Court Opinion

ID: 6648710
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:52:12.296213+00
Date Added: 2024-06-11T15:59:33.746987
License: Public Domain

Ragan, C.
This is an appeal from a decree of the district court of Gage county, rendered July 17, 1891. The action whs brought by the appellees, Kilpatrick Bros. & Collins, to foreclose a mechanic’s lien against the property of the Kansas City & Beatrice Railroad Company (hereinafter called the “Beatrice Company”) for a balance due for labor and material furnished in the grading of that company’s rail*622road. The appellant, The New York Security & Trust Company (hereinafter called the “Trust Company”), was made a party defendant, as it held a mortgage on the road of the Beatrice Company, given by it to secure an issue of $400,000 of its negotiable bonds. The appellee, The Kansas City, Fort Scott & Memphis Railroad Company (hereinafter called the “Fort Scott Company”), was also made a party and filed its answer, claiming a lien for a balance due it for ties sold and delivered to the Beatrice Company, and used in the construction of its road. The appellee, The Kansas City, Wyandotte & Northwestern Railroad Company (hereinafter called the “Wyandotte Company”), was-made a party defendant, as it was in the possession as lessee of the road of the Beatrice Company. By the decree of the district court Kilpatrick Bros. & Collins were given a lien upon the property in question for the sum of $29,445.17; and the Fort Scott Company was given a lien for the sum of $33,864.79. The two were declared first liens of equal rank and to prorate one with the other. The Trust Company, by the decree, was also given a lien on the property, subject to the first two liens, for the sum of $278,267.85. The decree also provided that in case of default in the payment- of these amounts within a time fixed, the property and franchises of the Beatrice Company should be sold and the proceeds of the sale applied to the satisfaction of the liens in the order of their priority. The Trust Company brings the case hei'e and avers that the decree is erroneous, in the fact that its lien is postponed to those of the Kilpatrick Bros. & Collins and the Fort Scott Company.
It is conceded that the value of the property in controversy is insufficient to pay the amount of all the liens adjudged against it. The facts disclosed by the record before us, so far as they are deemed material, are these : That some time prior to the 29th day of May, 1889, the Wyandotte Company, a foreign corporation, had constructed a line of *623railroad from Kansas City, Missouri, to the line between the state of Kansas and the state of Nebraska, at a point called Summerfield. For the prosecution of this undertaking, money had been furnished by the Philadelphia Investment Company (hereinafter called the “ Investment Company”), a Pennsylvania corporation, having its place of business in the city of Philadelphia, in said state, upon terms and security which are not disclosed by the record, and which are immaterial except as showing that the Investment Company was familiar with the affairs of the Wyandotte Company, which shortly thereafter proved to be insolvent, and was, at the date of the negotiations hereinafter mentioned, financially unable to carry out an enterprise involving an outlay of considerable sums of money. Previous to this time, however, and during the progress of the construction of the road of the Wyandotte Company, and probably, as a part of that undertaking, it was proposed to extend this line of road to Beatrice, Nebraska. At the time this project was first undertaken, it was supposed and intended that this extension would be made in the name and under the authority of the Wyandotte Company. Subsequently, however, pursuant to correspondence between one Erb, the president of the Wyandotte Company, and one Brockie, the president of the Investment Company, the plan was so changed as to require the formation of a Nebraska corporation, and accordingly a certificate of incorporation of the Beatrice Company was executed and recorded on the 19th day of June, 1889. On the first day of July, 1889, a mortgage was executed by the Beatrice Company upon all its property and franchises then existing, or thereafter to be acquired, purporting to be given to secure its negotiable bonds to the amount of $400,000. This mortgage, which was filed for record on the 13th day of July, 1889, contained, among other things, the following:
“ Whereas, the said party of the first part is the owner of a line of railroad constructed, and in process of construe*624tion, from a point on the line of the Kansas City, Wyandotte & Northwestern railroad where the same intersects the state line between Kansas and Nebraska, thence extending in a northerly direction through Pawnee county, state of Nebraska, to the city of Beatrice, in Gage county, in said state, all of said line of railroad being of the estimated length in the aggregate of thirty-five miles, or thereabouts ; * * *
“Whereas, for the purpose of building, furnishing, equipping, and operating said railroad, the party of the first part is desirous of borrowing money and has resolved to execute bonds of said company in amounts of $500 each, as hereinafter stated: * * * Upon the execution and delivery of this mortgage, and from time to time thereunder, the trustee shall, as requested by resolution of the board of directors of the railroad company, certify the bonds hereunder to the extent of and not exceeding $400,000, and on said resolutions of said board of directors shall sell all bonds requested to be certified, and their proceeds shall actually be used for and applied, under the direction of said board, to the construction, completion, maintenance, and operation of said railroad, and not otherwise.”
