Birmingham state herald. (Birmingham, Ala.) 1895-1897, 1897-01-31

1dnQ VS.. trust Company 100 OIlllSd
States SO, that court has already issued
its warning, that the rule will not be
extended to other than the exceptional
case specified, and reaffirmed the estab-
lished doctrine in the following Ian
guage: mo one. is bound to sell to
railroad company or to work for 1t and
whoever has dealings with a company
whose property is mortgaged must be
assumed to have dealt with 1t on the
faith of its personal responsibility, and
not in expectation of subsequently dis
placing the priority of the mortgage lien"
How is 1t possible to reconcile the doc
trine enuneiated in 136 U. S. supra with
that enunciated in the case at bar. where
the rule is applied to improvements
which add value in a sense permanent
to the property" and which holds that
If the income has been otherwise ex-
pended, then these claims become prior
lien upon corpus to which the labor
or materials of claimants contributed
nothing, and which originally constituted
the security of the mortgage? The writ
er cannot sanction as sound a rule of
equity which annuls, casually termed
'displaces'D existing relations between
a mortgagor and mortgage, in the in
terest of q third party, whose interest
was acquired against the mortgagor, sub
sequent to and with full knowledge of
the rights of the mortgage.
The justification of the courts, denying
y
mainly upon first, the equitable doctrine,
that he who seeks equity, must do equity,
and secondly, upon the equitable doctrine
of estoppel, and thirdly, that the claim
is one of abstract right arising from GER
tain conditions and circumstances.
AS to the first of these propositions,
that he who seeks the aid OF a court of
equity, must do equity, the rule operates
only between the parties to an agreement
or transaction to prevent the one from
taking an undue advantage of another,
but cannot be invoked by a stranger,
who is not even a proper party to the
suit. But the argument assumes the
question in controversy and that is, that
these claimants have an equity peculiar
to them because of the character of the
claims. These claims must necessarily
arise either from contract, express or
implied, or, from statute, or result into
such superior claims as matter of law
from facts. 1t is not pretended that the
right is of statutory creation, or of con-
tract between the parties, the mortgage
and labor or material man creditor, nor
between the mortgagor as the agent of the
MORTGAGE, and the labor or material
creditor.
Is it conclusion Of law that a mort
gage guarantees to labor and material
men, that the business of the company or
corporation will be conducted on business
principles, and the company never be-
come insolvent? Is Ii a conclusion of law
that mortgages lien shall be subordin-
ate to claims for labor and material? Is
1t conclusion of law that lien upon
incomes acquired by solemn contract Is
subordinate to such claims? And on the
other hand, Is the right of the laborer
or material man made by law to depend
upon the skill and judgment of the en-
ployer, so that If permanent injury re-
suits his claim becomes thereby of a
higher and superior character? or does 1t
hon
expended by the employer? If this be
law, 1t Is because the courts make it law,
and in no sense is 1t the application of
any just principle
Contracts for labor and material, I'M
aided by special provision of the con-
tract or statute, stand on no higher
ground than other simple contract cred
itors, and are no more entitled to the
income than the latter creditors. La
Dor and material claimants, have as
much right to have a simple contract
creditor to whom income has been paid.
declared a trustee for their benefit, as to
have a mortgage who has a lien upon it
to whom it has been paid declared such
trustee.
There is not single element of an es-
TOPPED in the whole matter. Neither the
laborer nor the material man act, or
refrain from acting, at the instance of
the mortgage. 1t is a question of con-
tract between them and the mortgagor
in a matter not under the control or SUI
pervison of the MORTGAGE, and rendered
with full knowledge of the mortgagee's
lien. 1t would require affirmative action
on the part of the mortgage, inducing
the la Dor and purchase, to raise an estop-
pei against him.
The new doctrine is a revolution in
jurisprudence, subverting settled prin-
ciples. and not the application of new
remedies to existing rights, and it should
be walled into the exceptional cases"
declared to be such by Justice Brewer in
Kneeland's case. 1876 U. s., and reasserted
in Thomas VS.. Car Co. in 146 U. s.
In the case of Wood VS.. Guarantee Co.
1913 u. S. 416. All, it was declared that
three conditions must exist to justify the
application of the rule of Fosdick vs.
Schall. first, it must be applied wholly to
Operating expenses" second, and only
where there is diversion OF the income
of a going concern and third, that 1t
had never been applied in any case ex-
cept that of railroad, and that there was
a. broad distinction between such a case
and that of purely private concern"
In the case of the National Bank of Au-
gusta vs. Carolina railroad, SO Fed. Rep,
the application of the rule is limited to
railroads. 1t is said: 1.-The theory of
the equity is this, 1t is the interest of the
public as well as all parties interested in
railroad that 1t be kept going con-
Germ To do this there must be ready
to this end. If persons who give labor
and materials were required in every in
stance to make careful examination into
the condition of the company, so as to
ascertain it's solvency capacity for pay
ing debts all of it's opera ions might be
brought to a stand STILL For this reason
persons dealing with company are en-
couraged to do so, with the knowledge
that the court will see that such supplies
and materials are provided for But in.
exercising this equity, the court goes up
on dangerous grounds and therefore pro-
ceeds cautiously keeping rightly within
prescribed limits"
In the case of Hanna VS.. State Trust,
20 Fed. Rep. 2, an attempt was made to
invoke and apply the rule of Fosdick VS..
Schall to a private company or CORPORA
ton. 1t was said "The doctrine of those
cases has no application to the case at
bar. They rest upon the peculiar char
acter of railroad property and railroad
corporations. The distinction between
railroad corporations, which are of a
quasi public character and purely priv
ate corporations has been often pointed
out. 1t is enough to say that the SUI
preme court itself has said, that doctrine
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