First National Bank v. Anderson

Burks, J., delivered the opinion of the court. This is a controversy among creditors of the Petersburg Railroad Company—judgment creditors on the one side and ■creditors secured by deed of trust on the other, the latter represented by the trustees. In proceedings of garnishment instituted by the former to enforce liens created, as alleged, by execution, the trustees interpleaded, claiming prior right and title under the deed of trust to the property ■or funds in dispute, and had judgment in their favor. [255] It is certified by tbe court iu tbe bill of exceptions taken by tbe plaintiffs in error, as agreed by tbe parties, tbat tbe facts stated in tbe petition of tbe trustees are true. Tbat petition states tbat tbe iron sold, tbe proceeds of wbicb constitute tbe funds in dispute, was old iron taken up from tbe road-bed by tbe railroad company, and was covered by tbe deed of trust. This admission would seem to be conclusive against the claim of tbe execution creditors. The rails, wbicb were severed from tbe soil to wbicb tbey were attached, and, as shown by tbe proofs, were unfit for further use on tbe road, may by tbe severance have been converted from real into personal property, but tbey nevertheless remained subject to tbe lien created by tbe deed of trust; for the deed conveyed all tbe property, real and personal, including in express terms “rails,” “material,” &c., owned by tbe company at tbe date of tbe deed, or wbicb should be thereafter acquired, as well as tbe net income, tolls and receipts of tbe company. This lien was never waived, discharged, or in any way or to any extent impaired. Tbe company bad no right to dispose of tbe rails to tbe prejudice of tbe mortgagees or secured creditors, nor to divert tbe property from tbe purposes of tbe trust, and it does not ■appear tbat there was anything done or omitted to be done by them upon wbicb an estoppel in favor of tbe execution creditors could be founded. Indeed, after tbe sale bad been made and tbe proceeds to wbicb tbe several alleged liens were transferred from tbe property under an order of tbe chancery court bad been deposited under tbe same order to abide tbe judgment of tbe circuit court in tbe proceedings of garnishment, tbe trustees interposed and asserted their claim to priority under tbe deed, alleging (among other things), what is admitted to be true, tbat between three and four thousand dollars of interest wbicb became due on tbe first day of January, 1877 (after tbe commencement of tbe proceedings), and wbicb was secured [256] by the deed, bad not been paid because the company had not the means, although the holders of the coupons representing that interest were demanding payment. It is not necessary to decide what would have been the rights of the execution creditors in respect to the proceeds of sale, if such proceeds had been paid over without objection and had gone into the general fund of the company, without any separate account thereof being kept. Ho such question arises in the present case, as the proceeds were claimed by the trustees before payment was made. The liens of execution creditors as against mortgage creditors were sustained by this court in Gibert v. Washington City, Virginia Midland and Great Southern Railroad Company, decided during the present term, but they were liens in respect of the subject against which they were operated and enforced, not on specific property, as in the present cáse, covered by the mortgages, but on the income, tolls and earnings which had been received by the railroad company before the mortgaged property had been taken possession of by the receiver under proceedings for foreclosure. It was considered that, under the mortgages, such earnings, before possession taken of the property either by the mortgagees or receiver of the court, were under the control and at the disposal of the mortgagor company, and therefore liable to the executions of unsecured creditors. The principles and authorities upon which that decision was based may be seen by reference to the opinion of the court delivered by Judge Christian, 33 Gratt. 587. In the case now before us the creditors, by placing their writs of fieri facias in the hands of an officer to be executed, acquired liens paramount to the lien created by deed of trust on the earnings, if any there were, then in the possession of the company, which earnings they might have subjected to the payment of their judgments. They also thereby acquired liens on the other property conveyed by [257] the deed, but such liens were subordinated to the deed of trust—that is, they were liens on the equity of redemption only, which could not be taken in execution at law. Green, J., in Coutts v. Walker, 2 Leigh, 268, 280. The views which have been presented show that, in our opinion, there is no error in the judgment of the circuit court, and it must be affirmed. Judgment affirmed.