Phillips v. Winslow

Judge Simpson

delivered the opinion of the court.

These actions in equity were brought by Winslow as trustee. His title to the property in contest is derived under two deeds, executed to him by the Covington and Lexington railroad company, one bearing date the 8th of April, 1853, and the other the 1st day of June 1855. The deeds were executed to enable the corporation to borrow money. They both purport to convey to the trustee, to secure the payment of the money borrowed, “all the * present and in future to he acquired property of the ‘ parties of the first part, that is to say: their road ‘ made or to be made, including the right of way *444‘ and land occupied thereby, tog-ether with the super- ‘ structure and tracks thereon, and all rails and other ‘ materials used therein, or procured therefor, and en- gines, tenders, cars, tools, materials, machinery, contracts, and all other personal property, right * thereto, or interest therein, together with the tolls, ‘ rents, or income to be had or levied thereupon, and c all franchises, rights, and privileges of the said ‘ parties of the first part of, in, to, or concerning the * same.”

The corporation had made a previous deed on the same property, in precisely the same language, to John A. Stevens and Charles N. Fearing, to secure the payment of the bonds of the company to the amount of four hundred thousand dollars. The grantees in this first deed, therefore, were invested with the legal title to the property embraced in the deeds.

The defendants in the action, being judgment creditors of the corporation, sued out their respective executions, and caused them to be levied on two freight cars of the company, then on the track, eight ear wheels at the car shop, twenty-five cords of fire wood obtained for the use- of the engines and locomotives, and five hundred bushels of stone coal at the machine shop. The proceedings under Woodward’s execution were enjoined before a sale was made by the officer, but the property was sold under the execution in favor of Phillips and Jordan, &c., and was purchased by them. Its removal was enjoined in the action in which they were defendants, and the injunctions in both cases were sustained and perpetuated by the judgment of the court below on final hearing.

The first and most important question that arises in these cases is do the deeds to the plaintiff include the property upon which the executions of the defendants were levied? If they do not, he has no ¡right or title to the property, and cannot maintain his *445actions even although the property was not subject either to levy or sale.

1. The power to pledge the franchises and rights of a corporation implies, as incident thereto, the power to pledge everything that may be necessary to the enjoyment of the-franchise.

The plaintiff did not allege in his petition in either case, that the property belonged to the railroad company at the time the deeds were executed, it may therefore be assumed that it ■ has been subsequently acquired by it.

The company, • by its charter, was authorized to borrow money, and execute such evidences of indebtedness as might be deemed proper, and pledge the property, franchises, rights and credits of the corporation for any loan, liability, or contract which it had made, or should make.

We do not deem it necessary to-decide in this case whether, under ordinary circumstances, a mortgage on subsequently acquired property would be valid, or pass any title to the property. These deeds were made under the power conferred by the charter, and their validity and effect have to be determined by the provisions of the- charter, and not by the general law upon the subject. The object in conferring this power on the corporation was to enable it to borrow money for the purpose of constructing the road, and putting it into full and complete operation. The power to pledge the franchises and rights of the corporation implies, as incident thereto, the power to pledge every thing that may be necessary to the enjoyment of the franchise, and upon which its real value depends. It could not have been intended by the legislature merely to. confer a power to pledge the naked franchise, which belonged to the corporation, without the right also to pledge such things as were incident and indispensable to its use and énjoyment, and without which it would be of no value whatever1. A power of such limited operation would have been of no avail, in- the then condition of the road, and would not have accomplished the object contemplated by the legislature and -the company. The corporation was authorized to pledge not only the existing property of the road, but the corporate *446rights and franchises, and the railroad itself, as an entire thing. To render such a pledge effectual it was necessary that it should embrace all such future acquisitions of the corporation as were proper accessions to the thing pledged, and essential to its enjoyment, and the power thus to extend it was implied in the grant itself. Of what value would the railroad be without the cars on the road, and the fuel necessary to run them? The bonds of the company were redeemable in thirty years. To secure their payment, the road of the company made and completed, including the right of way and the land occupied thereby, with the superstructure and track thereon, and all the rails and other materials used and to be used therein, and all engines, cars, tools, machinery, and all other personal property then owned, or which might be afterwards acquired by the company, together with all franchises, rights, and privileges of the company to use the road and collect tolls and freight, were conveyed in pledge by the company. Now it is evident that as the pledge was to continue during many years, new cars and engines and materials of different description would from time to time become necessary, and fuel would all the time have to be purchased as it was needed. These articles were therefore included in the deed, and as the business of the road could not be carried on without them the power to pledge the road itself, with its profits and privileges, and the rights and franchises of the corporation, carried along with it the implied authority to pledge all such future acquisitions of the company as were necessary and proper to the full and complete use and operation of the road itself.

2. A deed purporting to convey “alt the present, and in future to be acquired property of the party of the first part, that is to say, their road, made or to be made, including the right of way, and land occupied thereby .together with the superstructure and tracks thereon, and all rails and other materials used therein, or procured therefor, and engines,tenders, cars, tools, materials, machinery, contracts, and all other personal property, right thereto, and interest therein, together with the tolls, rents, or income to be had, or levied thereupon, and all franchises, rights, and privileges of the said parties of the first part, of, in, to,or concerning the same:”— Held, to include cars,wheels, firewood obtained for the use of the engines, and coal for the use of the machine shop, as things incident to and indispensable to the use and enjoyment of the thing conveyed.

