Pierce v. Emery

Pekley, C. J. Corporations, as a general rule, have power to sell their property, real and personal, and to mortgage it for the security of their debts. Com. Dig., Corporation, F, 18 ; Barry v. Merchants’ Exchange Co., 1 Sand. Ch. 280 ; Despatch Line of Packets v. Bellamy Manuf. Co., 12 N. H. 206. — 504 — Railroads, by the law of this State, are public corporations, so far as to be subject in many respects to general legislation and the control of the public authorities. They are created to answer a public object, and are bound to the State for the performance of -their public duty. They can do no act which would amount to a renunciation of their duty to the public, or which would directly and necessarily disable them from performing it. They cannot convey away their franchise and corporate rights, nor perhaps the track and right of way which they take and hold for the necessary use of their road. But they may contract debts ; may purchase on credit; and we see nothing in the nature of their business, or in their relation to the public, which should prevent them from making a valid mortgage of their personal property, not affixed to the road, though used in the operation of it. Instead of disabling the road from performing its public duty, a mortgage might assist in doing it, in the same way that other corporations or individuals are aided in carrying on their business by mortgages of their property. The two mortgages made to the complainants before the mortgage to the trustees for the bond-holders, we think are valid to hold the personal property specifically described in them for the security of so much of the debts as remain unpaid. The bill does not’state how much of those debts are still due. But the complainants have no right in the road by virtue of those mortgages; they must assert their security by taking the property away, as in the ease of a mortgage by an individual. A different and more difficult question arises as to the claim of the complainants under mortgages made after the 20th of August, 1850, the date of the mortgage to the trustees for the bond-holders. The ground taken by the bond-holders is that the act of the Legislature authorized a mortgage, not only of the property which at the time belonged to the road, but of all the franchises and corporate rights of the road, and the road itself: That the trustees under such a mortgage would take, as security for the — 505 — bonds the railroad, and all its franchises and rights, as one entire thing, and that, as incident to this mortgage of the road and its franchise, all the property, real and personal, which might at any time afterwards become vested in the road, would be covered by the mortgage, and held by the trustees, subject to the right in the directors, until breach of the condition, of managing the road for the benefit of all concerned, and of selling such of the property from time to time as might be convenient in the course of the business, provided they substituted other property of equal value ; that when the trustees should make a sale under their mortgage, all the property, and all the franchises and corporate rights of the road would pass to the purchasers, subject in their hands to the public liabilities and duties of the corporation ; that the mortgage deed in this case exhausts the powers conferred by the act, and covers the road and its franchises, and the accruing property, as an accession to the thing mortgaged, and as part and parcel of it; that consequently the lien of the mortgage to the trustees attached upon property subsequently acquired immediately upon its vesting in the road, and the claim of the complainants must be postponed to the mortgage made for security of the bond-holders. Whereas, the complainants maintain that the act confers no power to make such a mortgage, and that the mortgage to the trustees does not cover property of the road subsequently acquired. We take it to be a general rule of the common law that nothing can be mortgaged that is not in existence, and does not at the time of the mortgage belong to the mortgagor. Tapfield v. Hillman, 4 M. & G. 240 ; Lunn v. Thurston, 1 M., G. & S. 383; Winslow v. Merchants’ Ins. Co., 4 Met. 306; Jones v. Richardson, 10 Met. 488; Moody v. Wright, 13 Met. 17. This rule, that a mortgage cannot cover future acquisitions, would seem to have been established on the technical ground that a mortgage is a sale upon - condition, and by the common law there could be no sale of a thing not in esse, and not at the time the property of the seller. By the civil law a mortgage may cover the future property of — 506 — the mortgagor. Domat., part 1, hook 3, tit. 1, sec. 1, articles 5 and 7. And in some jurisdictions, where the maxims of the common law prevail, mortgages have been sustained covering the future and shifting stock of a trading or manufacturing establishment ; as in the case of Holly v. Brown, 14 Conn. 255. So in Abbott v. Goodwin, 20 Maine 408, a mortgage of a stock in trade and of the substituted goods was held to be valid. And such a mortgage was sustained against an assignee in bankruptcy in Mitchell v. Winslow, 2 Story 630. In these cases, not merely the existing property, but also the business and establishment appear to have been regarded as the subjects of the mortgage ; and the mortgagor, while he remained in possession, was looked upon in the light of an agent for the mortgagee, so far as his interest was concerned, with an implied authority to buy and sell, and manage generally, according to the usual course of the business. Even where the strict rule against the mortgaging of subsequently acquired property is enforced, if the mortgage purport to cover such property, and the mortgagee take possession, with assent of the mortgagor, before another title attaches, he will hold from time to time, not as mortgagee, but as pawnee, under the contract contained in the mortgage. Rowley v. Rice, 11 Met. 333. And in mortgages of real estate it is a familiar rule that buildings, and other things^mnexed to land after the mortgage, are regarded as accessions to the original subject