive of the interests of the defendant railway company, of the interveners, and of the 'purchasers to allow such improvements to be detached from the premises: that they should have been and were sold together, and the reasonable value of the improvements has passed ratably into the common fund. The master's report was approved by the court. Held that, ,a lien havIng the purchallers had no rightto contest its limits or extent on tbe railroad property, and it was immaterial Whether It covered anyspeclfic structures or other integral part of the Interveners were, entitled, to a decree ordering the purchasers with interest thereon from the date to pay the amount of their of its recovery \n the state court. '

CENTRAL TRUST CO. V. GEORGIA PAC. RY. CO.

289

Appeal from the Circuit Court of the United States for the Northern District of Georgia. Frank A. Critz and R. C. Beckett, for appellants. John T. Glenn, John M. Slaton, and Benj. Z. Phillips, for appellees. Before PARDEE and McCORMICK, Circuit Judges, and SWAYNE, District Judge. PARDEE, Circuit Judge. This is an intervention to enforce a mechanic's lien in the main case, which isa foreclosure suit brought by the Central Trust Company of New York, trustee in a mortgage of May 1, 1888, against the Georgia Pacific Railway Company. The interveners allege that on June 8, 1888, R. M. and J. M. Brooks made a written contract with the Georgia Pacific Railway Company to -do all their earthwork, woodwork, clearing, and grubbing in the construction of 11 miles of its railroad, from sections 40 to 50, inclusive, in the counties of Clay, Oktibbeha, and Webster, in the state of Mississippi; that they commenced work about June 23, 1888, under this contract, and worked until November 14 or 15, 1888, doing a very l'arge proportion of work, and furnishing a very large amount of the material for the woodwork, on said 11 miles, for a large part of which work and material the railway company failed to pay; that on November 28, 1888, said R. M. and J. M. Brooks commenced a suit in the chancery court of Oktibbeha county, Miss., to enforce their mechanic's lien under the laws of Mississippi against said railway company, and on November 15,1893, the said court rendered a final decree in their favor for the balance due of $10,000 and cos1:'s, amounting to $895.88, and decreed that the same be a lien on that part of the railroad and right of way embraced in their contract, which lien, by an amended decree on April 28, 1894, was extended so as to cover aU the railroad in Mississippi; that part of the railroad from Atlanta, Ga., to Columbus, Miss., had been completed and in operation several years before the date of the trust deed of May 1, 1888, but no part of the railroad from Columbus. west to Johnsonville, Miss., a distance of 140 miles, had been built at that date; that the trust deed to the Central Trust Company provided for the building of this 140 miles, and also provided that the b<mds secured by the trust deed could be issued on each S dion of 10 miles when completed, but not before; that interveners have a lien under the Mississippi statutes upon all of said railruad in Mississippi for s,aid $10,000, with interest at 6 per cent. from November 15, 1893, and all costs; that said lien is superior to, and entitled to priority over, any and all bonds issued under and by reason of said trust deed; and that the holders of said bonds, or any part thereof, are in no sense bona fide purchasers or holders so far as interveners are concerned. The intervention, in suitable averments, contains, besides the above, all the specifications necessary to a full understanding of the case presented. The interveners pray, among other things, that the Georgia Pacific Railway Company, the Central Trust Company, and the receivers be made parties; that the court would require said decree of the chancery court of Oktibbeha county, in the state of Mississippi,
87F.-19

