Opinion ID: 1473139
Heading Depth: 1
Heading Rank: 3

Heading: Iowa Central First Mortgage.

Text: The special master found that this mortgage had no after-acquired property clause. The lower court reached the conclusion, from the language of the mortgage as a whole, that it was the intention of the parties that there should be a lien on after-acquired equipment owned by it and used by it to produce an income subject to the mortgage. The granting clause of this mortgage contains the following language:    And also all machinery and tools now owned or which may hereafter be owned or acquired by the mortgagor for use in connection with said railways, and all locomotives, tenders, cars and other rolling stock and equipment, and all implements, fuel, materials and supplies now owned or acquired by the mortgagor for the construction, maintenance, operation, repairing and replacing of said railways, and also all the privileges, rights and franchises connected with, and relating to the said railways and each of them, and all other corporate property, real or personal, of the mortgagor. Together with all and singular the tenements, hereditaments and appurtenances thereunto belonging or in any wise appertaining, and the reversion and reversions, remainder and remainders, rents, issues and profits thereof; and also all the estate, right, title, interest, property, possessions claim and demand whatsoever, as well in law as in equity, of the mortgagor of, in, and to the above-described premises, and every part and parcel thereof with the appurtenances. The fourth paragraph of the mortgage is as follows: IV. The personal property and chattels hereby conveyed, or intended so to be, shall be real estate for all the purposes of this indenture and shall be had and taken to be fixtures and appurtenances of the said railways and a part thereof, and, except as hereinafter provided, shall be used and sold therewith and not separate therefrom. The fifth paragraph contains the following language with reference to the authority of the trustee in the event of default: to enter into and upon all and singular the premises hereby conveyed, or intended so to be, and each and every part thereof, and shall until the same be sold or surrendered to the mortgagor, its successors or assigns, as hereinafter provided, use, manage and operate the same by its superintendents, managers and servants or other attorneys or agents, making from time to time all repairs and replacements as may seem to it judicious, and collect and receive all tolls, freights, earnings, rents, issues and profits of the same and every part thereof. This paragraph further provides that, The mortgagor, its successors and assigns upon any default as herein specified will immediately upon demand made, deliver, surrender and yield up the railways, property, equipment and appurtenances hereby conveyed and transferred, or intended so to be, to the trustee who is hereby constituted their irrevocable attorney with power to enter upon and take possession of the said railways, equipment, lands, property and appurtenances immediately upon the happening of any default as aforesaid. The sixth paragraph authorizes the trustee, in case of default, to sell all and singular the said railways, property, equipment, franchises and appurtenances hereby conveyed or intended so to be. The eighth paragraph authorizes the trustee under certain conditions to release portions of the mortgaged property, and concludes as follows: The trustee shall also have power to allow the mortgagor, its successors or assigns from time to time to dispose, according to its or their discretion, of such portion of the equipment, machinery and implements at any time held or acquired for the use of the said railways as may have become unfit for such use, replacing the same by new, which shall at once be subject to the lien of these presents without any further conveyance or mortgage. The fourteenth paragraph contains the following covenants and agreements: The mortgagor shall and will until the bonds secured by this indenture are fully paid, make all necessary repairs and replacements to keep up the property, rolling stock and equipment hereby conveyed and transferred, and seasonably pay and discharge all taxes, assessments, charges and dues which may hereafter be imposed, assessed or levied upon all or any part of the property or franchises hereby conveyed, or intended so to be, and the said railways, equipment and property shall be kept free from any encumbrances or charges to the prejudice of this indenture and no conveyance shall be made to the prejudice thereof. All of the bonds provided for in this mortgage were duly issued and are now outstanding in the hands of the public. It is to be noted that in the general granting clause the language used is as follows: All machinery and tools now owned, or which may hereafter be owned, or acquired, by the mortgagor. This, it is to be observed, describes machinery and tools. Following the above excerpt is the language describing equipment, and this language is as follows: And all locomotives, tenders, cars and other rolling stock and equipment, and all implements, fuel, materials and supplies now owned or acquired by the mortgagor.  