Court Opinion

ID: 6517246
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:27:47.669272+00
Date Added: 2024-06-11T15:55:03.494230
License: Public Domain

COLEMAN, J.,
dissenting. — The Mary Lee Coal & Railway Company, a corporation, authorized by its charter to own and operate coal mines, coke ovens and a railway, in Jefferson county, to secure its bonded indebtedness executed a deed of trust to the Mercantile Trust & Deposit Company, the appellee, upon all its property., and tolls, charges, and its income. Having defaulted, the trustee filed a bill, praying for a receiver, and foreclosure of the mortgage. Pending the foreclosure bill, the appellants, Drennen & Company, by petition interposed a claim for fourteen thousand, -six hundred and ninety-seven dollars, and prayed that it be allowed as a preferred claim. The basis of this claim is, that it was “due for repairs and work and labor done and performed for the defendant, the Mary Lee Coal & Railway Company, during the months of July, August, September, October and November,” preceding the fil*622ing of the bill. Of the amount claimed, about $8,947 was due for digging and mining and shipping coal, and in keeping said mine in operation and in preparing said coal for shipment; that about $5,000 was due in operating and repairing said coke ovens, and in preparing coke for shipment to market, and about $750 was due for operating and repairing defendant’s said railroad. The real issue involved, is whether the doctrine believed to have been first promulgated in the case of Fosdick v. Scholl, 99 U. S. 235, which allowed wages earned within six months before the appointment of a receiver, preference and priority over the bondholders whose debts were secured by a mortgage preceding the accrual of the claim for wages, and which doctrine, by that decision and others since rendered, was expressly limited to public railroads, shall be further extended, and as extended be applied to private business corporations, companies and individual transactions. The principle asserted and the rule adopted for its application in the opinion of the court, logically leads to this result. No case has been cited in support of the contention, and the writer believes it is without precedent.
New and useful inventions for the benefit of mankind are commendable, but the province of courts is to apply existing principles, and not create rules and principles which injuriously affect the rights of parties, acquired by contract. The province and power of courts of equity to intervene for the protection of right and prevention of wrong, and to invent remedies where none exist, to secure these ends, is one of its most useful attributes, and the exercise of this power on proper occasions, has developed into our present admirable system of equity jurisprudence ; but there is a great and irreconcilable difference between the application of a remedy, and the creation of a right and priority, which subverts and subordinates existing contractual interest. It has been truly said, that under some circumstances courts of equity may amplify remedies, but cannot dispense Avith legislation, nor amplify jurisdiction. The reasons now assigned for this new departure, have been obvious to the judicial mind for a century or more, and the very fact, that the conclusion has not hitherto been accepted as sound and permissible, of itself is full of warning to that conservatism which should characterize courts of *623justice. Precedents, though not always entitled to absolute domination, when they have become so established as to enter into and become elements of contract, cannot be set aside by courts without inflicting injustice. The legislative department has no authority, by its enactments, to impair the obligation of contracts, and surely courts of justice ought not, by their adjudications, to adopt and apply principles to existing contracts, which will have the effect of an ex post facto legislative enactment. It is unnecessary to cite authority in support of a proposition of law, recognized in all courts and especially in this State, to the effect that in the absence of an agreement to the contrary, at common law, a mortgage upon property carried with it all subsequent improvements, repairs and betterments, and this rule prevails until changed by statute in courts of equity as well as law in all States, where the common law exists. Nor is it necessary at this late day, to cite the authorities which have upheld the validity of mortgages, including those of railroads upon after acquired property, and tolls and charges and incomes. It was the prevalence of these rules, which led to the enactment of what are known as the mechanics’ and material-men’s lien laws and statutes, giving priority for labor and supplies and materials, the constitutionality and application of which statutes have undergone so many exhaustive discussions in the courts of the country. In no case that is now recalled have these statutes been sustained in so far as they were intended to “displace” or subordinate prior liens and contracts ; nor can there be found a decision, in my opinion, which demanded of the owner of a right, vested in him by virtue of a prior valid contract, that he concede something of his rights, as a condition precedent to his obtaining the aid of the courts of the country. I