290

87 FEDERiII.L .REPORTER.

tobepai(L im:full; according to 'the' directions therein contained, out of the income of said railway in the hands of said receivers, or out of the proceeds of said property; and that;saiddecree be given priority all: aaid bonds, and 'be paid off. in full, including interest and anything is paid upon said bonds or upon the interest costs, due upon said bonds. This intervention was :filed in the clerk's office June 8, 1894, and was ordered by the court to be treated as an intervention as of that date. On August 18th the Central Trust Company of New York and the Geotigia Paci:ficRailway Company and the receivers acknowledged service, of the intervention, and consented that the matter should be'referred at once to a master, whereupon, on the same day, the court ordered that th.e intervention be referred to Wi;D;Ellis, special master, to hear and report upon the same. ,. On the 26th of March, 1894, a decree of foreclosure was entered in the main case, directing thesalwofthe Georgia Pacific Railway, to satisfy the principal and interest of the bonds secured by the trust deed to theOentl'al Trust Company of May 1, 1888, and therein, among other things, it was provided as follows:
"The purchaser or purchasers' at sllellhall, as part of the consideration for such sale,fake the property purchased upon the express condition that he or they, orhia or their assigns, approved by the court, will, notwlthstallding, pay of!' and satisfy any and all cial/llilftied in this case, but only when the court shall allow slich claims, and adjUdge the same to be prior In lien to the mortgage foreclosed In this suit, in accordance with the order or orders of the court alloWing such claim'S; and adjudging with respect thereto; but this provision shall not be In any manne.rapPUcllble to the rights and claims of the complainant, .as trustee underthll said first mortgage of May 6, 1882, or of the trustee, under said mortgage o.f OctOber 1, 1883, or of the complainant, as trustee, under either of the equipment sinking fund mortgages; and the' purchaser or'tlUrchasers or their approved assigns shall be'entltled to appeal from any and all orders or decrees of the court in this respect to such claims, or any of them, and shall have all the .rights in this respect. to such appeals which the complainant Central 'J;rust Company or' New York would have in case such appellJs had been taken by it." .

, The sale the decree occ\l.J."l'edon August 18, 1894; and the solicitors for the interveners appeared at the sale, and gave a written notice to bidders of the claims of the interveners. The mortgaged property was adjudicated to Charles H. Costa andi\.nton H. Thomas, purchasing committee for the Southern Railway Company, for the sum of$500,OOO, and the decree of confirmation recites as follows:
"And it appearing by the report of the special master that such purchasers have fully complied with the directions of said decree;!. as to the sale of the sllid property, and that such purcMsers wer.e the highest and best bidders for such railroad property and franchises, and that the same was struck of!' to them for the sU/llof five hundred thousand dollars ($500,000), SUbject, however, as recited .in said decree, to the mortgages, receivers' debts, and other preferential liens and claims, and to all and singtllar the terms and conditions in said decree set forth, and that such purchasers have made the payment thus far obligatory upon them, and it being shown to the satisfaction of the court that the recitals in the report of the special master are true, and 1).0 cause being shown against such report; * * * !lnd the court further reserves rull power from time..to .t!me to ellter orders binding upon the said Southern Railway Company and the said Southern Railway Company in Mississippi, as such purchasers under its decree, requiring them to pay into the registry of this court all such sums as have been, or may be, ordered by

CENTRAL TRUST ,CO.

v.

PAC. RY. CO.

291

this court for the payment ,of any and all receivers' debts or claims adjudged, or to be adjudged, by it as prior in lien or equity to the Jl?0rtgage foreclosed in this cause, or entitled to preference in payment out of the proceeds of sale prior to the bonds secured by the said mortgage of the Georgia Pacific Railway Company."

