Green v. Coast Line R. Co.

• Decision Date: 05 October 1895
• Citation: 24 S.E. 814,97 Ga. 15
• Parties: GREEN v. COAST LINE R. CO. et al.
• Court: Georgia Supreme Court

24 S.E. 814

97 Ga. 15

GREEN v. COAST LINE R. CO. et al.

Supreme Court of Georgia

October 5, 1895

Syllabus by the Court.

1. By invoking equitable relief, such as the appointment of a receiver and the administration of the mortgaged property by equitable means and agencies, mortgagees submit themselves to do equity relatively to any creditor of the mortgagor who may rightly intervene in the foreclosure proceedings in which such relief is sought. Mortgages upon a railway, and the income from the same, the mortgagor being left in possession are, as to the income, whether produced before or after the appointment of a receiver in foreclosure proceedings, subject to be postponed in equity in favor of a claim for damages resulting from a tort committed by the mortgagor while and by reason of operating the railway after the execution of the mortgage. The tort now in question consisting of negligence in running a train upon the railway, whereby damages accrued and judgment therefor against the mortgagor having been obtained before the mortgages were foreclosed or the receiver was appointed, such damages, so reduced to judgment, should be regarded as operating expenses charged by the judgment upon income as against the mortgages and all their incidents. So long as such a charge is unsatisfied, the mortgagees cannot justly and equitably divert income from its payment and take the benefit of such diversion, whether directly or indirectly.

2. In the present case, when the court adjudicated finally upon exceptions to the master's report, it was, according to recitals in the bill of exceptions, matter of authentic fact, of which the court should have taken judicial notice, that, counting income expended by the receiver for new steel rails, iron, and cross-ties, and the sums applied by the court to fees of the receiver and his counsel, about double as much income as would be required to satisfy the judgment for damages had been thus used up while the case was in progress. It is manifest that the mortgagees cannot take all the fruits of the case without incidentally profiting by this income, to the detriment of the judgment creditor. For this reason, if for no other, the court erred in approving and sustaining the master's report in so far as it ranked the judgment below the mortgages as a claim upon the fund in court for distribution, that being all the fund there was for distribution; the mortgages being more than sufficient to exhaust it, and the common debtor being insolvent. The court, under the special circumstances, should have ranked the judgment as superior to the mortgages. Let this be done by properly modifying the decree.

3. The evidence taken by a master, and duly reported by him to the court appointing him, is a part of the record in that court of the case to which it appertains, and, when specified in the bill of exceptions as material, is properly brought to the supreme court in the certified transcript. This being so, the motion to dismiss the writ of error is denied.

Error from superior court, Chatham county; R. Falligant, Judge.

Petition in intervention filed by Lucy Green against the Coast Line Railroad Company and others in proceedings to foreclose a mortgage of the defendant company's railroad, claiming payment out of the fund under control of the court in preference to the mortgage debt. There was a decree in favor of the mortgagee, and intervener brings error. Reversed, with directions.

R. R. Richards, Wm. R. Leaken, and Charlton, Mackall & Anderson, for plaintiff in error.

Geo. A. Mercer & Son and Saussy & Saussy, for defendants in error.

SIMMONS C.J.

At my request, concurred in by my associates, Ex Chief Justice BLECKLEY has assisted the court both in deciding this case and in preparing the opinion. After adoption by the full court, it now appears in his language. The same is true of the headnotes.

