Fid. Ins. Trust v. Shenandoah Valley R.R. Co.
| Decision Date | 20 March 1890 |
| Citation | 33 W.Va. 761 |
| Court | West Virginia Supreme Court |
| Parties | Fidelity Ins. Trust and Safe Deposit Co. v. ShenandoahValley Railroad Co. |
The C. I. Co. holds first mortgage bonds under a mortgage, dated in 1872, given by the S. V. R'd Co.; and the two companies make an executory agreement providing that the bonds held by the C. I. Co. shall be cancelled, and in place of them the S. V. R'd Co. shall issue and deliver to the C I. Co. second mortgage bonds, which are to be subject to certain first mortgage bonds specified in the agreement to be issued by the 8. V. R'd Co. to go to other parties, to complete the railroad of the S. V R'd Co. Under the agreement, the bonds under the mortgage of 1872 are cancelled, and a release of that mortgage is made by the trustee therein. Then the 8. V. R'd Co. executes three mortgages on its property, the trustee therein having notice of the right of the C. I. Co, under said agreement. It never delivered to the C I. Co. the second mortgage bonds called for by said agreement. The C. I. Co. is held entitled to equitable compensation under such agreement for the failure of the 8. V. R'd Co. to deliver such second mortgage bonds. Held, that by force of such agreement, notwithstanding the failure to deliver such second mortage bonds, the equitable compensation for such failure decreed to the C. I. Co. must be subject to the first mortgage bonds to which such agreement made the second mortgage bonds subject; and it can not be accorded priority over such bonds by reason of the mortgage of 1872.
The C. I. Co. repudiated such agreement, and claimed as for the said cancelled bonds, and did not demand such second mortgage bonds, and never claimed any compensation under said agreement for failure to deliver the second mortgage bonds until after a decree holding it bound by said agreement. For this reason, though, had such bonds been delivered according to the agreement, they could have been sold by the C. I. Co. at par, and that company is thus damaged by such failure to deliver the bonds, yet these facts will not give it preference for the compensation decreed it over the first mortgage bonds, to which the agreement makes such second mortgage bonds subject, notwithstanding such position of subordination may entail great loss to tbe C. I. Co., as compared with what it would have realized by a sale of the second mortgage bonds, had they been delivered.
The measure of compensation under said agreement is the amount of bonds called for therein, and the lien is according to the order specified in such agreement.
Every express executory agreement in writing whereby the contracting party indicates an intention to make some particular property, real or personal, or a fund therein identified, a security for a debt or other obligation, or whereby he promises to convey, assign, or transfer the property as security, creates an equitable lien upon the property which is enforceable against the property.
An attachment against the estate of the C. I.Co. summons M., president of the S. V. R'd Co., garnishee, to answer what property of the C. I. Co. he has in hand, and a judgment is rendered that tbe plaintiff recover of M., president of the S. V. R'd Co., garnishee of C. I. Co., a sum of money, are not an attachment and judgment against the S. V. R'd Co. as garnishee, and do not bind property in the hands of the latter company belonging to the C, I. Co.; and a sale of the property under execution upon such judgment does not pass title thereto, or bar the C. I. Co. from setting up its claim to such property against the S. V. R'd Co., either according to the general law, or law of Pennsylvania.
Such property being negotiable mortgage bonds, and it not appearing that when judgment was rendered they had been so executed as to be considered in existence as valid mortgage bonds, a sale of them under such proceeding would not pass title thereto under the Pennsylvania law.
Counsel below.
McDonald $ Moore and F. Beckwith for appellant.
W. H. Travers for Shenandoah Valley Railroad Co., F. P. Clark, S. Dickinson and 67. Caldwell for the Fidelity Ins., Trust & Safe-Deposit Co., C. L Lamberton for First Mortgage Bondholders.
