52 Vt. 144 | Vt. | 1879
The opinion of the court was delivered by
On the 1st day of May, 1871, the Lamoille Yalley Railroad Company, the Montpelier & St. Johnsbury Railroad Company, and the Essex County Railroad Company, associated together for the purpose of building a railroad from the Connecticut River to Lake Champlain, and known as the Vermont Division of the Portland & Ogdensburg Railroad Company, in order to raise money to construct, complete, and equip their railroad, executed to Luke P. Poland and Abraham T. Lowe, as trustees, a trust deed of their railroad, including all its real and personal property, together with the tolls and income and all their corporate rights and franchises, in trust to secure the payment of $2,300,000 in joint bonds issued by said companies, with semi-annual interest coupons attached. In the habendum it is stipulated that the conveyance is made and accepted upon trusts, and subject to limitations and conditions,
First, to secure the payment of the principal and interest upon the joint bonds ratably and without preference, &c., and further as follows:
Third. Upon trust until default shall have been made by the parties of the first, second, and third parts in payment of the principal or interest of said bonds, or some of them, or until de
Fourth. Upon trust that in case the said parties of the first, second, and third parts shall fail, neglect, omit, or refuse to pay the principal of, or the interest upon, the said bonds or any thereof, as the same shall respectively become due and payable, and such failure, neglect, omission, or refusal shall continue for the period of four months after the payment thereof shall have been demanded in writing, then the said parties of the fourth part, of either of them, upon the refusal of the other or their successors in said trust, may by themselves, or their attorneys, agents, or servants in that behalf, upon the written request of the holders of a majority in amount of such bonds then outstanding in respect whereof there shall have been any such failure, neglect, omission, or refusal, enter into and upon, and take possession of, all, or, in their or his discretion, any part of the said premises and property hereinbefore described, and work and operate the said railroads and receive the income, receipts, and profits thereof, and out of the same pay : 1st. The expenses of running and operating the same, including therein such reasonable compensations as they or he may allow to the several persons employed or engaged in running and superintendence of the same, and all taxes, assessments, charges or liens having priority or preference to the lien of these presents upon the said premises, or any part thereof, and a rea.
Under the sixth trust specified the trustees were empowered, after a default for six months, and on request of the holders of three fourths in amount of outstanding bonds, to take possession and sell the mortgaged premises at auction. On the 1st day of April, 1874, said companies executed a second mortgage of the same property to the same trustees, to secure the payment of joint bonds to the amount of $1,770,000, and upon the same trusts as those expressed in said first mortgage. About $125,000 only in bonds were issued under this mortgage. On the 1st day of January, 1875, said companies, jointly with the Lamoille Valley Junction Railroad Company and the Maine Division of the Portland and Ogdensburg Railroad Company executed a third, called a consolidated, mortgage of their several railroads to said Poland and Israel Washburn, Jr., and P. H. Brown, as trustees, to secure the joint bonds of all said companies, to the amount of $9,500,000, and upon like trusts to those expressed in said first mortgage. About $80,000 of this class of bonds were isssued. The first named three companies, having expended the proceeds of all said bonds and being insolvent, and said second and said consolidated bonds being unsalable, and the sum of $500,000 in money being necessary to complete their railroad, on the 18th day of July, 1876, executed a fourth, called a preference mortgage of all the property, rights, tolls and income described in said first mortgage to said Poland, trustee, in trust to secure the payment of $500,000 in joint preference bonds, issued by said companies, and upon the other trusts expressed in said first mortgage. And it was provided in said last-named mortgage that no bonds should be issued under it, until the holders of first-mortgage bonds to the amount of' eighteen hundred thousand dollars, should have signed an agreement in writing, in the following words, to wit: “We,
A cross-bill was filed by the trustees under the first mortgage, with like prayer for relief. The bill and cross-bill also contained an allegation that the orator was informed and believed that said companies, in running and operating their roads, jointly became and were indebted for services and supplies furnished for such purpose to various persons who claimed to have some kind of equitable lien on the roads, or the personal property thereon, or the earnings and income thereof, and that George E. Howe of St. Johnsbury, Vt., and Capen, Sprague & Go. of Boston, Mass., claimed to be creditors of that class, and asked that they might be made defendants, to represent their own claims and all others having like claims. Receivers were appointed October 18, 1877, upon the filing of the original bill, who immediately took posses
The first question presented upon this appeal is, whether the preference bonds are entitled to the priority which the parties concerned in their issue intended they should have. No one of the first-mortgage bondholders who assented to the issue of the
The questions arising upon the cross-bill of George E. Howe and others are new in this State, but are of easy solution. These orators as a class are seeking to enforce a common right against a common fund which they claim is, in equity, chargeable in their favor. The bill is not multifarious, and these orators have a proper standing in court. They insist that the companies were indebted to them at the time receivers were appointed, for service
“ Section 101. All mortgages of railroad franchises, furniture, cars, engines, and rolling stock of any kind, when properly executed and recorded, shall be effectual to vest in the mortgagee a valid mortgage interest in and lien upon all such property without delivery or change of possession ; and for the purpose of mortgage, all such property shall be deemed part of the realty.
