Old Colony Trust Co. v. Medfield & M. St. Ry. Co.
| Decision Date | 31 May 1913 |
| Citation | 215 Mass. 156,102 N.E. 484 |
| Parties | OLD COLONY TRUST CO. v. MEDFIELD & M. ST. RY. CO. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Harold Stearns Davis and Storey, Thorndike, Palmer & Dodge, all of Boston and Verrill, Hale & Booth, of Portland, Me., for plaintiff.
Chas C. Milton, of Worcester, and Henry H. Fuller, of Boston, for claimant.
The defendant having made default in the payment of the semiannual installments of interest, the bill is brought by the plaintiff, who by force of St. 1911, c. 128, is the successor of the original trustee, for a foreclosure of the mortgage or indenture of trust by the railway company upon all its real and personal property as security for the payment of the bonds. A decree has been entered taking the bill for confessed as against the defendant, and no question is raised as to the regularity of the proceedings, or the right of the plaintiff to a foreclosure in accordance with the provisions of the mortgage, or that the defendant is insolvent. The receiver appointed to take possession of the property, operate the railway, and to receive and disburse the income and earnings derived therefrom as the court might direct, having filed his report allowing, subject to the mortgage, certain unsecured claims which have been presented and proved, the Milford, Attleboro & Woonsocket Railway Company, hereinafter referred to as the claimant, the amount of whose debt is undisputed, contends that the mortgage as to the personal property is invalid, because it was not duly recorded, and that, if the mortgage is held to be valid, its debt should be given precedence either for the entire amount or by analogy with the period fixed for the semiannual payment of interest on the bonds, for so much as accrued within six months next preceding the filing of the bill. Westinghouse Air Brake Co. v. Kansas City Southern Ry., 137 F. 26, 40, 71 C. C. A. 1.
R. L. c. 198, § 1, requires a mortgage of personal property to be recorded within 15 days 'from the date written in the mortgage' or it shall not be enforceable against a person other than the parties thereto, unless the property mortgaged has been delivered to or retained by the mortgagee. What do the words, 'date written in the mortgage,' mean? The original St. 1874, c. 111,§ 1, provided that such mortgage must be recorded 'within fifteen days after the date thereof,' and so in substance are Pub. Sts., 1882, c. 192, § 1. It was held in Shaughnessey v. Lewis, 130 Mass. 355, that the word 'date' should be considered as meaning the time when the instrument became effectual as the contract of the parties, namely, upon delivery, of which the time stated in the mortgage might be considered as evidence, even if it would not be conclusive. But presumably in consequence of this decision St. 1883, c. 73, enacted that 'every mortgage of personal property shall be recorded within fifteen days from the date written in the mortgage,' and this has since been the law. The mortgage could not have been admitted to record in the registry of deeds without acknowledgment, even if by reason of the dual character of the mortgaged property it also must be entered upon the records of the town. R. L. c. 127, § 7; Id. c. 198, § 1. If the indenture or mortgage is referred to in the caption as dated July 2, 1900, the in testimonium clause and certificate of acknowledgment, where it is declared that the defendant's corporate seal is affixed and the instrument lawfully executed and acknowledged in its name and behalf by its president and treasurer, duly authorized by vote of the stockholders, bears date as of July 27, 1900. The instrument, while a mortgage, includes the terms of the contract, the performance of which is secured. The wording of the context, especially in article 2, shows beyond conjecture that the time first named designated only the date of the bonds from which the periods when the semiannual interest should accrue and become payable were to be computed. It was the intention of the parties that the instrument, when properly executed, should constitute a mortgage, and until then it was not dated, nor did it become a lien upon the property. Having been recorded within 15 days thereafter the mortgage is valid. Orcutt v. Moore, 134 Mass. 48, 52, 45 Am. Rep. 278; Drew v. Streeter, 137 Mass. 460, 462; Amerige v. Hussey, 151 Mass. 300, 24 N.E. 46; Berry v. Levitan, 181 Mass. 73, 63 N.E. 11; Harrison v. J. W. Warner Co., 183 Mass. 123, 66 N.E. 589.
The defendant, although chartered to construct, equip and operate a street railway, never installed an electrical plant, but from the time it began to do business, the motive power has been furnished by the claimant. Under the terms of the contract the compensation was fixed at a daily rate, which the parties agree was reasonable, and the plaintiff concedes that the service rendered was necessary for the operation of the railway. Although for a time payments were regularly made, when the receiver was appointed they were in arrears for a period slightly in excess of two years. The property for the purpose of our decision may be treated as if converted by sale and the proceeds held as a fund for distribution by the court. Markey v. Langley, 92 U.S. 142, 23 L.Ed. 701. The argument of counsel for the claimant is that the debt should be given priority over the bondholders, on the authority substantially of Miltenberger v. Logansport, Crawfordsville & Southwestern Ry., 106 U.S. 286, 1 S.Ct. 140, 27 L.Ed. 117. See also Southern Ry. v. Carnegie Steel Co., 176 U.S. 257, 20 S.Ct. 347, 44 L.Ed. 458. It is unnecessary, however, to determine whether Miltenberger v. Logansport, Crawfordsville & Southwestern Ry., holding that a court of equity has power not only to appoint, but to authorize, a receiver of a railroad to hire money required for the management and preservation of the property, and to pay claims for materials, repairs, ticket and freight balances, some of which were contracted more than ninety days before his appointment, yet all of which were indispensable to the business of the road, and to order the receiver to pay such loans and claims before making payment of a valid first mortgage, overdue when the suit to foreclose was begun by a second mortgagee, has been limited by Gregg v Metropolitan Trust Co., 197 U.S. 183, 25 S.Ct. 415, 49 L.Ed. 717, where a majority of the court decided that a claim for ties necessary to the preservation of a railroad, furnished six months previous to the appointment of a receiver, did not in the absence of special circumstances entitle the petitioner to a preference over a mortgage recorded before the contract for the ties was made. See also Wallace v. Loomis, 97 U.S. 146, 24 L.Ed. 895; Union Trust Co. v. Souther, 107 U.S. 591, 2 S.Ct. 295, 27 L.Ed. 488; Union Trust Co. v. Illinois Midland Ry., 117 U.S. 434, 6 S.Ct. 809, 29 L.Ed. 963. It is plain, from the nature and terms of the contract, that the parties at its inception had no intention to charge the property with a lien. Pinch v. Anthony, 8 Allen, 536; Elmore v. Symonds, 183 Mass. 321, 322, 67 N.E. 314; Westall v. Wood, 212 Mass. 540, 545, 99 N.E. 325. The service was performed in so far as appears on the general credit of the mortgagor, and apparently the power could have been discontinued at will if the payments which accrued daily were not made. The plaintiff's security would have been unimpaired if the claimant, being unable to collect, had sought to secure reimbursement by a second mortgage, or to enforce payment by attachment, of the same personalty. Berry v. Levitan, 181 Mass. 73, 63 N.E. 11; Travis v. Bishop, 13 Metc. 304; R. L. c. 167, § 69. If during the period in arrears current earnings, with its knowledge and assent, had been diverted for the benefit of the plaintiff before necessary current indebtedness, to maintain the road in operation, had been paid, there might have been ground for contending that the security of the bondholders should be charged in equity with the restitution of the fund, where but for such diversion there would have been net earnings to which the equitable lien...
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