This is an action in equity to compel the defendant, as trustee under the general mortgage of the Lehigh and Hudson Biver Bail-way Company, dated July 1,1890, to deliver certain bonds reserved under the provisions of article 19, subdivision 2, of said mortgage, and the only question presented upon this appeal is the proper construction of the mortgage' contract. The learned court at Special Term has construed the contract according to the contention of the plaintiff, and has directed the defendant, as trustee, to issue the bonds in controversy. The defendant appeals from so much of the judgment as directs this issue, though in form the appeal is from the entire judgment, this being inadvertent.
On the 1st day of July, 1890, the Lehigh and Hudson Elver Bail way Company, for the purpose of securing its issue of $3,000,000, five per cent thirty-year gold bonds, made, executed and delivered to the Central Trust Company of Hew York, as trustee, its general mortgage. By the granting clause the mortgagor conveyed to the trustee all its railroad, beginning at Greycourt, in Orange county, H. Y., and continuing to the terminus of said road at Belvidere, in Warren county, H. J., being about sixty-three miles in length, including all lands, water rights and all property of every name and nature, and all privileges and franchises acquired, “ together with all the streets, ways, alleys, passages, waters, watercourses, easements, rights, liberties, privileges, hereditaments and appurtenances whatsoever unto any of the hereby granted and mentioned premises and estates belonging and appertaining, or to belong and appertain, and the reversions and remainders, rents, issues and profits thereof, and all the estate, right, title, interest, property, claim and demand, of every nature and kind” of the railroad company. That is, the mortgage undertook to place the mortgagee in exactly the same position that the railroad company occupied in respect to the railroad and its property rights, so that in the event of the foreclosing of the mortgage the trustee would take all that the railroad company owned in connection with the railroad property. In addition to the above property there was also pledged as further security 2,000 shares of the capital stock of the Orange County Bailroad Company, o'f - the par value of $100 each, this constituting the entire *306capital of the company ; 750 shares of the capital stock of the South Easton and Phillipsburg Railroad Company, of the par value of $100 ' each, and 1,500 shares of the capital stock of the South Easton and Phillipsburg Railroad Company of Pennsylvania, of the par value of $50 each. The granting clause also conveyed all rolling stock and equipment, with certain lease rights, and all after-acquired property, and the mortgage provided that until there was a default the railroad company was to retain possession and control of the property, and to receive and use the tolls, incomes, rents, revenues, issues and profits thereof. There was a provision that 50 shares of stock in each of the corporations whose stock was included in the mortgage should be held ouf' for the. purpose of qualifying directors, but all to be held subject to the trust provided in the mortgage.
It appears that those several corporations whose stock was thus mortgaged were operated in connection with the Lehigh and Hudson River Railway Company’s railroad. Indeed, it may. be gathered from the record that the Orange County railroad was practically constructed by the Lehigh and Hudson River Railway Company, which owned all of its stock, and that, at various times subsequent to the making of the mortgage the plaintiff advanced money to the Orange County Company to pay its operating expenses, that company having no equipment, and serving, no other purpose than as a means of reaching the plaintiff’s practical terminal. It was, therefore, provided in the mortgage that “ the assignment of the aforesaid shares of stock shall, not prevent the consolidation and merger of any one or more of the companies, the stock of which .is hereby mortgaged, with any other or others of said companies, or with the Lehigh and. Hudson River Railway Company, or the purchase of the railroad and property of any one or more of said companies by the Lehigh and Hudson River Railway Company,, but such consolidation and merger or purchase may be made under any existing or future laws, anything in this mortgage contained to the contrary notwithstanding. ' Upon such consolidation and merger •or purchase, the Railroad Company shall duly execute and deliver a supplemental mortgage conveying to the trustee all the railroad and other property so consolidated and merged or purchased, to be held by. it under the terms hereof, with like effect as if .specifically described herein, and the trustee shall, upon the request of the Rail*307road Company, deliver up to it all the certificates of stock of the company so consolidated and merged or the railroad of which company has been purchased, which may have been deposited under this mortgage.” Clearly the purpose of this provision was to substitute the property of the merged corporation for the stock which was delivered under the mortgage; it was to make the lien apply to the tangible property in the place of the representative of that property which had already been deposited, and in practical effect contemplated no actual change in the situation of the parties.