“ Section 102. Provided, nothing in the preceding section shall prevent such furniture, cars, engines, and rolling stock, from being attached by any person having a claim against the corporation owning such property, for an injury sustained on the road of said corporation by reason of any neglect of said corporation, or for services rendered or materials furnished for the purpose of keeping said road in repair, or in running the same, or for any liabilities as common carriers, or for the loss of any property while in the possession of said corporation ; and such property, when so attached, may be taken, held, and disposed of in the same manner as it could have been if that section of this chapter had not been passed.”
At the time the several mortgages above described were executed, we had no law in this State authorizing the execution of chattel mortgages, and but for this section (101) such mortgage of chattel property by railroad companies would be invalid as against creditors and purchasers. To obviate this embarrassment section 101 was passed, enabling railroad companies to make a valid mortgage of personal property. But section 102 is a proviso to section 101. , The intent of the section is that such a mortgage shall be inoperative against the liabilities specified. It affirms the right to attach the chattel property, and hold and dispose of it in the same manner it could have been done if that section had not been passed. If that section had not been passed such mortgage, without change of possession, would be void as to creditors.
The master’s report shows that the chattel property, when taken by the receivers, was worth enough to satisfy these preferred claims. It has been used in the operation of the road, and, consequently, some of it has been consumed and destroyed, and all of it much worn and depreciated in value. Other property of like kind has to some extent been supplied in its place, but this is not all available to these creditors. The property taken by the receivers was ample security for the payment of these creditors. The receivership must be made debtor accordingly, and held to respond from such resources as it has, properly applicable' for that purpose. The ground of the application for the receivership was, the danger that these creditors would attach the chattel property, and that all its earnings and the earnings of the road would be taken to pay the unsecured creditors. This application could have been fully answered by an injunction. In that case, security for consequential damages would be furnished by bond, and the property would have remained in the custody of the mortgagor, pending the proceedings to foreclose. The receivership without bond of indemnity cannot be permitted to operate differently upon the claims, rights, and interests of the unsecured creditors from an injunction, nor work a greater embarrassment upon the assertion and realization of such claims, rights, and interests.
We have thus far considered the equity of these creditors to have this chattel property made available to them, as flowing from the priority given them by the statute in question. But there is another ground, equally tenable, upon which the receivership is equitably bound to respond by applying the net income of the railroad property in payment of these debts. As we have seen,
What creditors under the statute have this preferred right to
The ground and reason of giving to a creditor who has furuished materials for repairing, erecting, or operating a factory a lien upon it or its machinery, is, that such supplies have been incorporated into the building, and thus not only lost their identity, as chattels, but have increased the value of the principal thing to which they are annexed. Stout v. Sawyer, 37 Mich. 313 ; Grosz v. Jackson, 6 Daly 463. Phillips Liens, passim. If a printer who supplied posters and tickets to officials running a steamboat or a theater, could fasten a mechanic’s lien upon the boat or building, upon the theory that he had furnished materials for such structures within the meaning of the statute, he could gain a like priority in this case. Such is not, however, the construction given to this word as used in the statute relating to mechanics’ liens, and it ought not to be so construed in the statute in ques
The decree below, dismissing the cross-bill of the preferred creditors, must be reversed, and such of them as have brought themselves within the statute, are entitled to relief.
In view of the condition of the road and its duties to the public and its security holders, a reasonable time should be allowed to the parties in interest to provide for the payment of these claims without serious embarrassment to the operation of the road, and failing to make such provision, the chattel property named in the statute should be sold under the order of the court, and the proceeds ratably applied in payment of these claims, and if any part thereof then remains unsatisfied, the net earnings of thé receivership must be applied to extinguish the same.
The cause is remanded, with mandate embodying the views herein expressed.