Calumet River Railway Co. v. Brown

12 L.R.A. 84, 26 N.E. 501, 136 Ill. 322, 1891 Ill. LEXIS 977

• Court: Illinois Supreme Court
• Decided: January 22, 1891
• Status: Published

Opinion

Mr. Justice Magruder

delivered the opinion of the Court:

In this case, the appellant railway company instituted the proceeding for condemnation of the land against the owner of the equity of redemption, and omitted to make the mortgagee a party to the proceeding. This omission was not due to the carelessness or negligence of the railway company, but was the result of a mistake. Section 2 of the Eminent Domain Act provides that the petition shall state the names of “all persons interested as owners or otherwise” in the property to be taken or damaged. The holder of a mortgage upon the property is such an owner or interested party as should be made a party defendant. ' Here, the mortgage to Dale was upon record when the petition was filed, and the name of the mortgagee thus appearing of record should have been stated in the petition for condemnation. In order to ascertain what persons were interested in or held liens upon the property, the company applied to a firm of abstract makers and conveyancers, whose business it was to furnish information upon such subjects, and received from' such firm a report as to the title which failed to give the name of Dale, or to show the existence of the Dale mortgage. The company was thus mis-. led without fault of its own. It paid the whole amount of the condemnation money into the hands of the county treasurer, before it learned that there was a mortgage upon the property condemned.

The mortgagees, Dale and Drexel & Co. who were interested ' with him, must have known of the proceeding to condemn, because their agent and attorney was present at the trial of the condemnation suit. They did not, however, become parties by filing a cross-petition as provided for in section 11 of said Act. The appellee, Brown, the owner of the equity of redemption and the only defendant in the condemnation proceeding,. communicated no information as to the existence of the mortgage. Still, neither Brown nor the mortgagees were responsible for the failure of the company to make the mortgagees parties. It remains true, nevertheless, that the payment of the money to the county treasurer would not have taken place but for the mistake of the abstract makers as to the condition. of the record. Why should not equity relievp the company from the consequences of such mistake ?

Let us see what consequences might follow. The sum of $17,500.00 paid to Davis, the county treasurer, was not the value of Brown’s equity of redemption only. It represented the full value of the property taken and damages to the portion of Block B not taken, the former being $4600.00 and the latter $12,900.00. Brown insists upon the payment of all the money to him, and if such payment should be made to him, he would be receiving more than the value of his interest in the property. Indeed it is questionable if his interest is worth anything. The amount of the mortgage is $150,000.00, and the proof shows that it exceeds the value of all the property subject to it. The proof also shows that Brown’s indebtedness is not less than $500,000.00. The mortgagees not having been made parties to the condemnation suit, their rights were not cut off by that suit. They are still entitled to foreclose their mortgage against the land condemned. If, therefore, the money is paid to Brown, the company may be compelled to pay for the land a second time by the foreclosure of the mortgage. Such a result as this would be inequitable in the extreme.

Where the gpwer of eminent domain is exercised, the fund paid stands in the place of the land condemned; the lien attaches to the fund; “the rights of the mortgagee remain unaltered and he is entitled to have the money in place of the land applied to the payment of his claim.” (1 Jones on Mortg. sec. 708; C. B. & Q. v. Chamberlain, 84 Ill. 333; So. Park Com. v. Todd, 112 id. 379; Union Mut. Life Ins. Co. v. Slee, 123 id. 57). It is true that Dale and Drexel & Co. have not filed a bill to foreclose the mortgage, although it is overduethey have made no application to Davis to have the money, paid to them, and have made no opposition to the payment. of it to Brown, not being willing, according to the proof, to “make an enemy of Brown by doing it. ” But, at the samtime, they are entitled' to have the money as an equivalent of the land; their lien in equity follows the fund, which is a sub-. stitute for the land. (Sherwood, Admr. v. City of Lafayette, 109 Ind. 411). This being so, there is reason here for the application of the well-known principle, that a person having two funds to satisfy his demands shall not, by his election, disappoint a party having but one fund. (3 Pom. Eq. Jur. sec. 1414). Upon the assumption that the verdict and judgment would not have been more than $17,500.00 if the mortgagees had been parties, and subject to the other qualifications hereafter stated, the mortgagees may either take the money and apply it on their debt, or resort to a foreclosure of their mortgage against the land condemned and damaged. They have two funds, the money and the land. The appellant company has but one fund—the land condemned—, and, in equity, may require the application of the money to the debt before resort is had to the land.