The mortgage provided, among its many terms, that the trustees should authenticate and deliver to the railroad company upon its written request all bonds secured thereby, except $1,750,000 par value thereof, which were reserved for the purpose of taking up certain' prior issues therein mentioned, and $330,000 par value of said bonds, in respect to which the mortgage provided that the “ general mortgage bonds so secondly excepted from certification shall nevertheless be certified by the trustees and delivered to the Railroad Company from time to time upon its written request at the rate of thirty thousand dollars per mile for every mile of additional railroad acquired by the Railroad Company, either by construction or purchase, whether such purchase be evidenced by conveyance or by securities representing the ownership thereof, provided, however, that such additional railroad, or the securities representing the same, shall be made subject to the terms of this mortgage as further security to the bonds secured hereby.” Subsequently the Orange County Railroad Company, being indebted to the Lehigh and Hudson River Railway Company to the extent of $342,326.43, steps were taken which resulted in the consolidation of that corporation with the plaintiff, and a supplemental mortgage, complying witli the terms of the original mortgage, was made and executed and delivered to the defendant, and the plaintiff thereby became entitled to the delivery of the 2,000 shares of stock which it had deposited with the defendant. The defendant does not question this right, which is a part of the relief demanded, but it does deny that the plaintiff, by taking over the Orange County Railroad Company’s line, consisting of something over ten miles of track, became entitled to the certification and delivery of $300,000 of par value bonds under the provision for acquiring additional railroad to be found in *308the nineteenth provision of the mortgage,' and quoted in part above.
Notwithstanding that the learned court below has found in favor of the plaintiff, we are unable to construe this contract in harmony with the decision. The original mortgage had conveyed to the trustee, for those who were to become the bondholders, all the property of - every kind and -character which it owned, including all of the stock of the Orange County Railroad Company, which was undoubtedly organized for the very purpose of consolida- . tion with the Lehigh and Hudson River railroad, and the value of the plaintiff’s road concededly hinged very largely upon this Orange County railroad, which afforded the connecting link in its road with other carriers. The stock represented' the ownership of the road, and while it is probably true, as a matter of law, that its indebtedness to the plaintiff was a matter to be provided for before this ownership could have been made available to the bondholders* the mortgage unquestionably contemplated that it was taking over the entire property as it was being operated, subject to its operating' expenditures, and this is what the Orange County indebtedness appears to have been made up of, and was, in all probability, a mere matter of bookkeeping in the practical operation of the line as a whole pending the consolidation. All of this was provided for in the 15th paragraph. There was express permission to do just what was done, and the details were all arranged at that time and for that. contingency. The 19th paragraph was dealing with another situation. There were $330,000 par value of bonds not disposed of by the agreement ; no one was authorized to certify these for issuance under the mortgage, and to provide for this, and to provide for the extension of the railroad, it was written that these bonds should “ be certified by the trustees and delivered to-the Railroad Company * * * at the rate of thirty thousand dollars per mile for every mile of additional railroad acquired by the Railroad Company, either by construction or purchase, whether such purchase be evidenced by conveyance or by securities representing the ownership thereof.” The . meaning is clear ; this $330,000 of bonds was to be issued for newly-acquired road, either by, construction of new road, or 'the taking over of the securities, representing the ownership, as had been done *309in the case of the- Orange County Railroad Company and others. “ Additional railroad ” did not mean merely a change in the form of ownership of the railroad property already covered by the mortgage, but new line added to that which was already in the control of the mortgagor. Any other construction of this proposal on the part of the plaintiff to those who were to purchase these bonds does violence to language, and operates to lessen the value of the securities which are now outstanding, and which have been purchased in reliance upon this proposition made by the plaintiff. The mortgage in equitable contemplation not only conveyed the road and its equipment, subject to the terms of the mortgage, but it conveyed the earnings; these could not be diverted from the legitimate purposes of the railroad, and such of them as' were required for the operation of the Orange County railroad were properly used, and if these advances constituted the purchase price of the property, this was all provided for in the 15th clause of the agreement under which the trustee holds the projierty. The further provision in the 19th clause is to provide means for constructing or purchasing “ additional railroad ” either directly, or as had already been done in the case of the Orange County railroad, by taking the stock “ representing the ownership thereof.” It is a very common practice with railroad corporations to effect a change in route, or to reach a destination not originally contemplated, to organize an independent corporation, construct the road, and then, under the provisions of the General Railroad Law, to consolidate the new line with the old, and this is done by advancing the money and holding the stock as the representative of the ownership, and this mortgage clearly contemplated that something of this kind might be desirable. The language used is proper for this purpose, but it is entirely inconsistent with the contention of the plaintiff, which now seeks, under a forced construction of its own language, to pour $300,000 of “ water ” into an issue of' $3,000,000 of bonds.
The judgment, except in so far as it provides for returning the stock of the Orange County railroad, should be reversed, with costs.
Burr, Rich and Miller, JJ., concurred; Hirschberg, P. J., dissented. - ■
Judgment reversed and new trial granted, costs to abide the final award of costs.