On the 17th day of July, 1889, all these bonds were delivered to the Investment Company under an agreement as finally perfected, that the latter company should advance, from time to time, to the Wyandotte Company, or to Erb, as its president, money for the construction of the proposed Beatrice Company, upon the notes of the Beatrice Company, guarantied by the Wyandotte Company, for the payments of which these bonds should be held as collateral security. The entire amount of the capital stock of the Beatrice Company was subscribed by and issued to the Wyandotte Company; but it is evident that nothing was ever paid or intended to be paid therefor. During the earlier weeks of these negotiations, and until about the time of the execution of the bonds and mortgage, it had *625not been decided whether a Nebraska corporation should be formed or not; nor if so, what should be its name; nor had the right of way been secured, or the route, or the Nebraska terminus of the road determined upon.
Elias Summerfielcf, the treasurer and general manager of the "Wyandotte Company, testified on the trial as follows:
Q. Was there a note for this money?
A. Yes, sir.
Q. Who executed it ?
A. It was first executed by the Kansas City & Northwestern road. Afterwards the attorney of the Trust Company suggested that it had better be changed, and returned the note to us to be executed by the Kansas City & Beatrice road, and indorsed by the Kansas City, Wyandotte & Northwestern road, and by the Northwestern Construction Company. *
Q. When was that exchange made?
A. I can’t tell you now. It was after the first note was signed, and we had gotten some of the money on it.
Q,. Was it as late as October?
A. I can’t remember. I possibly might find out at my office.
Q. But the original notes were made by the Kansas City, Wyandotte & Northwestern Railroad Company, and indorsed by the Construction Company ?
A. Yes sir. We hadn’t even incorporated .the Kansas City & Beatrice road.
Q. It hadn’t been incorporated?
A. No, sir; I think not, when the arrangement was made for the loan.
‘ Q,. The money was borrowed by the Kansas City, Wyandotte & Northwestern road, and placed in «its treasury?
A. The exchange of notes was made before we got all the money. We might have got one payment, or the second, I can’t tell which.
*626Q. Did you have a treasurer for the Kansas City & Beatrice road?
A. Yes, sir, a nominal one.
Q. But none of this money went into his hands?
A. No, sir.
Q. And these bonds of the Kansas City & Beatrice road were placed as collateral, after issued, to these notes?
A. Yes, sir.
Q,. Do you know when the bonds were issued, as a matter of fact?
A. I think it was some time after we got the first issue,. —the first $65,000.
Q. After that?
A. Yes, sir.
Q. How long after?
A. I think some time after the latter part of July, 1889; I am not sure.
Q. At the time these first notes were executed, what, if anything, had been done by the Kansas City & Beatrice road towards the organization for the building of such road?
A. Nothing at all.
Q. Had the grade stakes been set?
A. No, sir; we had not even concluded on the final location at that time, nor even the name of the road.
Q,. And the right of way had not been procured?
A. No, sir.
Q. So that nothing, in fact, had been done at the time you executed these first notes and got the first money?
A. I think not. Of course we had made preliminary surveys.
Q,. But had not established your lines?
