Case ID: ohio-st_14/html/0187-01.html
Source: Caselaw Access Project
Author: {"author": "Ranney, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

George S. Coe, Trustee, etc. v. Thomas Peacock et al.
    1* The cases of Coe v. The Columbus, Piqua and Indiana Railroad Company, 10 Ohio St. Pep, 372, and Coe v. The Knox County Ranh, Ibid. 412, have settled, that a railroad company deriving its powers under the “ Act regulating railroad companies/* passed February 11, 1848, may effectually mortgage its property connected with the use of its franchise, whether real or personal, to be subsequently acquired; but that the existence of such a mortgage does not operate to exempt such property, in its nature personal, and while it remains in possession of the corporation, from being levied upon by judgment creditors of the company.
    2. A power inserted in a mortgage authorizing the mortgagee, upon default of payment, to take possession of the railroad and other property connected therewith, and use or sell the same, must be exerted upon all the property mortgaged; and does not authorize the mortgagee to detach portions thereof, either from the possession of the company, or an officer succeeding to its rights, by a valid levy thereon.
    3. The “right and proper” damages given by the statute to the defendant, in an action of replevin brought by the mortgagee against the officer, when it appears that the mortgage lien upon the property exceeds its value, is not the value of such property, or the amount of the execution levied upon it, but nominal merely.
    Error to the court of common pleas of Union county.
    The original action was brought, in the court of common please of Union county, by George S. Coe, trustee of the bondholders, under the first and second mortgages of the Springfield, Mount Vernon and Pittsburg Railroad Company, to recover the possession, and damages for the detention, of about one hundred and fifty cords of wood, piled along the track of the road of said company, at Marysville, in said county, and levied upon by Thomas Peacock, as constable, by virtue of executions in his hands, in favor of his co-defendants, John German and Wallace & Paul, on judgments against said railroad company.
    The case was tried in April, 1861, to the court, upon the following agreed statement of facts:
    “ It is agreed that the plaintiff is the holder of, and trustee in, two certain mortgages or deeds of trust, one dated August 17,1852, and the other dated April 7, 1853, whereby the said railroad company conveyed to the said plaintiff, his successor or successors in said trust, all the present, and future to be acquired property of said railroad company, including the roadway, track, right of way, and all superstructures thereon, all machinery, materials, and all personal property, right thereto, and interest therein, together with the name and functions appertaining to the said road, tolls, income, etc., all franchise right, etc., of, in, to or concerning the same; that said mortgages or deeds of trust were duly executed and delivered, and recorded in the counties through which said railroad is locateu, at or about the respective dates thereof, and are both in full force,; and that bonds to a very large amount have been issued by said railroad company and negotiated, and are now held and owned by various parties, and that said bonds are outstanding and unpaid, either in whole or in parcel, and that the interest due thereon for several years last past, was, at the time this suit was brought, due and. unpaid; and that the property of said railroad, included in said mortgages, is largely insufficient to pay bonds that have been issued, negotiated, and outstanding under the same, and that the said railroad company is insolvent; and that the conditions of said mortgages provided that, in case of failure, for sixty days after the same shall become due, to pay either principal or interest, the plaintiff may enter upon and take possession of the said railroad, and all property thereof conveyed in said mortgages, and have, use, and employ the said property, and run the said road, and apply the proceeds thereof in payment of said bonds and interest, or may sell the same and apply the proceeds thereof to the payment of said bonds and interest; and that the interest on said bonds was payable semi-annually.
    “ And it is further agreed that said wood was purchased and paid for by the said railroad company, since the execution and delivery of said mortages, and was purchased and prepared by said railroad company, and corded at their depot in Marysville, in said county, about one month before the action was brought, for the purpose of being used in running their trains, and was actually necessary for that purpose; and that their trains could not have been run without its being so used.
    “ It is further agreed that said railroad company is duly incorporated under the law of Ohio; and its act of incorporation, as well as the provisions of the general railroad law of the state, applicable to the same, are made part hereof; and that at the time this suit was brought, the said plaintiff was prosecuting a proceeding in the court of common pleas of Clark county, Ohio, on the said mortgage, to obtain jugdment for the principal and interest due upon said bonds, and for the sale of the said road and property, franchises, etc., to satisfy the same; and that on the 21st day of March, 1859, on the said first mortgage, obtained a judgment for the sum of $675,786, and a decree of said court establishing the said first mentioned mortgage as the first lein on said road and property, franchises, etc., to satisfy the said judgment.
    “ And it is further agreed that said defendants levied upon the said wood, at the Marysville depot, as stated in the plaintiff’s petition; and that the judgment of John German was for necessary work and labor done for said railroad company; and the judgment of Wallace & Paul was for failure to deliver goods shipped; and that said railroad company, at the time of said levies, was engaged in running trains on their road from Delaware, Delaware county, to Springfield, Clark county; and that said wood, at the time said suit was brought, was of the value of one hundred and fifty dollars.
    “ The wood replevied in this case, was taken by the plaintiff for the purpose of being returned to the use of the railroad company, and it was by said company consumed for fuel, in the running of trains on the road.”
    Upon the foregoing agreed statement of facts, the court found for the defendants, and assessed their damages at one hundred and fifty dollars, and judgment was entered accordingly.
    The plaintiff excepted to this finding and judgment, and to reverse the same filed his petition in error in this court.
    
