Boston & New York Air Line Railroad v. Coffin ( 1882 )

Park, C. J.

The principal question in this case is, whether the mortgage of the New Haven, Middletown & Willimantic Railroad Company to the treasurer of the state, made on the Blst of May, 1869, to secure the bonds of the company to the amount of $3,000,000, included such portion of the lands in question as were not necessary or convenient for railroad purposes.

The property mortgaged is thus described in the mortgage deed:—“All and singular the railroad of the said party of the first part, from the city of New Haven to the village of Willimantic, in the state of Connecticut, as the same is now or may be hereafter located, constructed or improved; and all the roadway and lands that are or may be included in the location of said railroad or acquired by -said company for the purpose of said railroad, within the several points aforesaid; with all and singular the railways, rails, bridges, fencesj station-houses, depots, shops, buildings, structures, tools, cars, engines, equipments, machinery, fuel, materials, privileges, appendages, appurtenances and property, real and personal, which now belong, or may hereafter belong, to the said company, and be used as a part of the said railroad, or be appurtenant thereto, or necessary for the construction, operation or security thereof; and also all the property, rights and franchises of the said company under its charter and every part thereof; together with the tolls, income, issues, and profits thereof, and all rights to receive the same, and everything necessary for the completion and operation of the road.”

It will be observed that the description of the lands mortgaged is in almost every instance qualified by some one of the following phrases—“that may be included in the location of said railroad”—“used as a part of said railroad ”—“ appurtenant thereto ”—“ necessary for the construction, operation or security thereof”—“necessary for the completion and operation of the road.” If the mortgage was intended to include all the lands of the railroad company, whether they were necessary for railroad purposes or not, it is strange that these qualifications should have been made. But the plaintiffs mate the claim that the phrases, “ lands acquired by the said company for the purposes of said railroad,” and “ all the property of the said company under its charter and every part thereof,” were intended to be without qualification, and to include all the lands owned by the railroad company. But we think the context, at the places where thL phrases relied upon are found, clearly shows that they are subject to the same qualification that is applied to other property mentioned, and that they were intended to be confined in their application to what was prospectively necessary añd convenient for the construction and future operation of the railroad. The construction and operation of the road were the objects to be accomplished, and lands “ acquired for the purposes of the road,” were lands acquired for the accomplishment of these objects, and must be lands necessary and convenient for such construction and operation. Lands purchased and sold at a profit, although the profit might be expended in the construction of the road, were never intended to be embraced by the phrase, “ acquired by the company for the purposes of the railroad.” The other phrase, “all the property of the said company under its charter,” is found intimately connected with the phrase “ and everything necessary for the completion and operation of the road.” These expressions are brought together in the same sentence, and it would be strange if the former should be more comprehensive than the latter, when the latter is a sweeping clause, evidently used by the draftsman to include everything intended to be conveyed which possibly the previous language might not include.

Again, the case finds that the railroad company in procuring-their right of way considered it advisable, as a matter of economy, to purchase in many instances larger tracts of land than were required by necessity or convenience for such way, and to sell the surplus. It was thought that the cost of their right of way through such lands would be lessened by it. Nearly all the lands in question are included in the surplus of such purchases. The case further finds that the bonds, which the mortgage was given to secure, would have twenty years to run. It would seem therefore unreasonable to suppose that lands, purchased for a temporary purpose, would be included in a mortgage that was to run so long.

