Gray v. Central Massachusetts Railroad

Barker, J. The claim of the Massachusetts Central Railroad Company under the alleged right and authorization of the committee of the bondholders cannot be sustained. The twenty thousand dollars which was the source of the fund was paid into court by a purchasing committee, and was received by the original trustees on account of the purchase price of mortgaged property sold by them as vendors under a power of sale, at a foreclosure sale which was affirmed by a final decree declaring the mortgage foreclosed. When the money was so paid and received as a part of the purchase price it became the property of the mortgage trustees, and there is nothing in the agreed statement of facts which requires a finding or a ruling that the sum so paid, or any part of it, afterward reverted to the committee. The sale was part of a scheme for the reorganization of the Massachusetts Central Railroad Company, which then had an unfinished railroad,'mortgaged to the trustees to secure an issue of bonds, the interest upon which was then overdue, and the committee was acting for the holders of a portion of the bonds under a memorandum dated January 20, 1883, and also under the provisions of St. 1883, c. 64, by which they were empowered to purchase the mortgaged property upon foreclosure sale, and to hold it in trust for the bondholders, but absolutely in fee, and free from every right and equity of redemption of the mortgagor. At the time of the sale all of the bondholders had not come into the scheme, and the whole debt represented by the bonds and coupons was not brought in until the year 1895. The trustees had to rely upon the proceeds of the sale to reimburse themselves for the expenses of the sale, and also to discharge — 122 — the obligations of their trust to such bondholders as should not consent to extinguish their bonds by taking preferred stock in the reorganized company. The purchase price at the sale was $500,000, of which the $20,000 only was paid in cash. If the whole mortgage debt had been represented by the committee at the time of the sale, and there had been some fund other than the purchase price out of which the expenses of the mortgage trustees could be paid, the purchasers at the sale might have paid into court a sum to secure the completion of the reorganization, and to be returned to them upon the extinguishment of the mortgage debt by the issue to the bondholders of preferred stock in the reorganized corporation. But the real situation at the time of the sale required the offer of a substantial price, which would enable the mortgage trustees to discharge their obligations in respect to that part of the mortgage debt whose holders had not then agreed, and might not agree, to surrender it for preferred stock. So the committee bought for the price of $500,000, and paid the $20,000 as a part of that price, and the mortgage trustees received the part paid in cash, not as a pledge or as collateral, but as an asset of their trust. That the committee did not pay the balance of the purchase money, and that the whole mortgage debt has since been extinguished, do not cause that part of the purchase money which was in fact paid to revert to the purchaser. The committee released to the new corporation, on November 24, 1886, the property which they had bought at the foreclosure sale in May, 1883. The reason why this fund remained untouched after deducting the expenses of the foreclosure sale was no doubt the fact that, until the last of the mortgage debt was obtained and cancelled in 1895, the fund was held primarily in trust to pay that debt. If the mortgage debt should be wholly extinguished without recourse to the fund, the fund would go to the mortgagor or its successors or assigns ; the right to the fund subject to the prior rights of the holders of the mortgage debt being as of course in the mortgagor. But by the reorganization which was authorized by St. 1883, c. 64, and was completed before the committee’s release of November 24, 1886, the Central Massachusetts Railroad Company had become the legal successor of the mortgagor, and so was the owner of the beneficial interest — 123 — in this fund, subject only to the prior claims of the holders of so much of the mortgage debt as had not then been extinguished. The bondholders’ committee were never the full successors of the mortgagor, either before their purchase or after becoming by means of the purchase the trustees to hold in fee the title to all the property which they had purchased; but the reorganized corporation is such a successor, and it obtained its title to the fund, not through the sale, but from the mortgagor through the reorganization. The remaining question is whether the right which the Central Massachusetts Railroad Company had in the fund on December 7, 1886, passed to its lessee under the demise contained in the indenture of that date. Whether the original trustees were then living does not appear, but the fund was then deposited in their names as trustees under the mortgage in the bank in which it yet remains. The first claim upon it at that time was a portion of the mortgage debt spoken of in the agreed statement as “ coupons to the amount of some $150,000,” which are also said to have been in litigation until 1895, when they were all obtained and cancelled. It is therefore plain that at the time of the indenture the lessor’s right in this fund was not money or cash, but was an equitable right the value of which was wholly contingent and uncertain, which would not probably be reduced into money payable to the lessor, if at all, until the whole mortgage debt should- be otherwise extinguished. The demising clause of the indenture is as follows: “ Lease of all property. The lessor doth hereby grant, demise, and lease unto the lessee its railroad and railroad property of every description, both as the same now exists and it shall exist after the location, construction, completion, and equipment of said railroad from North Cambridge to Northampton as herein provided, and the location, construction, and equipment of said branch or extension of said railroad as above specified, including therein its railroad, lands, and all real estate, rights, and appurtenances connected therewith, within this Commonwealth ; also all branches, tracks, side tracks, and the land on which the samé are located, roadbeds, superstructure, gravel pits, station-houses, depots, viaducts, bridges, piers, wharves, shops, buildings, fixtures, water tanks, engines, tools, cars, rolling stock, machinery, furniture, — 124 — telegraph apparatus, poles, and equipment of every kind, material and supplies, and all personal property and estate owned by said lessor; also all rights, franchises, easements, privileges, and appurtenances belonging to said lessor in connection with said railroad, together with the right to fix, demand, and receive all tolls, rent, revenue, income, and profits of the demised railroad and ■ premises, and the right to run, manage, and control the same, subject to the provisions of its charter and of the laws of this Commonwealth.” While the whole indenture, with the situation of the parties and the circumstances under which the indenture was entered into by them, is to be taken into account in construing the demising