Gunnison v. Chicago, M. & St. P. Ry. Co.

130 F. 259, 64 C.C.A. 505, 1904 U.S. App. LEXIS 4152

• Court: Court of Appeals for the Seventh Circuit
• Decided: April 12, 1904
• Docket: No. 1,009
• Status: Published

Opinion

JENKINS, Circuit Judge

(after stating the facts as above), delivered the opinion of the court:

Among the questions of interest presented at the argument were these: Whether the Cleveland judgment was a lien upon the railway and the franchises of the Ea Crosse Company from the date of its rendition, October 7, 1857; whether the St. Paul Company derived its title solely from the James decree of January 7, 1867; whether the trustees of the Fonda and Scribner mortgage, and the bondholders under the mortgage, are concluded by that decree, which determined that the sale to the St. Paul Company passed the whole of the interest of the Ea Crosse Company existing at the time of the rendition of the judgment; and whether that decree was other than an equitable execution rendered necessary from failure of statute law to give a complete remedy by sale upon execution. The Fonda and Scribner mortgage was subsequent in date to the Cleveland judgment, and subject to it; but if the trustees or the bondholders in that mortgage were not parties to or in some way concluded by the James decree, and the St. Paul Company derived its title only through that decree, the representatives of, or the parties, interested in, the Fonda and Scribner mortgage might not be bound by it. If, on the other hand, the proceeding which culminated in the sale under the James decree may be treated as merely an equitable execution upon the Cleveland judgment, and as a substitute for the execution provided by statute in ordinary cases, and the title of the St. Paul Company is derived from and based upon the Cleveland judgment, then it may be that, as in the case of the sale under a statutory execution, all having a subordinate interest in the property sold might be concluded. It is clear from the evidence that Gunnison and Bright, who by the bill claim to be the owners of 500 of the 541 bonds issued under the Fonda and Scribner mortgage, by leave of the court, upon their own petition, prosecuted the appeal from the James decree to the Supreme Court in the name of the Minnesota Company, and are therefore concluded by the decree. We do not, however, find it essential to consider these questions at large, or to pass judgment upon them, since upon another branch of the case we are constrained to affirm this decree.

It is provided by section 4211 of the Revised Statutes of Wisconsin of the year 1878, as has been the law of that state since the year 1858, that “where the occupant or those under whom he claims entered into the possession of any premises under claim of title, exclusive of any other right, founding such claim upon some written instrument, as being a conveyance of the premises in question, or upon the judgment of some competent court, and that there has been a continual occupation and possession of the premises included in such instrument or judgment, or of some part of such premises, under such claim, for ten years, the premises so included shall be deemed to have been held adversely.” The St. Paul Company acquired possession of the Eastern Division of the railway in March, 1867, under and by virtue of a deed to it from the marshal of the district of Wisconsin, which recited that in pursuance of the James decree, and also by virtue of the statutes in such cases made and provided, the marshal “hath granted, bargained, sold, aliened, released and confirmed, and by these presents doth grant, bargain, sell, alien, release and confirm unto the said party of the second part, its successors and assigns forever: All and singular the railroad formerly known as the La Crosse and Milwaukee Railroad, from Milwaukee to Portage City, its depots, station-houses, and buildings, together with its rolling-stock, franchises and appurtenances, now in the possession of or claimed by the defendant, The Milwaukee and Minnesota Railroad Company, including all the locomotive-engines, cars and rolling-stock, and all the materials, tools, implements and utensils, and other property belonging to said road from Milwaukee to Portage City, subject however to the following liens and encumbrances thereon, to-wit: A mortgage to Francis A. Palmer for $950,000.00, with interest thereon at eight per cent, per annum since May 1st, 1866; two mortgages to the city of Milwaukee for $314,000.00 with interest thereon from the first day of September, 1866; a mortgage to Green C. Bronson and James T. Soutter for $1,000,000.00 with interest at eight per cent, per annum from March 1st, 1866, and a judgment rendered in favor of Selah Chamberlain, in the district court of the United States for the district of Wisconsin, on the second day of October, 1857, for $629,105.22, and a certain lease given to said Chamberlain as security for the amount of said judgment.”