am not now construing the question of the unqualified right of a suitor to a receiver in a proper case, and the terms a court may impose as a condition to the appointment of a receiver, nor the power of a court to create prior liens for the preservation of property held by it during the pendency of litigation. The principle asserted in the case under consideration, goes far beyond all these rules and regulations incident to the appointment of receivers and the preservation of propertjn It boldly announces as a universal principle of “abstract equity,” not de*624pendent upon contract nor affected by contract, “and •which needs no other justification for its application in any case than the existence of facts upon which it arises and rests.” I quote from the opinion itself as follows : “Enough has, we think, been said by ourselves and through our adoption of the language of Judge Waite to demonstrate that the equity of the doctrine lies solely in the facts that the gross income of the corporation which in good conscience belongs to its laborers and operatives has been, in one form or another, diverted from them and converted directly or indirectly to the use, benefit and behoof of the bondholders to whom in equity and good conscience i.t does not belong, whether the mort- . gages securing 'the bonds in terms embrace income or not, until the wages of laborers and operatives and the accounts of supply or material-men for labor done and supplies furnished recently before the appointment of the receiver have been paid. And this is the whole equity, and it is in itself a perfect-equity. The fact that the corporation is of a public character does not enter into it and is not an element of it, any more than such fact would be necessary to a recovery in trover for a horse converted by a corporation. Every element of this equity may exist as well against a private as against a public corporation, and against bond creditors of the one as well as the other. The right to be asserted is obviously the same whatever the character in this respect of the corporation. The wrong done to the employes is the samé — the misapproriation of the fund for the payment of their wages. And the remedy for the effectuation of the right and the redress of the wrong is applied upon considerations which take no account of whether the corporation whose earnings have thus been wrongfully diverted from the payment of its employes is a railroad company, a manufacturing company or a mining company. The diversion of the fund being shown and the equity being thus made- to appear, the redress is accorded, the equity is declared and effectuated by courts of chancery upon the broad and beneficent maxim of equity jurisprudence which imposes, or authorizes the court to impose, upon every suitor asking equitable relief the duty and burden of doing equity, and we have not heard or seen it suggested that this principle is applicable more to one suitor *625than another or more to a public than a private corporation. The necessity for the application of this equitable doctrine for giving preference to claims of employes for wages is doubtless more frequent in railroad cases, but that does not argue that the facts which authorize it cannot as well exist in other cases. So there is more necessity ordinarily for a railroad corporation to be kept a going concern because of the duty it owes the public and the character of its business, and hence it is true that the facts stated constituting the equity of the doctrine in the third category, supra, exist more frequently in respect of railroad property. But there may well be, from the point of view of the bondholders, as much necessity to keep the works of a private corporation going in order to protect and preserve the property which is the bondholders’ security as also to earn income for the payment of current expenses and the principal and interest of the bonds. And the necessity of keeping the corporation a going concern is in all cases gauged, not from the standpoint of the public, but from the standpoint of the bondholders, and for the purpose of determining, not what injury the public would have suffered from the stoppage of the works, nor how they have been benefitted by the continuation of the business, but what injury the bondholder would have suffered from such stoppage in the loss of net income and in the diminution of the value of the property, with a view to measuring the.benefits he has received from the labor of employes in continuing to carry on the operations of the corporation. The damages and loss to the bondholder from a stoppage of the operations of a railroad would generally be greater than from the stoppage of the works of a mining company; but whether greater or less they stand upon the same footing as a measure of the benefit accruing to him from the labor which prevented their infliction upon him ;’the difference is one of quantity and not of kind.” It must be observed that the “equity” here asserted, is not made to depend upon any statute, or agreement to that effect, in favor of the 1 ‘wages of laborers and operatives and the accounts of supply or material-men for labor done and and supplies furnished recently before the appointment of the receiver; ’ ’ and until paid made a prior charge upon the gross income proceeding from such considera*626tion, 