Vilas v. Milwaukee & Prairie du Chien Railway Co.

By the Court, PAINE, J. It seems to us almost too plain for argument that this action cannot be sustained. The plaintiff was a creditor of the Milwaukee & Mississippi Railroad Company. The road and property of that company were sold on a mortgage, and the purchasers organized the company which is the defendant in this suit, in pursuance of the provisions of chapter 121, Laws of 1856. The question is, whether this company, organized under that law by the purchasers at the mortgage sale, is liable for all the debts of the old company whose property they purchased ? The counsel for the respondent concedes that it would be ’ absurd to claim that a purchaser of property sold on a mortgage became liable to pay the general debts of the original owner. But he seizes upon the provisions of the law of 1856, giving to the new company all the rights and powers of the old, as a foundation upon which to base the claim that tlje whole effect of such a proceeding is merely to work a change in the name of the old corporation, and then to apply the familiar principle that a corporation remains liable for its debts through all its changes. The fallacy of this argument consists in the assumption that because the new corporation is clothed with the same powers as the old, therefore it is the same corporation. [503] Such a conclusion could only be arrived at by resolutely shutting the eyes to the entire sc'ope and object of a railroad mortgage and a sale and purchase under it in pursuance of the law of 1866. The object of that law was to enable railroad companies to borrow money, and to mortgage their property and franchises as security. To give full and perfect effect to such mortgages as securities was the leading idea of the law. To accomplish it, the company was authorized to mortgage its franchises, and, for the purpose of removing all doubt, it was further expressly provided that the purchasers at a mortgage .sale might organize anew, and be invested with all the rights and powers of the old company in the management of the road and business. Without some such provision, a purchase of the property would be unavailing. The “same” powers are conferred, not with a view to a continuation of the same corporation, but to give full effect and protection to rights created by the mortgage, adverse to those of the old corporation. To say, therefore, that because the purchasers have the same powers they are in effect the same corporation, would be to defeat the primary object of the law, and to destroy the interests of the " mortgagee. His interests, and all the proceedings to protect those interests, are adverse to the original corporation. And it is this adverse character which excludes the idea that the proceeding has no other effect than merely to continue the old corporation, and which so plainly distinguishes the case from those mere changes of corporate names or powers where the principle relied on by the plaintiff has been held applicable, that it is difficult to imagine that they could ever have been confounded. The law shows plainly that it was intended that such mortgages should have effect, like other mortgages, according to their priority, and it certainly would have been idle to expect to obtain loans upon such securities if it had been otherwise. Yet the doctrine here contended for would destroy all priority, [504] and the purchaser under the prior mortgage would take the property and franchises of the company, with a liability to pay not only the subsequent mortgages but all its unsecured debts. The judgment is reversed, with costs, and the cause remanded for a new trial.