A. We had not done anything until the 8th day of August, 1889, the date of the vote for municipal bonds was had at Beatrice. If we hadn’t gotten the bonds we would not have built. We intended going to Wymore. * * *
Q. Are you able to state approximately the amount of actual cash you received from the Philadelphia Investment *627Company or from the Wyandotte & Northwestern Company?
A. I think something about $250,000. There was about three per cent commission paid for the loan.
Q. Money was constantly taken out for interest on these notes from month to month?
A. No, sir, they were not due. The road went into the hands of a receiver before the notes became due, I think; that is my impression. We might have made one payment of interest, I am not sure — I expect we did; I think we paid the interest on the six months installment; I have forgotten about that. ■
It was estimated that the proposed construction would cost $350, 000. Of this sum $260,000 was to be furnished by the Investment Company upon the notes of the Wyandotte Company, afterwards changed to the notes of the Beatrice Company, guarantied by the Wyandotte Company, and collaterally secured by the bonds of the Beatrice Company, to the amount of $400,000, secured by a mortgage on its anticipated property. These bonds, when executed, were to be placed in the possession of the Investment Company. Sixty-five thousand dollars of the cost of the proposed road was expected to be realized from municipal donations, and any deficiency was to be made up from the treasury of the Wyandotte Company. The success of the enterprise depended upon the co-operation of the Investment Company, and its officers and attorneys were consulted at every step in the organization and progress of the enterprise. Pursuant to this arrangement money was furnished from time to time by the Investment Company to Erb and his associates, which it was intended by the Investment Company should be used in the building of the road. However, the Investment Company does not know how much thereof was in fact so employed, nor how much, if any, was diverted to other purposes. Erb and his associates proceeded to make contracts, as officers of and in the name of *628the Beatrice Company, for work and material for the construction of the road of that corporation, and, among others, entered into a contract with Kilpatrick Bros. & Collins for grading, and with the Fort Scott Company for ties. The parties thus contracted with fulfilled their respective obligations, performing the labor and furnishing the material contemplated, until the 8 th day of January, 1890, when the same was completed. For the balance remaining unpaid on both their accounts notice of liens against the property of the Beatrice Company was duly filed. It is not denied that all of the bonds, together with the notes for which they were deposited as collateral, remain in the possession of the Investment Company.
The important and controlling question in this case is whether the liens of the men who furnished the material and labor that entered into the construction of this railroad are superior to the lien of this mortgage made thereon before the road had any existence, except on paper, and made for the benefit of the Investment Company, which knew, at the time of its execution, that the pi’operty which it purported to cover had in fact no existence. The statute relative to mechanics’, material-men’s, and contractors’ liens upon property of this character is found in chapter '54, article 2, Compiled Statutes, 1893, sections 2 and 3 of which are as follows:
“ Sec. 2. And when material shall have been furnished, or labor performed, in the construction, repair, and equipment of any railroad, canal, bridge, viaduct, or other similar improvement, such labor and material-man, contractor or subcontractor, shall have a lien therefor, and the said lien therefor shall extend and attach to the erections, excavations, embankments, bridges, road-bed, and all land upon which the same may be situated, including the rolling stock thereto appertaining and belonging, all of which, including the right of way, shall constitute the excavation, erection or improvement provided for and mentioned in this act.
*629“Sec. 3. Every person, whether contractor or subcontractor, or laborer ■ or material-man, who wishes to avail himself of the provisions of the foregoing section shall file with the clerk of the county in which the building, erection, excavation, or other similar improvement to be charged with the lien is situated, a just and true statement or account of the demand due him after allowing all credits, setting forth the time when such material was furnished or labor performed, and when completed, and containing a correct description of the property to be charged with the lien and verified by affidavit; such verified statement or account must be filed by a principal contractor within ninety days, and by a subcontractor within sixty days, from the date on which the last of the material shall have been furnished, or the last of the labor is performed; but a failure or omission to file the same within the periods last aforesaid shall not defeat the lien, except against purchasers or incumbrances in good faith without notice, whose rights accrued after the thirty or ninety days, as the case may be, and before any claims for the lien was filed.”
