Boston Safe-Deposit & Trust Co. v. Hudson

• Decision Date: 28 May 1895
• Docket Number: 93.
• Citation: 68 F. 758
• Parties: BOSTON SAFE-DEPOSIT & TRUST CO. v. HUDSON.
• Court: U.S. Court of Appeals — Fourth Circuit

68 F. 758

BOSTON SAFE-DEPOSIT & TRUST CO. v. HUDSON.

No. 93.

United States Court of Appeals, Fourth Circuit.

May 28, 1895

This is an appeal from the decree of the circuit court ordering a judgment of the appellee, Hudson, to be paid out of the proceeds of the sale of the Charleston, Cincinnati & Chicago Railroad in preference to the claim of the first-mortgage bondholders. Hudson, while in the employ of the railroad corporation in the state of North Carolina, was injured April 29, 1887. He entered suit against the corporation October 13 1887. In that suit judgment of nonsuit, in invitum, was entered against him at the August term, 1888. On October 2 1888, he entered a second suit, in which he recovered judgment for $1,500 and costs. The railroad corporation, on August 9, 1887, after the injury to Hudson, executed a mortgage to secure a large issue of first mortgage bonds which was recorded October 8, 1887. Default having been made in the payment of the interest on the bonds, a decree of foreclosure was entered in this cause, and the railroad property sold. There were no earnings, and the proceeds of the sale were largely insufficient to pay the bonds. Hudson filed his judgment in this case, claiming that, by virtue of the statutes of North Carolina, he was entitled to be paid his judgment in preference to the holders of the mortgage bonds. The dates are as follows: Hudson was injured April 29 1887; his first suit was commenced October 13, 1887; his second suit was commenced October 2, 1888. The circuit court, by its decretal order, adjudged that Hudson's claim by the statutes of North Carolina, had priority over the bonds secured by the mortgage, and directed his claim to be paid. To reverse that decree this appeal was taken.

A. M. Lee, of Smythe & Lee, and Platt D. Walker, of Walker & Cansler, for appellant.

Julian Mitchell, for appellee.

Before GOFF, Circuit Judge, and HUGHES and MORRIS, District Judges.

MORRIS District Judge (after stating the facts).

Whether or not Hudson's claim for personal injury was entitled to be paid in preference to the debt secured by the mortgage depends upon the effect to be given to two sections of the North Carolina Code which was adopted in 1883. In adopting this Code, the legislature of North Carolina repealed all other statutes and declared that it should be construed as one act, and as if enacted on one day. The first section is found under the head 'Corporations,' and is as follows:

'Sec. 685. How Corporations may Convey by Deed; Void as to Existing Creditors. R. C., c. 26, s. 22, 1798, c. 514, s. 4. Any corporation may convey lands and all other property which is transferable by deed by deed of bargain and sale, or other proper deed, sealed with the common seal and signed by the president or presiding member or trustee, and two other members of the corporation, and attested by witnesses. But any conveyances of its property, whether absolutely or upon condition, in trust, or by way of mortgage executed by any corporation, shall be void and of no effect as to the creditors of the said corporation, existing prior to or at the time of the execution of said deed, and as to torts committed by such corporation, its agents or employes prior to or at the time of the execution of said deed; provided said creditors or persons injured or their representatives, shall commence proceedings or actions to enforce their claims against said corporation within sixty days after the registration of said deed, as required by law.'

The second section is found under the head 'Deeds and Conveyances,' and is as follows:

'Sec. 1255. Property of Corporations not Exempt from Certain Liabilities on Account of Mortgages, 1879, c. 101. Mortgages of incorporate companies upon their property or earnings, whether in bonds or otherwise, hereafter issued, shall not have power to exempt the property or earnings of such corporations from executions for the satisfaction of any judgment obtained in courts of the state against such incorporation for labor performed, nor for material furnished such incorporation, nor for torts whereby any person is killed, or any person or property injured, any clause or clauses in such mortgage to the contrary notwithstanding.'

The contention of the appellant is that Hudson's claim, being for a tort committed by the railroad corporation prior to the execution of the mortgage, comes within the proviso of section 685, and does not have priority over the mortgage unless Hudson's action to enforce his claim was commenced within 60 days after the recording of the mortgage, and that although Hudson's first action was so commenced, as he was nonsuited in that action and did not commence the action in which the judgment now filed was obtained until one year after the recording of the mortgage, he has not brought himself within the terms of section 685. The contention of the appellant as to section 1255 is that it applies only to torts which occur after the execution of a mortgage by a corporation, and therefore not to the tort for which Hudson obtained his judgment. The circuit court held (Simonton and Brawley, J. J., 61 F. 369) that section 1255 applied to all claims for labor, materials or torts against a corporation, whether incurred before or after the execution of a mortgage, and that its beneficial provisions were not to be limited by the proviso inserted in section 685. It is conceded that the precise point in controversy has not been determined by the supreme court of North Carolina, and we are therefore to determine the meaning and effect of the statute by such settled rules of interpretation as are applicable.

In the first place, it is to be presumed that the attention of the legislature was called to the differences and to the similarities in the two sections, and that they were designed. If they run in parallel lines, each covering something that the other also covers, and each covering something that the other does not, still the presumption is that the legislature, out of abundant caution, so intended it. Maxw. Interp. St. 199. There is nothing doubtful or obscure in the words of either section. The difficult arises solely from the fact that the subject-matter of section 685 is in part also covered by section 1255, and the contention is that as to that part the proviso appended to section 685 should be construed as applying also to section 1255. But it is a rule that a proviso is strictly construed, and should be confined to what precedes it, unless it clearly appears to have been intended to apply to other matters also. Suth. St Const. Sec. 223; Potter, Dwar. St. 272; End. Interp. St. Sec. 186; Wayman v. Southard, 10 Wheat. 30; U.S. v. Dickson, 15 Pet. 141-165. Before, therefore, the proviso appended to section 685 is made to modify and limit section 1255, it must clearly appear that by no other construction can the two sections stand together. In section 685 the legislature declared that any conveyance of property by a corporation should be of no effect as to existing creditors or existing claims for torts, provided the claimants commenced proceedings within 60 days. In section 1255 the legislature declared that thereafter a mortgage of its property or earnings by a corporation should not exempt its property or earnings from execution on any judgment for labor or materials, or for torts by which persons or property was injured. We have in section 685 an enactment...