Brady v. State

26 Md. 290 | Md. | 1867

Weisel, J.,

delivered the opinion of this Court.

The motion for a preliminary injunction in this case was postponed by an agreement of the solicitors, to be called up ■at a future day. Answers having been filed, it was after-wards agreed that the cause should be submitted upon final hearing, and that upon such hearing a decree pro forma should he entered denying the right of the appellant to enforce his judgment, and that a perpetual injunction should be granted, from which said Brady was to appeal. The injunction was accordingly entered on the 13th of February, 1866, from which -this appeal has been taken... It was therefore granted and perpetuated on bill, answers and exhibits.

The bill took a broader scope than the controversy with the appellant, touching his right to attach the chattels and moneys mentioned in the proceedings to satisfy his judgment. It embraces and enumerates the several relations of the State of Maryland' to the Chesapeake and Ohio Canal Company, as stockholder and creditor, and re-asserts the claims of the State to the property, works and revenues of that company under the several Acts of Assembly which, from time to time, during the progress of its work, authorized aid to be afforded-to it by subscriptions to its capital stock and by loans, and under the several promises, agreements and conveyances which those Acts of Assembly contemplated»and provided for, and which were made, entered into and executed by the company. In view of these relations, and the heavy indebtedness to the State secured by these engagements and conveyances, the State, through its Board of Public Works, charged with its interests in this respect, claimed the protection of the Court and asked that the president and directors of the Canal Company should be strictly enjoined and prohibited from'parting with any portion of its revenues, tolls or income, as net revenue or otherwise, until a sufficient amount shall have been deducted and reserved to meet all necessary current and probable contingent expenses, and from paying any debts from net revenues to any creditors not entitled to claim payment in priority of the State, whereby its revenues would be absorbed and applied to other purposes than those which would enable the company to perform all its duty and engagements to the State without hindrance or embarrassment. The company, by the admission of its answer and submission to the decree of the Court, is a willing- party to the injunction and has not appealed from the order.

The only matter now to be' determined upon this appeal la, the right of the appellant, Brady, to a judgment- of condemnation of the chattels and credits which have been levied on under his writ of attachment. If he has this right, the injunction as to him would be dissolved and his writ permitted to take its course at law.

The only garnishees who admit credits in their hands, or moneys belonging to the Chesapeake and Ohio Canal Company, are the Cumberland City Bank to the amount of $469, and John EL Shaw, the collector of the company at Cumberland, to the amount of $9,244.61. The American Coal Company, another garnishee, also admitted moneys due by it, at the time the attachment was laid in its hands, for tolls to the amount of $2,137.59, which however it was induced to pay over to the company upon an indemnity, These, it sufficiently appears from the answers, were of the tolls and revenues of the company.

The bill alleges and charges, that these sums are not more than should be reserved by prudent" men charged with the conduct and management of the canal, to meet the necessary current and the probable contingent expenses of the company, according to past experience and the uncertain reverses and injuries to which such a work is constantly exposed from freshets and other casualties, and that the company is entirely without available means for such purposes, manifestly indispensable other than those of its ordinary tolls and revenues. Tho State further alleges and charges, that these moneys so attached are exempt from the reach of this creditor by reason of the various relations it sustains to the company as stockholder, with preferred claims to dividends, and as a creditor with liens upon all the property and works of the canal and all its net tolls and revenues, and relies for the assertion of this right upon the various Acts of Assembly passed upon these subjects, and the agreements and covenants with the company, and the conveyances executed by it to the State, as provided for in said Acts.

We do not consider it necessary, in the aspects presented by this case, to examine minutely how far the State, as a stockholder in this work, with guaranties for preferred dividends out of its profits, would be sustained in enforcing its rights against the appellant. Much stress was laid in the argument upon the superior rights of the State as a sovereign, not only in granting the chartered rights to the company, but in exercising visitorial power over the company, and by this means controlling its revenues and keeping them within the line or course of expenditure provided for in its charter, and other laws authorizing subscriptions by the State to its stock. The provisions of the Constitution, in the establishment of a Board of Public Works for supervising all public works in which the State is interested as stockholder or creditor, were also urged as imparting to the State peculiar attributes in its character as complainant in this suit.

