Shepley v. Atlantic & St. Lawrence R. R.

Walton, J. This is a bill in equity to which the defendants have demurred. April 1, 1851, the Atlantic & St. Lawrence Railroad Company mortgaged their franchise, and all their property, real and personal, including their right of way, to secure the payment of bonds issued by said company to the amount of $1,500,000. In that mortgage it Is agreed, among other things, that if the railroad company should at any time fail to pay the interest which should become due upon any of said bonds, or the principal, according to the tenor thereof, it should then be lawful for the trustees, (subject to the prior rights of the city of Portland,) to take possession of said property, and to work the railroad and machinery and equipments, and receive the income, rents and profits thereof. The bill alleges that a portion of the bonds became due April 1, 1866 ; that payment was demanded, but they were not paid ; that the trustees have been notified by the holders of said bonds of the non-payment and requested to exercise the powers and perform the duties and obligations conferred and imposed upon them by said mortgage; that, on June 4, and on June 9, 1866, they demanded possession of said railroad and other property included in the mortgage, of the Grand Trunk Railway Company, now in possession of the same under a lease, and endeavored to take possession of the same, but were obstructed and prevented from so doing. Wherefore they pray, among other things, that the [406] Grand Trunk Railway may be decreed and required to surrender, quietly and peaceably, to the trustees, the railroad and other property mortgaged to them. It is contended that it was not the duty or the right of the trustees to take the possession and management of the road, because they had not been directed so to do by a vote of the bondholders at a meeting notified and hold as provided in R. S., c. 51, § 54. The answer is that they do not claim possession by virtue of the provisions of the public statutes for the foreclosure of railroad mortgages, but by virtue of the express stipulation in the mortgage. In other words, they ask for a specific performance of their contract in this particular. We think they are entitled to it, and that a bill in equity is a proper form of proceeding to obtain it. So held in Shaw et als., trustees, v. Norfolk Oounty Railroad Co., 5 Gray, 162. (See opinion of the Court on pages 182-3.) Also by Mr. Justice Curtis, in Hall et als., trustees, v. Sullivan Railway, (U. S. Circuit Court for district of New Hampshire,) cited by Judge Redtteud in his work on Railways, page 578, where the opinion of Judge Curtis is given at length. It has been argued in defence that this mortgage was originally illegal and void; that it owes its validity to subsequent statutory ratification; and, inasmuch as the same statutes which give it validity prescribe the remedies for a breach of it, those remedies are exclusive, and the only ones that can be adopted; and we are referred to several decisions in other States in which it is held that in the absence of legislative consent such mortgages are invalid. Wre do not consider it necessary to enter into a discussion of the question whether this mortgage was originally valid or not. It being conceded that it is now valid, probably the bondholders will be content with the result, and will not care to know particularly how that result is reached, provided it is not hampered with such embarrassments and difficulties as to make it practically unavailing as a means of getting their pay. [407] Such mortgages have always been regarded and treated as valid in this State, by the courts as well as the Legislature, and we confess that the contrary doctrine seems to us little better than practical repudiation, and not supported by reasons sufficiently weighty to commend it to our judgment. The whole argument seems to' have no greater force than this, that it is dangerous to the public interests to have the powers and privileges conferred by a railroad franchise transferred from the original corporators to a new body. But when we consider how little importance is attached to the persons of the original corporators, how soon death must and other circumstances may remove them from all participation in the affairs of the road, how constantly those who have the active management of it are in fact being changed, we shall see how little practical merit this argument has. At the beginning the corporators undoubtedly have a controlling influence, but afterwards the directors are elected by the stockholders, and are often changed. Is there any reason to suppose that if a mortgage should, by foreclosure, transfer the franchise to new hands, that as capable men would not be appointed to manage the road as before? Would not the bondholders be as interested and as capable of appointing suitable managers as the stockholders? Does any one fear that the public interest would not be as safe with the former as the latter? Why then is it dangerous to the public interests to allow such a transfer? We confess that, after giving the matter much thought, the doctrine that all railroad mortgages made without the consent of the Legislature are illegal and void, because they may operate as a permanent transfer of the corporate powers from the original corporators to another body, seems to us to have little to commend it and much to condemn it. We do not understand that by this bill the trustees seek to obtain a decree of foreclosure of their mortgage. The objection, therefore, that this Court has no jurisdiction in equity to decree such a foreclosure is not well taken. The bill does not ask for such a decree. Nor do we understand [408] that possession of the mortgaged property is claimed by virtue of any rule or express provision of law. The objection, therefore, that they have not performed those acts which the statutes referred to make conditions precedent to such a right, is equally foreign. What the trustees claim is to have their contract, by which it was agreed that in a certain contingency they should have possession of the mortgaged property, specifically performed. They do not claim the possession as the result of a rule of law, (except so far as the law requires parties to keep and perform all their lawful contracts,) but as the result of an express agreement. That the Court has jurisdiction of the case made by the plaintiffs’ bill we cannot doubt. We do not, of course, undertake to determine with which party the merits will lie upon further answer and proofs. Demurrer overruled. Defendants to answer further. Appleton, C. J., Kent, Dickerson, Barrows, Daneorth and Tapley, JJ., concurred.