The Coast Line Railroad Company executed to trustees two mortgages in the form of trust deeds, the first dated September 1, 1874, and the second May 1, 1876. The former was made to secure the payment of bonds amounting to $25,000, maturing September 1, 1894, issued by the company to raise a fund for use in the construction of a portion of its railway; the latter to secure bonds of the company amounting to $32,000, maturing May 1, 1886, issued to liquidate the floating debt of the company. Both mortgages covered the franchises, present and prospective, and all the property, real and personal, of the company, both acquired and to be acquired, including expressly all "tolls, income, rents, issues, and profits," accruing after any default made in the payment of the bonds themselves, or of any interest due thereon. All the bonds bore interest from date, payable semiannually. The Coast Line Railroad Company had its origin as a corporation under the name of the Wilmington Railroad Company. Acts 1868, p. 114. For change of name, see Acts 1872, p. 375. "Power to borrow not exceeding $25,000, current and lawful money, and issue bonds for the payment of the same," was conferred upon a majority of the directors by an amendment to the charter. Acts 1874, p. 312. The first mortgage was made to secure these bonds, and there was no statutory authority for making it except the general provision relating to mortgages, contained in section 1954 of the Code, which reads as follows: "A mortgage in this state is only a security for a debt, and passes no title. It may embrace all property in possession, or to which the mortgagor has the right of possession at the time, or may cover a stock of goods, or other things in bulk, but changing in specifics, in which case the lien is lost on all articles disposed of by the mortgagor up to the time of foreclosure, and attaches on the purchases made to supply their place." Before the second mortgage was executed, power was conferred upon the company to issue bonds, not to exceed the sum of $250,000, "secured by mortgage upon the whole or any portion of the property of the company." Acts 1876, p. 258. Though the act of February 29, 1876 (Acts 1876, p. 118), which now forms sections 1689v to 1689y of the Code, was in existence when the second mortgage was executed, it has no application to that mortgage, for the reason that this act relates only to railroad corporations formed by the purchasers of railroads in the mode pointed out by the provisions of the act. The company made default as to the principal, as well as interest, on the second mortgage bonds in 1886, and as to the interest on the first mortgage bonds in March, 1890, and has continued thus in default ever since. On the 30th of April, 1890, a train, when running upon the railway of the company by steam power, ran against or over the husband and also a son of Mrs. Green, killing them both; and on July 17, 1890, she recovered against the company, in the city court of Savannah, $1,750 as her damages for this tort. The Messrs. Green, at the time of the homicide, were not employés of the company, or, so far as appears, under any contract relation to it or with it, but were simply members of the general public, passing on foot along a sidewalk adjacent to the railway track. According to express provision of the mortgage deeds, the trustees could, when the default of the company in paying principal or interest due on any of the bonds had continued for 60 days, have entered into possession, and operated the railway, or could have instituted legal or equitable proceedings to foreclose; but neither of these steps was taken until after judgment in favor of Mrs. Green was rendered, nor until October 25, 1890, when a petition by the only trustee then in office and by one of the bondholders (the latter owning all the second mortgage bonds, and most of the others) was filed in Chatham superior court to foreclose the mortgages, and for the appointment of a receiver. This bondholder (co-plaintiff) was president of the railroad company at the time of bringing this suit, and had been so continuously since the year 1883 or 1884. A receiver was appointed on November 7th thereafter, and the company turned over to him all of its property, including $225.04 in cash. Among the expenditures of the receiver, reported by him August 6, 1892, was an item of $2,349.88, for steel rails, iron, and cross-ties, which he had purchased and used in improving the property; and the net earnings for distribution reported by him amounted to $2,327.22. The corpus of the property, when sold on July 5, 1892, produced $75,000, none of which was expended by the receiver. Pending the cause in Chatham superior court, Mrs. Green filed her intervention, claiming payment out of the fund under the control of the court. There was a reference to a master in August, 1891, and the master reported in April, 1893, and again by supplemental report in March, 1894. The master disallowed Mrs. Green's claim as one having priority over the mortgages, ranking it as inferior to them, both as to corpus and income; and she filed exceptions to his reports, which exceptions the court overruled on July 9, 1894, and approved both reports of the master. The verdict of a jury was rendered on August 3, 1894, in conformity with the master's report; and on the next day exceptions pendente lite were filed by Mrs. Green, complaining of error committed by the court in overruling her exceptions and in approving the reports. Afterwards, on the same day, the court decreed finally in favor of the priority of the mortgages; and by bill of exceptions certified September 1, 1894, Mrs. Green brought the case to this court, assigning error on the decree and

on the matters embraced in her exceptions pendente lite. Pending the case before the master, and on the same day of the receiver's last report, to wit, August 6,...