The Chesapeake and Ohio Canal Company, though chartered for great public purposes, and exercising by grant a portion of the State’s right of eminent domain to take private property for the use of its work, upon just compensation to the owner, is nevertheless a private corporation. The fact that the State itself is a shareholder, or a large shareholder, in the capital stock of the company, does not impart to the company any of its sovereignty as such, nor can the State, by virtue of its sovereignty, claim any other or higher rights, as a suitor., than that of an ordinary stockholder, except so far as it may have rights and interests over other stockholders secured to it by law and engagements with the company, or its other stockholders in pursuance of law. The cases cited by the appellant illustrating this, are sufficient for the purpose. Angell & Ames on Corp., secs. 30, 31, 32. Bank of United States vs. Planters Bank of Georgia, 9 Wheat., 907. Curran vs. State of Arkansas, 15 How., 304. Wallace vs. Turnpike Company, 8 Watts, 316. But while this company is a private corporation, as distinguished from a public municipal body, it is not of that ordinary kind which is created merely for the pecuniary benefit of its stockholders, but like that of the Baltimore and Ohio Rail Road Company, it was designed to promote great public interests, which were its chief objects, and to the accomplishment of which moro than ordinary powers were granted, and liberal rules of interpretation for its benefit ought to be adopted in expounding its privileges and rights for effectuating the designs of the Legislature, and securing the rights of the State in a work of such magnitude and involving such vast public interests. Mayor & C. C. of Balto. vs. Balt. & Ohio R. R. Co., 21 Md. Rep., 91.

But the State, in this ease, claims exemption from the proceedings instituted by the appellant, and asks for the restraining power of equity, on the ground of its character as a creditor of the company, with liens on its property, and net revenues and tolls, to secure its loans. It relies, in this branch of the case, on the Acts of 1834, ch. 241, and 1844, ch. 281, and the obligation or stipulation of the company and the mortgage executed by it, which these Acts authorized and required, as conditions upon which the Legislature of the State granted the aids for prosecuting and completing the canal to Cumberland, as provided in those Acts.

By the Act of 1834, eh. 241, a sum not exceeding two millions of dollars was authorized to be raised and loaned to the Chesapeake and Ohio Canal Company, to enable it to complete its work to Cumberland. As a condition precedent, the company, after assenting in general meeting to the terms of the Act relating to itself, was to prepare and deposit with the Treasurer of Maryland, a covenant and obligation, verified by its corporate seal, and the signatures of its president and directors, pledging the whole of the net revenues of the company, and the whole of the water rights, lands and other property at any time acquired by it, or the rents or other, avails thereof, for the purpose of securing to the State the payment of the interest and principal of said loan ; the interest to be paid quarterly as therein specified, and the principal at the time therein stipulated. To secure the final payment of the debt, it was further provided that the company should stipulate in said covenant or obligation for the payment to said treasurer of the whole of its net revenues, and the proceeds of the sales or leases of the whole of the property thitherto or thereafter to be acquired by it, as the same should from time to time be sold or« leased, until he should receive a sum in his judgment sufficient to constitute a sinking fund adequate to pay off the principal of said debt, when and as the same should become payable, over and above the payment of the interest.

The bill alleges that the company assented to this law, executed the covenant or obligation as therein provided and required, and received the said loan’of two millions of dollars. It further states that nothing has ever been paid to the complainant by said company, or in any way, on account of the principal or interest due on said loan ; and that no payments have ever been made to,the treasurer for the purpose of constituting the sinking fund required ; and that the interest which has accrued on the loan and is due to the State, computed to the 31st of May, 1865, amounted to the sum of three millions and fifteen thousand dollars.

