132 F. 68 | U.S. Circuit Court for the District of New Jersey | 1904
This suit is brought to foreclose a mortgage given by the defendant, the Atlantic Coast Electric Railroad Company, to the complainant, the Guaranty Trust Company of New York, as trustee for the holders of 500 of the bonds of the defendant company for $1,000 each.
The only questions to be now considered relate to the extent of the lien of the mortgage. Admittedly, the mortgage covers all the properties specifically described in it. But does it also extend to and embrace the following properties, acquired by the defendant company after the date of the mortgage: The leasehold interest in the West End & Long Branch Railroad, the leasehold interest in the Sea Shore Electric Railroad, the leasehold interest in the hotel property at Pleasure Park Bay, the capital stock of and the leasehold interest in the Asbury Park & Sea Girt Railroad, and the line of rail
Although the authority for the execution of the bonds and mortgage was not given until October 7, 1896, and the mortgage was not recorded until October 13, 1896, the resolution authorizing their execution required them to be antedated July 1,1896. They were so antedated. As between mortgagor and mortgagee, therefore, the mortgage will be considered as a conveyance of property on July 1, 1896. This was the plain intention of the defendant company, and property acquired by that company between the date of the mortgage and the time of authorizing its execution, or of recording it, as well as that acquired after such authority or record, must be deemed to be future-acquired property. If. then, the mortgage covers any future-acquired property at all, the mere fact that two leasehold interests— one in the West End & Long Branch Railroad and the other in the Sea Shore Electric Railway — were acquired after the date of the mortgage, but before the authority for its execution was given, will not exclude them from the lien thereof.
The mortgage is inartistically drawn. Whether it was the intention of the defendant company to subject to the lien of its mortgage after-acquired properties like those above mentioned must be ascertained from an examination of the various clauses in the mortgage concerning after-acquired, properties. On such examination it appears that the mortgagor conveyed to the mortgagee “all the right, title, and interest of the railroad company (the mortgagor) now owned or hereafter in any wise acquired by it in and to all and singular the lines of railroad and railroad tracks and routes and other property, real and personal, hereinbelow described.” Then follows, first, a specific description of the lines of railroad owned by the defendant company on July 1, 1896; secondly, the description embraces “all lands and real estate, * * * buildings, improvements, tenements, and hereditaments now owned by the railroad company, or hereafter at any time or howsoever acquired by it, which are or may be connected with or appurtenant to the above described and hereby mortgaged railroad and routes”; thirdly, the description embraces “all and every franchise (including the franchise to be a corporation), right, privilege, and easement of whatsoever kind or nature now or hereafter at any time or howsoever owned, acquired, possessed, enjoyed, or exercised by the railroad company, either by virtue of any act of the Legislature of the state of New Jersey, or * * * of any contract or lease between the railroad company and any other railroad or other corporation * * * which are or may be connected with or appurtenant to the above described and hereby mortgaged railroad and routes.” The description further embraces
The next question is, does the mortgage cover the capital stock of, or the leasehold interest acquired from, the Asbury Park & Sea Girt Railway Company? The Asbury Park & Sea Girt Railway Company was organized under the provisions of the act of the Legislature of New Jersey entitled “An act to authorize the formation of traction companies for the construction and operation of street railways or railroads operated as street railways, and to regulate the same,” approved March 14, 1893. P. L. p. 302. That act declares that the period during which a corporation organized under its provisions may continue shall not exceed 100 years. The term of its
“Whereas, Messrs. Acton C. Hartshome and G. B. M. Harvey, acting as a reorganization committee and in representing themselves and other owners of the first and second mortgage bonds of the Asbury Park and Belmar Street Railway Company, have acquired title under a decree of the United States Circuit Court to the property, rights, and franchises of the Asbury Park and Belmar Street Railway Company, and to its railroad and routes ; and whereas, said reorganization committee have offered to dispose of the same to this company: Be it therefore resolved, that this company purchase from said reorganization committee the property above described upon the following terms : First. This company to execute and deliver to the Monmouth Trust and Safe Deposit Company, as trustee, a purchase-money first mortgage of the amount of $50,000 upon the railroad and other property so purchased, securing fifty 20 year gold bonds bearing 5% interest, of $1,000, redeemable at the option of the company at 105, the interest thereon to be paid semiannually on the first days of September and March, and said bonds when issued to be delivered to or on order of said reorganization committee. This company to deliver to or on the order of said committee, or either of them, 110 of its general mortgage bonds now held in the treasury of the company, and to issue to or on the order of the said committee, or either of them, 5,000 shares of the capital stock of this company.”
