delivered the opinion of this court.
The rights and liabilities of the parties to this cause, springing from and depending, in a great measure, upon the Acts of the General Assembly, in the proceedings referred to, we deem it necessary to a proper understanding of the character and magnitude of the interests involved, to prefix a summary of their provisions.
By an Act of the General Assembly of Maryland, passed on the 10th of March 1854, entitled, “An Act to authorize the consolidation of the Baltimore and Susquehanna Rail Road Company with the York and Maryland Line Rail Road Company,” &c., the stockholders of the Baltimore and Susquehanna Rail Road Company were authorized to unite and consolidate their company, or corporation, with the York and Maryland Line Rail Road Company, the York and Cumberland Rail Road Company, and the Susquehanna Rail Road Company in the State of Pennsylvania, so as to form and constitute one
•On the same day, by an Act, entitled, “'An Act to provide for the sale of the interest of the State of Maryland in the Baltimore and Susquehanna Rail Road Company, and for the completion of the Northern Central Railway,” <fc., it was enacted, “that whenever the corporation, authorized by this General Assembly to be created by the consolidation of the Baltimore and Susquehanna Rail Road Company^,” and the other companies above mentioned, to be known by the name of the Northern Central Railway Company, “shall have been duly established and erected, in conformity with the Act of this General Assembly, and an Act of the General Assembly of Pennsylvania, authorizing the same, and shall execute and acknowledge, and cause to be recorded in due form of law, in the city of Baltimore, and in all the counties of Maryland and Pennsylvania, in which the same may'' be, a mortgage to the State of Maryland of the entire line of railroad belonging to the said, company, from Baltimore to Sunbury in Pennsylvania, with all the revenue or tolls thereof, to secure to the State of Maryland the payment of the annuity of $90,000, and shall, in all respects, comply with the provisions of this Act,” then the treasurer of the State was authorized to execute and deliver to said company and its assigns, in perpetuity, a conveyance and release of all the estate and interest of the State of Maryland, in the then Baltimore and Susquehanna Rail Road Company, and all its property, whether as stockholder, creditor or mortgagee. It was further enacted, that the consolidated company, in the execution of the mortgage, should covenant and bind itself to pay to the State of Maryland from its
On the 27th of January 1855, the Northern Central Railway
Thé State filed its information on the 18th of December I860-, in the Circuit court for Baltimore city, suggesting that the Northern Central Railway Company was then in arrear $>92,500', of the principal annuity, besides interest;—that it realized profits more than sufficient to pay the State, which, in violation of its covenants, were misapplied, and appropriated to the payment- of junior .obligations,- and especially to the payment of interest on' bonds,- amounting to $>2,500j000, issued long' after the mortgage, and it apprehended the company intended to apply its future earnings,-and earnings then in hand, in- payment of interest on said bonds";—that the company had no effects out of which the State could realize its aforesaid claims, except the property mortgaged, and had no adequate means to enforce the payment of arrears,'except by sequestrating the tolls and revenue.
The information prayed that the company be enjoined from applying'the tolls and revenue to any other purpose, save only to the cost of working the railway, and maintaining the same in good order; and that a receiver may be appointed to take charge of said railway and other mortgaged premises, and work the same, and apply the revenues thereof, under the direction
An injunction having issued,- as prayed, the respondents, the Northern Central Railway Company, filed their answer on the 27th of February 1861,- in which, after admitting' the mortgage, the arrears of the annuity,- they allege “no subsequent payments have been made on account of said- annuity, owing to the fact of all the net receipts of said road béing absorbed by other legitimate and more urgent objects.”
“And it further saith, that the bonds, subsequent in priority to the annuity, upon which it has paid the interest, were bonds given for construction, and that it was considered a matter of necessity to make such payment, in support of its credit, which would have been utterly ruined by a default, but which, by this means,- was so sustained, as not to drive it to the extremity of making ail its purchases for cash: an extremity which it is not too much to say,-would have practically brought the company’s operations to a stand.” The respondents further say, the State has -not the first lien on the road in Maryland or Pennsylvania, but there are $150,000, prior liens on the former, and $700,000, prior liens on the latter;—that the State had no right to file the information, on the day it was filed, and objects that, this court hath no jurisdiction of the case made by the information,-and prays to have the benefit of the objection, as fully as it could have by any form of pleading.
