77 Neb. 580 | Neb. | 1906
The Kearney Power & Irrigation Company is a corporation organized under the laws of this state. The general nature of the business of the corporation is thus stated in its articles of incorporation: “The owning, constructing and operating canals, reservoirs, dams, and other works for irrig-ation and water power purposes, including the power to lease its own property, and to acquire by purchase such canals, reservoirs, and other works for irrigation and water power purposes and the application of such power to all purposes, including the power to execute mortgages or deeds of trust to secure such bond or bonds as may or shall be issued by the said company in furtherance of the objects of its incorporation.” On the 15th day of July, 1898, it executed and delivered to the Mercantile Trust Company of New York, as trustee, a mortgage on a ditch or canal near the city of Kearney, including the right of way and other property and rights, to secure a bond issue of $150,000 in bonds of $500 each. Of these bonds only 274 were disposed of, the remaining 26 require no further mention. On the 1st day of November, 1889, the mortgagor entered into a contract in writing with the Northwestern Electric Heat & Power Company, a corporation, whereby for a consideration therein named the latter was given the right to take water from the canal in question for the period of 15 years, with the privilege of a renewal of the contract on the same terms for an additional 15 years, at its option, for the purpose of furnishing power for its electrical machinery. Default was made in the payment of the interest on the bonds, and on the 9th day of September, 1903, Sammons brought this suit to foreclose a mortgage, alleging that he was the holder of 239 of the bonds. The defendants all defaulted. Sarah Miller, claiming to be the owner and holder of some of the bonds, was permitted to intervene and joined in the prayer of the plaintiff for a foreclosure of the mortgage. The Northwestern Electric Heat & Power Com
The plaintiff assigns several errors, but they all turn on the single question: Hid the court err in providing in the decree that the sale thereunder should be subject to the rights of the intervening company under its contract with the mortgagor? The plaintiff invokes the general rule to the effect that, where a corporation mortgages its property, the mortgagee is not bound by subsequent contracts of the mortgagor with respect thereto, whether such contracts .are leases, sales, mortgages, or other contracts. 3 Cook, Corporations (5th ed.), sec. 860; 5 Thompson, Commentaries, Law of Corporations, sec. 6239; Jones, Railroad Securities, secs. 567-569. .See also 41 Cent. Dig. “Railroads,” sec. 685. The foregoing rule is easily recognizable, as it is grounded on the general rule applicable to all mortgages that an interest subsequently acquired by a third party in the mortgaged property is subject to the mortgage; but the question is whether the facts in this case bring it within that rule. It will be conceded, notwithstanding the positive language in which such rule is stated, that it would be competent for the parties to a mortgage to take it out of the operation thereof by express stipulation. That is to say, that, in case the mortgage should expressly provide that the mortgagor should be authorized to lease the property or portions
The granting clause of the mortgage, after describing the canal and right of way, is as follows: “Together with all reservoirs, dams and lakes connected with or forming a part of said canal, including three lakes now known as ‘Lake Echo,’ ‘Lake Greenwood’ and ‘Lake Kear-ney’ ; also all parcels and tracts of land purchased for or used by such company in the construction of head gates or basins or other purposes connected with the said canal; and also the right and franchises of said company to construct, maintain, operate or use said canal, and to lease or sell waters therefrom for irrigation, town, city, power or other purposes, and all erections and buildings, and all machinery of every kind, nature and description, engines, reservoirs, pumps, wells, pipes or other constructions of every kind and description, tools, implements and fixtures of every kind and nature made, manufactured, constructed, built, laid, purchased or in any way acquired in or about the construction, maintenance and operation of said canal, and which may hereafter be made, manufac
From the portions of the mortgage just quoted it clearly appears (1) that the mortgage covered all the property of the mortgagor of every character; (2) that the mortgage was intended to cover not only such things in action, contracts, leases, claims and demands as existed when the mortgage was given, but all such as the mortgagor might thereafter acquire; (3) that such things in action, con
The plaintiff presents an argument of considerable force against the construction we have just placed upon the mortgage, which is based on the following state of facts: During the negotiations leading up to the execution of the mortgage, it appears to have been understood that the canal and entire plant covered by the mortgage should be leased.to the Kearney Cotton Mills for a term of ten years, with the privilege of an additional term of ten years, for a rental equal to 4 per cent, per annum of the amount of the prospective bond issue actually issued, the rent to be paid semiannually to the holder of the mortgage securing the bonds. A few days prior to the execution of the mortgage the mortgagor executed a lease on those terms to the Kearney Cotton Mills. The lease provided, among other things, that upon the nonpayment of the whole or any portion of the rent when the same should become due and payable, or upon a breach of any of the covenants and agreements of the lease by the lessee,
This brings us to the intervener’s cross-appeal. Its contract for the use of water contains this clause: “The
The principle involved in the case at bar does not, as it appears to us, differ from that involved in the case from which we have just quoted. The business of the irrigation company is of the peculiar character mentioned by the West Virginia court. In the latter there was an attempt to give one person engaged in transporting oil an exclusive right to occupy certain lands for that purpose, to the exclusion of all others who under the laws of that state had an equal right to use the land, after proper condemnation proceedings, for the same purpose. Here there was an attempt to give the intervener an exclusive right for a term of years to use water which under the law the irrigation company was bound to furnish to the public on equal terms, and the one, no less than the other, is contrary to public policy and illegal.
But the intervener takes the position that the question of the validity of that clause of the contract is not involved in this case and,-consequently, that the determination thereof by the trial court is error.. This position is clearly untenable. The intervener came into court asserting the priority of its rights under its contract with the
Other questions are presented by the cross-appeal; but, in the view we have taken of the case, they are not such as affected the rights of the intervener, consequently they will not be considered.
It is recommended that the decree of the district court be affirmed.
By the Court: For the reasons stated in the foregoing opinion, the decree of the district court is
Affirmed.