Cleveland, C. & S. Ry. Co. v. Knickerbocker Trust Co. of New York

• Decision Date: 12 April 1898
• Docket Number: 5,156.
• Parties: CLEVELAND, C. & S. RY. CO. v. KNICKERBOCKER TRUST CO. OF NEW YORK et al.
• Court: U.S. District Court — Northern District of Ohio

86 F. 73

CLEVELAND, C. & S. RY. CO. v. KNICKERBOCKER TRUST CO. OF NEW YORK et al.

No. 5,156.

United States Circuit Court, N.D. Ohio, Eastern Division.

April 12, 1898

Baldwin & Shields, for complainant.

C. E Pennewell, Amos Denison, and F. A. Durhan, for intervener, T B. Townsend Brick & Contracting Co.

RICKS District Judge.

The intervener seeks to obtain a preferential lien for work done and performed and material furnished for the Cleveland Canton & Southern Railroad Company upon the pier and abutments of the Independence street bridge over the Cuyahoga river, in the city of Cleveland, and, with that end in view, sets up three grounds of recovery: (1) A mechanic's lien is asserted. (2) It is asserted that at least a portion of its claim is preferred under the order of the court appointing the receiver, in which six months' claims for material, supplies, and labor are to be paid out of the net income of the road in the hands of the receivers. (3) That the labor performed and material furnished were necessary to keep the road a going concern, and that, in equity, they are entitled to payment out of the corpus.

In my opinion, the mechanic's lien placed upon the bridge upon which the work was performed and material furnished is ineffectual to charge the railroad company, for the reason that a claim against a railroad cannot be obtained under the general mechanic's lien law, but must be obtained under the act of April 10, 1884, and known as the 'Railroad Lien Law.' According to the provisions of that law, the lien must be filed within 40 days after the account is closed. The lien upon which reliance is placed in this case was not filed until after the expiration of 40 days. The last work was done June 20, 1893, and the affidavit was not filed until August 16th thereafter. The Townsend Company also failed to serve notice of its alleged lien within 10 days after the filing thereof on the secretary or other officer of the company, as provided by the act referred to. See Commissioners v. Tommey, 115 U.S. 122, 5 Sup.Ct. 626, 1186; Industrial & Mining Guaranty Co. v. Electrical Supply Co., 16 U.S.App. 196, 7 C.C.A. 471, and 58 F. 732. Then, too, the mechanic's lien relied upon includes the Independence street bridge only as the property affected. The United States supreme court in the case of Porter v. Steel Co., 122 U.S. 267, 7 Sup.Ct. 1206, held that:

'The bridges become a part of the permanent structure of the railroad as much as the rails laid upon the bridges or upon the railroad outside of the bridges. ' 'Whatever is the rule applicable to locomotives and cars, and loose property susceptible of separate ownership and of separate liens, and to real estate not used for railroad purposes, as to their being unaffected by a prior mortgage given by a railroad company, covering after-acquired property, it is well settled in the decisions of this court that rails and other articles, which become affixed and a part of a railroad covered by a prior mortgage, will be held by the lien of such mortgage in favor of bona fide creditors, as against any contract between the furnisher of the property and the railroad company, containing stipulations like those in the contracts in the present case.'

If a specific contract made by the company giving a lien upon a bridge cannot be maintained as against mortgage lienors, certainly a mechanic's lien cannot be made more effectual for that purpose. Even if this lien can be maintained, it would be subordinate to fill the mortgages executed by the company, and set up in the proceedings affecting the property of the railroad company in this court, because of their prior date.

2. The clause authorizing the payment of certain items of indebtedness by the receivers reads as follows: 'And the said receivers are hereby authorized to pay and discharge out of the net income of said railroad all unpaid traffic balances and the indebtedness of said company to its servants and employes, and for materials and supplies accruing within six months last past, and also the unpaid coupons, amounting in all to $4,000, due July 1, 1893, on the Coshocton & Southern Railroad line, and mentioned in the said bill of complaint.'

The master found that, of the amount due for work and materials claimed in this case, the sum of $6,072 accrued within six months prior to the appointment of the receivers. It is suggested that this amount is inaccurate, and that the amount due within six months is not so much as found by the master. This claim is not founded upon proof, but upon the assumption that only one-half the estimate for March ($2,496) should be allowed. In the absence of anything definite, the court will adopt the master's findings of facts.

If the character of this contract was such that the order of the court preferring labor and material men applies to it, only the sum of $6,072 could be paid by the receivers, and then it could only be paid out of the net income in their hands. The evidence does not establish the fact that there is a net income in his hands applicable to the payment of said sum of $6,072 so reported by the master. If it can be shown that there is sufficient net income in the hands of the receiver to pay this sum, I am of the opinion that the nature and character of the work done by the intervening creditor would entitle it to payment out of such income. But there is nothing in that order which would entitle it to payment out of the corpus of the property, to the prejudice of the rights of mortgage creditors. If the claim of priority is justified, it must be on the grounds of superior equity.

The International Trust Company, representing certain of the bonds secured by mortgage on the property of the railroad company, by its solicitors, alleges that the contract under which the labor was performed and material furnished was a contract for original construction made in April, 1892, about 18 months before the receivers were appointed, and more than two-thirds of the work done under it more than 6 months before the receivers were appointed,-- a contract made with full knowledge of the existence of the bonds and mortgages upon the property,-- and that no equity arises as against these mortgages; and it asserts that the Hamilton Case, 134 U.S. 296, 10 Sup.Ct. 546, and other cases cited, are conclusive upon this point. If the work of the intervener was original construction, within the view of the Hamilton Case, then there can be no priority. The agreed statement of facts in this case is as follows:

'The old bridge at Independence street was built in 1880, and was a wooden structure. In 1886 it was re-enforced by overhead trusses. Later, it was necessary to support it by piling. In 1892, because of the age and worn-out condition of the bridge, it became necessary, in order to safely operate the road, to replace the old bridge with a new one. On application to the city for permission to put a new bridge over the river, the city required a draw to be put in the new bridge, and refused to permit the old bridge to be replaced by anything but a drawbridge, and thereupon the new bridge for which the pier was built by the intervener was constructed and took the place of the old one.'

In my opinion, the replacement of the old bridge, whether the work was done by 'force' work of the company or by contract with other persons, was in all essentials necessary repairs, and not original construction. This agreement states that the old bridge had been re-enforced by overhead trusses. Later it was supported by piling. In 1892, because of the age and worn-out condition of the bridge, it became necessary, in order to safely operate the road, to replace the bridge with a new one. The city authorities required a swing bridge. But the new bridge was...