The injunction granted, upon filing the bill, or information, was, on motion of the complainant, and with the consent of the Northern Central Railway Company, dissolved, without prejudice to the equity of the complainant, to move that the same shall be reinstated at any time thereafter, and the motion for a receiver was postponed. The complainant, afterwards, moved to reinstate the injunction and appoint a receiver, whereupon the respondents, the Northern Central Railway
The respondents (the appellees) insist:—
1st. That taking the bill and answer together, there was no-default on the part of the company, at the time of the application.
2d. Throwing out of consideration-the answer,-there is no-jurisdiction in equity to grant on the bill alone the injunction, or appoint a receiver.
3d. The case should be dismissed^ for want of jurisdiction-to entertain the appeal.
The last position, lying at- the threshold, (and being decisive of the action-of the court,) will be considered first.
The 21st and 25th sections of Article 5 of the Code, and the-interpretation of the latter section, in the case of Steigerwald vs. Winans, 17 Md. Rep., 62, have been referred to, in support of the motion to dismiss the appeal. We are saved the necessity of examining these, by the special Act passed at the present session,. entitled “An Act authorising the Court- of Appeals to hear and determine, at the present term thereof,- the appeal of the State of Maryland, on the information of the State of Maryland, against The Northern Central Railway Company.” It is too late to question the power of the Legislature, to confer-on the Court of Appeals the right to hear appeals in special cases; but such a law, to be constitutional, must leave the judicial functions of the court untrammelled. Prout vs. Berry, 2 Gill, 149.
The Act above cited,- does not divest any. right or- infringe upon the judicial powers of the court. It refers to it all such questions as may fairly be presented by the transcript, touching the construction and operation of themortgage from thesaid company to the State, and the equity of the State to be relieved by the issuing of an injunction and appointing a receiver as prayed, and “the right of the company to off-sets or discounts as claimed in. said.cause.”- All these questions were necessa
The Act for an appeal in this case, being, in our judgment, constitutional, it devolves upon us to determine whether the bill and answers taken together, present a case for an injunction and receiver, and what property is subject to the complainant’s lien. It is manifest from the Acts of Assembly above referred to, the bill, answers and exhibits, that in the consolidation of the several companies therein named, and the merger of the Baltimore and Susquehanna Rail Road Company in the Northern Central Railway Company, all the existing contracts of the Baltimore and Susquehanna Rail Road Company were to continue to bind the said company and its property,
The bill alleges that the quarterly payments of the annuity are in arrear to the amount of $92,500; that the defendants are in possession of the road, realizing large profits over and above the co3t and charge of working, managing and keeping the same in repair, and that the excess of profits has been more than sufficient to satisfy the State’s annuity; that the defendant, in violation of i.ts covenants, has applied from time to time, large sums of money, parcel .of said excess of profits, to the payment and satisfaction of other debts junior in lien and obligation. The original and supplemental answers admit these allegations, but the latter introduces new matter not responsive to the bill, and which is nut properly before us at this stage of the cause, as will be hereafter shown.
The respondents, in attempting to excuse their default on the plea of necessity, exhibit such a degree of extreme pecuniary pressure, as made it the imperious duty of the court to assert its legal rights in order to protect, if not to preserve, the large amount loaned to the respondents. If the condition of the company was such, that the misapplication of its pledged toils and revenues, was necessary to a support of its credit, which would have been otherwise litterly ruined, or the operations of the company practically brought to a stand, the crisis was such, as to require a creditor having only a second lien on a part of the respondents’ property, and a third and fourth on other parts, which lie beyond the jurisdiction of the State, to
The plea to the jurisdiction of the court below, is not tenable, either on the ground that the respondent’s property lies in part in another State, or that its corporate existence is derived in part from a charter of another State. Corporations owing their corporate existence in part to the State of Maryland, and exercising their franchises therein, may be restrained here, from expending their funds for any oilier than corporate purposes any where. 2 Bland, 99, 147, 148. “Process issued by any court of this State, against a corporation holding and exercising franchises within this State, may be served upon the president or any director,'' or manager, or other officer of such corporation.” 1 Code,page 540, secs. 99, 101, 102. It follows, that this body politic must, for the purposes of justice, be treated .as a separate corporation by the courts of justice of each government, from which it derives its being, that is, as a domestic legal entity to the extent of the government under which it acts, and as a foreign corporation as regards the other sources of its existence.