It is urged that this statute is not unlike other enactments of the same general character, in. that it entitles the contractor, laborer, or material-man to a lien only upon the interest of the party or parties at whose instance the work may be done or material furnished; and that, therefore, if at the time the work of the construction or reparation is begun the property is subject to existing liens shown on the public records, such liens will be entitled to precedence over any claim that may be asserted for labor or material furnished for improvements on the property after the date of the filing of said liens; and it is argued, therefore, that the appellant is entitled to a first lien upon the property in question for the amount of the advances made by the Investment Company to Erb and his associates, because the mortgage of the Beatrice Company was executed and filed for record at a date prior to that at which the *630contracts for labor and material were entered into. To sustain this contention the learned counsel for the appellant cite many authorities. Of the authorities so cited, the one most relied upon, perhaps, is Toledo, D. & B. R. Co. v. Hamilton, 134 U. S., 296, in which it is said: “Arecorded mortgage, given by a railroad company on its road-bed and other property, creates a lien whose priority cannot be displaced thereafter, either directly by a mortgage given by the company, or indirectly by a contract between the company and a third party for the erection of buildings or other works of original construction.” It appears from the reported opinion in this case that January 17, 1880, the railroad company executed a mortgage on this property to the Central Trust Company of-New York to secure the payment of $1,250,000 of six per cent bonds. The mortgage was to cover all the property then owned or that might thereafter be acquired by the railroad company. The trust company accepted the trust created by the mortgage and the railroad company issued its bonds. They were certified by the trust company and sold on the market. On March 20, 1883, Hamilton entered into a contract with the company, under and by which he furnished material and erected for the company a dock on the Maumee river, and having received only a partial payment, he filed a claim for a mechanic’s lien for the balance due him. The land on which the dock was built was a part of the railroad and covered by the mortgage made to the Central Trust Company. Brewer, justice, speaking for the supreme court of the United states, said: “It will be noticed, and it is a fact which lies at the foundation of this case, that the contracts for the construction of the dock were not made till more tlian three years after the execution and record of the mortgage. The record imparted notice to Hamilton and to all others of the fact and terms of the mortgage; and the question is thus presented,' whether a railroad company, mortgagor, can, three years after creating by a recorded *631mortgage an express lien upon its property, by contract with a third party, displace the priority of the mortgage lien. It would seem that the question admits of but a single answer. Certainly as to ordinary real estate no one would have the hardihood to contend that it could be done, and there is in this respect no difference between ordinary real estate and railroad property. A recorded mortgage, given by a railroad company on its road-bed and other property, creates a lien whose priority cannot be displaced thereafter, directly by a mortgage given by the company, nor indirectly by a contract between the company and a third party for the erection of buildings of other works of original construction.”
By the judgment of the court pronounced in that case Hamilton’s lien was held to be subject to the lien of the mortgage executed by the railroad company in January, 1880. But in that ease the railroad company had a real franchise. It owned, and had owned for some time, the lands upon which the docks were built. The mortgage had been of record on a railroad in existence for some years prior to the performance of this work by Hamilton.
In our opinion, the principles of law announced by the supreme court of the United States in that case are inapplicable to the facts disclosed by the record in the case we have under consideration. When the mortgage of the Beatrice Company was executed, that company had, at most, but a nominal existence and nothing whatever upon which a mortgage or other conveyance could operate. Property or property rights it did not have; but it is said that it had a franchise, and that this could be mortgaged, and that the mortgaging of it, together with the after-acquired property, drew with it the subsequently constructed road and appurtenances. How can it be said with any degree of accuracy that the Beatrice Company, at the time of the execution of this mortgage, was possessed of a franchise? At that time nothing had been done, or certainly determined upon, in its *632behalf, excepting the mere execution and filing of its certificate of incorporation. No map of its proposed line-of road had been filed or prepared. No right of way had been procured, nor steps been taken towards its acquisition; nor had the proposed route or Nebraska terminus of the road been determined upon, further than if the road should be built at all, which was a matter still in abeyance and dependent upon certain contingencies, it would extend through and into certain counties. It is quite certain at least, prior to the location of the line of the proposed road and the procurement of its right of way, either actually or by the beginning of proceedings therefor, under the statutory enactments for such purposes, any other five persons might have filed a like certificate of incorporation, and if ' possessed of the inclination and necessary pecuniary ability, might have constructed, maintained, and operated the very line'of road now in controversy.
