Bank of Auburn v. Roberts

By the Court, E. D. Smith, J.

The chief question upon this appeal is whether the plaintiffs have any lien, legal or equitable, upon the moneys awarded by the canal board to Bradfield and Roberts in and by the resolution of said board, passed May 28, 1858. The cases referred to by the plaintiffs’ counsel and upon which he relied to maintain the judgment of the referee, do not, so far as the facts of those cases are concerned, it seems to me, cover the case. They are the cases of Danforth v. Suydam, (4 Comst. 66,) and Munsell v. Lewis, (2 Denio, 226.) In the case of Danforth v. Suydam, the state had appropiated a mill lot for the enlargement of the Erie canal, and by the statute of limitations the provisions of the Revised Statutes limiting claims against the state to one year had attached. Notwithstanding this the legislature passed an act directing the canal appraisers upon the application of the owners, their heirs or assigns, to appraise the damages sustained by such owners from the appropriation of such land with others in the city of Rochester. Suydams had mortgages covering the mill lot in question, but before the passage of this act they had foreclosed such mortgages and bought in the property and had the legal title thereto, if a legal title could be acquired after such appropriation. They were held, under this act to be the legal owners of the property, by Vice Chancellor Whittlesey, who first decided the case, and by this court on appeal, in an opinion of Judge Maynard, and also finally by the Court of Appeals; and as such owners or assignees of the land, Suydams were held entitled to the money awarded by the state for the taking and appropriation of such land. This case stands upon this ground. In the case of Munsell v. Lewis, the act of the legislature provided that those contractors who entered into contracts for any part of the Chemung canal, at either of the three first lettings thereof, should be entitled to receive, on the completion of their respective jobs, such further sums beyond the contract price as the canal board should deem just and equitable, in consequence of the rise of the prices and value of forage and provisions and labor subsequent to the time of entering into such contracts respectively. Lewis, the defendant, was an original contractor within the terms of said act, but he sublet his contract to Munsell, who agsqnaed his responsibilities and completed the job. The Court for the Correction of Errors held very properly that the extra compensation belonged to Munsell who did the work, and that he was to be deemed the contractor intended by the legislature, within the spirit and equity of the act. In both these cases the award was held to belong primarily, .to the Suydams, in the former case, and to Munsell in the other, by the terms of the act. This is not so in the case before us. The plaintiffs can not claim to be the original parties intended to be benefited by the act of the legislature of April 2, 1858. That act was passed chiefly for the benefit of Bradfield and Roberts, who had the legal title to the mill property in question. The second section of the act expressly authorized and directed the canal board “to settle upon the damages to the mill property of Edward Bradfield and Henry Roberts, situated upon the said canal, caused by the abandonment of said land, [as allowed in the 1st section of said act,] and to award to them such sum as in the judgment of said board should be just and equitable.” This is a provision to make compensation to the said Bradfield and Roberts personally as the owners of the mill property, for the injury done to such property. Very clearly, as it seems to me, the plaintiffs can not claim the award by Torce of the terms of the act. It does not apply to them or include them. But the plaintiffs were mortgagees of this mill property, and the question which remains, in this connection, is whether as such mortgagees they have any lien upon or claim to such award. If the state had appropriated any part of the land covered by their mortgage, it could not cut off the lien of such mortgage by payment of the value of such land, or of the damages appraised therefor, to Bradfield and Roberts. As mortgagees, the plaintiffs could have claimed such money if the property should not be of sufficient value to pay their debt, independently of the portion thereof so appropriated. It is, besides, a rule in equity upon the doctrine of equitable conversion, that when land is taken for public use, for canals, railroads, streets or otherwise, the money awarded for such land remains, and is to he considered, as land in respect to all rights and interests relating thereto. The money in such cases is deemed to represent the land, and is applied in equity to discharge the liens upon it, precisely in accordance with the legal or equitable rights of creditors or incumbrancers in respect to such land. (Astor v. Miller, 2 Paige, 68. Astor v. Hoyt, 5 Wend. 610. In the Matter of Cherry streets, 19 id. 660.) But the state has taken no land covered by the plaintiffs’ mortgage. It has made no appropriation of property, but has simply changed the location of a public work adjacent to the premises covered by the plaintiffs’ mortgage. But while this is strictly so, and the damages which Bradfield and Boberts, or the property owned by them, sustained from such change of the location are purely consequential and could in no way be recovered without a special act of the legislature recognizing a right of compensation for such damages and giving and creating a tribunal for the ascertainment of the amount thereof, yet I think the