clause, the language of that clause itself is the first and principal subject of consideration. After the words, “ The lessor doth hereby grant, demise, and lease unto the lessee,” the clause contains three co ordinate sub-clauses, the second and third of which begin with the words “ also all.” The first designates as demised the lessor’s railroad and railroad property of every description, both as it -then existed and as it should exist after the contemplated completion and equipment of the railroad and its branch or extension by the lessee. The second designates as demised also many particular classes of things, some of which would clearly be parts of or included in the railroad property already designated, and others of which as “furniture,” “ material,” and “ supplies,” might not be railroad property in any sense other than that they would be owned by a railroad company, and this sub-clause ends with the words, “ and all personal property and estate owned by said lessor.” The 'third sub-clause designates as demised also all rights, franchises, easements, privileges, and appurtenances belonging to the lessor in connection with said railroad, together with the right to take .tolls, rent, revenue, income, and profits, and the right to operate the railroad. The construction for which the appellant contends is that the words, “and all personal property and estate owned by said lessor,” are not part of a clause designating additional subjects of the demise, and that they are governed by the prior word “including,” and should be restricted so as to include only such property, not already specified, as is in its nature distinctively — 125 — railroad property. But the whole clause as it stands does not seem to us to bear this interpretation. We think the words, “ including therein its railroad, lands, and all real estate, rights, and appurtenances connected therewith, within this Commonwealth,” are the end of one distinct part of the whole clause, and that the words which follow relate back directly to the words “ grant, demise, and lease,” and that the things described and designated in this clause are demised simply by force of being named therein, and not as included in something previously demised, and in the same way in which the franchises and the rights to tolls and to operate the railroad and the other rights designated in the third sub-clause are treated as distinct subjects of the demise, although some of them would have passed to the lessee as appurtenant to the demise of the railroad and its lands and real estate. That there is repetition in the different sub-clauses does not tend to show that the only office of the language of the second or the third clause is more clearly to designate what was meant to be covered by the first. We think that as it is written the whole demising clause was intended to demise all of the lessor’s property and rights which were fairly included in the language of any part of the clause. Such a right as that of the lessor to the fund iu question was clearly personal property owned by the lessor, since the word “ property ” extends to every species of valuable, right and interest. Boston & Lowell Railroad v. Salem & Lowell Railroad, 2 Gray, 1, 35. Williston Seminary v. County Commissioners, 147 Mass. 427, 430. This meaning of the demising clause will stand as its true construction, unless the other parts of the indenture taken with the situation and circumstances of the parties show that it is untenable, and that it could not have been the intention of the parties. After considering all that has been urged by the appellant in this connection, we are not convinced that the parties did not intend that the right of the lessor to this fund should pass by the demise. The indenture was much more than a mere lease. It was part of an arrangement by which the lessor’s railroad should be completed and equipped by the lessee, and operated by it until the expiration of ninety-nine years, and by — 126 — which also the lessor’s debts of $250,000 in certificates of indebtedness held by the lessee, and the lessor’s other debts and liabilities not exceeding $150,000 in amount, should be extinguished by the lessee, out of the two million of bonds at par which the lessee purchased of the lessor, and the balance of which was to go to the completion and the equipment of the railroad. It is true that the lessor’s debts outside of the certificate of indebtedness might exceed the sum of $150,000, but it does not appear that they did exceed that sum, and it is also clear that, if they did exceed it, there was no probability that the lessor’s interest in this fund would be available in season to be applied upon the excess, which must be at once paid off in order to make the new mortgage a first lien. The position in which the lessor was placing itself was one in which its only business would be to make such contracts as the lessee should approve, and after the completion of ^he road keep up its corporate organization at the expense of the lessee, and apply to its own use the rental which it should receive. The omission of both parties to make the inventory of demised property for which the indenture called has no bearing upon the present question. While there are a number of expressions in the indenture which would not have been used if the only property demised were this right and similar rights, there are none which are specially significant when it is once admitted that this right with other property of many different kinds was demised. It was of course so improbable that the right would continue as an unadjusted equitable claim for ninety-nine years, that the parties could not have meant that it should be returned to the lessor in like good order and condition as when demised, using that phrase literally. But the phrase is in substance suitable enough to do justice between the lessor and the lessee with respect to the right leased, and is used appropriately and comprehensively with reference to all the demised property as a whole. If the right had been to an ascertained balance of money due and payable by the trustees, the parties might or might not have included it in the demise, and if they did include it they would probably have made some express stipulation as to its application by the lessee, and very likely as to — 127 — interest and to repayment at the end of the term. But it was not money or likely to be the means of causing any speedy payment of money, and was perhaps of no value whatever, and therefore the absence of any clause in the indenture having special relation to the treatment of the right or of its proceeds is not significant. The rent reserved was not fixed by the income of the demised property, but by the gross receipts from the operation of the railroad, and the clauses about taking possession raise no argument that this right did not pass, any more than they would an argument that any incorporeal right did not pass. We consider that it is useless to distinguish from the present case the numerous oases cited by the appellant in which broad general terms like the word “ property ” have been construed as restricted in meaning by the other portions of the instruments in which they appear, as each such case must stand mainly upon its own peculiar circumstances. Decree affirmed.