Case Name: SAMUEL B. JANES, Respondent, v. THE FITCHBURG RAILWAY COMPANY, Appellant
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1888-11
Citations: 57 N.Y. Sup. Ct. 310
Docket Number: 
Parties: SAMUEL B. JANES, Respondent, v. THE FITCHBURG RAILWAY COMPANY, Appellant.
Judges: Ingalls, J., concurred.
Reporter: Supreme Court Reports (Hun)
Volume: 57
Pages: 310–317

Head Matter:
SAMUEL B. JANES, Respondent, v. THE FITCHBURG RAILWAY COMPANY, Appellant.
Duty of a corporation, formed by a consolidation of other corporations under chapter 917 of 1869, to pay obligations of the latter secured by mortgage.
The provisions of chapter 917 of the Laws of 1869, relating to the consolidation of railroad companies, to the effect that “ the rights of all creditors of, and all liens upon the property of, either of said corporations, parties to said agreement and act, shall be preserved unimpaired, and the respective corporations shall be-deemed to continue in existence to preserve the same; and all debts and liabilities incurred by either of said corporations, except mortgages, shall thenceforth attach to such new corporation, and be enforced against it and its property to the same extent as if said debts or liabilities had been incurred or contracted by it,” do not impose upon the new company formed under such act any liability to pay the past due coupons upon bonds secured by a mortgage-upon the property of one of the corporations consolidated under the provisions of said act.
The intention of the consolidation act, in the use of the words “except mortgages,” was to cover thereby debts and liabilities of the consolidated company which were secured by mortgage. (Learned, P. J\, dissenting.)
Semhle, that if the mortgage security were not adequate, so that a portion of the indebtedness of the consolidated company would not be at all provided for thereby, and justice required that a third party succeeding to the over-incumbered property should be held liable for such portion of the indebtedness of the consolidated company as exceeded the value of the mortgaged property, that, to that extent, a liability would exist on the part of the new company to pay such indebtedness. (Learned, P. J., dissenting.)
Appeal from a judgment in favor of the plaintiff, entered July 14, 1888, at the Rensselaer County Circuit, after a tidal before the court without a jury.
This action was brought to recover over-due interest on $20,000 of Troy and Boston Railroad Company’s registered bonds, payable July 1, 1924, with interest at seven per cent per annum, payable half yearly.
June 25, 188J, the obligor (a domestic railroad company) and the former Fitchburg Railroad Company (a Massachusetts corporation), under chapter 91Y, Laws of 1869 (2 R. S. [Ith ed.], 1591, 1592),, consolidated their respective capital stocks, franchises and properties and became one corporation, the defendant, and thereby, as plaintiff claimed, defendant became liable for the over-due interest.
E. Oowen and John H. Pedia, for tbe appellant.
John B. Gale, for tbe respondent.
See case of Polhemus v. Fitchburg Railway Company,post page 397. — [Rep.

Opinion:
Landon, J.:
The plaintiff hau a recovery against the defendant upon certain past-due interest coupons of the bonds of the Troy and Boston Railroad Company. The payment of the bonds and coupons is seemed by a mortgage given by the company, in 1874, to trustees upon the real estate and property of the Troy and Boston Railroad Company. The principal of the bonds falls due in 1924. The mortgage contains no covenant to pay the bonds or post-foreclosure deficiency:
The defendant is a new corporation formed by the consolidation, in June, 1887, of the Troy and Boston Railroad Company and the former Fitchburg Railroad Company, made by an agreement under and in pursuance of chapter 917, Laws of 1869. The liability of the defendant, the new corporation, upon these past-due coupons, if any, exists by virtue of the terms of the aforesaid act of consolidation.
The act provides for the consolidation of two or more railroads, coming within the terms of the statute, by organizing a new corporation, to which all the property and franchises of the roads joining in the consolidation are to be transferred. It is manifestly the purpose of the act to place the new company completely in the shoes of the constituent companies with respect to their property and franchises, and, also, with respect to their debts and liabilities, except as provided in the fourth and fifth sections of the act. By section 4 all real estate, personal' property, rights, franchises, privileges and exemptions of the old companies become vested in the new. Section 5 provides: "The rights of all creditors of, and all liens upon the property of, either of said corporations, parties to said agreement and act, shall be preserved unimpaired, and the respective corporations shall be deemed to continue in existence to preserve the same, and all debts and liabilities incurred by either of said corporations, except mortgages, shall thenceforth attach to such new corporation and be enforced against it and its property to the same extent as if said debts or liabilities had been incurred or contracted by it."
The question presented by this appeal is: Do the words " except mortgages," exempt the new company from present liability upon the past due coupons in suit ? The contention of the plaintiff js that the coupons are not mortgages, that the bonds are not mortgages, that the present action does not seek to make the defendant answerable upon the mortgage liability of the Troy and Boston Railroad Company, but does seek to make it answerable upon a liability of that company which exists by virtue of its promise to pay, and for which the mortgage is only collateral and possibly inadequate security. This view prevailed in the court below. We should be inclined to adopt it, if by any fair construction of the exception we could attach it to anything else than to the debts and liabilities of the constituent company secured by mortgage. But if the term mortgages, in the connection in which it is used, does not mean the debts secured by their very terms, what does it mean ? We are to look for the legislative intent. We know that the draughtsmen of legislative bills are sometimes incompetent or careless and do not always use words with technical precision. We must, therefore; try to discover what is the meaning intended to be conveyed by the words employed, so that the act shall accomplish its manifest purpose instead of defeating it. We know well enough that in ordinary language the term mortgage is commonly used to signify the debt it secures. 'We think that is what it means here ; that such was the meaning intended by the legislature, and that every other suggested meaning is artificial and unnatural.
The new company, by the terms of the act, is liable for " all debts and liabilities incurred by either of said corporations, except mortgages." In the legislative mind, mortgages were either debts or liabilities. The exception is made out of the class previously mentioned. We can argue that mortgages are neither debts nor liabilities, and are made, not incurred; but it is clear that the legislature did not pause over technical distinctions, nor search for technical accuracy. They used language of very common use in the sense of its common acceptation. Debts and liabilities secux'ed by mox'tgage are usually x'egax-ded as already protected. We can suppose this to have been the reasoxx for the exceptioix. A case may axise — the px'esent may be such a case — in which the mortgage security is inadequate; if so, we caxx conceive that either the debt remains unprovided for or that the justice of making a thix-d party, succeeding to the over-incumbex-ed propex-ty, liable for such debt of the insolvent •constituent was denied, or that to the extent that the mortgaged property fails to pay the mortgage debt, to that extent, when the fact •appears, the debt is not secured, and, therefore, not within the exception of the statute; and hence the liability of the new company exists, but meanwhile is undeterminable. However this may be, we are to interpret the statute as we find it, giving full effect to its words in the sense which the legislature, as we can gather it from the act itself, employed them.
The judgment is reversea, a new trial granted, costs to abide the event.
Ingalls, J., concurred.