■ A franchise which not only imposes upon its possessor no obligation, but confers upon him no right or privilege not enjoyed by every other person, is so singular as to defy classification. Mankind are prone to mistake words for things, and are often pardonable for the fault; but it is difficult to form a sufficient excuse when there is nothing in existence for which the word is in any sense descriptive. Be that as it may, it is evident from the facts disclosed in this record that the Beatrice Company never had, or was intended to have, either by the Investment Company or by Erb and his associates, any beneficial interest in or control over its franchise or property, at least not until after the building and equipment of the line. The controlling motive and intent of the parties, and the sole purpose from the inception of the scheme, was not that the Beatrice Company should build the road, borrowing such sums as in addition to its own means should be necessary, but that the Investment Company should construct the road through the instrumentality of the Wyandotte Company and Erb *633and his associates, as its agents,' retain at all times, by means of the bonds and mortgage, the practical possession and control of its franchise, property, and revenues. Doubtless, it was hoped by the Beatrice stockholders and incorporators that something would be realized in the way of dividends, or otherwise, over and above what would be required for the satisfaction of the principal and interest of the advances made by the Investment Company; and this sum, whether great or small, would accrue to them upon the sale of the Beatrice road, or otherwise, as a compensation for their participation in the undertaking. But they embarked nothing in the venture, and cannot, with any propriety, be said to have had any interest in its success, except the contingent and speculative one just mentioned. Practically, the Investment Company undertook to construct the railroad of the Beatrice Company, furnishing the requisite means therefor, and employing Erb and his associates, as its agents, to effect a technical organization, procure such municipal donations as were obtainable, look after and make the requisite contracts for the procurement of the material and construction of the road; see to the disbursement of the money, they assuming no personal obligation or responsibility in the matter, and accepting as' compensation for their services such profits, if any, as should be realized out of the speculation. To regard such a transaction in the same light as that of the erection of a building by a mortgagor upon mortgaged lands for which he retains the title, is, it seems to us, false reasoning.
It is' urged with much force by counsel for the appellant that the record of the mortgage was constructive notice to persons dealing with the railroad, óf the rights of the mortgagee. True, but that is the extent of its effect. The recording of the mortgage created no rights or obligations. Under the circumstances of this case, the facts that the bonds which the mortgage purported to secure were negotiable is of no significance. The rights of the parties and *634the legal effect of the transaction would be precisely the same had no such bonds been executed or contemplated, and had the mortgage recited at length the transactions and agreements between the Investment Company and Erb and his associates, and simply pledged the proposed road and franchise to the Investment Company as security for its advances for the construction of the road. Had the mortgage contained such a recital, no one would doubt, it seems to us, that the Investment Company was the real promoter and builder of this road, and that Erb and his associates, and the officers of the Beatrice Company were in reality, though not nominally, the Investment Company’s agents, and that the contracts and obligations incurred by them, even in their own names, in and about the construction of this road, would be binding upon the Investment Company.
It is admitted by counsel for the appellant that if the bonds had remained in the hands of Erb or the Wyandotte Company into whose possession they first came, the mortgage would not have been entitled to priority over the mechanic’s lien claimants, and we are unable to see that anything subsequently occurred which improves the status of these bonds. What recourse or remedy, if any, the lien holders would have had if the bonds had been sold to innocent purchasers, or whether prior to the completion of the road and filing of the liens there could have been any such purchasers, we are not called upon to determine.