The purchaser, the St. Paul Company, entered into this possession in antagonism to the title of the Minnesota Company, claiming title under the Cleveland judgment and the sale thereunder, pursuant to the James decree, subject only to the incumbrances stated in the marshal’s deed, which were prior in time to the Cleveland judgment. That company has since continued in exclusive possession, in no way recognizing, but at all times denying, the right of the Fonda and Scribner mortgage. It is insisted for the appellants that the Fonda and Scribner mortgage is stated in the bill in the James suit, and that it was so stated as a specific ground of relief upon which the decree was based, and it is claimed that that decree is the foundation of the title of the St. Paul Company, and that therefore it is now estopped to question the mortgage and the debt. But counsel overlook the fact that the bill was founded upon the Cleveland judgment and prayed a sale .subject only to the incumbrances specified in the marshal’s deed. It is true that it states the execution by the Minnesota Company of the Scribner and Fonda mortgage, but it expressly charges that that mortgage is junior and subsequent to the Cleveland judgment, and the allegation respecting that mortgage is made only as the basis for the appointment of a receiver, it being charged that the Minnesota Company, being in possession of the revenues of the road, was diverting them to the payment of the principal and interest of that mortgage, while fraudulently failing to pay interest on the prior incumbrances. We find no element of estoppel as asserted by counsel. The possession of the St. Paul Company during the 30 years prior to the filing of the bill in this cause was actual, open, notorious, exclusive, and adverse. It has treated the property as its own in antagonism to every other interest or claim, except the prior incumbrances specified in the marshal’s deed. It has paid those prior incumbrances, amounting to nearly $3,000,000; it has paid the taxes assessed against the property by the state of Wisconsin; it has largely improved the physical condition of the property; so that we have no difficulty in finding as a fact that the St. Paul Company, entered into possession of this property and has remained in possession for 30 years, claiming title under the Cleveland judgment and the deed upon the sale under the James decree, and that such possession has been adverse to any claim of the complainants. We had occasion to consider this statute of Wisconsin in the case of the City of La Crosse v. Cameron, 80 Fed. 264, 25 C. C. A. 399, and it has often been spoken to by the Supreme Court of Wisconsin, as well since that decision as by the cases therein referred to. Heinselman v. Hunsicker, 103 Wis. 12, 16, 79 N. W. 23; McCann v. Welch, 106 Wis. 142, 148, 81 N. W. 996; Pitman v. Hill, 117 Wis. 318, 322, 94 N. W. 40; Hatch v. Lusignan, 117 Wis. 428, 432, 94 N. W. 332. The resultant of these decisions is that the statute applies where one has entered under claim of title, founded upon written instruments as being conveyances of the premises, and has held adverse possession for more than 10 years. It is immaterial that the instrument does not convey a good title. It is immaterial that the instrument is invalid. It is immaterial that the claim is made in bad faith. It is the hostile, exclusive possession under the instrument that satisfies the statute. It is said that all that the St. Paul Company derived from the judgment was a conveyance from the Minnesota Company of the property held in fee by it, with an assignment of the Cleveland judgment, which was a prior incumbrance. This we conceive to be an incorrect statement of the situation. The St. Paul Company was not a grantee of the Minnesota Company. The effect of the James decree was to direct a sale of the interest of the La Crosse Company in the land to satisfy the Cleveland judgment, which was prior to any title of the Minnesota Company, the latter company being made a party because it was in possession and claimed adversely to the St. Paul Company, and it was therein decreed that ■the Cleveland judgment was a lien upon the property and the franchises of the La Crosse road as of the date of the judgment, and directed a sale to satisfy that judgment. The St. Paul Company ev - tered into possession under the marshal’s deed, claiming title under, through, and by virtue of the Cleveland judgment and the decree in the James suit, and adversely and not under or in right of the Minnesota Company. The title that was obtained and that was sought to be obtained was not the title of the Minnesota Company, but the title of the La Crosse Company at the date of the judgment. Nor did the St. Paul Company enter into possession under or in subordination to the Scribner mortgage. The marshal’s deed purported to-make an absolute conveyance of the property, subject only to the incumbrances therein specified, namely, the mortgages to Palmer,, to the city of Milwaukee, to Bronson and Soutter, and the judgment in favor of Selah Chamberlain. Its claim of possession under that deed was hostile to the Scribner mortgage, as is abundantly shown by this record. We think that the Supreme Court of Wisconsin has determined that under such circumstances possession is adverse and: that the statute applies. In North v. Hammer, 34 Wis. 425, one-Sampson was the owner of homestead premises, and while so occupying them a judgment was recovered against him by one Delaney in< a justice’s court, which was docketed in the proper court of record on December 12, 1850. There was a sale by the sheriff under that judgment to Delaney in November, 1851. The deed following thereon from-the sheriff to Delaney only purported to convey the interest which Sampson held at the date of filing the transcript of the judgment in the county where the land was situated, stated to be December 12, 1851, but a second or corrected deed correctly stated the date as December 12, 1850. On August 19, 1851, Sampson conveyed to-North the premises in question as security for a debt, taking back a defeasance In the form of a bond under seal for a reconveyance, the grantor remaining in possession. Delaney conveyed to Hammer for full value, the purchaser taking possession claiming title under the-deed, exclusive of any other right, and occupied the same continuously for more than 10 years. The bill was filed by North to foreclose-Sampson’s supposed equity of redemption. The court ruled that the-suit was barred by the statute, observing, at page 432:

“Various objections are taken to the sale on tbe execution, and to the title-derived through the sale, and it is claimed that the interest of the judgment debtor was not divested by it. But we shall not dwell upon these objections to determine whether they are valid or not, because, in the view we entertain, of the case, the bar is effectual although the. defendant Esther may not have-acquired a rightful title under the execution sale. In order to constitute adverse possession under the statute, it is not necessary that the title under-which the party claims should be a good one. It is sufficient that a party enters into possession under claim of title exclusive of any other right, founding such claim upon some written instrument. It is not essential that the-claim upon which an adverse possession is founded is made upon an instrument which conveys a valid title. If adverse possession could only be based upon an instrument which conveyed a good and perfect title, it is apparent that the-statute would be of little value.”

The court further observes:

“She [Hammer] took the deed as conveying to her the full title, and entered' into possession claiming the land as her own absolutely, and justifies and maintains her possession by virtue of this conveyance. I-Ier possession has been, hostile from the first, not acknowledging any right of the plaintiff or of Sampson, or of any other person, in the land; and, if there is any efficacy in the statute, her title has ripened into a perfect one, whatever defect there might have-been in the execution sale. If she knew of the plaintiff’s claim to the land, either at the time or after she purchased of Delaney, she denied that this claim ?vas of any validity, and never acknowledged it in any manner. . It is assumed that she only purchased an equity of redemption, and subject to the plaintiff’s mortgage. But it seems to us that this assumption is opposed to all the facts- •and proofs in the ease. For the evidence conclusively shows that she supposed she was getting a perfect title — that the interest of Sampson had been divested by the sheriff’s sale; or, at all events, that the conveyance from Delaney to her carried the fee, and not merely the equity of redemption. And since the character of her possession has been hostile and adverse from its inception, under this deed, the statute of limitations has run in her favor, even if there was a defect or irregularity in the sale upon the execution against Sampson.”

It is supposed that the case of Maxwell v. Hartmann, 50 Wis. 660, 668, 8 N. W. 103, is opposed. There Maxwell, the holder of a mortgage dated January 9, 1857, made by one Gessner, brought suit to foreclose. The defendants, Hartmann, asserted. adverse possession under warranty deed from Gessner, the mortgagor, to them. The court held that the mortgage being duly recorded, and the deed by the mortgagor to Hartmann being long subsequent to such record, it must be presumed to have been taken with full knowledge of the mortgage, and, so taking title, her rights were subject and subordinate to the mortgage, until it is shown by some act that such possession is inconsistent with the rights of the mortgagee. We do not ■understand that this case in any way impugns the force of North v. Hammer. Of course, one talcing a deed from the mortgagor and entering into possession is, as against a prior recorded mortgage, -presumed to take in subordination thereto, and, in the absence of acts showing claim of title and possession hostile to such mortgage, holds in subordination thereto. The recent case of Pitman v. Hill, 117 Wis. 318, 94 N. W. 40, fully supports the doctrine of North v. Hammer. The land in dispute in that case was selected and entered in June, 1859, by one Pitman, as the agent of one Stetson and in the latter’s name, and a patent issued to Stetson in August, 1860. In August, 1861, Stetson assigned the certificate of entry to Pitman as ■security for a debt, under an agreement by Pitman to reconvey upon ¡payment, and the note and agreement were found after Stetson’s death among his papers. Pitman entered into possession under the -assignment of the certificate, exercised acts of ownership by taking ■wood from the premises, and upon his death the property, or his interest in the property, passed by will to the plaintiff, who continued to use the property substantially as had Pitman, paying the taxes during the time of the exercise of acts of ownership, the land being wild and unoccupied territory during all the time subsequent to the entry, ■except as it was used as a wood lot. The court held that adverse ¡possession was established, saying:

“The assignment of the certificate of entry, in terms conveying the same :and the land therein described to respondent’s predecessor, was a sufficient ■written instrument upon which to found adverse possession under sections ■ 4211, 4212, Rev. St. 1898. Grant that the purpose of the parties was to make a mortgage and not a conveyance of the title, and grant, also, that the mortgage indebtedness had been paid; still there is evidence from which the court was warranted in coming to the conclusion that respondent’s predecessor held adverse possession under the instrument for the full statutory period neces- - sary to give him full title to the property. A mere mortgagee of land has no right to the possession thereof. In this case respondent’s father, under the written instrument mentioned — let it be a mortgage or full conveyance, it makes no difference which we call it — took possession of the property and treated it as his own for more than 20 years, and his conduct during the whole •time was consistent only with the idea that his possession was adverse. Ten years would have been sufficient. Such conduct by a mortgagee is sufficient to give him title by adverse possession. Knowlton v. Walker, 13 Wis. 264; Waldo v. Rice, 14 Wis. 286. The acts of ownership were open, continuous, hostile, and of a nature to satisfy all the essentials of adverse possession under or independently of the statute. Lampman v. Van Alstyne, 94 Wis. 417, 69 N. W. 171. They consisted of using the premises for a wood lot, the adverse possessor taking the wood therefrom for his ordinary use annually for the full statutory period. That satisfies to the letter subdivision 3, § 4212, Rev. St. 1898. To that we have added the significant circumstance of the payment of the taxes, which is inconsistent with any other theory than that the payor claimed the property as his own. Whether his claim was in good faith or bad faith, of course makes no difference. Lampman v. Van Alstyne, supra. The continued use of the property as indicated, by force of the statutes (sections 4210, 4211), displaced the presumption that it was subordinate to' the rights of a superior owner, and substituted in its place the presumption that the use was characterized by all the elements of adverse possession necessary to cut off the title of a once superior owner, if there were such, and vest a complete title in fee in the hostile claimant.”