01* if such income has been otherwise expended then upon the corpus into which consideration entered. The predicate for the argument is, “that the gross income belongs to the laborers and operatives and material-men, which in one form or another has been diverted from them and converted directly or indirectly to the use, benefit and behoof of the bondholders, to whom in equity and good conscience it does not belong, whether the mortgages securing the bonds in terms embrace income or not until these wages and material-men have been paid.” "We have italicized the words which are made the pillars of the argument. ’ Is it a fact, that the gross income covered by a prior executed mortgage, known to the parties, belongs in any sense to the laborer or material-man as a matter of equal or equitable right; and that it does not belong to the bondholder, although by contract he has secured a prior lien, which lien existed, and which the laborer and material-men knew existed when the services were rendered and the supplies or material were furnished? Have we’discovered or invented a legal X-ray which exposes to the judicial eye an imperfection in the old doctrine of contract on personal credit, or manifests as unsound, the rule which declares contracts to be sacred and inviolable? If the income belongs to the laborer he ought to be able to recover it in an action for money had and received, and not by a judgment for services rendered. If he or the material-man has a lien upon or prior claim to the income, or upon the “corpus into which the labor or material has entered,” as an “abstract” and “perfect equity,” independent of contract or statute, the judicial mind for a century or more has been grossly at fault. The interventions of legislatures to provide for labor and material furnished, and the'study and worry of courts to adjust the rights of contractors and prior mortgagees under these statutory enactments, were to a great degree superfluous and labor lost, for if the doctrine now contended for be sound, there arose from the facts, without the statute, or agreement, a perfect equity, which only needed application and enforcement. If the doctrine now contended for is sound, there must arise on every farm, in every manufactory, mine and enterprise in which labor is performed and material furnished from which a gross income is derived, the same rights and *627equity, independent of and superior to the claims of all other creditors without regard to previous or subsequent contracts. If the perfect equity exist, the arbitrary limitation by some courts to six months within which such claims may be enforced is a tyrannical usurpation by the courts. We can not reasonably presume that the distinguished court which rendered the decision of Fosdick v. Schall, 99 U. S. 235, supra, and subsequent decisions in line with it, did not clearly perceive the full force of the argument and “abstract equity” now insisted upon successfully for the first time in this or any other court, at least within the knowledge of the writer, and apprehend the nature and consequences involved. That court did not attempt to justify the new rule adopted upon the ground that the petitioners had an abstract equity, perfect in itself, superior to the bondholders, but based its conclusion upon the power of the court to impose conditions precedent to the appointment of receivers and the granting of equitable relief, and justified the imposition of these conditions because of the, public character of railroad corporations, and limited its application to such enterprises, and to cases in which the mortgagee applied to courts of equity for affirmative relief. In the case of Kneeland v. Trust Company, 136 U. S. 89, that court has already issued its warning, that the rule will not be extended to other than the exceptional case specified, and reaffirmed the established doctrine in the following language : “No one is bound to sell to a railroad company or to work for it, and whoever has dealings with a company whose property is mortgaged must be assumed to have dealt with it on the faith of its personal responsibility, and not in expectation of subsequently displacing the priority of the mortgage lien.” How is it possible to reconcile the doctrine enunciated in Kneeland v. Trust Co., 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 expended, then these claims become a prior lien upon the “corpus” to which the labor or materials of claimants contributed nothing, and which originally constituted the security of the mortgage? The writer can not sanction as sound a rule of equity which annuls (usually termed “dis*628places”) existing relations between a mortgagor and mortgagee, in the interest of a third party, whose interest was acquired against the mortgagor, subsequent to and with a full knowledge of the rights of the mortgagee.
' The justification of the courts, denying a mortgagee his priority, has been rested 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 certain 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 can not 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. It is not pretended that the' right is of statutory creation, or of contract between the parties, the mortgagee and labor or material creditor, nor between the mortgagor as the agent of the mortgagee, and the labor or material creditor.
