Jackson v. Ludeling

Supreme Court of the United States · 1879 · Corporations

99 U.S. 513 (1879)

Updated August 22, 2026

CorporationsRailroadsMortgagesReceiversImprovements by possessors in bad faithLouisiana civil lawpossessor in bad faithrailroad property

Facts

The Vicksburg, Shreveport, and Texas Railroad Company mortgaged its railroad and related property to secure bonds. After default, the property was sold in 1866 to Ludeling and others in a judicial sale that this Court had previously declared fraudulent and void, but the purchasers had taken possession and reconstructed and repaired the ruined railroad. On remand, an accounting showed that the defendants received earnings from the railroad and also spent large sums rebuilding and equipping it, and the dispute became whether, and to what extent, they should be allowed compensation for those expenditures.

Issue

When fraudulent purchasers of mortgaged railroad property are treated as possessors in bad faith under Louisiana law, are they nevertheless entitled to compensation for repairs and improvements made while in possession, and if so, how should that compensation be measured against the fruits and profits they received?

Rule

Where Louisiana civil law governs and the property is a railroad whose repairs and improvements are inseparable from the thing itself, a possessor in bad faith may be compensated when the rightful claimants effectively retain the improvements, but only for improvements existing when possession is surrendered and only up to their actual value, not their higher original cost. The possessor may also receive interest on the cost of those improvements only as an offset against fruits and profits for which he must account, and not beyond that amount.

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Louisiana, Red Cypress Rail Holdings acquired a damaged short-line railroad near Baton Rouge through a foreclosure process later set aside because the buyers had orchestrated inequitable bidding restrictions. While in possession, Red Cypress rebuilt bridges, relaid track, and restored locomotives. Bondholders then obtained a receiver, who took over and continued operating the line in its restored condition.

Under the governing rule, is Red Cypress entitled to compensation for its expenditures?

Explanation. The majority held that Louisiana civil law controlled and that, in the special context of railroad property, the claimants could not take the improved railroad and its benefits without compensating the bad-faith possessor for improvements and repairs that remained in existence at turnover. The key points are the inseparable nature of railroad improvements and the fact that the receiver and claimants retained and benefited from them.