of the mortgage, and covered by it. Pettingill v. Evans, 5 N. H. 54. There is, therefore, no intrinsic difficulty in a mortgage which should cover the future and shifting stock and property of a trading or manufacturing establishment, or of a corporation. But by the common law, according to the weight of authority in other jurisdictions, and as we understand the rule to be in this State, no mortgage can be made to cover any personal property, except specific articles belonging to the mortgagor at the time of the mortgage ; and, unaided by the special act- of the Legislature, the railroad in this case would have no power to make a mortgage that should have the effect contended for by the bondholders. The question whether the trustees can hold subse — 507 — quently acquired property against the claim of the complainants, will, therefore, depend on the construction of that act and of the mortgage deed made under it. Did the act authorize the road to make a mortgage which should cover property of the road afterwards acquired ? and if so, did the directors make such a mortgage in this instance ? The word “ franchise,” so often used in the act and in the deed, has various significations, both in a legal and popular sense. A corporation is itself a franchise belonging to the members of the corporation; and a corporation, being itself a franchise, may hold other franchises, as rights and franchises of the corporation. A municipal corporation, for instance, may have the franchise of a market, or of a local court; and the different powers of a private corporation, like the right to hold and dispose of property, are its franchises. In a more popular sense the political right of subjects and citizens are called franchises, like the electoral franchise. Com. Dig., Franchise, F, I.; Angelí & Ames on Corp. 8; The King v. London, Skinner 310, 311. A corporation, being itself a franchise, consists and is made up of its rights and franchises; and when all its franchises are gone, by surrender, by forfeiture judicially ascertained, by limitation of the grant, or in any other way, the corporation has no longer any practical existence. If the franchise or franchises are of a nature to continue after they are lost by the corporation, they may be regranted to another corporation, or to other individuals ; but the former corporation is substantially dissolved. 2 Kent’s Com. 305, and note a, 308 and 309; The King v. Pasmore, 3 T. R. 199; Com. v. Hancock Bridge, 2 Gray 59, 60. The grant of a corporation is a contract between the State granting it and the grantees. It is peculiarly and emphatically so in the case of railroad corporations, which are created upon public considerations, and clothed with extensive and extraordinary powers, for the purpose of enabling them to accomplish the public object contemplated in the grant. The members and — 508 — stockholders have private rights; but the corporations are also bound to the discharge of their public duties, and cannot, without the aid of special legislation, disable themselves from performing their duty to the public by alienating or transferring their corporate rights and franchises. They may sell or mortgage their personal property, but they cannot sell or mortgage with it the right to manage and control the road, nor any other corporate right or franchise. The King v. The Severn & Wye R. W. Co., 2 B. & Ald. 646 ; Reg. v. The Eastern Counties R. W., 10 Adol. & Ellis 531; Reg. v. South Wales R. W. Co., 14 Ad. & Ellis (N. S.) 902; Clark v. Washington, 12 Wheaton 46, 54; Winchester & Lexington Turnpike R. Co. v. Vimont, 5 B. Monroe 1; Arthur v. The Commercial R. R. Bank, 9 S. & M. 394. If this corporation had authority to make a mortgage that should convey the franchise and corporate rights, the power must be derived from the special act. It is a very familiar rule in the interpretation of statutes that all parts of the act must be considered together, and such construction given to it as will best answer the intention of the makei’S. To accomplish this object, in some cases the letter of the statute may be restrained by an equitable construction ; in others, enlarged; and sometimes the construction may be even contrary to the letter. Holbrook v. Holbrook, 1 Pick. 250 ; Somerset v. Bighton, 12 Mass. 384. On examination of this act it will at once be seen that the several parts cannot all take effect in the sense that would most naturally belong to each, if they were considered separately. In the third section the directors are authorized to mortgage “ the whole or a part of the real or personal estate of said coi’poration.” Stopping here, and taking this clause by itself, no inference can be drawn from it of an intention to give the power of mortgaging the franchises or future acquisitions and accessions of personal or real estate. This is the clause in which the authority to mortgage is directly conferred. If a more extensive power were intended to be given by the act, why is no mention made of it here ? The argument drawn from this part — 509 — of the act against the construction contended for by the bondholders, goes upon the ground that this clause was intended to include and define all the powers of mortgaging conferred by the act. But by the same section the trustees are authorized to sell, according to the conditions and limitations that may be contained in the mortgage deed, “ the real and personal estate, and all rights, franchises, powers and privileges named in said mortgage deed.” The directors therefore are authorized to name in the mortgage deed, not only the real and personal estate, but rights, franchises, powers and privileges of the corporation. The rights and franchises named in the deed are to be disposed of by sale, to enforce the mortgage security in the same way with the property mortgaged; and there is nothing from which it can be inferred that the rights and franchises, and the property of the corporation, are not to be named in the same way and conveyed in the same way by the deed; that is to say, the rights and franchises are to be conveyed and mortgaged like the property, and are to be