Is it a conclusion of law that a mortgagee guarantees to laborers and material-men, that the business of the company or corporation will be conducted on business principles, and the company never become insolvent? Is it a conclusion of law that a mortgagee’s lien shall be subordinate to claims for labor and material? Is it a conclusion of. law that a 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 employer, so that if permanent injury results his claim becomes thereby of a higher and superior character ? or does it depend upon how the gross -income be expended by the employer? If this be law, it is because the courts make it law, and in no sense is i-t the application of any just principle.
*629Contracts for labor and material, unaided by special provision of the contract or statute, stand on no higher ground than other simple contract creditors, and are no more entitled, to the income than the latter creditors. Labor 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 mortgagee who has a lien upon it to whom it has been paid declared such trustee.
There is not a single element of an estoppel in the whole matter. Neither the laborer nor the material-man acts, or refrains from acting, at the instance of the mortgagee. It is a question of contract between them and the mortgagor in a matter not under the control or supervision of the mortgagee, and rendered with a full knowledge of the mortgagee’s lien. It would require affirmative action on the part of the mortgagee, inducing the labor and purchase', to raise an estoppel against him.
The new doctrine is a revolution in jurisprudence, subverting settled principles, and not the application of new remedies to existing rights, and it should be walled into the “exceptional cases ” declared to be such by Mr. Justice Brewer in Kneeland's Case, 136 U. S. 89, and re-asserted in Thomas v. Western Car Co. in 146 U. S. 95.
In the case of Wood v. Guarantee Co., 126 U. S. 416, 421, it was declared that three conditions must exist to justify the application of the rule of Fosdiclc v. Scholl-. first, it must be applied wholly to “ operating expenses,” and, second, only where there is a “diversion of the income of a going concern,” and third, “that it had never been applied in any case except that of a railroad, and that there was a broad distinction between such a case and that of a purely private concern.”
In the case of the National Bank of Augusta v. Carolina Railroad, 63 Fed. Rep. 25, the application of the rule is limited to railroads. It is said: “The theory of the equity is this, it is the interest of the public, as well as all parties interested in a railroad, that it be kept a going concern. To do this there must be a ready supply of labor and material necessary to this end. If persons who give labor and materials were required in every instance to make careful examination into the condition of the company,so as to ascertain its solvency and capacity for paying debts, all of its operations might be brought to a *630stand still. For this reason persons dealing with a company are encouraged 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 upon dangerous grounds, and, therefore, proceeds cautiously keeping rigidly within prescribed limits.”
In the case of Hanna v. State Trust, 70 Fed. Rep. 2, an attempt was made to invoke and apply the rule of Fosdick v. Schall to a private company or corporation. It was said: “The doctrine of-these cases has no application to the case at bar. They rest upon the peculiar character of railroad property and railroad corporations. The distinction between railroad corporations, which are of a quasi public character, and purely private corporations has been often pointed out. It is enough to say that the Supreme Court itself has said, that the doctrine has only been applied in railroad cases.” A lengthy quotation is made in the opinion from the case of Raht v. Attrill, 106 N. Y. 423, in point, and quite a number of decisions from other courts are also cited.
In Coe v. Midland Railway Co., 31 N. J. Eq. 105, the question of the application of the rule to private business enterprises and the consequences is fully discussed and disapproved. Also in Poland, Trustee, v. Lamoille Valley R. R. Co., 52 Vermont, 144. Without a single exception, so far as the writer has been able to ascertain after a most diligent investigation, the courts are uniform in applying and limiting the rule wholly to railroad cases ; and in the case of Thomas v. The Western Car Co., 146 U. S. 95, believed tobe the last utterance of the Supreme Court of the United States on tire question, a lengthy quotation is made from the case of Kneeland, 136 U. S., supra, in which the warning given in that case, and the limitation placed upon the rule, was repeated with approbation and re-asserted.
