Source: https://supreme.justia.com/cases/federal/us/130/565/
Timestamp: 2019-04-23 14:48:06+00:00

Document:
Justia › US Law › US Case Law › US Supreme Court › Volume 130 › Union Trust Co. v. Southern Inland Nav. & Imp. Co.
County of Warren v. Marcy, 97 U. S. 96, affirmed to the point that all persons dealing with property are bound to take notice of a suit pending with regard to the title thereto, and will on their peril purchase the same from any of the parties to the suit.
The conveyance by the trustees of the Internal Improvement Fund of Florida, on the 10th February, 1871, to the Southern Inland Navigation and Improvement Company was subject to such decree as the court might reader in a suit commenced in the Circuit Court of the United States for the Northern District of Florida against said trustees and others on the 3d of November 1870, and as the Navigation and Improvement Company was a party to that suit, and as the decree of December 4, 1873, in that suit rescinded the agreements which the company had with the trustees in respect of lands constituting a part of the trust fund and restored to that fund the lands conveyed or attempted to be conveyed to the company by the trustees, the said deed of February 10, 1871, and the mortgage by that company to the Union Trust Company of March 20, 1871, based upon it, are invalid as against the present trustees of the Internal Improvement Fund.
In equity. Decree dismissing the bill. The case is stated in the opinion.
the comptroller, treasurer, attorney general, and register of state lands, and their successors in office, in trust, to dispose of the same, and invest their proceeds, with power to pledge the fund for the payment of the interest on the bonds (to the extent of $10,000 per mile) which might be issued by any railroad companies constructing roads on certain lines indicated by the act. The companies, after completing their roads, were to pay, besides interest on their bonds, one percent per annum on the amount thereof, to form a sinking fund for the ultimate payment of the principal. The act declared that the bonds should constitute a first lien or mortgage on the roads, their equipment and franchises, and, upon a failure on the part of any railroad company accepting the act to provide the interest and the payments to the sinking fund as required thereby, it was made the duty of the trustees to take possession of the railroad and all its property and advertise the same for sale at public auction."
In the same case, it was said that the trustees are merely agents of the state, invested with the legal title of the lands for their more convenient administration, and that the state remains in every respect the beneficial proprietor, subject to the guarantees which have been made to the holders of railroad bonds secured thereby. See also Railroad Companies v. Schutte, 103 U. S. 118; Littlefield v. Improvement Fund Trustees, 117 U. S. 419; Vose v. Reed, 1 Woods 647; Vose v. Trustees of Improvement Fund, 2 Woods 647.
"on the 28th day of July, 1868, the said trustees, by resolution of that date, attempted to secure to the said Southern Inland Navigation and Improvement Company forty thousand acres, or thereabouts, of the said trust lands, and that about the 1st of March, 1870, they entered into an agreement with the said New York and Florida Lumber, Land and Improvement Company, by which they undertook to convey one million one hundred thousand acres of the same for the nominal price of 10 cents an acre, and that this vast domain was and is to be selected from the most valuable of the said trust lands."
On the 6th of December, 1870, the circuit court issued an injunction to the trustees and their successors, commanding them, among other things, to desist "from selling or donating or disposing of the land belonging to said trust otherwise than in strict accordance with the provisions of said act of 1855," and "from selling said lands for scrip or state warrants of any kind, or for aught other than current money of the United States." This injunction was duly served upon the trustees within a few days after it was issued.
the principal allegations of the bill. On the 10th of February, 1871, four days after the bill had been taken for confessed, a majority of the trustees, "for and in the consideration of the sum of one dollar to them in hand paid," conveyed to the Southern Inland Navigation and Improvement Company 1,360,600 acres of land, and shortly thereafter, March 20, 1871, the latter company mortgaged the above and other lands obtained from the trustees of the Internal Improvement Fund, to secure the payment of bonds for a very large amount, which the mortgagor company proposed to issue.
"the contracts or agreements entered into by the trustees of the Internal Improvement Fund with the corporation known as the 'Southern Inland Navigation and Improvement Company,' be rescinded, and the same are hereby declared to be null and void, and the lands undertaken to be conveyed or contracted to be conveyed shall be restored to the said Internal Improvement Fund, and be subjected to sale by the agents appointed by decree of this court, rendered during the term in accordance with the provisions of said decree."
Subsequently, in May, 1875, the Southern Inland Navigation and Improvement Company filed its petition in the Vose suit praying that the decree of December 4, 1873, be vacated and it be permitted to file such pleadings as were necessary for the defense of its interests. The grounds upon which this relief was asked were that the company had not been made a party to the suit, nor served with a subpoena. These grounds were controverted in an answer filed by Vose to the petition. The questions thus raised were heard by MR. JUSTICE BRADLEY, March 26, 1877, who found that the Southern Inland Navigation and Improvement Company was duly made a party to the bill filed by Vose, was served with process of subpoena thereon, and failed and neglected to appear and answer the bill. Its prayer to vacate the order or decree of December 4, 1873, and to permit it to file necessary pleadings in that suit was denied.
The present suit was instituted April 12, 1883, by the Union Trust Company of New York against the Southern Inland Navigation and Improvement Company and the trustees of the Internal Improvement Fund. Its object is to obtain a decree adjudging that the said trustees have no right, title, or interest in the lands embraced in the mortgage of February 10, 1871; that the same are subject to said mortgage, and that the property so mortgaged be sold to pay the amount found to be due upon any outstanding bonds secured by that mortgage. The principal defense rests upon the above proceedings, orders, and decrees in the Vose suit. The bill was dismissed with costs, and from the decree of dismissal the present appeal was prosecuted.
"all persons dealing with property are bound to take notice of a suit pending with regard to the title thereto, and will, on their peril, purchase the same from any of the parties to the suit."
"a lis pendens, duly prosecuted and not collusive, is notice to a purchaser so as to affect and bind his interest by the decree, and the lis pendens begins from the service of the subpoena, after the bill is filed."
Here, the Southern Inland Navigation and Improvement Company accepted a conveyance of the lands in question from the trustees of the Internal Improvement Fund, after service of the subpoena, and a copy of the injunction, upon the trustees, its grantors. That company therefore took its titles pendente lite, and its mortgagee, the Union Trust Company, was bound by the final decree rendered in the case to the same extent that it is bound.
"be rescinded, and the same are declared null and void, and the lands undertaken to be conveyed, or contracted to be conveyed, shall be restored to the said Internal Improvement Fund, and be subjected to sale by the agents appointed by the court."
that suit, and was fairly covered by the prayer for such relief as might be deemed just and equitable. Besides, if that company was a party to the Vose suit, and we have seen that it was, the decree, so far as it rescinds the agreement or contracts it had with the trustees, and restores to the Internal Improvement Fund the lands covered by these contracts, was not void. If erroneous, it could only be avoided by an appeal. It cannot be questioned in this collateral proceeding.
It results from what has been said that the conveyance by the trustees to the Southern Inland Navigation Company was subject to such decree as the court might render in the Vose suit, and as the decree of December 4, 1873, rescinded the agreements which the latter had with the former in respect to lands constituting a part of the trust fund, and restored to that fund the lands conveyed, or attempted to be conveyed, to that company by the trustees, the conveyance of February 10, 1871, and the mortgage of March 20, 1871, based upon it, are invalid as against the present trustees of the Internal Improvement Fund of Florida.

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