It is significant that the mortgage when it refers to machinery and tools uses the phrase, which may hereafter be owned or acquired, whereas in referring to equipment the language is now owned or acquired. The term now owned or acquired would not seem to be equivalent to now owned or hereafter acquired. Manifestly the mortgage covers certain classes of after-acquired property, which are specifically enumerated, and in these classes is not found equipment. Railroad mortgages are not drawn by laymen, as are many of the ordinary mortgages involved in commercial transactions, but by lawyers specially trained in this branch of legal work, and as said by the trial judge: Railroad mortgages are and for years have been drawn by men highly skilled in that branch of the legal profession, by men acquainted with and accustomed to make use of accuracy of expression. The argument that rolling stock and equipment constitute appurtenances to a railroad is not sustained by the authorities, and here again the omission of the language clearly describing rolling stock and equipment of the railroad company is significant. Humphreys v. McKissock, 140 U. S. 304, 11 S. Ct. 779, 35 L. Ed. 473; Guaranty Trust Co. v. Atlantic Coast Elec. R. Co. (C. C.) 132 F. 68; Nelson, Benton & O'Donnell v. Iowa Eastern Ry. Co., 51 Iowa, 184, 1 N. W. 434, 439, 33 Am. Rep. 124; Hinchman v. Point Defiance Ry. Co., 14 Wash. 349, 44 P. 867. The language of the Supreme Court of Iowa in Nelson, Benton & O'Donnell v. Iowa Eastern Ry. Co., supra, seems apposite here: It may be safely assumed that all mortgages executed on railroads specially mention rolling stock as being included. Why is this done if it was regarded as real estate or as appurtenant thereto? Why the labored efforts of counsel sustained by the elaborate opinions of the highest court in this country, demonstrating that mortgages executed by such corporations, were liens on after-acquired rolling stock, if the same was an appurtenant to the realty? Reasonably construed, we think it clear that, so far as the specific terms of this mortgage are concerned, it does not cover after-acquired equipment. A perusal of the language contained in the covenants of this mortgage convinces that no one of them covers after-acquired equipment, nor do all of these covenants, considered together, evince an intention to cover such property. The lower court, however, while sustaining this view, was of the opinion that the mortgage contained a grant of income with a similar power over income in the trustee after default, which taken with the covenants for repairs and replacements was the equivalent of an after-acquired property clause covering equipment. In support of this view the case of Louisville Trust Co. v. Cincinnati Inclined Plane Ry. Co. (C. C.) 91 F. 699, 700, is cited. In the first place, it is to be observed that the mortgage here under consideration contains specific enumeration of certain classes of property, and confessedly contains an after-acquired property clause with reference to certain of those classes. In the Louisville Case, the sole description of the property granted was as follows: All and singular, the railways, rails, bridges, and real estate, and all the tolls, income, issues, and profits to accrue from the same or any part thereof, belonging to or held by said company, and, all and singular, the cars and rolling stock, and also, all and singular, the franchises and property, real and personal, of said company, including said leased railway, together with all the rights, easements, incidents, and appurtenances unto the hereby granted premises belonging or in any wise appertaining. In that case the court held that from the grant of income it was fair to presume an intention to create a lien on the subsequently acquired rolling stock. It is noticeable that in the Louisville Case the mortgage was entirely silent as to after-acquired property. The mortgage in the instant case, however, expressly covers after-acquired machinery and tools, which would seem clearly to negative the thought of any intention to mortgage any other class of after-acquired property. The rule expressio unius est exclusio alterius is applicable. Inferences or presumptions speak in the absence of evidence, but cannot be weighed in the balance as against evidence, and this mortgage does not leave the question of the intention of the parties open to inference or presumption, because it speaks on that subject. It is the settled doctrine that a mortgage will not be held to grant after-acquired property, unless it contains unmistakable language showing an intention so to do. Maxwell v. Wilmington Dental Mfg. Co. (C. C.) 77 F. 938; Baiz v. Coro & Le Vela R. R. & Imp. Co., 87 N. J. Eq. 438, 101 A. 395; In re Adamant Plaster Co. (D. C.) 137 F. 251. The doctrine of the Louisville Case is not applicable to this mortgage. The decision in that case is bottomed on the maxim that whoever grants a thing is supposed also tacitly to grant that without which the grant itself would be of no effect, or, as it has been expressed in Pullan v. Railroad Co., 4 Biss. 35, Fed. Cas. No. 11,461, cited in the Louisville Case: When the use of a thing is granted, everything is granted by which the grantee may have and enjoy such use. But there is here no occasion to invoke either maxim or presumption. The mortgage speaks for itself. Confessedly this maxim must have its limitations, and as said in one of the briefs in this case: The trouble with the maxim is it proves too much. A grant of rails would include locomotives, cars, and all equipment necessary for the operation of a railroad. It would not be necessary to include income at all. A grant of a house would include all the furniture, because surely a house would not be enjoyed without furniture. A grant of a factory would include all of the machinery, implements, and equipment. A grant of rails would include a grant of materials and supplies necessary to operate a railroad. The analogy might be further pursued, but it would seem unnecessary to do so. The mortgage does, however, contain replacement clauses, and under these it was the duty of the mortgagor and its successors to maintain and replace the mortgaged equipment. Under this covenant the mortgagor, and its successors, were required to keep under the lien of this mortgage the same value amount of equipment as it existed at the time of the execution of the mortgage. In other words, the lien of this mortgage attached to all equipment owned by the Iowa Central at the time of its execution, and so much of the equipment thereafter acquired, either by itself or its successors, as was necessary to keep intact in value the equipment as it existed at the date of the execution of the mortgage. For reasons hereinafter stated, the replacement clauses in this mortgage were not affected by the sale of the property, nor by the subsequent consolidation of 1916.