Federal Trust Co. v. Bristol County Street Railway Co.

• Decision Date: 06 October 1915
• Citation: 222 Mass. 35
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: FEDERAL TRUST COMPANY v. BRISTOL COUNTY STREET RAILWAY COMPANY & another.

222 Mass. 35

FEDERAL TRUST COMPANY v. BRISTOL COUNTY STREET RAILWAY COMPANY & another.

Supreme Judicial Court of Massachusetts, Suffolk.

October 6, 1915

March 22 1915.

Present: RUGG, C.

J., LORING, BRALEY DE COURCY, CROSBY, PIERCE, & CARROLL, JJ.

Mortgage, Of property and franchises of street railway corporation. Estoppel. Taunton and Pawtucket Street Railway Company. Railroad Commissioners. Deed. Equity Jurisdiction, To enforce covenant of further assurance. Street Railway. Receiver. Jurisdiction.

Taking part in negotiations, for the purpose of obtaining from the trustee under the mortgage securing the bonds of the Bristol County Street

Railway Company a release of certain property from that mortgage, did not estop the Taunton and Pawtucket Street Railway Company, which had acquired the property and franchises of the first named corporation, from impeaching the validity of a supplemental indenture to the same trustee purporting to add additional security to the bonds; nor did the payment of interest coupons of the bonds by the Taunton and Pawtucket Street Railway Company estop that company from denying the validity of such supplemental indenture. "Avoidance of dispute on a comparatively small matter by apparent yielding does not necessarily estop one from asserting his rights when the main question comes to an issue." By RUGG, C.J.

Where, in a mortgage made by a street railway corporation to a trustee to secure its bonds, the corporation covenanted to execute any further deed that the trustee reasonably might require for "more perfectly assuring to and to the use of the trustee . . . the mortgaged premises thereby conveyed or intended so to be and especially for vesting in the trustee upon and for the said trusts and purposes all property thereafter acquired," and thereafter the corporation makes a supplemental mortgage conveying to the trustee subject to the trusts of the principal mortgage all property acquired by it between the date when the principal mortgage took effect and the date of such supplemental mortgage, the supplemental mortgage is not a subsequently executed mortgage within the meaning of

Pub. Sts. c.

112, Section 64 St. 1889, c. 316, Section 3, (now St.

1906, c. 463, Part II, Section 50, Part III, Section 103,) requiring that a street railway corporation shall not subsequently execute a mortgage upon its franchise and property without including in and securing by such mortgage all bonds previously issued and all its pre-existing debts and liabilities. In a suit in equity to foreclose a trust mortgage securing an issue of $200,000 of bonds made by the Bristol County Street Railway Company, it was held, that the Taunton and Pawtucket Street Railway Company, which had purchased the property and franchises of the first named company from a receiver of its property under a decree of court, was estopped from contending that the issue of bonds secured by the mortgage was invalid as being issued in violation of St. 1897, c. 337 Section 2,

(now St. 1906, c. 463, Part III, Section 108, as amended by St. 1914, c. 671,) prohibiting the issue of bonds in excess of the amount of capital stock paid in, for the reasons stated in the decision of this court reported in 218 Mass. 367 , and because, by the express terms of the deed to the purchasing company and of the decree authorizing the sale to it, the property purchased was made subject to the mortgage securing bonds to the amount of $200,000.

As to how far and by whom the validity of bonds issued by a street railway corporation in accordance with orders of authorization made by the board of railroad commissioners is open to question, it here was not necessary to determine, because the raising of the question was precluded by reason of estoppel.

A mortgage made by a street railway corporation to a trustee to secure an issue of its bonds and containing the ordinary covenants of warranty conveys as between the parties all the real estate specifically described therein or incorporated by reference in the description which was owned by the corporation when the mortgage took effect or afterwards was acquired by it, this being in accordance with the settled law in this Commonwealth as to all deeds, but, in this Commonwealth, where such a mortgage by its terms includes after acquired personal property, such property does not become subject to the mortgage either at law or in equity until the trustee takes possession of it by virtue of the power conferred by the mortgage or it is conveyed to the trustee by a supplemental instrument in writing.