The provision of the complainant’s mortgage concerning the certification and issue of the 500 bonds secured by it is as follows:
“Three hundred and fifty of the issue secured'hereby shall be certified by the trustee and issued to or upon the order of the railroad company for the purposes of its business from time to time upon its demand expressed by a resolution of its board of directors, and each of such resolutions shall constitute full authority and protection to the trustee in certifying bonds in accordance therewith. The remaining one hundred and fifty of the hereby secured bonds shall be certified and issued only for the purpose of making payment for additions to and extensions of the railroad of the railroad company, or for a new power house, or additional machinery, or any of said purposes, from time to time, upon receipt by the trustee of a resolution of the board of directors of the railroad company stating the amount of bonds required and the purpose for which the same are to be used, and accompanied by a certificate signed by the president and treasurer of the railroad company that the bonds so called for have been disposed of for one or more of the purposes herein mentioned; and each such resolution and certificate shall constitute full authority and protection to the trustee in certifyifig bonds in accordance therewith.”
On the same day that the directors of the defendant company passed the resolution authorizing the purchase of the property of the Asbury Park & Belmar Street Railway Company — that is, on March 29, 1898 — they also passed the following resolution:
“Whereas, by the terms of the general mortgage of this company to the Guaranty Trust Conrpany of New York, as trustee, securing bonds of this company to the amount of $500,000, it is provided that $150,000 of said bonds*73 shall be certified and issued only for the purpose of making payments and expenses of the railroad of this company, from time to time, upon receipt of the trustee under said mortgage of a resolution of the board of directors of this company stating the amount of bonds required and the purpose for which the same are to be used: Now, therefore, be it resolved, that the amount of said general mortgage bonds of this company now required to be certified and issued is $110,000, or 110 bonds of a thousand dollars each, and that the purpose for which the same are to be used is the acquisition by this company of the railroad and routes and other property and franchises of the Asbury Park and Belmar Street Railway Company recently sold under foreclosure and now about to be purchased by this company.”
And on the same day a copy of the last-quoted resolution was delivered to the complainant, and the president and treasurer of the defendant company certified to the complainant that the $110,000 of bonds had been disposed of “for the purpose of acquiring, as an addition to and extension of its railroad, the railroad and routes, and railroad and other property and franchises heretofore owned and operated by the Asbury Park & Belmar Street Railway Company, and recently sold under foreclosure proceedings, the same being now about to be acquired by said Atlantic Coast Electric Railroad Company.” And on the same day the complainant certified and delivered to the defendant company the $110,000 of bonds thus required. On April 20, 1808. a report was made to the directors of the defendant company at their meeting held on that day that counsel had advised that,- instead of having the property of the Asbury Park & Belmar Street Railway Company conveyed directly to the defendant company, a new corporation should be organized to take the title, and that the defendant company should own all the equity in the property over and above the $50,000 purchase-money mortgage. The directors thereupon passed the following resolutions:
“Resolved, that in the event of counsel finally deciding it to be advisable to take over the Asbury Park and Belmar property heretofore purchased by this company through the ownership of stock in a new corporation to be created for that purpose, the proper officers of this company are hereby authorized and directed to secure the incorporation of such company, and in all other respects to pursue the method proposed by counsel: provided that this company shall own the entire equity in the property, subject only to a purchase-money mortgage of $50,000; and be it further resolved, that this company guaranty the payment of the principal and interest of bonds to be issued by such new corporation to the amount of $50,000 gold coin; and be it further resolved, that the proper officers of this company are hereby authorized and directed to sign upon each of said bonds a proper guarantee to that effect on behalf of this company.”
On the same day — April 20th — the stockholders of the defendant company, at a meeting held by them, adopted the following resolution :
“Resolved, that the action of the board of directors in the matter of acquiring from Messrs. Acton C. Hartshorne and G. B. M. Harvey the property rights and franchises of the Asbury Park and Belmar Street Railway Company, as set forth in their resolutions adopted at their meetings of March 29, 1898, and April 20, 1898, be in all things ratified, approved, and confirmed.”
Accordingly, some time before May 27, 1898, a new corporation was organized under the name of the Asbury Park & Sea Girt Railway Company. This new corporation took the title, executed the purchase-money mortgage for $50,000, delivered all its capital stock
The rights acquired by the lease of the Pleasure Park Bay property, which is located at the extreme northern end of the defendant company’s railway system, are not covered by the mortgage. That is a hotel property. There is a provision in the lease that the defendant company may remove from the demised premises all railroad tracks which it may place thereon, but there is no proof that any such tracks halve been placed thereon, or that the property has been used in connection with or as appurtenant to the defendant company’s railroad. The only evidence in the case, exclusive of the lease itself, which refers to this property, is that of Charles L. Speir, who says merely that the property was turned over to the receiver appointed in this case. If this hotel property has been used by the defendant company as a place of pleasure for the patrons of its railroad, and as a means of inducing increased patronage of its railroad, the proofs do not disclose such use. The language of the mortgage is not sufficiently comprehensive to include property so situated.
A decree will be made in accordance with the views above expressed.