Another case relied upon by counsel for the appellant is Porter v. Pittsburg Bessemer Steel Co., 120 U. S., 649. The syllabus of that case is as follows: “In this case unsecured floating debts, due by a railroad company for construction, were, in the absence of a statutory provision, held not to be a lien on the railroad superior to the lien of a valid mortgage on it, duly recorded, and of bonds secured thereby, and held by bona fide purchasers for value.” It will be seen from an examination of the opinion in that *635■case that it differs from the one at bar in many important particulars. There the railroad company, at the time of the execution of the mortgage, owned, not only its franchises, but the road-bed and right of way and township aid voted for the construction of the road; and the bonds which the mortgage was intended to secure were delivered by the railroad company to one Crawford in consideration of his agreement to construct the road, and he, and not the company, negotiated and pledged the bonds for money with which to perform his contract; and the lien claimants contracted, not with the railroad company, but with Crawford, with actual knowledge of the existence of the mortgage and of the consideration upon which the bonds were delivered to Crawford, and of the fact that they were negotiated by him, and that the proceeds belonged to him and were being expended in the fulfillment of his contract. Of course the fact that the parties to whom he sold the bonds took precautions to have the proceeds actually expended in the construction, could not have'the effect, equitably or otherwise, to postpone the lien of the mortgagee to that of the other persons, who, with full knowledge of all the circumstances, were selling Crawford material for use under his contract, for the railroad company, for the procurement of which, on his part, he had been paid by the very securities which they sought to have deferred for their benefit.
A case very much like the one at bar is the Farmers Loan & Trust Co. v. Canada & St. L. R. Co., 26 N. E. Rep. [Ind.], 784, where it is said: “The remaining question may be thus stated: Is the lien of the appellant’s mortgage superior to the liens of the appellees? In order to intelligently discuss this question it is necessary to state the material facts out of which it arises. Those facts may be thus summarized: On the 28th day of May, 1888, the railway company entered into a contract with the Burns Construction Company to build and equip its road. Burns *636was the president of the railway company, and also the general manager of the construction company. On the 28th of August, 1888, the railway company ordered the execution of a trust deed, and the instrument was written and signed in duplicate. One of the duplicates was delivered by Burns to the Farmers Loan & Trust Company on the 18th day of October, 1888. The other was retained by the railway company. The bonds which the trust deed was executed to secure were retained by the company that executed the mortgage; but from time to time bonds were delivered to Burns upon estimates issued to him by the railway company’s engineer. Ten of the bonds were transferred to William Dallin, and sixty-six were transferred to John Fitzgerald, a subcontractor. The remainder of the bonds, three hundred and sixty-four in number, were hypothecated by the Burns Construction Company, but when, where, to whom, or for how much, is not shown. In considering the question of priority, one of the important things to be kept in mind is that the mortgage was executed upon property that had, in fact, no existence, for the railroad mortgaged had not been built. That there is a material difference between a case such as this, where the railroad had not been built, and a case where the railroad has been constructed, is so evident that no one can fail to perceive it the instant his attention is directed to the matter. As held in Brooks v. Railway Co., 101 U. S., 443, parties must in such a ease as this be deemed to have contracted with reference to the existing condition of things so far as they were open to observation. The mortgagee must have known that its security was valueless as long as there was no road in existence, and it must have known also that labor, material, and money would be required to build the road. It was bound to know, too, what the law was, for 'it entered into and became a part of their contract.’ This general rule has been repeatedly declared and enforced by this court. The principle we are discussing was ap*637plied to the case of a lien asserted by a miner, and it was held that the lien was superior to a mortgage. But the present case is much stronger than the one referred to, for here there was in fact no property in existence when the mortgage was made. The property upon which the mortgage finally fastened was created by the labor, materials, and the money of the appellees. We are strongly inclined to doubt whether the mortgage lien would be paramount even if the bonds which the mortgage was executed to secure had been delivered before any notices of liens were filed. Yery strongly reasoned decisions declare that the liens of the mechanics are superior to the lien of the mortgage in cases where the mortgage is executed before the construction of the