The application of the rule was denied as to manufacturing corporations, in Fidelity Ins. Co. v. Shenandoah Iron Co., 42 Fed. Rep. 372, and in Bank v. Shenandoah Co., 35 Fed. Rep. 436. In Cook on Stockholders, section 861, p. 1402, it is said the rule “is extraordinary,” and “does not apply to manufacturing companies.” The principle is criticised as to its application in railroad cases, and it is held that it “ plainly impairs the *631obligation of the mortgage contract ’ ’ by the following eminent texts : Wait on Insolvent Corporations, §§ 280-281; Beech on Receivers, §§ 391-393 ; High on Receivers, § 294a; Jones on Corporate Bonds, § 555. Surely the rule ought not to be extended by adjudications of a court, as it has been in the case before us, in the face of such high authority, and in defiance of the obligations of contracts.
.If the equitable right exist as an abstract right, the parties themselves can come into the courts and insist upon its protection, and need not wait for the bondholder or mortgagee. That I have not overstated the position of this court, may be seen by a reference to the case of Merchants Bank v. Moore et al., 106 Ala. 646, which the present opinion and decision of the court declares to be unsound. In that case, there was no question of a bondholder or prior lien claimed by contract. A general creditors’ bill was filed on behalf of all creditors and a decree rendered, which declared a conveyance made by the defendant in favor of certain creditors to be a general assignment for the like benefit of all creditors. The defendant debtor had been engaged in sawing and planing lumber for a market, a mere private business concern. It was not continued or asked to be continued as a “going concern.” Moore and others filed their petition in which they claimed that the company was indebted to them for labor and materials, which entered into the “permanent improvement” of the property which had been assigned for the benefit of creditors, and which fact petitioners asserted gave them a priority over the other general creditors. There was no claim of priority by virtue of any contract or statutory lien ; but the contention was based purely and solely upon the one fact, that their labor and materials entered into the permanent improvement of the property. This court held that these facts did not entitle them to a priority over the other creditors. Certainly this has been the uniform holding of this court under like circumstances from its organization, and now it is proposed to declare different principles and annul long established rule of parties contracting on a personal credit, and lay dowm the new rule, that labor performed or materials furnished which enter into the improvement of property, creates a perfect equity, which entitles that class of creditors to a *632priority over other creditors, without regard to the terms of the contract or provisions of statutes. The very improvements may have been the basis ■ of credit, and the credit given without any notice or knowledge of the existence of claims for labor or material. The writer of the opinion in the ease of Merchants Bank v. Moore, supra, did not at the time suppose there was any conflict between that case, and that of Tallassee Mfg. Co., 64 Ala. 567; and after a careful re-examination, believes it to be demonstrable beyond reasonable controversy, that there is no co'nflict upon any issue involved and decided in these cases. In the case of the Tallassee Mfg. Co. there were three different creditors who appealed from the decree of the chancery court to this court, Lehman Bros., Clopton et al. and Stone & Clopton. Lehman Bros, appealed upon the grounds that the chancery court held that they were not bona fide holders of certain bonds, which were in their hands as collateral security, and that Lehman Bros. & Co. were not entitled to the benefit of this security. There was no contest between the bondholders and mortgagees and Clopton et al. On the contrary, the bondholders acceded to the claim of Clopton et al., and consented, so far as they were concerned, to the granting of the payment of this claim. The claim of Stone & Clopton was for an allowance of attorney's fees out of the general fund, not covered by any mortgage. The chancery court disallowed this claim. The other claim was that of Clopton, Goldthwaite et al., and arose from the following facts : The Tallassee Manufacturing Company was financially •pressed and unable to raise money. It had hypothecated certain cotton which was needed for manufacturing purposes. It was at that time a “going concern." In order to release the cotton and get possession of it, for the ase and benefit of the company, with the consent of the trustees and assignees, and with the understanding had with these parties that they were to be repaid as appears from the pleadings, these parties, upon their individual responsibility, raised the money for the purpose of releasing the cotton. There was no