On November 3,1894, the following written agreement was filed in the case, and submitted to the master:
"We hereby withdraw the demurrer heretofore filed to the intervening petition of said J. M. Brooks, surviving partner, et aI., in the above-stated case, and admit the statements of fact contained in said petition to be true. We agree that Exhibit A to said petition is a true copy of the contract between the Georgia Pacific Railway Company and R. M. and .J. M. Brooks, under which the work was done for which allowance is claimed In said intervention; that Exhibit B to said petition is a true copy of the original decree; and Exhibit C to said petition is a true copy of the amendment of said decree in the case of R. M. & J. M. Brooks et al. vs. the Georgia Pacific Railway Company, in the chancery court of Oktibbeha county, Mississippi, as stated in said petition; and we further agree that said Exhibits A, B, and C may be used as evidence in the trial of all issues presented by said petition without further authentication or proof of said exhibits. It is further admitted that on the 18th day of August, 1894, Frank A. Critz, as solicitor of said interveners, in the city of Atlanta, Ga., at the time and place appointed for the sale of the Georgia Pacific Railway in the decree in the above-stated case, and at the sale of said railway 'under said decree, before any bid was made by the purchaser at said sale, read in the presence and in the hearing of said purchaser notice ()f the cialin of said interveners, and of said intervention, as shown by said written notice filed in this case on said 18th day of August, 1894; and it is agreed that said written notice, with the indorsements thereon, may be used as evidence in the trial and .disposition of said intervention. The Mississippi statutes referred to in said petition need not be pleaded more fully. The above agreement, however, is made subject to the right, which is hereby expressly reserved, to object to any and all matter offered as evidence which may not he material and relevant to this issue in this intervention. "Signed this November 3rd, 1894. James Weatherly, "Sol'r for Ga. Pac. Railway, and Southern Rwy. Co., Purchaser. "Henry Crawford, "Sol'r for Same Parties."

After hearing the parties, the special master, on the 7th of May, 1896, filed a very exhaustive and well-considered report, concluding as follows: .
"The special master finds and reports as follows: (1) That the interveners, as contractors, have a lien set up and established by the decree set forth in the record of this case, which is superior to the lien of the bondholders only as to the improvements and erections placed by them on the railroad right of way. (2) That the lien of the bondholders is superior to the lien of the interveners upon the realty composing the right of way and SUbstructure of the railroad, as distinguished from anything like depots, bridges, cross-ties, eulverts, or rockwork which the interveners may have furnished and erected. (3) The proof does not show what work, improvements, or erections the interveners did on the line of road covered by their contract with sufficlent detail or certainty or value to authorize any finding in their favor for any particular amount, and therefore the special master is forced to find against their claim as presented and proven in the proceedings in this case. (4) The special master finds that it would be destructive of the interests of the defendantrallway ,company, and of the interveners, and of the purchasers, to allow the improvements, they were, erected by the interveners, to be detached or moved away from the premises; and therefore they should have been and were sold together, and whatever was the reasonable value of such Improvements and ,erections, has passed ratably into the common fund. (5) The railway east at. ColUmbus; Miss., ",as not subject to the lleD

87 -FE'OERAL REPORTER.

of the InterveneI'll, and thereforesliduld not be taken Into account In estimating the pro rata value of the Improvements and erections made by the interveners." ,

The scope and effect of this report do not seem to have been fully understood, by the counsel for the interveners, for they filed elaborate exceptions to it, and thereafter sought to amend their intervention, presenting .p.ew matter and new questions, all of which resulted in a dismissal of their interVention (83 Fed. 386), from which they appeal.to this court. The assignment of errors is very elaborate, and presents many questions which have been very learnedly and elaborately argued in this court; but, under the view which we take of the case, many of these questions need not be considered. The master finds and reports that the interveners have a lien, as established by the decree of the chancery court of Oktibbeha county, which is superior to the lien of the bondholders as to tpe bpprovements and erections placed by them,op the railroad right.,of way, and that it would be destructive of the interests of the defendant railway company and of the interveners and of the purchasers to allow the improvements, whatever 'they were, erected by the interven,ers, to be detached or moved away from the premises. Therefore they should have been, and were, sold together, and whatever was the reasonable value of such improvements and erections has' passed ratably into. the common fund. By the decree of foreclosure in the main case it is provided that the .purchaser shall, as a part of the consideration for the sale, take the property purchased upon the express condition that he will pay off and satisfy all claims filed. in court which should be adjudged by the court to be prior in lien to the mortgage foreclosed,-that ia to lien on the railway property to the rights of the bondsay, holders under the mortgage ofM:ay 1, 1888; and this provision is substantially'preserved in the decree confirming the sale. The report finding the lien in lavorof the interveners,· apof judge of the circuit court; anq, pears to for the elaborate and convincing reasons given by the special master, we think., it. was correct. And. t.i:le same may be said of the fourth finding .of special·master, to the effect that the improvements made by interveners should not have been detached or moved away, and that it ,was necessary- 'and proper to sell the whole property toand erections passing to the gether, 1J?eyal;Ue of the common, fun!'!.. This being we are of opinion that, under the terms, of the. decrees of foreclosure and confirmation, the purchasers have no' right, a lien being found; to contest the limits or of the. lien .OD the railway property.··· Under the terms of sale, the. interveners.. were dep#ved of all power to protect themselves by purchasing the property on which they had a lien, and they had aright to rely upon the provisiol'ls made for their protection in the decrees of the:, court, under which whatever amount should be ad'judged in tlieit favor as a Hep the pur<;hasers agreed to pay as a of tbecpnsideration; and we conclude that it is now wholly immaterial whether the lien adjudged in favor of the interveners on a ptlrtionofthe railway property covei'sBpeciflcsuperstructure, wood·