disposed of under the mortgage for the same purpose, and in exactly the same manner. The directors may name in the mortgage — in other words, they may convey in mortgage — any part or all the real and personal property, and any or all the rights, franchises, powers and privileges of the corporation. The act sets no limit on their discretionary power in this respect; and whatever the directors víame in the mortgage which they give in behalf of the road, is to be disposed of in the same way for the satisfaction of the mortgage debt, whether it be the property or the rights and franchises of the corporation. The power to mortgage the rights and franchises, as well as the property of the corporation, is plainly and necessarily implied from these provisions of the act. The act, therefore, does not limit the power of mortgaging to real and personal property on hand at the time, but gives authority to mortgage the rights and franchises of the corporation, which could not be done without the aid of the act. And it cannot be maintained that the authority to mortgage real and — 510 — personal property given in one part of the act, was intended to be exclusive of all further power, when the further power of mortgaging the rights and franchises of the corporation is clearly given by necessary implication in another part of the same section. The fourth section provides that the deed of the trustees shall convey to the purchasers “ all the real and personal property named in said mortgage deed, together with all the rights, franchises, powers and privileges in relation to the same, which said corporation possessed at the time of the execution of the mortgage.” If part only of the property belonging to the road had been mortgaged by a specific description, and the general right to the road had remained in the corporation, it is not easy to understand how there could have been any practical sale and transfer of the rights and franchises of the corporation in relation to the particular property mortgaged, which could have been beneficially exercised by the purchasers. And it will be seen that, by the subsequent provisions of the same section, the purchasers of the property mortgaged, whether less or more, are to have “ all the rights, franchises, powers and privileges” of the corporation. The purchasers, by the deed of the trustees, whether the whole or part only of the property is mortgaged, “ acquire all the rights, franchises, powers and privileges which said corporation possessed, and the use of said railroad, with all its property and rights of property, for the same purposes and to the same extent that said corporation could use the same if said deeds had not been made.” The directors, by the act, have power to mortgage the whole or any part of the property : and if they should mortgage part only, it would seem to be implied in one clause that the partial mortgage would carry with it the rights and franchises of the corporation so far only as they were connected with the property specifically mortgaged. It is manifest that there would be an intrinsic difficulty in carrying into practical effect such a construction of the statute. How could the rights and franchises of the corporation be divided so that the purchasers of part of the prop — 511 — erty should have and exercise their proportionate share of the franchises ? And the act evidently contemplates no such division and apportionment; for the provision depriving the effect and operation of the trustees’ deed is general, that when the property mortgaged, whether more or less, is sold, the purchasers shall take “ all the rights, franchises, powers and privileges” of the corporation. The act does not authorize a sale of the property mortgaged separate from the rights and franchises, nor a sale of any thing short of all the rights and franchises of the corporation. The rights and franchises are not to be divided and apportioned on a sale by the trustees, nor separated from the property mortgaged. There is a manifest want of accuracy and clearness in this, as in other parts of the act, which ought not, perhaps, to surprise us in a subject so intricate and so new to legislation. Probably the framers of the law were too well acquainted with the condition and prospects of the road to expect that a loan could be effected on the security of a mortgage, unless it were general, and covered the whole road, with all its property; and in the provision for a sale by the trustees they may well be supposed to have overlooked the possible case of a mortgage conveying a part only of the property belonging to the road. The directors then had power under the act to name in their mortgage, and to convey in mortgage to trustees, all the property, and all the rights, franchises, powers and privileges of the corporation. If they made such a mortgage it would convey to the mortgagees all the right and power which the corporation had to acquire and hold property, for the power to acquire and hold property is one of the rights and franchises of the corporation. That right would be conveyed and transferred from the road to the trustees by the mortgage deed, in the same way that the property was conveyed and transferred, subject to the condition of the mortgage; and the subsequently acquired property would pass under the mortgage as incident to the right of acquiring and holding it, which would be vested in the trustees by thé mortgage. — 512 — The purchasers under the deed of the trustees “ acquire all the rights, franchises, powers and privileges which said corporation possessed, and the use of said railroad, with all its property and rights of property, for the same purposes and to the same extent that said corporation could use the same, if said deeds had not been made, subject to the same liabilities as to the use of said railroad that said corporation would be under if said deed had not been made.” All this the purchasers take through a sale authorized to enforce the mortgage security ; and we cannot understand that anything different from this, or less than this, was authorized to be mortgaged and covered by the