*446We are therefore of the opinion that the property upon which the executions were levied was embraced by the deeds to the plaintiff, whether it belonged to the company at the time the deeds were executed or was subsequently purchased by it.

3. Under the Code, (sec. 4,) a pl’tff may prosecute his action by equitable proceedings, in all cases, where eery, before its /uHsTic tion; therefore a party having an equitable lien covered^by^an elder deed of hTs\Ten'Vsold tb^of* a^hird person, in disredeeds of trust* may appfy to a court of equity for a re delivery ed *or*aneorder restraining its where^no salé has been made, such party has a right to enjoin a eseecut*io*nSUin equity.

*447The next question to be considered is the jurisdiction of a court of equity in these cases, and its power to grant relief by enjoining the defendants from proceeding to dispose of the property under their executions. It is contended that they had a right to levy their executions on the equity of redemption, and to make sale thereof, and that for any wrong committed by them the plaintiff had an adequate remedy at law.

The plaintiff’s right to the property was merely equitable, inasmuch as it was covered by an elder deed of trust than those under which he claimed. Consequently, before the adoption of the Code of Practice, he could not have maintained an action at law against the defendants, but would have been compelled to resort to a court of chancery for relief; and under the Code a plaintiff may prosecute his action by equitable proceedings, in all. cases where courts of chancery before its adoption had jurisdiction. (Sec. 4, Code Practice.)

In one of these cases the property had been sold and purchased by the plaintiffs in the execution. In making the sale the deeds of trust had been disregarded, and the absolute right to the, property and not merely the equity of redemption therein, was sold by the officer. By this act, the levy itself became tortious by relation, and the sale was illegal. If the plaintiff had been invested with the legal title to the property he could have maintained an action of replevin or detinue against the purchaser for its recovery. (Fugate vs Clarkson, 2 B. Mon. 42.) As he only had an equitable title to it, he had a clear right to apply to a court of equity for relief, and was entitled to a judgment for a re-delivery of the property, if it had been taken into possession by the defendants, or to an order restraining them from a removal of it, if it had not been removed by them.

In the other case the property had not been sold, but the plaintiff alleged that the defendant had levied an execution upon it, and would sell it, unless *448restrained by the chancellor. As the plaintiff had a right to come into a court of equity for relief, on Bie ground that he had only an equitable right to the property, and as the defendant according to the allegations contained in the petition, was about to commit an illegal act, the court had the power to restrain him, and thereby prevent its commission. A court of law only affords relief, after the wrong has , , , . been done, but a court ox equity will interpose, and Prevent its commission, where it has jurisdiction of the case, and the act if committed would be evidently wrongful and illegal. The defendant did not Pl'°Pose seh merely the equity of redemption, but to sell the property itself.

But we are of the opinion that in these cases, the court had jurisdiction upon the ground, that the act . . . „ ,. .,. „ , complained oí was not only m violation of the P^m^ff’s right, but it was of a character which might produce great or irreparable injury to the plaintiff, and great inconvenience to the public.

If executions can be levied upon one car, they can . 1 be levied upon all the cars upon the road. If they can levle(l upon part of the fuel, they can be levied upon all of it, and thus the business of the road may be entirely suspended. Such a result would not only produce great injury to the plaintiff, but great inconvenience to the public. It would prevent all travel upon the road, and effectually destroy its business and its usefulness. If the property was subject to execution, the plaintiff would have no right to complain, let the consequences be what they might; but not being subject to execution, he has a clear right to apply to the chancellor for an injunction to prevent an act which might be productive of so great an injury; the right to redeem the property being a right that belongs to the corporation, is liable for its debts; but the defendants were not attempting to sell this equity of redemption, but the property itself, which they had no right to do*.

4. Since the Rev. Stat. (page 327,) a purchaser, under a sale of the equity of redemption, only acquires a lien upon the property for the repayment of the purchase money and interest; and if at such sale the previous encumbrancer is in possession, or has the right to possession, -under the provisions of his deed creating the encumbrance,having a right to apply the profits to the payment of his demand, a court of equity will secure him in the possession, leaving the purchaser of the equity the benefit of his lien.

Where encumbered property, is sold under execution, courts of equity have the control of it, and the power to make all needful orders for its preservation. Since the adoption of the Revised Statutes the purchaser, under a sale of the equity of redemption, only acquires a lien upon it, for the re-payment of the purchase money and interest. (Revised Statutes^ page 827.) If then one of the previous incumbrancers should be in the possession of the property, at the time of the sale of the equity of redemption, under the provisions of the deed creating the incumbrance,' having a right under the same to apply the profits to the payment of his demand, a court of equity having the power to control the property would secure him in the possession and enjoyment of it, leaving to the purchaser the benefit of the lien he had acquired under the sale of the equity of redemption.

Here the plaintiff was substantially in the possession of the road through his agents- the officers of the company, or if not in the actual possession of it, he had the right to it by the terms of the deeds creating the incumbrance, and also the right to appropriate the profits of the road to the payment of the debts of his cestui que trusts. If therefore the defendants had sold merely the equity of redemption, or in other words had sold the property subject to the previous incumbrances, the chancellor would have had a right under the discretionary powers vested in him by the statute to have prevented its removal by the purchaser. But as the defendants had under one execution sold the property, without any regard tosthe incumbrances upon it, and were proceeding to do the same thing in the other case, the plaintiff had-an undoubted right to the relief granted him by the judgment of the court below.

Wherefore, the judgments in both cases are affirmr ed.