Metro. Trust Co. of the City of New York v. Tonawanda Val. & C.R. Co.

• Decision Date: 05 October 1886
• Citation: 8 N.E. 488,103 N.Y. 245
• Court: New York Court of Appeals Court of Appeals
• Parties: METROPOLITAN TRUST CO. OF THE CITY OF NEW YORK v. TONAWANDA VAL. & C. R. CO. and others.

103 N.Y. 245

8 N.E. 488

METROPOLITAN TRUST CO. OF THE CITY OF NEW YORK

v.TONAWANDA VAL. & C. R. CO. and others.

Court of Appeals of New York.

October 5, 1886

Appeal from the judgment of the general term of the supreme court, Fifth department.

Herbert B. Turner, for appellant, Metropolitan Trust Co. of the City of New York.

Edward C. Randall, for respondents, Tonawanda Val. & C. R. Co. and others.

DANFORTH, J.

The appeal in this case is by the plaintiff and by the Farmers' Loan & Trust Company, one of the defendants, from so much of an order of the supreme court as authorizes Spencer, as receiver of the property, real and personal, easements, rolling stock, and equipment, leases, franchises, and all other rights and property whatsoever of the defendant, the Tonawanda Valley & Cuba Railroad Company, covered by the mortgage or deed of trust dated September 1, 1881, referred to in the complaint in this action, to pay, or issue his certificates of indebtedness for the payment of, the following items and amounts, namely, $8,400.21, to the employes and servants of the railroad aforesaid, and for labor and services in operating it prior to said receiver's appointment, and subsequently to September 1, 1884, and also $3,000 for deficiencies for supplies; and makes the certificates, when issued, a lien and charge on all the property of the defendant's railroad company prior to the lien of the several mortgages or deeds of trust upon the said railroad, or upon any part thereof.

Not withstanding the argument of the respondents' counsel, we are unable to discover any principle upon which the claims of the employes for labor performed before the appointment of the receiver can be so extended as to diminish or impair or postpone the lien of the mortgage, for the enforcement of which the action was brought, or the lien of the mortgage set up by the Farmers' Loan & Trust Company. Both are prior in point of time to the respondents' claims, and we are referred to no statute which displaces them. The legislature has given the laborer a remedy, in certain cases, against the stockholders of a corporation, upon default of the corporation to meet its obligations, (Laws 1850, c. 140, § 10; Laws 1854, c. 282, § 16,) but the decree in this case goes much further, and requires their payment out of the property of other creditors. The argument in its support is that the value of the mortgage lien has been enhanced by the labor of the workman. It is easy to see that under such a plea the lienor might be entirely defeated, and the foreclosure of his mortgage rendered inoperative and useless. Such a result, except upon his consent, the courts have no power to sanction. It is going a great ways in that direction to permit, as it is true courts sometimes have permitted, a receiver of an insolvent railroad corporation to pay for materials and labor procured by him after his appointment, necessary to the running of the road it may be, but not to the winding up of the affairs of the corporation. The propriety of that practice we are not called upon to review; but, notwithstanding the research of the respondents' counsel, no case has been cited where an unsecured creditor, however meritorious the...