litigation in the case whatever between the bondholders and mortgagees, on the one hand, and other creditors, but the contest was solely between general creditors, the petitioners as such claiming priority of payment over- other *633unsecured creditors, upon the facts stated, just as in the case of Bank v. Moore, 106 Ala. supra, out of the property, or proceeds of property, not covered by any mortgage or lien. It was conceded throughout the opinion, and by all the creditors, that the bondholders were entitled to everything covered by their mortgage, and the opinion of the court was careful to keep separate, not only the property itself covered by the mortgage, but. the income from this source, so far as it could be separated from the income derived from property not mortgaged for the benefit of the bondholder. The phase of the litigation applicable to the case under consideration arose only between unsecured creditors as to their rights in the property and the income from property not included in the mortgage. Clopton, Goldthwaite et al. claimed that the facts gave them a preference over the other unsecured creditors, as to the property not included in the mortgage. They set up no claim to property covered by the mortgage. The chancery court denied their right to any preference whatever. This ruling was affirmed on appeal. The one or other of the two conclusions follows : either, that the claim of Clop-ton, Goldthwaite et al. was not a claim similar to that preferred by Moore et al in Merchants Bank v. Moore, supra ; or if it was similar, then the decision of this court affirming the decision of the chancery court, which had denied and refused to decree a priority to petitioner, is directly in harmony with the case of Merchants Bank v. Moore, and directly at variance with the new doctrine. On the other hand, if the claim of Clopton, Goldthwaite et al. was not of a similar character and did not rest upon like circumstances, the decision is not an authority upon the question at issue, for there was no such question before the court, to be adjudicated. The only ground for the reversal of the case of In re Tallassee Mfg. Co., 64 Ala. 567, supra, was the error of the chancery court in holding that Lehman Bros, were not bona fide holders of the bonds. In all other respects the case was affirmed. It is impossible to find any conflict in the case of Bank v. Moore et al., 106 Ala. 646, supra, and In re Tallassee, 64 Ala. 567, as to any issue involved in either case. The writer is aware that counsel for Clop-ton, Goldthwaite et al., in written argument filed, insisted that their claim was within the principle declared *634in Fosdick v. Schall, and cited that case in their brief, and this no doubt led to a discussion, in the opinion of this court, to some extent, of that case and the principle insisted upon, but it is apparent that this court did not apply or undertake to enforce the doctrine In re Tallassee, for the priority of the claim was denied. What was said in the opinion as to extending the rule of Fosdick v. Schall to manufacturing enterprises, was merely dictum. It will also be seen that the court placed the power of the court to grant tlie relief not upon any abstract right or equity of claimants, but its authority to require a concession, as a condition precedent to granting relief. In the carefully considered case of Meyer v. Johnston, 53 Ala. 237, many of the principles involved in this discussion arose. On page 323, the rights and property embraced in the mortgage were considered. The mortgage conveyed all property, real and personal, then owned, or which might thereafter be owned, and all “tolls, incomes and profits.” This court reaffirmed the validity of such conveyances, and declared that the rights of the mortgagees were superior to subsequent claims for improvements and even for the construction and completion of the railroad .itself. Extensive quotations were made from the cases of Dunham v. Railway, 1 Wall. 254, and Railway Company v. Cowdrey, 11 Wall. 481, which are directly in point, and many other-authorities were cited. In the case of Cowdrey, 11 Wall. supra, the claim rested upon the fact that it was for iron laid upon the road and capital applied to the road, without which the road could not have been operated. The court held the claim subordinate to that of the mortgagee. As a conclusion, the court used the following language : ‘ ‘If the railroad company itself, the corporation created by the state to build, equip and operate a work useful to the public though belonging to the company, can not when its enterprise is about to fail and its labor and expenditure to be lost, give to those who shall come to its aid, and help to complete it * * * * obligations which should have priority over others previously contracted, what prerogative of a court of equity entitles the chancellor to step in and do so, instead of the company? The company may not do so, because holding that contracts should be