Again, the company had no power under their charter to purchase and permanently hold lands not required by necessity or convenient for the purposes of the railroad. The language of the charter upon this point is as follows:— “ And said corporation is hereby vested with all powers, privileges and immunities, which are or may be necessary to carry into effect the purposes and objects of this act as herein set forth. * * And shall have power to purchase, receive and hold such real estate, in fee simple or otherwise, as may be necessary or convenient, to accomplish the purposes of this act.” The object and purposes of the act are thus stated:—“To locate, construct, maintain, complete' and operate a single, double or treble railway or railroad, from some suitable poiitt in the city of New Haven, * * to some suitable point in the village of Willimantic.” Such lands, therefore, as were “necessary or convenient” for the location of the railroad and all its appurtenances they had the right by their charter to purchase or take in order to locate, construct, maintain, complete and operate a railroad between the points designated. It will be observed that the right of the company to purchase is limited to such lands as they have the right to take for railroad purposes; and certainly they had no right to take surplus lands in order to make their right of way through such lands cost less than it could have been otherwise obtained for. But the claim of the complainants would leave the power of the company to purchase lands unlimited, for if the terms of the charter could be made to embrace lands not “ necessary or convenient ” for the purposes of the railroad, there would be no limit to the power of the company to make such purchases. We do not mean to say that the company could not purchase land of which a portion was not needed and hold the surplus temporarily, where by so doing they could acquire the right of way through the land more cheaply, intending at the same time to sell or otherwise obtain the value of the surplus lands within a reasonable time, and expend the proceeds in the construction of the road. What we mean to say is that the company had no right under their charter to purchase lands that were not needed, and permanently hold them, as the claim of the plaintiffs under this mortgage would seem to imply. Such being the case, it is reasonable to suppose that the parties to the mortgage in question intended only to give on the one hand and receive on the other what the company could lawfully hold under its charter, and inasmuch as the language of the mortgage can be construed in accordance with such intent, we think it should have such a construction. The words “ necessary or convenient,” as used in the charter and mortgage, should have a liberal construction, and should include all that has been found to be reasonably necessary or convenient for the successful operation of the road since its construction. But inasmuch as some parts of the lands in question have been found to be unnecessary and not required by convenience for such purposes, we think those parts *«•» not included in the mortgage.

The following cases hear upon the question we have been considering. Raymond v. Clark, 46 Conn., 129; Walsh v. Barton, 24 Ohio St., 28; Eldridge v. Smith, 34 Verm., 484; Shamokin Valley R. R. Co. v. Livermore, 47 Penn. St., 465 ; Dinsmore v. Racine & Miss. R. R. Co., 12 Wis., 649; Youngman v. Elmira & Williamsport R. R. Co., 65 Penn. St., 278; 1 Jones on Mortgages, sec. 156.

It appears by the finding that “ the plaintiffs and their grantors have used for railroad purposes portions of the lands in controversy that are outside of the location of the railroad, and the plaintiffs have been in the possession of such portions for such uses. Their freight depot is partly on such lands.” We understand this to mean that such lands were necessary or convenient for railroad purposes; and if so they were covered by the railroad mortgage.

It further appears in the case that the mortgage and deeds from Coffin to Colegrove included all the lands described therein, “ except such portions thereof as were within the lay-out or location of the railroad.” It follows that the railroad mortgage included some lands that the Colegrove mortgage and deeds likewise included; and so far the Colegrove mortgage and deeds became a subsequent incumbrance upon the property.

It may be said that the railroad company never had the legal title to the lands thus covered by these deeds, and that therefore the railroad mortgage is ineffectual as against the defendants. These lands were as necessary for the successful operation of the railroad as the land covered by the lay-out. It is manifest that the road could not be operated without depots and side-tracks. They are as essential as the road-hed itself. Now it is conceded that the railroad mortgage is effectual to secure the bondholders so far as the lay-out of the railroad over the lands in controversy is concerned, and if so, what good reason can be given why it is not equally effectual so far as the land covered by the railroad depot is concerned ? The title to both was taken in the name of Lyman, the president, and Coffin, the treasurer, for purposes of convenience in the sale of lands of which they formed a part. The railroad company were the equitable owners, and agreeably to their charter, mortgaged the land covered by the lay-out of the road, and other lands necessary and convenient for the construction and operation of the road. And agreeably to their charter the deed was recorded in the office of the secretary of the state, in order to give constructive notice to the defendants, and all others interested, that the land now under consideration was included in the mortgage deed. The ease was exceptional. The recording of the deed in the office of the secretary had the same effect that it would have had if the deed had been recorded in the records of all the towns along the line of the road. Colegrove knew that the lands were purchased by the company for railroad purposes so far as they were essential. He'knew, or ought to have known, the charter of the company and what powers it conferred. He had constructive notice of the deed, and was in fault that he had not actual knowledge. He had all the means of knowledge that the nature of the case could furnish, or that the charter deemed important. The railroad company were the real owners of these lands, and no one would question their ability to mortgage them, although they never had the legal title. The law would compel a transfer of such title, at any time, to the grantee.