BOWERS V. VON SCHMIDT.

293

work, right of way, or any other integral part of the railway. This view of the case is fully supported by the principles declared and followed by the supreme court in Swann v. Wright's Ex'rs, 110 U. S. 590, 599, 4 Sup. Ct. 235, Trust Co. v. Newman, 127 U. S. 649, 659, 8 Sup. Ct. 1364, and Compton v. Jesup, 167 U. S. 1,33, 17 Sup. Ct. 795, et seq., and .disposes of this appeal. The decree of the circuit court is reversed, and this cause is remanded, with instructions to enter a decree in favor of the interveners, J. M. Brooks et al., for the amount found by the master to be due upon their claim, to wit, the sum of $10,0110, with interest thereon from November 15, 1893, until paid, at the rate of 6 per centum per annum, and the further sum of $895.88, costs of suit in the state court of Mississippi, and ordering the purchasers of the railway property to pay said amounts, together with the costs of the cause.

BOWERS v. VON SCHMIDT. (Circuit Court, N. D. California. No. 10,244.
VIOLATION OF INJUNCTION-CONTEMPT-PATENT INFRINGEMENT SUIT.

April 21, 1898.)

One selling a machine contrary to the terms of an injunction in a patent infringement suit is guilty of a technical contempt, though he in good faith supposes himself authorized to make the sale under an arrangement made subsequent to the decree, and to which complainant is a party. Before making the sale, it is his duty to bring such arrangement to the notice of the court, and procure a modification of the injunction; but the arrangement, and the defendant's good faith, will be considered in mitigation of the punishment.

This was a proceeding brought in the above-entitled case against A. W. Von Schmidt to punish him for an alleged contempt in violating an injunction. John H. Miller, for complainant. Wheaton & Kalloch, for respondent. MORROW, Circuit Judge (orally). The interlocutory decree of this court, dated July 23, 1894, ordered, adjudged, and decreed:
"That the said Allexey W. Von Schmidt, his agents, servants, workmen, attorneys, and emploJ'es, be. and they are hereby, perpetually enjoined· and restrained from making, using, or selling any dredging machine, appliance, or apparatus containing the inventions claimed, covered, and patented in and by claims 10,16,25,53,54, and 59, or any or either of them, of patent No. 318,859, dated May 26, 1885. and also from making, using, or selling any dredging machine, apparatus, or appliance containing the Inventions claimed, covered, and protected by claims 13, 17, and 18, or any or either of them, of letters patent No. 355,251, dated December 28, 1886." 63 Fed. 572, affirmed by 25 C. C. A. 323, 80 Fed. 12l.

In an affidavit filed by Mr. Bowers, it is alleged:
That the respondent, A. W. Von Schmidt, had full knowledge of this decree, and of the terms thereof, and "that the dredging machine involved in this case, and claimed to be an infringement, was a certain machine known as the 'Von Schmidt Dredger,' sometimes called the 'Oakland,' and at the time of the settlement with the McNee Bros., hereinafter mentioned, cald