The covenant or obligation executed by the Company and delivered' to the Treasurer of Maryland, in pursuance of this Act, has not been exhibited with the bill, and is not before the" Court; but the fact of its execution ajid delivery, in the mode required by the law, was not denied in the argument. The appellant in his answer admits that the State advanced to the company the two millions of dollars under this ■ Act, in regard to which sum the State is a creditor, with all the rights of a creditor. The answer is silent as to the interest due and in arrear, hut states that the principal was applied to the construction of the canal, and was exhausted when it reached Harper’s Ferry. The annual reports of the company made in June, 1865, and June 1866, the one a part of the record and the other filed with it, and made evidence hy the agreement of counsel, certify to the amount of such interest due and in arrear as stated in the bill.

To say nothing of other claims of the State as a creditor presented in the bill, here is an item of clear indebtedness exceeding five millions of dollars, for which the net tolls and revenues have been pledged to the State, hy solemn obligation of the company,c and in pursuance of one of the public statutes of the State. How far the information of the appellant is correct or can he relied upon as to the solvency and prosperous condition of the Canal Company, and its ability ere long to pay off its debts and establish its credit upon a firm and lasting basis, as averred in his answer, can he judged of in the face of this item of indebtedness alone, to say nothing of a ten millions of indebtedness besides, with an annual surplus of revenue from all sources, in 1865, of but thirty-seven thousand dollars, as disclosed by said reports.

Stopping at this point, we thus perceive that the State is a creditor of the company for a sum exceeding five millions of dollars, principal and interest, which debt originated hy loan in 1835, under an Act of Assembly which authorized the pledge of the company, in the mode therein prescribed, of the whole of the net revenues of the company, as, also, of all its other property, and the rents and avails thereof, as security for its repayment, and which pledge was accordingly given and still subsists. What protective force this has will be hereafter noticed.

We pass now to the consideration of the Act of 1844, eh, 281, the last in the series of legislative aids whieh the State-with unbounded liberality bas afforded to this important work of internal improvement.

The canal having reached dam bTo. &in its construction, after an additional expenditure of the State’s money, by way of subscriptions to its stock, amounting to four millions, three hundred and seventy-five thousand dollars, the generosity of the State and its known devotion to this enterprise were again appealed to. The application was not answered by a renewed appropriation of money, but by affording such means of credit to the company as would enable it to borrow from other capitalists money enough to complete the-work to Cumberland. This was- accomplished by authorizing the company by said Act of 1844, to borrow or raise upon its own bonds, with preferred liens 'on its revenues, a-sum not exceeding one million, seven hundred thousand dollars. The State waived and postponed its rights and lien3 on the revenues of the company, held under former Acts, in favor of the bonds to he issued by the company,, under this Act, so as to make them and their accruing interest preferred and absolute liens on its revenues-, until said bonds and interest should be fully paid. The law, also, provided that the company should have the privilege and authority to use and apply such portion of the revenues and tolls as would he necessary, in the opinion of its president and directors, to put and keep the canal in good condition and repair for transportation, provide the requisite supply of water, and pay the salaries of officers and agents, and the current expenses of the company. It directed a semi -annual payment by the company of the-interest to the preferred bondholders, and as soon as the-net revenues arising, from the canal and its works should he mors than sufficient for this parpóse, and some other purposes specified, the company should annually pay to tho Treasurer of the State, the surplus net revenues to such amount, not exceeding $25,000 annually, on an average of years, from the date of the completion of the work, as would be adequate for a sinking fund, to be invested by the treasurer and accumulated until deemed sufficient as a sinking fund to pay the principal of said bonds ; the moneys so applied to be considered as held by the State as •agent for the company, for the payment of said bonds as ■they matured, and on no account to be applied or used for any other purpose whatever. This Act further provided that (he Canal Company should execute to the State, and deliver to the Treasurer a further mortgage on the said canal, its lands, tolls and revenues, subject to the liens and pledges by this Act authorized, as an additional security for the payment of the loan made by the Slate to the company under the Act of 1834, ch. 241, and the interest due and in arrear, •and lohich would thereafter accrue thereon, to be approved by the Attorney General as sufficient in lews. This being done, and the company’s assent to it obtained and filed, the Act was to take effect and bs in full force.