The principies upon which the preventive powers of courts of equity are exercised, are too well known to need repetition. As a general rule, .an injunction before final hearing, does not determine any right, does not necessarily prejudice any party; its province is to preserve the property or fund in controversy, and effect ultimate justice. The instances in which it has been resorted to, are innumerable. In a variety of cases, as for instance, patent cases or cases of waste or nuisance, the English courts are in the habit of exercising their preventive and conservative powers, for the purpose of preserving the subject of litigation, from waste, injury or total loss, pending the controversy.
In general, where personal property, or the rents and profits of real estate in dispute, are in imminent danger of being wasted or lost, a receiver may be appointed to take care of it for the benefit of all concerned during the controversy. 1 Bland, 579, Duvall vs. Waters. Lord Hardwicke considered this power of appointment to be of great importance, and most beneficial tendency. 3 Atk., 564. 2 Story’s Eq., sec. 831. It is a discretionary power exercised by the court, with as great utility to the subject as any authority which belongs to it, and is provisional only for the more speedy getting m of a party’s estate and securing it for the benefit of such persons who shall appear to be entitled, and does not at all affect the right. Danl. Ch. Pr., 1949, 1950.
The leading cases in this Statcare, Clark, et al., vs. Ridgely, 1 Md. Ch. Dec., 70; Thompson vs. Diffenderfer, Ibid., 489, and Blondheim vs. Moore, 11 Md. Rep., 374. In the first it was held, that “the authority and; duty of the court to appoint or not to appoint a receiver, depends upon'the question whether the property is or is not in danger, in the hands of the party who may at the time be in possession. It was said by the court in the case in 1 Hopkins, 422, a receiver is proper, if the fund is in danger, and this principle reconciles the cases found in the books.” In the latter, all- the cases are summed up, and this conclusion, among others, is1 deduced, “that fraud or imminent danger, if the immediate possession should not be taken by the court,-must be clearly proved.”
The complainant occupies the relation- to the respondents in this case, of second and third incumbrancer; the subject- of the mortgage, is not susceptible of occupation by the complainant or any of its agents, without the intervention of the courts of this State, or of Pennsylvania; the relief prayed,-the sale of the railroad, cannot be effected without, protracted litigation, and tbe tolls and revenues whicii are expressly pledged, are in the mean time diverted-to the payment- of debts of junior obligation and lien. Besides these obstacles to the ordinary remedies of a mortgagee,- the greater part of the line of the railroad, lying without the State, the tolls and revenues, being claimed by adverse creditors or subject to various conflicting incumbrances, can only be collected and held by an officer of a court of equity, consistently with the rights of the parties litigant.
If the State courts have no jurisdiction over the subject of controversy, as contended by the ■ respondents, beyond the limits
The consideration, that the authority of this court cannot extend beyond the territorial limits of the State, in the exercise of its remedial power, does not deter it from acting in a case within its acknowledged jurisdiction, to the verge of those limits. It will not entertain a doubt that the company, owing its corporate existence, in a large measure, to the State, will recognize, with promptness, the judicial authority of its courts.
The argument uab inconvcnienti,” if admitted, would effectually preclude the complainant and all other creditors, from seeking’ relief in the courts of this State, against corporations, whose property and franchises extend through more States than one. Our courts have frequently exercised jurisdiction in similar cases. See Binney vs. The Canal Company, 2 Bland, 99; Ches. & Ohio Canal Company, vs. Balto & Ohio Rail Road Company, 4 G. & J., 1.