A mortgage made by a street railway corporation to a trustee to secure an issue of its bonds, which was delivered and recorded ten days after its date, was held to have taken effect on the day of its delivery and registration, the written date not being conclusive.

In a suit to foreclose a mortgage made by a street railway corporation to a trustee to secure an issue of its bonds, the release by the trustee, to a purchaser of the property of the corporation from a receiver, of a tax title upon a certain parcel of land of the corporation was held not to have released the parcel of land from the lien of the mortgage but to have released only the rights of the trustee that were acquired under a certain tax deed.

In a suit to foreclose a mortgage made by a street railway corporation to a trustee to secure an issue of its bonds, where the defendant in interest had purchased the property and franchises of the corporation that made the mortgage and the bonds from a receiver appointed by the Circuit

Court of the United States and the decree of sale made by that court provided that the land and other real estate rights "shall be conveyed to the purchaser or purchasers and shall be accepted by the purchaser or purchasers subject to" the mortgage that was being foreclosed, it was held that the defendant in interest was estopped to deny that the land and other real estate rights had passed under the lien of the mortgage.

Whether an express approval by the board of railroad commissioners, in their approval of an issue of bonds by a street railway corporation, of the inclusion by the mortgage of after acquired property, could have the same effect as an approval by an act of the Legislature of a mortgage providing for such inclusion, such as existed in the case of Howe v.

Freeman, 14 Gray, 566, it here was not necessary to consider, because the approval of the railroad commissioners, which related only to the amount of bonds to be issued and not to the form of the mortgage by which they were secured, made no reference to after acquired property.

Where a mortgage made by a street railway corporation to a trustee to secure an issue of its bonds provided for the execution of any further deed that should be required by the trustee for vesting in the trustee all after acquired property to be held upon the trusts of the mortgage, and a supplemental mortgage was executed conveying to the trustee all property of the corporation acquired after the principal mortgage took effect up to the date of the supplemental mortgage, but after that date the trustee did not take possession of any further property by the power conferred by the mortgage and no further written instrument was executed, it was held, that the mortgage and the supplemental mortgage did not cover personal property acquired after the date of the supplemental mortgage.

In a suit to foreclose a mortgage made by a street railway corporation to a trustee to secure an issue of its bonds, where the defendant in interest had purchased the property and franchises of the corporation that made the mortgage and the bonds from a receiver appointed by the Circuit

Court of the United States and the decree of sale made by that court declared what property was subject to the mortgage and what was not, this determination made by a court of competent jurisdiction was held to be conclusive upon the parties to that suit and their privies, which included the defendant in interest in the suit to foreclose the mortgage.

A mortgage made by a street railway corporation of its property and franchises to secure an issue of its bonds includes the interest of the corporation in property which, at the time the mortgage was made, it held in possession as the purchaser under contracts of conditional sale.

A covenant of further assurance made by a street railway corporation in a mortgage of its property and franchises to a trustee to secure an issue of bonds, whereby the corporation covenants to do any act and execute any deed demanded by the trustee for more perfectly assuring to the trustee all parts of the mortgaged premises intended to be conveyed, cannot be enforced, in a suit in equity to foreclose the mortgage, by an order of performance against the corporation, if before the suit was brought all the property and franchises of the corporation had been sold by a receiver under a decree of the Circuit Court of the United States to a new corporation, which bought the property subject to the mortgage.

Nor can the covenant be enforced against such purchaser, because the sale of the property subject to the mortgage merely meant that the purchaser took the property with all the infirmities that had come into existence and attached to it and did not impose an obligation to perform contractual duties of the mortgagor.

In the case above stated it further was said that an order to the purchasing corporation to perform such a covenant of the mortgagor would be contrary to St. 1900, c. 381, Section 2, (now St. 1906, c. 463, Part

III, Section 144).

In the same case it was held, that the trustee under the mortgage, in the suit in equity to foreclose the mortgage, was not entitled to have the...