      Mason ‡ Boiutmn, for plaintiff in error, argued:
    1. That the condition of the mortgage being broken, a right of possession of the property accrued to the trustee, as well from that fact, as also from the express provisions of the mortgage.
    2. That even if the plaintiff could not maintain his action of replevin, still, as he had a valid mortgage lien on all the property of the road, and as the property was insufficient to pay this mortgage debt, the interest which'the judgment debtor of the defendants had therein, was merely nominal; and as the defendants could sell that interest only, they were entitled to nominal damages only.
    
      B. C. Ciarle, and Robinson $ Robinson, for defendants in error.
   Ranney, J.

The case of Coe v. The Columbus, Piqua and Indiana R. R. Co., 10 Ohio St. Rep. 372, is supposed by the court to have decided, that the powers conferred upon this company by the general railroad law of 1848, enabled it to mortgage, effectually, its “property connected with the railroad, and the use of its franchise, whether real or personal, to be subsequently acquired.” It follows that the property involved in this action, was bound by the mortgage to the plaintiff ; and it was his right to protect and preserve it, and appropriate it to the payment of the debts named in the mortgage, in the manner therein specified, or by any appropriate legal proceeding. But in that case, and in the case of Coe v. The Knox County Bank, 10 Ohio St. Rep. 412, it was still further held, that the execution of such a mortgage by the company, operated no exemption to that part of its property in its nature personal, while it remained in the possession of the company, from levy upon executions to satisfy judgments rendered against the company; and that, in this respect, there was no distinction between such a mortgage and one executed by an individual upon other descriptions of personal property. The agreed statement of facts shows, that, at the time this levy was made, this property, together with all the balance included in the mortgage, was in the actual possession, and use and enjoyment, of the company. The levy, then, was properly and legally made, and bound such interests as the company had in the property seized. But as the interests of the company were subordinate to those of the plaintiff, under the mortgage, and as the payment of interest was in arrears, there is probably no doubt, that he might have taken possession of the “railroad, and all property thereof, conveyed in said mortgages,” either for the purpose of running the road, or bringing it to a sale, as therein provided. And there is no doubt, that upon the facts stated in the record, that all the property mortgaged was largely insufficient to pay the debts secured by it, and that the company was insolvent, he might have successfully invoked the interposition of a court of equity, to prevent further proceedings upon the executions. But he did none of these things; not even to demand the possession of the defendant, except by the writ of replevin; and that, the record informs us, was employed, and the property taken “ for the purpose of being returned to the use of the railroad company, and it was by said company consumed for fuel, in the running of their trains on the road.”

We do not, however, intend to imply, that a previous demand alone,would have justified the present action. It is very clear that it would not. By the terms of the mortgage, a default for sixty days in the payment of either principal or interest, authorized the plaintiff to take possession of the railroad, and other property mortgaged, and employ or sell it, as he should think proper. Neither the language of the mortgage, nor the nature of the property covered by it, will permit such a construction of this provision, as would allow the trustee to detach portions of the property, leaving the residue in the possession of the corporation. If it did, the trustee might take the rolling stock, leaving the road in the hands of the corporation, and thus both descriptions of property be rendered useless to both creditors and stockholders; and, what is of much greater importance, neither the trustee nor corporation enabled to discharge those public obligations, in the use of the road, as a public highway, and to which, by láw, the property has been devoted. If the trustee does not see fit to act upon this power, and take upon himself the responsibility of using the road, or selling it, so that the purchaser may do so, he may resort to the ordinary remedy, namely, in a court of equity, whose duty it would be, through the agency of a receiver, or otherwise, to see that this great object of the work was as little interfered with, as the interests involved in the action would permit.

If, then, the trustee has the power to take from the corporation portions of the property mortgaged, only when exercising a bona fide attempt to possess himself of the whole work, it is clear, that he stands upon no higher ground in respect to an officer who has legally levied an execution upon the property, and has thereby succeeded to all the interests which the corporation had; and, in no event, can he be permitted to use this power, either with or without legal process, for the purpose of restoring to the corporation the possession and use of property which has been lawfully taken from it, under the circumstances stated in the agreed case.

We are, therefore, of the opinion, that the court properly found for the defendants, upon the issues joined between the parties; and the only remaining question is, what damages, upon this finding, were they entitled to recover from the plaintiff? The court below thought they were entitled to the full value of the property (that amount not exceeding the amount of the executions levied upon it), and judgment was rendered accordingly. In this, we think, the court erred. The statute gives such damages as are “ right and proper.” 2 S. & C. 1000. Undoubtedly, the judgment must have proceeded upon the assumption, that this after-acquired property was not covered by the mortgages to the plaintiff. But this assumption has been declared to be unfounded, in the two cases already cited. With the lien of these mortgages upon the property, undisturbed by the levy, and with the admitted fact, that this lien very far exceeded the entire value of all the property included in the mortgages, it is very evident, that the levy bound no substantial interest, that the defendants lost substantially nothing, in losing the possession, and that it would be neither “right” nor “ proper” to compel the plaintiff to pay for an interest which the defendants never bound by their levy, but which was vested in the plaintiff, in trust for the bondholders, by the mortgage deeds. The defendants, therefore, should have recovered only nominal damages; and for the error in giving more, the judgment for damages must be reversed. And, thereupon, proceeding to render such judgment, upon the agreed statement of facts, as the court below should have rendered, we do order that the defendants recover nominal damages, and their costs.

■ The judgment finding the right of possession in the defendants, is affirmed — that part for the damages is reversed, and one for nominal damages rendered; and the judgment being reversed in part, and affirmed in part, the costs in error are equally divided.

Peck, C.J., and Brinkerhoee, Scott and Wilder, JJ., concurred.