Section 14 of the Eminent Domain Act provides that the compensation may, in all cases, be paid to the county treasurer, who shall, on demand, pay it to the party thereto entitled. The judgment in this case orders that the “petitioner pay to the county treasurer of Cook County for the benefit of the owner, or to John B. Brown, claimed to be sych owner, the sum of $17,500.00.” There is here no absolute direction to pay the money to Brown. The language is in the alternative, and contemplates that some other person than Brown may be the owner. Surely a court of chancery may determine who the owner, for whose benefit the money was paid. As between 'the mortgagor and mortgagee, the fund belongs to the latter the extent of the mortgage debt. As between Brown and Dale or Drexel & Co., the fund belongs to the latter inasmuch as the mortgage debt exceeds the fund. There can be no injustice in this view, as the appellee receives the benefit of the money when it is credited upon his debt. (So. Park Com. v. Todd and U. M. Life Ins. Co. v. Slee, supra).

It is said, however, that the mortgagees, not having been made parties to the condemnation proceeding, did not have their day in court, and had no hearing upon the question as to what was a just compensation to be paid by the railroad company. This is true, and the mortgagees are still entitled to such hearing; they are not bound to accept $17,500.00 as the exact and whole amount to be paid by the company without a chance to be heard upon that subject, either in a proceeding by the company to condemn their interest, or otherwise. (Mills on Eminent Domain, see. 74; Lewis on Em. Dom. sec. 324; Wilson v. E. & N. Railway Co. 67 Me. 358). But are they not fully protected in this regard by the decree of the Circuit Court?

By the terms of that decree they are authorized to receive the $17,500.00 and have it credited upon their debt, and, if the balance of the debt is not paid and they are obliged to resort to a foreclosure, they are further authorized to have a revaluation of the land taken and a re-determination of the damages to the land not taken, either by an issue out of chancery, or by some proceeding of their own selection, and, should the amount of a.just compensation be thereby found to exceed $17,500.00, to have the excess applied upon the mortgage. It is claimed, however, that the decree is erroneous, under the doctrine laid down in Union Mutual Life Ins. Co. v. Slee, supra, where it was said, that proceedings to condemn property under the Eminent Domain Act, are legal and not equitable, and that it would be inconvenient for a court of equity to remit the matter of condemnation to a court of law for trial according to the rules and practice in trials at law. The statement thus made in the Slee case is correct as a general proposition and as applicable to the facts of that case, but it can have no application to the circumstances of the present case, as will appear from a brief examination thereof.

Here, the decree directs that, in case of a foreclosure of the mortgage, the property mortgaged shall be sold in the inverse order of alienation, treating the taking of the strip of land condemned by the company as an alienation. It is certainly in accordance with equitable principles, that the balance of the mortgaged land be sold first before resorting to the strip taken for railroad purposes. But it appears from the evidence in this case, that the appellant company has taken possession of the strip of land condemned by it, and has improved it, and built its right of way upon it, and is using the improvements. If, upon foreclosure, the debt is not paid by the sale of the rest of the mortgaged land, how is the lien to be enforced • against the strip thus taken and improved ? Shall the right of way be sold with the railroad tracks and other improvements upon it ?