We think that the law of Wisconsin is settled, and that the facts disclosed by the record bring the case before us fully within the purview of the statute. The St. Paul Company entered adversely. It claimed that the title which it had obtained was the title of the La Crosse Company as of the date of the rendition of the Cleveland judgment, and that this interest so acquired was prior in time and superior to any title by the Minnesota Company, or of the trustees under the mortgage in suit executed by the Minnesota Company. That claim was.made in good faith. It.was fortified by the decree of the Supreme Court so adjudging as between the St. Paul Company and the Minnesota Company. The deed purported to convey an absolute title, subject only to the stated prior incumbrances not here involved. In every way its possession, whether it be referred to the Cleveland judgment, to the James decree, or to the marshal’s deed, was hostile and adverse to the Scribner mortgage, and exclusive of any right by virtue of that mortgage. We think the case comes clearly within the statute, and we are bound to follow the statute.

It is said that to hold this statute of limitations to be applicable would deny to the complainants opportunity to contest the right and possession of the St. Paul Company; that, as the trustees of the Fonda and Scribner mortgage were not parties to the James suit, they could not be concluded by the decree in that suit; and that at no time thereafter, within 10 years of the suit, could they or the bondholders have contested the right of the St. Paul Company, because the mortgage debt did not mature until the year 1884, and the provision of section 3186 of the Revised Statutes of 1878, that “any person not having such title or possession, but being the owner and holder of any lien or encumbrance on land, shall also have the same right of action as the owner in fee to contest the legality and validity of any other claim, lien or encumbrance on such land, or any part thereof,” was not in force until the year 1878, and until after the expiration of the 10 years’ adverse possession. If this were so, and however inequitable it may be, it is difficult to see how the fact could avail to toll the running of the statute. Amy v. Watertown (No. 1), 130 U. S. 301, 9 Sup. Ct. 530, 32 L. Ed. 946. As was there said, we are bound by statute, and are obliged to obey the state law, even if it lead to an inequitable result. But is it true that the complainants were without remedy? The Minnesota Company had defaulted in the payment of the bonds under the Scribner mortgage on January 1, 1865, prior to possession taken by the St. Paul Company under the marshal’s deed, and defaulted in the payment of every semiannual installment after that date. Over $120,000 of interest was due, assuming the bonds to have been issued and sold for value, at the time the St. Paul Company took possession. Just prior to the expiration of the 10 years’ adverse possession over $550,000 of interest was due and unpaid, exceeding in amount the principal sum of the bonds now claimed by the complainants to have been outstanding and held by them for value. The trustee had during all that time, by the terms of the mortgage, the right to foreclose and to sell the property; a right equal to his right to foreclose after maturity of the debt, for the mortgage provided that in the case of default for the space of 30 days in the payment of any interest warrant coupon, as it should fall due, the trustee was authorized to take possession of the railroad and the property conveyed, to receive the income and profits, and to sell it with all the rights and franchises of the Minnesota Company, and to execute conveyances thereof. The trustee and the bondholders knew, at the time of the sale under the James decree, that the Minnesota Company was wholly irresponsible, and that recourse could be had for payment of the mortgage debt to no other property than this Eastern Division; yet during that 10 years’ adverse possession they rested supinely, making no effort to obtain the possession or to dispute the right and claim of the St. Paul Company. We say they made no effort, because they assert that the Scribner bill, filed in 1868, was filed without authority of the trustee, and they repudiate that proceeding. It is also to be observed that the St. Paul Company was in exclusive and adverse possession for 30 years prior to this suit, and for nearly 13 years after the maturity of the principal of the bonds of the Scribner mortgage and before the filing of this bill. So that, if the enforcement of the statute law of the state with respect to adverse possession should seem to operate harshly upon the complainants, they have only themselves to blame, for, if they had rights as against the St. Paul Company, they had opportunity to contest their right in the courts.

The decree must be affirmed.