Mississippi Valley Trust Co. v. Southern Trust Co.

• Decision Date: 15 November 1919
• Docket Number: 5250.
• Parties: MISSISSIPPI VALLEY TRUST CO. v. SOUTHERN TRUST CO.
• Court: U.S. Court of Appeals — Eighth Circuit

261 F. 765

MISSISSIPPI VALLEY TRUST CO. v. SOUTHERN TRUST CO.

No. 5250.

United States Court of Appeals, Eighth Circuit.

November 15, 1919

James B. McDonough, of Ft. Smith, Ark., and William S. Gordon, (J V. Walker, of Fayetteville, Ark., on the brief), for appellant.

D. H Cantrell and W. E. Hemingway, both of Little Rock, Ark (Joseph De F. Junkin, of Philadelphia, Pa., and G. B. Rose and J. F. Loughborough, both of Little Rock, Ark., on the brief), for appellee.

Before HOOK and STONE, Circuit Judges, and MUNGER, District Judge.

HOOK Circuit Judge.

This is a controversy in a railroad foreclosure suit between the appellant, Mississippi Valley Trust Company, and the Southern Trust Company, appellee, both of them mortgage trustees, over the priority of their mortgages on certain railroad property in Arkansas. The trial court extended the mortgage of the appellee to property acquired and constructed after appellant's mortgage was given. Hence this appeal.

The mortgage of the appellee was executed in 1907 by the Arkansas, Oklahoma & Western Railroad Company, hereafter called the Oklahoma Company, to secure bonds of which $300,000 were issued and outstanding. The mortgage recited the mortgagor's ownership of 22 miles of railroad from Rogers to Springtown in Benton county, Ark.; also a line then being constructed from the latter place southwesterly to Siloam Springs in the same county; also an intention to build a line from Rogers 'in a northeasterly direction to a point at or near Eureka Springs, in Carroll county. ' It purported to cover all existing railroad property and all thereafter acquired by the Oklahoma Company 'or its successors,' including 'continuations, branches and extensions.'

In 1911 the Kansas City & Memphis Railway Company, hereafter called the Memphis Company, was organized. It purchased and took a deed of all the property of the Oklahoma Company, and as part of the consideration it assumed the payment of the $300,000 of outstanding bonds of the latter. About the same time it purchased from the Monte Ne Railway Company 8 miles of road from Freeman, a short distance below Rogers, to Monte Ne, on the White river. It also built about 30 miles of road from Cave Springs to Fayetteville. The line to Monte Ne and that to Fayetteville connect with the road bought from the Oklahoma Company. The new Memphis Company executed the mortgage to the appellant upon all of the properties purchased and constructed by it as above mentioned. The money represented by the bonds secured by this mortgage to the appellant was furnished for the specific purpose, in part, of enabling the Memphis Company to acquire and build the Monte Ne and Fayetteville lines, and with the expressed provision that the mortgage should be a first and prior lien upon the entire property of that company, except only the $300,000 already upon the part thereof bought of the Oklahoma Company.

The principal question in the case is of the effect of the 'after-acquired property' clause in the first mortgage; that is to say, whether by virtue of the clause the lien of that mortgage takes precedence over the lien of the subsequent mortgage by the Memphis Company to the appellant upon the Monte Ne and Fayetteville lines of railroad. We are of the opinion that it does...