These suits have been in this Court on appeals heretofore, and reports of decisions on such appeals will be found in 28 W. Va. 623, and 32 W. Va. 244 (9 S. E. Rep. 180) to which, particularly the latter, reference is made for the character and facts of the causes, so far as they are not given herein. When the causes went back to the Circuit Court of Jefferson county, a reference was made touching the claim of the Central Improvement Company; and the commissioner was directed to hear any testimony offered for or against that claim, and to report. The commissioner's report found in favor of the Central Improvement Company agains: the Shenandoah Valley Railroad Company on account of its claim based on second mortgage bonds, $250,000.00, with interest from April 1, 1879, to October 1, 1884, and on account of its claim based on income bonds, $379,224.00, with interest from April 1, 1879, to October 1, 1889, both aggregating $1,025, 635.12, and from that sum, made up in common from the claims based on both classes of bonds, he deducted $11,000.00 for the amount of a sale made under an attachment of B. K. Jamison & Co. against the Central Improvement Company of certain bonds, as hereinafter stated, with interest from October 1879, to October 1, 1889, aggregating $17,600.00. The report gave the demand of the Central Improvement Company priority over all of the mortgages made by the Shenandoah Valley Railroad Company to the Fidelity Insurance, Trust & Safe-Deposit Company, trustee for bondholders. Exceptions were taken by the Fidelity Company, in effect, because of the amount found in favor of the Central Improvement Company, and because any amount was found for it, and because the report gave the Central Improvement Company preference over its mortgages, and other causes. The Shenandoah Valley Railroad Comoany excepted because any amount whatever was found against it in favor of the Central Improvement Company, and because it did not report certain attachment suits pending in Philadelphia against the Central Improvement Company as pending, and the priorities and amounts thereof, should there be recoveries therein. The court, on the hearing, held and decreed that the Central Improvement Company was entitled to $127,000.-00 without interest until the decree, and refusing its costs, and declaring its claim a lien on the railroad property in preference to the mortgages of the Fidelity Company, and all other demands. From this decree of December 3, 1889, Crumlish's administrator has appealed to this Court. Said administrator, the Shenandoah Valley Railroad Company, and the Fidelity Company all complain of said decree, and specify errors therein. Crumlish's administrator, representing stockholders of the Central Improvement Company, complains because the decree allows only $127,000.00 for its demand, and refuses interest for time prior to date of the decree, and because it refuses costs.
On April 29, 1878, an agreement was made between the Shenandoah Valley Railroad Company and the Central Improvement Company reciting that, under contract theretofore made between said railroad company and said improvement company, the improvement company had agreed to build the road from Shepherdstown to the Chesapeake & Ohio Railroad, near Staunton 133 miles and had done a large amount of grading and masonry on the first seventy five miles south of Shepherdstown, and, by reason of the financial panic of 1873, work had ceased up to the date of the agreement, and that it wras the desire of both parties to the agreement that the bonds which had been paid to the Central Improvement Company, and by it pledged to other parties, be retired and canceled, in order that a new contract between John Satterlee & Co. and Alfred Creveling and the Shenandoah Valley Railroad Company might be carried out for the completion of the road to the Chesapeake & Ohio Railroad; and, in order that the Central Improvement Company be released from all liability under its contracts to build the railroad, it was provided, first, that the securities deposited with the Pennsylvania Railroad Company for advances by it to the Central Improvement Company should be surrendered by the Pennsylvania Railroad Company, it agreeing to receive in exchange therefor $250,000.00 of an issue of $500,-000.00 six per cent, currency second mortgage bonds of the Shenandoah Valley Railroad Company, subject to a prior lien of $15,000.00 per mile of first mortgage six per cent, bonds, which second mortgage bonds the Shenandoah Valley Railroad Company agreed to deliver to the Pennsylvania Railroad Company; and it provided, second, that the Central Improvement Company should deliver to the Shenandoah Valley Railroad Company all its first mortgage bonds held by the Central Improvement Company received by it for the work it had done; and it provided, third, that the Shenandoah Valley Railroad Company should issue and deliver to the Central Improvement Company $250,000.00 of the second mortgage bonds aforesaid, in full consideration for the delivery and cancellation of the securities aforesaid; and the agreement provided, fourth, that the Shenandoah Valley Railroad Company should issue and deliver to the Central Improvement Company, in payment for the amount received by it from subscribers to its capital stock, which had been expended in the work, the amount paid in on said stock, with interest, six per cent, currency income...
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