change of the location of the Erie canal adjacent to these premises was a virtual appropriation of property, in a qualified sense, belonging to the said Bradfield and Boberts, and in which the plaintiffs had an equitable interest. Upon the construction of the Erie canal, cities and villages sprung up immediately upon its banks through its whole extent, and valuable buildings were erected and improvements were made in such cities and villages adjoining the said canal and connected therewith, and 'dependent thereupon for their chief value. The mill of Bradfield and Boberts, in Port Byron, was obviously one of such erections. The act providing for the enlargement of the Erie canal, passed April 15, 1854, section 7, declares as follows: “That nothing in this section shall authorize said board [the canal board] to abandon the present canal through cities or incorporated villages.” This act recognizes a species ’of vested right on the part of the citizens who had made valuable erections and improvement^ in the cities or yillageg of the state adjacent to the canal, to have the said canal continued as then located. The defendants, Bradfield and Roberts, purchased this mill and premises May 1, 1855, at $25,000, the mill having actually cost, as the plaintiffs’ cashier testified, from $50,000 to $60,000. This mill was adjacent to the Erie canal. The referee finds that the canal was, in a limited sense, appurtenant to the mill property, and also that it (the canal) was directly necessary to the full enjoyment of the mill property. Such being the situation of this mill, the legislature passed the act of April 2, 1858, aforesaid, providing that all that portion of the old Erie canal lying west of the Owasco outlet in the village of Port Byron, and east of lock 52, might be abandoned by the canal board, and directing, in the 2d section above recited in part, said board “to settle upon the damage to the mill property of said Bradfield and Roberts caused by such abandonment.” This was a distinct admission and recognition by the legislature of an equitable claim on the part of said Bradfield and Roberts, as the owners of said property, to compensation for such damages. It was not a gratuity. It was a provision for payment of a just claim arising out of the implied vested right in the canal, as then located, of the inhabitants of the cities and villages situate upon its banks, which the legislature conceded or recognized in the act of 1854, aforesaid. It was an acknowledgment by the legislature that said Brad-field and Roberts, as the owners of said property, were entitled to an equitable compensation for the damages to such property consequent upon the abandonment of that portion of the said canal adjacent thereto. The money advanced for such damages was a substitute for the valuable interest of the owners of said mill property in the canal as then located. It was to be a payment for the extinguishment of a privilege appurtenant to said canal and incident to said mill property as then situated, of much real and actual value, though not of such a character as property to be legally maintained and enforced. The abandonment of the canal at this place extinguished a property on the part of said mill owners of great value—a clear equitable property, not absolute and legal but as certainly just and equitable as against the state as if it had been created by grant or prescription. The $8000 awarded by the canal board to Bradfield and Roberts was for such equitable property—was to pay a just claim for its destruction, or the deprivation thereof, to the said mill property. It was just as much a substitute for equitable property _ as was the money awarded to Lewis, in the case of Munsell v. Lewis, for an equitable right to extra compensation. The latter was for work, services and expenses incurred. This for property destroyed and extinguished. The money awarded for this injury to the mill property of Bradfield and Roberts, is an equitable fund for the payment of the liens upon said mill property. It is a substitute for the said property to pay their debt. The fact that it was awarded to them does not change the plaintiffs’ rights. They have a lien upon a fund which arises from the destruction of the property upon which they had a lien. If they had foreclosed their mortgage and sold the property before such allowance had been made, or the act therefor passed, it can not be doubted that they would have had an equitable claim upon the state to make up the deficiency "within the limits of the actual depreciation of such mill property consequent upon the abandonment of the canal adjacent thereto. It would be like a case of waste to the injury of a mortgagee, who may maintain an action for the damages sustained thereby to the injury of his security when the mortgagor, as in this case, was insolvent and the security insufficient. ( Van Pelt v. McGraw, 4 Comst. 110, and 3 Barb. 347) I think the plaintiffs had a clear equitable lien upon this award for the payment of the mortgage after exhausting their legal lien upon the said min property. The defendants, L. Roberts & Co., are not bona fide holders of the draft given by the canal commissioners for the payment of'the award. They were subsequent incumbrancers on the mill property, had received as such the $15,000 insurance money upon the mill, knew all the facts and advanced nothing upon the draft, except the sum of $1750 mentioned in the report of the referee and excepted in the judgment. The judgment rendered by the referee, I think, was right and should he affirmed.

[Monroe General Term, December 4, 1865.

Welles, M. D. Smith, J. C. Smith and Johnson, Justices.]