But, it is said, that the railroad company, by a vote of its directors, authorized the deeds to Colegrove. How does that affect the question ? Can a grantor, after he has conveyed property, convey it again so as to affect the former grantee? Certainly not. We see no reason why the railroad mortgage is not effectual against the defendants so far as it covers these lands.

It appears that the defendants, to whom the property was conveyed by Colegrove, were not made parties to the'foreclosure of the railroad mortgage, and consequently they were not affected by it; and hence arises the question, whether the prayer of the complaint can be granted, which asks for a foreclosure of whatever interest the defendants may be found to have in these lands. The charter of the New Haven, Middletown & Willimantic Railroad Company specially^ authorized the company to issue its bonds to a certain amount, and prescribed the manner in which they should be executed and recorded, and the time when they should be issued. It further authorized the company in a certain specified mode to secure its bonds “by a mortgage of its railroad, and all its property, rights and franchises under its charter, or any part thereof, b'y deed duly executed by its president under the corporate seal of the company, to the treasurer of the state and his successors in office, in trust for the holders of the bonds; which deed shall be recorded in the office of the secretary of this state.”

The General Statutes on the subject prescribed the duties of the treasurer in the premises, and under what circumstances foreclosure proceedings should be brought. The charter of the plaintiffs’ company directed the treasurer to convey to the plaintiffs in fee simple all his right, title and interest in the mortgage property, after the same should have become foreclosed, in the following language:— “ Whenever the title of the trustee under the first mortgage shall become absolute by the foreclosure of the mortgage premises, he shall * * convey to said company [the plaintiffs] and its successors and assigns, in fee simple, all his then right, title and interest in and to said mortgage premises.”

Thus it appears that every step in the proceedings from the giving of the mortgage down to the conveyance of the property to the plaintiffs was prescribed by the legislature. The subject was of course one to be regulated by legislation ; and the legislature having prescribed a certain course to be pursued, impliedly denied the right to pursue any other. The treasurer pursued that course, and foreclosed nearly all the property conveyed to him by the mortgage; but by oversight failed to accomplish the object so far as the small portion was concerned on which these defendants hold a second mortgage, by omitting to make them parties to the proceeding; and the question is, can the plaintiffs do what the treasurer failed to do? or does that duty still remain with the treasurer ? If the plaintiffs can sustain a suit of foreclosure for a part of the property mortgaged to the treasurer, they could have done so for the whole, and the action of the treasurer in the matter was wholly unnecessary. The treasurer was made the trustee of the property for the bondholders; and that trusteeship could not be otherwise discharged than by pursuing the course prescribed by the legislature. That course was the only one provided for a transfer of the property from the one company to the other, to wit—a foreclosure of the property by the treasurer, and a conveyance of it by him in fee simple to the plaintiffs, after the title had become absolute in him. We think the treasurer is still the only one who can sustain a suit for a foreclosure. He has performed a part of his duty; let his successor perform the remainder, if it is to be performed at all. A majority of the court are of the opinion that the prayer of the complaint in this regard cannot be granted.

Can the prayer be granted which asks a decree for the conveyance to the plaintiffs of the title to the lands remaining in the name of Coffin, the secretary of the New Haven, Middletown & Willimantic Railroad Company ?