railroad. (Neilson v. Iowa E. R. Co., 44 Ia., 71; Equitable Life Ins. Co.v. Slye, 45 Ia., 615) We need not, however, decide this question, but it is proper to say that as the labor, materials, and money of the appellees gave all there is of value to the property claimed under the mortgage, the mortgagee ought to show a clear and strong superior right in order to defeat the claims of those who, in reality, brought the property into existence. The doubt in our minds is whether the mortgagee’s lien can, in any event, be justly held to be the prior one. We have no doubt that if the mortgagee can succeed at all it must be because it is shown clearly and strongly that the mortgagee is a bona fide purchaser. In our judgment the appellant has shown no such right as entitles it to the paramount lien. It is true that the trust deed or mortgage was placed in the hands of the mortgagee or trustee before some of the notices were filed, but the instrument securing the bond was a mere shadow; for had no bonds ever been delivered to bona fide holders the instrument would never have been effective against these lien holders. We are far within the authorities in asserting this, as they carry the doctrine much further. * * *
“The delivery of the mortgage or trust deed alone did *638not destroy the priority of the liens of the appellees, for the delivery of such an instrument cannot of itself defeat equitable or legal claims, since it is essential that one who asserts a right against a legal or equitable claim should show that he parted with value before notice of such equitable or legal right. (Anderson v. Hubble, 93 Ind., 570, and cases cited; Hunsinger v. Hofer, 110 Ind., 390, 11 N. E. Rep., 463.) This is the rule in ordinary cases, and certainly it must govern a case like this, where the mortgagee seeks to defeat the claims of those whose labor, materials, and money created the property which it is sought to subject to the lien of the mortgage. The mortgagee must succeed, if at all, as a bona fide holder of bonds executed under the mortgage. It cannot, as against the claims of the laborers, mechanics, and material-men, be deemed a bona fide holder unless it affirmatively shows that it paid value for the bonds before notice of the liens, The rule in analogous cases is well settled in this state, and the strong equities of the appellees call for its liberal application in this instance. * * * There is reason for saying that it was the duty of the party buying the bonds to ascertain whether a lien had been placed on the property prior to the time of its acquisition of those instruments, but we do not go as far as that in this case. * * * We are not here seeking a general rule that shall apply to every case resembling the present, nor do we attempt to lay down any such rule. We simply adjudge that in such a case as this the mortgagee cannot prevail over laborers and material-men without showing that it is a bona fide holder of the principal debt in all that the term ‘bona fide holder’ implies. It cannot, in a case like this, where there was no railroad in existence when the mortgage was delivered, be deemed a bona fide holder as against laborers, mechanics, and material-men without showing that before notice of the acquisition of the liens under the statute a fair value was paid for the bonds.”
*639We concur in both the reasoning and the conclusion of the foregoing opinion. It is not to be denied that the supreme court of the United States distinguishes between the rolling stock and chattels of a railroad company, which it characterizes as “loose property susceptible of separate ownership and separate liens,” and the road-bed, station houses, tracks, etc., and upon this distinction holds that while the doctrine as to the after-acquired property applies to the former it does not apply to the latter. The basis of this distinction is the doctrine relative' to fixtures to real property. It is not denied that if one owns real estate which is subject to a valid mortgage or other lien, and another sells him personal property which he permits to be affixed to or incorporated into the real estate, he, by so doing, waives any right he might otherwise have to claim a lien for the purchase price superior to the prior mortgage; and this arises out of the necessity of the case, because, otherwise, the mortgagee might be deprived of his security by the depreciation of values or by extravagant or exorbitant improvements without his knowledge or consent. But how can this be the case when a mortgage is made and the money advanced upon it for the sole purpose of bringing into existence the entire property upon which the mortgage is intended to rest? The case at bar is a good illustration. The Investment Company knew that its bonds and mortgage were, and would remain, of no value unless the railroad should be constructed; it knew that in order that such a road should be constructed that material and labor were indispensable, and that the Nebraska statute guaranties- a lien to those who should furnish them. The Investment Company made Erb and the Wyandotte Company its agents for the purposes of this construction, and it owed the duty to persons furnishing material and labor in the building of this railroad to see that the money advanced was applied to the payment of their claims.
