Court Opinion

ID: 8854874
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:26:18.323615+00
Date Added: 2024-06-11T17:05:37.195015
License: Public Domain

HUGHES, District Judge
(after stating tbe facts). It is to be observed that the coal and iron company, at the time of its contracts with the Norfolk & Western Railroad Company, was in possession of the branch road and its. spurs which are the subject of this inquiry. It had purchased the strips of land on which they were located. It had constructed the grading, bridging, masonry, and kindred work, and it had furnished the money for purchasing the rails, cross-ties, spikes, and so forth, which were used in fitting the branch road and spurs for use. While in possession it contracted to convey the whole in fee simple, free of incumbrances, to the railroad company, in consideration of a stipulation on its part to pay the earnings of the branch road and its spurs, at the rate of 10 cents per gross ton transported over them, to the coal and iron company, until the cost to it of the branch road and its spurs should be reimbursed in full. It was after this contract was made that the coal and iron company conveyed the branch road and its spurs to the railroad company. It will-be admitted that the coal and iron company was liberal almost beyond example in constructing a branch road out and out, costing many thousands of dollars, at its own expense, and then conveying it to the railroad company outright on an agreement to accept the prospective earnings of the branch read for the whole outlay. On this state of facts, I think the case at bar is governed by the rulings of the supreme court of the United States, in the cases of Ketchum v. St. Louis, 101 U. S. 300, and U. S. v. New Orleans R. R., 12 Wall. 362, and the numerous cases cited in each of them. In these cases the distinction between mortgages by formal deeds and equitable mortgages is emphasized. One of the rulings in the case of Ketchum v. St. Louis is stated in one of the headnotes, as follows:
“A party may, by agreement, create a charge or claim in the nature of a lien on'real as well as on personal property whereof he is the owner or in possession, which a court of equity will enforce against him, and volunteers or claimants- under him with notice of the agreement.” , ‘:
*707One of the cases cited by the learned justice who delivered the opinion-of the supreme court in that case was that of In re Strand Music Hall Co., 3 De Gex, J. & S. 147, in which Lord Justice Turner said:
“There can be no doubt that it was intended by these agreements to create a charge upon the property of the company. * * ' Where this court is satisfied that it was intended to create a charge, and that the parties who intended to create it had the power to do so, it will give effect to the intention, notwithstanding any mistake which may have occurred in the attempt to effect it.”
The learned justice also cited from Jones on Mortgages the following passage and the numerous authorities which support it:
“An agreement of a company to set apart specific earnings or property in tlie hands of a. third person to meet- the interest or principal of its bonds creates an equitable lien or charge.”
In the case of U. S. v. Row Orleans R. R., supra, the court said:
“A mortgage intended to cover after-acquired property can only attach itself to such property in the condition in which it comes into the mortgagee’s hands. " * * -It only attaches to such interest as the mortgagor acquires; and if he purchase property, and give a mortgage for the purchase money, the deed which lie receives and the mortgage which he gives are regarded as one transaction, and no general lien impending over him, whether in the shape of a general mortgage or judgment or recognizance, can displace such mortgage for purchase money.”
In the case of a lease of land for an annual rent, it will not be contended that a transfer of the lease to a company whose property is under a heavy mortgage, would give priority to the mortgagee over the right of the lessor to his rents. The transfer carries the lease cum onere, which goes to the purchaser charged with the contract for rents running with the land. The Norfolk & Western Railroad Company expressly stipulated, in advance of receiving a conveyance of the branch road and its spurs, that their freight earnings should be paid to the vendor from whom it received them, until the purchase price should be fully discharged. This charge upon the earnings was fixed before tlie transfer of the branch roads, and as the consideration for the transfer. There was no necessity for an actual mortgage of these earnings, because the coal and iron company, its agents and assigns, were the owners of the coal and iron intended to-be shipped; and a formal mortgage would have given them no better control of tlie earnings than the coal and iron company had and would continue to have as miners and shippers of tlie coal. I will sign a decree directing the receivers to carry out the contract under consideration, and to pay the earnings of the branch road and its spurs to the petitioner in compliance with the stipulations of the railroad company.