The facts in this part of the case are substantially as follows. The titles to the lands in controversy weré taken in the name of the president and secretary of the last named company in order that they might more easily be disposed of and the proceeds expended in the construction of the railroad, the title being taken by them as joint tenants. The defendant Colegrove loaned the company large sums of money to be so expended, and a mortgage of that portion of these lands lying without the location of the railroad was made to him to secure the loans. Colegrove for a valuable consideration assigned the mortgage note to the defendant Birdsey, who received the same in good faith, and had no knowledge that the railroad company or the treasurer claimed any interest in the lands described in the mortgage deed. Afterwards Colegrove loaned other large sums to the company to be expended in the construe* tion of the road, on a representation made by the president of the company that the title to these lands was taken in his name and that of Coffin, the secretary, in order that they might dispose of such portions of them as lay without the location of the railroad, and use the avails for railroad purposes; that the lands were free from all incumbrance, and that they should be conveyed to him as security for the advances he had made or should thereafter make to the company, with the right on his part to sell the lands and from the avails pay the amount of his claims. Induced by these representations Colegrove afterwards made the advancements stated, and deeds were given of the lands, with the exception of what was contained in the lay-out of the railroad, to secure them. Colegrove took the deeds in good faith, without any knowledge that the railroad company or the treasurer of the state claimed any interest in the lands. He afterwards, for a valuable consideration, conveyed all his right, title and interest in the lands to the defendant Birdsey, who likewise received the same in good faith without any knowledge that the railroad company or the treasurer claimed any interest in them. The grantor of the deeds intended to convey and supposed that he was conveying to Colegrove all the lands in controversy outside of the location of the railroad, but by the mistake of the draftsman of the deeds four pieces of land, designated as Nos. 1, 2, 3 and 4, were omitted. Coffin, the grantor, had title not only to the lands conveyed and to the four pieces omitted, but also to that portion adjoining them which is covered by the lay-out or location of the railroad. The lands covered by the lay-out are not in controversy in this suit for the defendants have no interest in them. It does not appear where the four pieces of' land omitted are located. If any part of them are within the location of the railroad, then we are all of the opinion that Coffin should convey such portion to the plaintiffs, together with all other lands standing in his name which are covered by the location or lay-out of the railroad. And we are all further of the opinion that the portion which lies without the railroad mortgage should be conveyed in fee simple by Coffin to the defendant Colegrove, in trust for the defendants Lucy C. Birdsey and Sarah H. Colegrove. And it is the opinion of us all that all the lands in controversy outside of the mortgage, are the absolute property of the defendants.

If any part of the four omitted pieces are covered by the mortgage and lie without the location or lay-out of the railroad, then a majority of the court are of opinion that Coffin should convey such portion to the defendant Cole-grove, in trust for the defendants Lucy C. Birdsey and Sarah H. Colegrove, according to the agreement under which Colegrove made his advancements to the railroad company.

The plaintiffs claim that the defendants have not laid the foundation for affirmative relief by filing a sufficient cross-complaint to that effect. But the defendants have filed what has all the essential elements of a cross-complaint. It states all the facts, and asks a conveyance of the lands remaining in the name of Coffin. We think it is sufficient.

In regard to the testimony which was objected to on the trial before the committee and the court below, we all think it was properly received for the purposes claimed. The defendants’ answer and cross-complaint allege the facts, which the evidence tended to prove. It is there set forth that the defendant Colegrove loaned large sums of money to the railroad company in consequence of the promises of the president of the company that he should have security for the loans in deeds of the lands, to which the president then held the legal title as a joint tenant with Coffin, the secretary of the company. And it is further set forth, that after the death of the president Coffin attempted to consummate the agreement by a conveyance of the lands, and supposed he had done so, hut by mistake failed to accomplish the object. We think these allegations admitted of being proved. It appears that the legal title to these lands was taken in the names of the president and secretary that they might more easily be disposed of and the proceeds expended in the construction of the railroad. They were so disposed of, and the proceeds were so expended, and the company had the benefit of them. We think the evidence was properly admitted.

We therefore advise the Superior Court, on a further hearing of the case as to what lands were mortgaged to secure the bondholders, and as to the location of the four pieces of land omitted by mistake from the mortgage to Colegrove, to render judgment in accordance with the foregoing opinion.

In this opinion Pardee and Loomis, Js., concurred.