Daily globe. [volume] (St. Paul, Minn.) 1878-1884, 1878-04-02


operate the road and to take and use the rents.
incomes, profits, tolls and issues thereof in the
same manner, and with the same effect,
as If the mortgage deed had never been made
by the ninth article, it is provided that in
case Of default in the payment of the interest
for the period of six months the trustees may
enter into the possession of the said railroad
and mortgaged property, and collect and receive
all tolls. freights, incomes, rents issues, pro-
hts OF the same, and operate the road for the
benefit of the bondholders. By article second,
IT. It. IS further stipulated, among other things,
mat all the current net earnings and income
OF the said railroads, after deducting current
expenses, and after paying the interest on the
nonds secured by the prior liens above men
. .!oned' shall be appropriated and used, from
III. 1ne 70 time, If necessary, in the payment of
.ne interest on the bonds secured by this in
strument With the exception Of this last
reclted stipulation, it is conceded that the
cages In question, in all their essential
R1 1.u and conditions, are substantially
. IKE those passed upon by the supreme court Of
G Sno on1ceo states in Galveston R. r. Co. VS..
1;nn;s ~ M: wall 459; Gilman ct al, VS.. IL
Otto, COB, and American BRIDGE e.. vs.
Hudelback, Otto, 1873 In each
OF these cases it was held that the mortgage did
not attach or become a lien upon any portion
ol me savings or income of the road accruing
Wnlle the mOrtgagOr continued in its possession
! control and management, and that the mortga
| gees acquired no lien right upon any por-
ton OF the income accruing prior to the time
OF Their taking possession of the road either
personally or through the Intervention of the
court by receiver in the exercise Of their OPP
tlon after default. The principle of these de-
clslons in this that whenever by the terms of a
mortgage upon this kind of property either
expressly or by implication the right is re-
served to company, the mortgagor, who is the
general owner, to retain possession and use of
me mortgaged property by operating the road
receiving the earnings and applying them in its
discretion towards defraying the operating
expenses, such mortgagor must be re-
garded as the owner of all such
earnings acquired during the continuance Of
his possession, and Invested with the absolute
right OF disposal as fully as any general owner
OF property enjoys. This right is wholly in
consistent with the existence of any specifca-
ton under the mortgage in favor of the mort
gage trustees.
The principle as applied to this case of mort
&ges, we deem emlnently wise and beneficial
it,
The objection made by appellants counse
that the hereinbefore quoted stipulation from
the second article of the mortgages under con
sideration, in reference to the appropriation
and use, if necessary, of the net earnings t,
the payment OF the interest on the bonds SO ia
distinguishes the present case from those de
; cided by the federal court, as to take it out 0
the operation of the principal of thos
, decisions is not in our Judgment tenable. Hi
claim is that the net earnings therein men
toned refer to all the net earnings of the road
including both those earned prior and after tn
,, trustees took possession and that the effect O
the clause was to specifically appropriate ther
. in advance, to the purpose indicated. It seem
, to us that this proportion differs in no essen
tial particular from that considered in th
. case cited from 4th Otto supra. There tn
Nkrorve Ill
and profits of said bridge, as far as the sam
+ were not required to pay the necessary exper
SEES of keeping in repair and operating til
bridge and it expressly declared that sal
rents, issues and profits chat is the net profits
were thereby pledged to the payment Of int
: sinking fund for the redemption of tn
: principal of said bonds,'' &C., clearl
this language as fully and spec
: fcally, and appropriates the NJ
q earnings to the purpose named as does tn,
= used IN the instruments now under consider
ton, and is equally as broad in its application
Besides conceding the correctness of counsel
> proposition in respect to this stipulation al
: its effect, it is difficult to see how his ellen
can avail themselves of its benefits upon IL
= disclosure made. 1t is not claimed that tt
. provision refers to anything but net profit
The disclosure shows that the unpaid cure,
- - expenses incurred by the company in operatir
the read prior to the time the trustees toe
= possession, exceeded this balance of $42, 618.t
= of income which then remained in the cor
), pany's hands, and one branch of the appe
= lant's defense against the garnishment here
: is that they have paid such expenses SO nece
= sarily incurred to an amount exceeding IL
- balance of income received by them from Il
/" company. In view Of these facts, it is appa
y = rent there was no net income to which tn
- - stipulation could apply. The order for jud
:, ment was providently granted, and must
y affirmed. CORNELL, J.