inviolable the law will not permit the obligations of them to be impaired,” *635On page 352 this court expressly repudiated the doctrine that the mortgagee could be charged with improvements put upon the mortgaged property. The opinion as a whole is in direct conflict with the principle now being asserted. It is clear, from the authorities of this State and elsewhere, that when the Mary Lee Coal & Railway Company executed its mortgage to the Mercantile Trust & Deposit Company, its mortgage was valid as a conveyance upon all its property, and upon “income and tolls," and that this principle of law entered into as a constituent of that contract. That this prior right, acquired by a solemn contract, can not be displaced in favor of the claims of petitioner subsequently accruing, and which in the absence of agreement must be presumed to have been rendered upon the personal obligation of the mortgagor, without impairing the obligation of the mortgage contract, is too clear to admit of controversy. It is the doctrine of all the courts. Even in the cases where the rule has been enforced against a prior mortgage, the courts concede that the effect of the application of the rule is to “displace'' prior liens, and the “displacement” is justified solely upon the ground that courts of equity may demand from the mortgagee, as a condition precedent to relief either in the appointment of a receiver or foreclosure, that he concede or consent to the final payment of the claim of the laborer and material-man, although by virtue of the mortgage, the lien, in fact and in law, is prior and superior to any claim for labor or supplies, realizing that the priority could not be adjudicated upon any principle of “abstract equity." So apparent was it, that the innovation impaired the obligation of contracts, the courts limited the application of the “condition precedent" to railroads because of their public character, and to ‘ ‘going railroads,” and where there was a “diversion" of income. How it can be, that the application of assets, whether money or property, to the satisfaction of a mortgage, which by valid contract known to all parties is a first lien upon it, is a “diversion" of assets, remains yet to be sustained. There is much force in the position, that the public have great interest in railroads, and that no one should be allowed to strike down without warning the public interest. This question is one not simply of debtor and creditor growing out of contract, but of com*636merce itself. Many States have provided for these conditions by statute, and saved their courts from the imputation of “court made law.”—Central Trust Co. v. Thurman, 20 S. E. Rep. (94 Ga.) 141. Whether the same results as .to impairing the obligations of contracts would follow as to railroad mortgages executed since the promulgation of the rule of Fosdick v. Schall, we need not now consider. We have no such case before us. In the case of Meyer v. Johnston, the same distinction was drawn as to railroad corporations, on the ground that the public were interested in such enterprises, as that drawn in Fosdick v. Schall; and upon this ground the giving of a prior lien to receiver’s certificates was upheld. It is said that when Meyer v. Johnston was rendered, the case of Fosdick v. Schall had not been established. That is no argument. The same equity existed then, and it was directly repudiated. But that argument is further stripped of all force, when we consider the final determination of the case. The law of this State at that time required this court on a second appeal, to render judgment without being bound by.the first appeal. When the case of Meyer v. Johnston came up on a second appeal (64 Ala. 603), it seems that the opinion in the case of Fosdick v. Schall had been delivered. We can not doubt that the learned counsel, representing the interest which had been adversely decided, would have availed themselves of the new doctrine had it been supposed to have been so far reaching. The same members of the court presided on the first appeal as on the second, and also when the case of In re Tallassee Mfg. Co., 64 Ala. 567, was decided.
What the attitude of this court should be when a case like that of Fosdick v. Schall comes before it, need not now be considered ; but in my opinion, the rule can not be extended to cases like that before us without violating the sacredness of contracts. The rule declared in Bank v. Moore, 106 Ala. 646, which strictly followed the decision of Meyer v. Johnston, ought to be adhered to. Certainly if there was any conflict between the case of The Bank v. Moore et al. and the case of In re Tallassee, the same conflict exists between the latter case and the case of Meyer v. Johnston, and which, if there be such conflict, was virtually overruled, without any reference *637to it. In my opinion, there is no conflict in any of the decisions previous to that rendered in the case at bar.
Head, J., concurs in the dissenting opinion.