A mortgage was accordingly executed by the Chesapeake -and Ohio Canal Company to the State of Maryland, a copy of which is exhibited with the bill, and not denied by the appellant’s answer. After reciting the provisions of said Act, it conveyed all the property of said Canal Company, real and personal, then owned or thereafter to be acquired, to the State, including the tolls and revenues that may thereafter accrue from the said canal and its works, and every part thereof, together with all goods, chattels, property and rights, and all tools, implements and boats then owned or which might thereafter be provided, built or purchased by the ■said company, or its agents, for the use of the said canal, or •to be used in its construction, repairs or operations, subjectP however, to all the liens und pledges created or authorized, then or thereafter, by said company, under and in pursuance of the provisions of said Act of Assembly; conditioned for the repayment to the State by the company of the two millions of dollars, and all interest in arrear and to accrue thereon, loaned to it under the Act of 1884, ch. 241.

This instrument bears date the 8th day of January, 1846. It was acknowledged in Maryland on the 19th day of January, 1846, and was recorded in Allegany county, Maryland, on the 5th day of May, 1848.

The judgment of the appellant was originally rendered on the 25th of October, 1844. This judgment was revived by sci fa in October, 1855 ; and, again, on the 3rd of October 1864. On this last fiat, the writ of attachment by way of execution was issued returnable to October term, 1865, of the Circuit Court for Allegany county, under which the chattels and credits already mentioned were attached.

Mr. Brady, the appellant, by his answer, and in the brief of his counsel, took three positions, which were mainly urged and relied upon in the argument. The first was, that by the Act of 1844, the State waived its liens upon the revenues and property of the company in favor of the bonds to be issued under it, and that by such waiver, the State retired and gave place to strangers, and having done so, it cannot now legally or in conscience step in before other creditors of the company, and stand next in priority to said bondholders. It is also admitted that the appellant is not one of said bondholders, or entitled to any priority over the State, except so far as he asserts it by reason of his judgment and proceeding in attachment.

It is very clear from the language of the Act of Assembly of 1844, and the mortgage mad.e in pursuance of it, that the State waived its priority only in favor of the liens created and authorized by that Act. ' In all other respects, and against all other creditors, the State expressly reserved Its rights and priorities, and there is no doubt that one of the objects, if not the only object, of talcing the now mortgage authorized by that Act, was to re-assert and re-secure its prior rights and claims, and place them beyond all cavil and dispute. If other creditors could thus step in and grasp by legal process the tolls or revenues of the company, or enforce executions upon its property and works, the plain design of that law would be frustrated. The work itself would not only he destroyed by the abstraction of the means for its preservation, repairs and operation, hut the preferred creditors deprived of tbeir chartered securities, and the State itself defeated in all its plans and munificence for making this work the great and important channel of trade which was designed by these Acts of Assembly, and the conveyances made under them. The appellant states, that his original judgment was obtained in October, 1844, which was prior to the passage of the law of 1844, ch. 281, which took place on the 10th of March, 1845, and that his lien upon the property of the canal was therefore prior to the law. This Court does not mean to pass any opinion, in this caso, on the efficacy of judgment liens upon the real estate of the Canal Company. All the conveyances to the State are not before us in this cause» It is sufficient here to say, that by the Acts of Assembly of 1834, ch. 241, and 1844, ch. 281, and the covenant and mortgage which followed, all the net tolls and revenues of the Canal Company were assigned by way of security to the State, and, as any other other assignee, the State would have the right to interpose its claim against any subsequent attachment. The credits attached in this case, the appellant himself admits in his answer, and it is clearly shown elsewhere in the record, represent in part the income and earnings of the said canal.