Ordinarily fixtures placed upon mortgaged premises by the mortgagor become a part of the realty, and enure to the benefit of the mortgagee by increasing his security. But it has been held that, in such a foreclosure as that now under consideration, the holder of the mortgage ought not to be allowed to sell the road track, superstructure and fixtures placed upon, the land at great expense by the railroad company, for the reason that the public has an interest in the successful operation of the road, and that, therefore, equity only requires the company to make compensation by paying the value of the land at the time it was taken, and interest on that amount. (Kennedy v. The Milwaukee and St. Paul Ry. Co. 22 Wis. 581; Aspinwall v. The Chicago & N. W. Ry. Co. 41 id. 474; Wooster v. The Sugar River Valley R. R. Co. 57 id. 311; Wilson v. E. & N. Railway Co. supra). Hence, some method must be adopted of ascertaining what the value of the land condemned was at the time when it was taken, exclusive of the value of the improvements placed upon it by the railroad company since that time. It would seem, that the proper method to be adopted for such purpose is the statutory method, or that prescribed by the Eminent Domain Act for ascertaining the' amount of compensation. (Kennedy v. M. & St. P. Ry. Co. supra).

The decree of the circuit court, in the case at bar, conforms to the rule thus laid down in the Wisconsin cases, and may be regarded as correct so far as it has reference to the value of the strip of land taken. To what extent is it correct in requiring the amount of damages to the portion of Block “B” not taken to be also ascertained, and the excess thereof, if any, over the damages found by the jury in the condemnation proceeding, to be applied upon the mortgage debt ? The verdict in that proceeding showed, separately, the value of .the part of the block which was taken, and the damages to the part thereof not taken. The judgment also refers to the total amount as being for both value and damages. After the court of chancery has directed an issue at law to be tried to ascertain the value of the land taken exclusive of the improvements upon it, it could easily be determined at the same time, as an incident to such issue, what were the damages to the land not taken at the time of the condemnation. As such damages had the effect of lessening the value of the land subject to the security of the mortgage, it would be equitable to credit them upon the mortgage debt.

But if the decree is erroneous in directing such damages to be ascertained, and the money now in the hands of the county treasurer is paid to the appellee, Brown, how are "the mortgagees to receive the benefit of the damages in the event of a foreclosure? This is not a case where the condemnation money has already been paid to the mortgagor.' The present bill was filed and an injunction was obtained while the money was yet in the hands of the county treasurer. If the money is paid to Brown, then when the foreclosure takes place the mortgagees will sell the land damaged but not taken at its reduced value; if there is no way under the foreclosure proceeding to ascertain, the damages and require the payment of the same, then the mortgagees will he remitted to their action at law against the railroad company or Brown, the mortgagor. In Wilson v. E. & N. Railway Company, supra, where the mortgagee was not made a party to the condemnation proceeding and the condemnation money was paid to the mortgagor, the mortgagee was allowed to maintain trespass against the railroad company.

Consequently, if the decree of the Circuit court is erroneous in the particular now under discussion, it is difficult to understand why Dale or Drexel & Co. should object to it. It is favorable to them, in that it gives them a chance to show, if they can, that the value of the land taken was greater than $4600.00 and that the damages to the land not taken were more than $12,900.00, and gives them the benefit of the excess, if excess there is.

The mortgagees, however, are not objecting to the decree. Decree pro confesso was rendered against them. They assigned no errors in the Appellate Court. They have assigned no cross-errors here. It does not lie in the mouth of the appellee, Brown, to object to the decree so far as it provides for the proceedings under the foreclosure hereafter to be had. The judgment already rendered in the condemnation suit is binding upon him. He was a party to that suit and introduced evidence upon the trial of it. He is estopped from denying that the sum of $17,500.00 is just compensation for the value and the damages. His assignments of error merely question the justice of the decree, in so far as it orders the money now in the county treasurer’s hands to be paid to the mortgagees, and not to himself. As we hold that the money should be applied upon the mortgage debt which he owes, it is unnecessary to indulge in any further discussion as to those features of the decree which concern the mortgagees only.

It follows from the views hern expressed that the judgment of the Appellate Court must be reversed and the decree of the Circuit Court affirmed. It is accordingly so ordered.

Judgment reversed.