James v. Western N.C.R. Co.

• Decision Date: 21 December 1897
• Citation: 28 S.E. 537,121 N.C. 523,121 N.C. 530
• Parties: JAMES v. WESTERN N.C. R. CO.
• Court: North Carolina Supreme Court

28 S.E. 537

121 N.C. 523, 121 N.C. 530

JAMES v. WESTERN N.C. R. CO.

Supreme Court of North Carolina

December 21, 1897

Appeal from superior court, Rowan county; Starbuck, Judge.

Action by Mrs. C. James, administratrix of the estate of W. A James, deceased, against the Western North Carolina Railroad Company for the death of plaintiff's intestate caused by defendant's negligence. A judgment was rendered, and both parties appeal. Reversed.

L. S Overman, A. C. Avery, and Long & Long, for plaintiff.

Charles Price, G. F. Bason, and F. H. Busbee, for defendant.

FURCHES J. (On plaintiff's appeal.)

The legislature of North Carolina, in 1855, passed an act known as the charter of the Western North Carolina Railroad. Under this charter a company was formed and organized known as the Western North Carolina Railroad Company. This company located and constructed a railroad from Salisbury, in the county of Rowan, to Paint Rock, in the county of Madison, and, also from Asheville, in Buncombe county, to Murphy, in Cherokee county. This road was known and operated as the Western North Carolina Railroad from the date of its construction until April, 1884, when the Western North Carolina Railroad Company leased the same to a corporation known as the Richmond & Danville Railroad Company for the term of 99 years. Upon the execution of this lease this last-named company went into possession and control of said road, and ran and operated the same until 1894. On the 1st day of September, 1884, the Western North Carolina Railroad Company executed a mortgage to the Central Trust Company of New York, in which it conveyed all its property of every kind, including its franchise, which mortgage is not yet due. And on the 2d day of September the said Western North Carolina Railroad Company made and executed a second mortgage to said Central Trust Company, and again conveyed all its property of every kind including its franchise, but subject to the first mortgage mentioned and the payment of the bonds therein secured. The bonds secured by this second mortgage being due, and not being paid, the Central Trust Company brought suit in the circuit court for the Western district of North Carolina for a foreclosure and sale under the second mortgage. Under the proceedings in this suit a decree of foreclosure was had, subject to the lien of the first mortgage, which had not been satisfied; an order of sale was made; a special master appointed to make the sale, which he did in August, 1894, when the Southern Railway Company, a corporation organized and existing under the laws of the state of Virginia, became the last and highest bidder. This sale was duly reported to said court, and confirmed; the said Southern Railway Company declared to be the purchaser; and the special master was directed to make a deed to the purchaser, the Southern Railway Company, conveying to it all the property of every description, including the franchise of the Western North Carolina Railroad Company, subject to the lien of the first mortgage, which he did on the 22d of August, 1894; and the said Southern Railway Company at once went into possession and control of the said Western North Carolina Railroad property, and has been running and operating the same ever since under said purchase and deed. The intestate of the plaintiff was an employé of the Southern Railway Company, and was killed in 1896.

There were four issues submitted to the jury: "(1) Was the death of plaintiff's intestate caused by the negligence of a fellow servant, as the sole proximate cause? Ans. No. (2) Was the death of plaintiff's intestate proximately caused by the negligence of the Southern Railway Company, which at the time was operating the road? Ans. Yes. (3) Is the defendant answerable for the negligence of the Southern Railway Company in causing the death of plaintiff's intestate? Ans. No. (4) What damage is the plaintiff entitled to recover? Ans. $15,000."

The third issue was withdrawn from the jury, and answered by the court as a question of law, and the ruling upon this issue constitutes the only question presented by this appeal for our consideration. The correctness of this ruling, it seems to us, involves, or may involve, the consideration of two questions: Did the Western North Carolina Railroad corporation become extinct? And did the Southern Railway Company, as a corporation, succeed the Western North Carolina Railroad Company, as a corporation, upon the completion of the sale under the foreclosure proceedings and execution of the deed by the special master?

By the laws of this state, the mortgagee is the owner of the legal estate in the mortgaged property, and the mortgagor is the equitable owner, with the right to pay the debt and discharge the mortgage; but, after the day of payment has passed, he then has only the equity of redemption. Parker v. Beasley, 116 N.C. 1, 21 S.E. 955; McIver v. Smith, 118 N.C. 73, 23 S.E. 971. But the mortgagor, in possession of the mortgaged property by the consent of the mortgagee, is considered to be so far the owner as to be entitled to the rents, tolls, and profits of the mortgaged property without being liable to account, and is liable for damage wrongfully done to others in its use and enjoyment. Dunn v. Tillery, 79 N.C. 497, cited and approved in Killebrew v. Hines, 104 N. C., on page 188, 10 S.E. 161. At the time the second mortgage was executed the legal title to this property was in the Central Trust Company of New York, having been conveyed to this company by the first mortgage, and the Western North Carolina Railroad Company had only the equity of redemption when it executed the second mortgage, and only the equity of redemption at the time of said sale; and, as the Southern Railway Company claims under the second mortgage, it can have no more, no greater, estate than the Western North Carolina Railroad Company had at the date of the sale under the second mortgage. By the sale of the special master under the second mortgage, the purchase thereunder and the express assumption of the first mortgage debt binds the purchaser, the Southern Railway Company, for this debt; and, as between the Southern and the Western, it makes the Southern the principal and the Western its surety. But this does not release the Western nor the property mortgaged to pay this debt from liability; and this, it seems to us, would be a reason for not considering the Western North Carolina Railroad Company as extinct. Woodcock v. Bostic, 118 N.C. 823, 24 S.E. 362; Keller v. Ashford, 133 U.S. 610, 10 S.Ct. 494. The franchise and the corporate property must go together. They cannot be separated. There cannot be a corporation without a franchise. Gooch v. McGee, 83 N.C. 59. This rule does not interfere while the mortgagor is in possession operating the road by the consent of the mortgagee, because he is considered the owner, and is the owner for certain purposes, and is responsible to the public for the manner in which it is run. Dunn v. Tillery and Killebrew v. Hines, supra.

But how is it if the contention of the Southern is true? The first mortgage conveys everything, including the franchise. The Southern says the Western was authorized to make this mortgage, and to convey the franchise. But, to enable it to have a corporate existence, it must also have the franchise. There cannot be two independent corporations dependent upon one franchise. Nor can the Southern be a corporation built upon the franchise granted to the Western while that franchise is owned by the Central Trust Company of...