*640Another point made by the appellant is that Kilpatrick Bros. & Collins, by their conduct, have waived their rights to a lien. It appears that after the completion of the work, one Strohm, who was their accountant and book-keeper, together with Erb, the president of both railroad companies, made a computation and agreement as to the amount remaining unpaid under the contract, and received from the latter accepted drafts upon the. Wyandotte Company for that amount; but he testified, without contradiction, that it was expressly agreed that these drafts were not taken or to be considered as payment, but only as collateral security therefor, and as constituting a record of the computation and accord; and that there was no agreement for the relinquishment of any existing or prior obligation in favor of his principals, and that no such release was intended by him, nor, so far as he was aware, by Erb. We do not think that the mere receipt of the drafts under such circumstances amounted to a waiver, which, in the absence of an express agreement, will not be presumed or implied contrary to the intention of the party whose rights would be injuriously affected thereby, unless by his own conduct the opposite party has been misled, to his prejudice, into the honest belief that such waiver was intended, or consented to; and it is not claimed that such was the case here.
In Farlow v. Ellis, 15 Gray [Mass.], 229, it is said: “Waiver is a voluntary relinquishment or renunciation of some right, a foregoing or giving up of some benefit or advantage which, but for such waiver, he [the party relinquishing] would have enjoyed. It may be proved by express declaration, or by acts and declarations manifesting an intent and purpose not to claim the supposed advantage, or by a course of acts and conduct, or by so neglecting and failing to act, as to induce a belief that it was his intention and purpose to waive. Still, voluntary choice not to claim is of the essence of waiver, and not mere negligence.”
In Jones, Liens, sec. 1011, it is said: “The mere taking *641of security for the amount of a debt for which a lien is claimed does not ordinarily destroy the lien. To have this effect there must be something in the facts of the case, or in the nature of the security taken, which is inconsistent with the existence of the lien and destructive of it.”
“Sec. 1013. The taking of a mortgage upon the same property upon which the creditor claims a statutory lien, may not displace the lien. The mortgage is regarded as a cumulative security, and the creditor may enforce either the lien or the mortgage. So also the taking of the collateral obligation of another person for' the payment of the lien debt does not ordinarily debar the lien-holder from claiming the security of his lien, unless the circumstances are such that an intention to waive the lien may be reasonably inferred.” (Payne v. Wilson, 74 N. Y., 348).
The appellant pleaded, by way of cross-petition to the claim of the Fort Scott Company, that the latter had intervened in an action still pending in the United States circuit court for this district, concerning the same matter, and that that court, by an interlocutory decree, had adjudged the lien of the intervenor to be superior to that of appellant. An interlocutory order or finding in a pending suit in equity in a federal court is not a final determination of the rights of the parties, but one which may be modified or discharged at any time before the enrollment of the final decree. (Ayres v. Carver, 17 How. [U. S.], 592; Thomas v. Wooldridge, 23 Wall. [U. S.], 283; Forgay v. Conrad, 6 How. [U. S.], 201; Ex parte Jordan, 94 U. S., 248.) This order, therefore, did not merge the claim of the Fort Scott Company, and was not a bar to the litigation of the same matters in the state court. The mere pendency in the courts of another jurisdiction of an action between the same parties, and concerning the same subject-matter, cannot be successfully pleaded in bar or abatement. (Gordon v. Gilfoil, 99 U. S., 168; Sharon v. Hill, 22 Fed. Rep., 28; Stanton v. Embrey, 93 U. S., 548, and authorities there *642cited.) A demurrer to this answer was therefore properly-sustained.
The foregoing conclusions we regard as decisive of the case and as rendering unnecessary the determination of other questions, some of them important and far-reaching, which are discussed in the briefs. The judgment of the district court is therefore in all things
Affirmed.