McPherson v. Atlantic & Pacific R.R. Co.

• Citation: 66 Mo. 103
• Parties: MCPHERSON et al. v. THE ATLANTIC AND PACIFIC RAILROAD CO., Garnishee of the Osage Valley & Southern Kansas Railroad Co., Appellant.
• Decision Date: 31 October 1877
• Court: United States State Supreme Court of Missouri

66 Mo. 103

MCPHERSON et al.

v.THE ATLANTIC AND PACIFIC RAILROAD CO., Garnishee of the Osage Valley & Southern Kansas Railroad Co., Appellant.

Supreme Court of Missouri.

October Term, 1877.

Appeal from Cooper Circuit Court.--HON. T. M. RICE, Judge.

Plaintiffs recovered judgments against the defendant, the Osage Valley & Southern Kansas Railroad Company, for the aggregate sum of $8,384. Executions were issued and the Atlantic & Pacific Railroad Company was garnished as debtor to the defendant.

The cases were afterward consolidated and tried as one case. It appeared by the pleadings and proofs that the Osage Valley & Southern Kansas Railroad Company had, in 1867, leased its unfinished road to the Pacific Railroad, which had finished it and afterward assigned its interest in the lease to the garnishee. By the lease, the lessee was to pay quarterly, as rental, thirty-five per cent of the gross earnings, “provided that before such thirty-five per cent. of the said gross receipts is paid over, there shall be deducted therefrom all taxes now or at any time hereafter imposed under authority of either the United States, State, city or county laws, upon the whole or any part of said demised road, its buildings or appurtenances, and a pro rata share of any tax imposed by the United States upon the gross receipts therefrom, which taxes the said party of the second part have either paid or may be liable to pay.” The lease also contained an agreement on the part of the lessor to fence the road at its own cost, and a stipulation that the lessor should not be held accountable for any damages to third parties by reason of the road being unfenced, provided the fence should be built within a certain time. It also undertook to convey to the lessee, with warranty of title, a certain lot in the city of Boonville.

Under this lease rent had become due to the amount of $9,637, but the garnishee claimed the right to retain this amount in order to pay taxes, which had been assessed against the road to the amount of twelve thousand dollars and upwards, and to indemnify itself against loss by reason of the failure of the lessor to keep the stipulation about fencing, and by reason of failure of the title to the Boonville lot, and to re-imburse itself for several sums of money paid to other creditors of the defendant, under earlier garnishments. Upon the trial it appeared that the garnishee had fenced a small part of the road at its own cost, and evidence was offered to show that it had contracted for the fencing of another part, and intended to complete the whole as fast as it conveniently could. It also appeared that one Ells had brought an action of ejectment for the lot, and had recovered a judgment for $1,400 damages and costs, which had been paid by the garnishee. It also appeared that the garnishee had been previously garnished as debtor of the defendant in several cases, and had been obliged to pay $1,840 in satisfaction of judgments in those cases; that in consequence of the road being unfenced, the garnishee had been compelled to pay to various persons whose stock had gotten upon the road and been killed $2,194; that the taxes, though assessed, had not been paid by the garnishee, and that defendant was insolvent. The court allowed the garnishee credits to the amount of $4,841 for the cost of the fences actually built, and the sums actually paid out as damages and costs in the Ells case, and under the prior garnishments, but refused to allow the items of taxes, damages paid for stock, and fences which the garnishee intended to build, but had not built, and gave judgment for the plaintiff for $4,796. The garnishee appealed.

During the progress of the case, a paper was filed by the representative of the holders of certain bonds, setting forth that they were secured by a mortgage on the road and property of the defendant company, given by defendant after the execution of the lease to the Pacific Railroad, and claiming that by virtue of this mortgage the bondholders were entitled to have the rental in the hands of the garnishee applied to the payment of their past-due coupons for interest; and the garnishee prayed that the court might adjudicate the claim of the bondholders. Plaintiffs denied the validity of this mortgage on the ground that the stockholders of the defendant company had never authorized its execution, and denied that the bondholders had any right to the rental.

John Montgomery, Jr. for appellant.

1. The liability of the garnishee to the creditor must, of course, be determined by the extent of its liability to the principal defendant; and whatever defense it could successfully make to the demand of the principal debtor to recover the sums of money in its possession, it may safely plead in the garnishment proceeding. The contract cannot be affected by the garnishment proceeding, or the rights of the garnishee disturbed by it. Firebaugh v. Stone, 36 Mo. 114.

In the construction of the contract it is material to consider the evident intent of the contracting parties, to be gathered from the whole instrument. It seems to have been understood by both parties that taxes had then or would be assessed upon the demised property, and that the lessee would be called upon to pay them or be rendered liable therefor, and express reservation is made by the provision allowing the amount of these taxes to be deducted from the rental. In leasing this property the lessor could not have supposed that thereby the lessee became in law personally liable for the payment of the taxes which were then due, or which would thereafter be levied. There was no reason for such a presumption, but the fact was well known to both parties, and must be presumed to have been in view when the stipulation was made, that when the taxes were levied upon the demised property they constituted a lien upon it, and unless they were paid the lien thereon would be enforced and the lessee be compelled to pay them, to preserve its leasehold interest. It would become liable to pay these taxes in that event, if it would preserve the leased property. Of course these taxes could not, under the law as it then stood, be assessed as a personal liability or obligation of the lessee, but if to save the leased premises from sale and consequent eviction therefrom the lessee should pay the taxes, it cannot be doubted but that, without any express agreement in the lease, he could withhold it from the rent or maintain assumpsit to recover it from the lessor. Wells v. Porter, 7 Wend. 120; Smith's Landlord and Tenant, side page 129, note 12.

But in this case there is a special contract that the lessee shall deduct from the rental all taxes levied, or to be levied upon the leased property. Such a contract is unquestionably good, and many cases might be cited showing that similar contracts have been held binding and the garnishee entitled to his discharge, even though at the time of the trial the liability was still undetermined and contingent. St. Louis v. Regenfuss, 28 Wis. 144: Thompson v. Fischesser, 45 Ga. 369; Wheelock v. Tuttle, 10 Cush. 123; Shearer v. Handy, 22 Pick. 417.

It is admitted that the taxes were not actually paid, but under the lease the lessee had a right to retain a...