A second ground taken by the appellant is, that the State is a mortgagee not in possession of the canal and the other property of the company, and therefore it cannot divert the revenues to its use and possession upon the principle of an implied agreement between mortgagor and mortgagee, that the mortgagor shall take the rents and profits to his own use until dispossessed by the mortgagee.

It is very evident, from the Acts of Assembly and the covenant and mortgage referred to, that the Canal Company was to remain in possession and management of the work, while the net revenues were to be appropriated to the State’s use as a creditor. A portion of the tolls and revenues were to be used, by express stipulation, for the purpose of repairs and to meet current expenses, and these were as much to be protected as the net earnings, for the vitality of the canal, as a public and profitable improvement, depended upon their use, as well as the ultimate security of the State as a creditor. And it seems unnecessary to inquire, in the condition of this work and its finances, as shown by the proofs in the record, how much would be needed for repairs, &c., for all the revenues are guarantied and assigned tot the State, to be applied neces-. sarily, first, to the repairs, maintenance and management of the work ; next, to the preferred bondholders under the Act of 1844, the State being the agent and party for the accumulation and application of the sinking fund provided for by the law ; and then, in its own right to its own claim as the next preferred creditor under both laws and the mortgage or assignment. The right of the State to see to the proper application of all the tolls and revenues of the company to these legitimate objects, and prevent their Waste or diversion to any other purpose whatever, is not to be interfered with by the application of the technical rules' which govern the ordinary relation of mortgagor and mortgagee. And the doctrines enunciated by this Court, in the cases of Parsons vs. Hughes, 12 Md. Rep., 1, and the State vs. Nor. Cent. R. R. Co., 18 Md. Rep., 193, can well be applied and extended to a case like this, the mortgagor here being a party defendant as well as the attaching creditor.

A third position taken by the appellant is, that the mortgage of the 8th of January, 184.6, was not recorded for more than two years after its date, and that it cannot interfere with the rights of creditors without notice ; that he is a rightful and merotorious creditor of the company, and that lie had no notice of the claims of the State at the time of the service of the attachment or before, or until after the filing of the bill in this case.

We think, that as to the credits attached in this ease, they passed to the rightful ownership of the State for the purposes hereinbefore expressed, by virtue of the Acts of Assembly and the covenant and mortgage aforesaid, as an ordinary assignment to which recording was not necessary. The revenues and tolls were to be assigned to the State, and they were assigned, and it is not necessary as the law now stands in Maryland, that an assignee of claims or moneys shall give notice, by registration or otherwise, in order to shield his claim from an attaching creditor.

In addition to this, these Acts_ of Assembly are public Acts of which the Courts take notice, and they are notice to the public of what they contain , — 13 Wheat., 16. 3 Bland, 63 ; — and are sufficient to put any party dealing with the company upon inquiry.

With regard to the chattels spoken of in the proceedings as levied upon under the writ of attachment, it is not necessary for this Court to inquire. The answer of the Canal Company denies that they were levied on under said writ, but avers they were taken by the sheriff under another and different proceeding; and that they are erroneously mixed up with this proceeding. The counsel for the appellant, in the argument before this Court, disclaimed any intention to interfere with them, and stated that they were not intended to be levied upon under the writ of the appellant. Under such circumstances, we forbear to express any opinion upon the appellant’s right to them, but think, under the circumstances, that the injunction should cover them.

( Decided January 24th, 1867.)

No exception was taken to the jurisdiction of the Court, nor could any he taken in the face of the agreements of counsel in the record. The whole scope of the bill presents a clear case for equity against the Canal Company, touching its revenues and the proper application of them, and any parties interfering in them would properly be made parties and come within the restraining powers of the Court, during the investigation of the matters in controversy, and be subject to its final decree in the premises.

Entertaining these views, we thiuk the the action of the Court below should he sustained throughout, and that the decree awarding a perpetual injunction should be affirmed, but without costs.

Decree affirmed„