That it is not against public policjr to appoint a receiver over the property of corporations, is shown by the decisions in Fripp vs. Chard Railway Company, 21 Eng. Law & Eq. Rep, 53; Covington Drawbridge Company vs. Shepherd, 21 How., 112, and White Water Valley Canal Company vs. Villette, 21 How., 422, in which cases receivers were appointed.
The case of Booth vs. Clark, 17 How., 330, shows only’ that the power of a receiver does not extend to the collec
The mortgage conveying to the complainant the entire line of railroad belonging to the said company, from Baltimore to Sunbury in Pennsylvania, with all the revenue or tolls thereof, it becomes necessary to inquire, in order to determine the extent of the power and duties of the receiver, what passes under the mortgage deed. In Seymour vs. The Canandaigua & Niagara Falls Rail Road Co., 25 Barbour, 309, 310, where a railroad company executed a mortgage upon its railroad constructed and to be constructed, a question arose whether the branch track from the main tract at Tonawanda, to the Niagara river, or to the docks on the banks of the river, passed. This branch was not laid out at the time of the original location or mortgage, and was not then projected or located. It was held to be covered by the mortgage as an incident to the principal subject of the grant, upon the maxim, that whoever grants a thing is supposed tacitly to grant that, without which the grant would be of no effect. “ When a thing is granted, all the means to attain it, and all the fruits and effects of it, are granted also. It is a rule of law, that the incident passes, by the grant of the principal: whatever is essential to the use and enjoyment of the principal thing.” Brooms Maxims, 198. Shep. Touch., 89. Broom, 205. 4 Kent, 467. In the case of Farmers Loan Trust Company, vs. Hendrickson, 25 Barbour, 484, the mortgages were of all the pieces or parcels of land, forming the track or road,way of the company, ifc., also of all engines, tenders, cars, tools, 5fc., together with tolls, rent or income to be had .or levied.
. The tolls and revenues of the Northern Central Railway Company being expressly pledged by the mortgage in this case, we entirely concur with the opinion of the court in the case last quoted, that the mortgage covers not only the line of the road from Baltimore to Sunbury, but all the rolling stock and fixtures, whether movable or immovable, essential to the production of tolls and revenues.
The motion to reinstate the injunction, is equivalent to an application for an injunction after bill and answer filed, and'
The supplemental answer does not anywhere positively and directly qualify the admissions contained in the original answer, but indirectly and argumentatively says, that it hath paid to the State, since the information was filed, large sums on account of the annuity mentioned in said information, and that with the exception of a trifling amount for interest, believed not to exceed two or three hundred dollars, and which it is ready at any moment to settle on ascertainment thereof, there is nothing whatever due by it to the State, for the instalment of the annuity, accrued before or since the information was filed, though the State claims a further amount, which this respondent denies to be justly claimable under the circumstances hereinafter detailed.
The respondents aver, that on the morning of the 20lh of April 1861, a number of bridges upon the railway of, and belonging to, the respondents, within the limits of this State, were burned, and made impassable and destroyed;—the object was to render the communication between Baltimore and the Pennsylvania portion of the railway impracticable for passengers or freight. The agents, through whom this destruction was accomplished, were ordered and directed in the premises, by the Mayor and members of the Police of the City of Baltimore, and the Governor of the State was made aware of
The new matters introduced by the respondents in their supplemental answer cannot, according to the decisions above cited, be considered on the motion to dissolve or reinstate the injunction. They cannot be assumed to be true without proof; and if proved, they do not constitute such grounds of set-off as are available in courts of law or equity. It is not denied, that in equity set-offs will be allowed where reason and justice require it, although not authorised by any statutory enactment, (9 Gill, 89,) yet there is no principle of discount, set-off or recouper, known to this court, which would enable it to recognize, as .a debt, obligation, or liability for damages liquidated or unliquidated, the amount claimed by the respondents in their supplemental answer.
Deeming the order of the circuit court for Baltimore city, passed on the 29th day of October 1861,.erroneous, the same is reversed, with costs to the appellant; and it is further ordered and decreed, that this cause be remanded to the said court.
Order reversed and cause remanded.