mortgage for the security of the mortgage debts. It is contrary to all the received notions of a mortgage that anything should be sold under it to pay the debts secured, that was not mortgaged and covered by it before the sale. It would seem to be the plain intention of the act to preserve the corporate rights and franchises, and maintain the corporate liabilities in the hands of the purchasers at the trustees’ sale. All the rights and franchises of the corporation, and the use of the road, are transferred to them by the deed of the trustees, and they hold the corporate rights and franchises, subject to the same liabilities as to the use of the road by which the corporation was bound before the sale. They have all the property and all the rights and franchises, and are likewise bound to perform all the public duties of the corporation. It is not easy to see how the original corporation, in the hands of the former corporators, could, after such a sale, have any practical or even legal and theoretical existence. They could hold no property; they could maintain no action, nor elect any corporate officer ; these powers are all rights and franchises of the corporation, created and granted by the act of incorporation, and are all transferred and conveyed by the deed of the trustees to the purchasers under their sale. In some eases, after the franchises of a corporation are lost by forfeiture, the corporation is still held to exist in contemplation of law, so far as to be capable of being revived by a regrant from the government. But here the franchises would — 513 — not be forfeited to the State, but transferred to the purchasers ; and the State could not revive the old corporation by a re-grant of the franchises, which had become vested in the purchasers. The sale would in substance transfer the road and the corporation to the purchasers. There may be a difficulty, which it is not necessary to anticipate, in saying how the purchasers shall exercise some of these rights. There is no provision in the act for their doing it through the machinery of the old corporation. They may, perhaps, be regarded somewhat in the light of new grantees of the old franchises. If, then, the purchasers under the trustees’ sale take what was originally mortgaged, and take all the property, rights and franchises of the corporation, to hold and enjoy as the corporation held and enjoyed them, they take substantially the corporation itself; and the corporation itself was the thing originally mortgaged. In the fifth section the act gives the directors power, notwithstanding the mortgages, before possession is taken by the trustees, to “ sell and dispose of any of the personal property of said corporation.” This provision applies in terms to all personal property of the corporation, without distinguishing between property on hand at the time of the mortgage, and property acquired afterwards; and standing alone might imply that without the authority of this provision the directors would have no power to sell any personal property of the corporation, whether acquired before or after the mortgage. But under a proviso in the same section it is made the duty of the directors, with the proceeds of the property sold by them, to purchase other property equal in amount, and “ which shall be holden by said trustees under said mortgage, in the same manner as if the same had been owned by said corporation at the time of the execution thereof, and included specifically in said mortgage deed.” From this last provision it is argued that no property acquired after the mortgage was intended to be covered by it, except such as was specifically substituted for particular articles included in — 514 — the mortgage and sold afterwards by the directors; for if all property acquired by the mortgage were subject to it, this provision, it is said, would be idle and unnecessary. But it is to be observed that the act gave the directors power, if they should see fit, to make a partial mortgage to the trustees of the personal property belonging to the road ; and if such a mortgage had been made the directors could not have sold any of the specific articles mortgaged without this provision. And the argument is equally strong to show that the directors would have no authority under the act to mortgage, unless the particular articles of personal property were specifically described, in the mortgage, for the trustees are to hold the substituted property in the same manner as if it were owned by the corporation at the time of the mortgage, “ and specifically described in the mortgage.” There is, in fact, no description of any specific property in the mortgage to the trustees, and the argument from this clause, if it would avail for anything, would make the whole mortgage void, certainly so far as relates to the personal property. This proviso has much the appearance of having been patched into the act after the original draft, and is very likely to have been adopted without very carefully considering its meaning and effect; and, at most, lays the foundation for a loose inference of a negative from an affirmative proposition. The proviso declares that certain pi’operty acquired after the mortgage shall be covered by it; but does not provide in direct terms, nor by any necessary implication, that other property acquired afterwards shall not be subject to the mortgage. Power to sell, notwithstanding the mortgage, in the manner necessary for the profitable and convenient management of such a business, would probably be implied without express authority given in the act. The directors and the corporation could retain the charge and management of the road until the conditions of the mortgage were broken, which might be for twenty years. They would act, so far as the mortgage was concerned, in the character of trustees or agents, with an implied authority to conduct the business of the road in a proper and judicious manner — 515 — for the benefit of all concerned, as the mortgagor of a trading or manufacturing establishment does, where such mortgages are allowed; and this would necessarily imply power to buy and sell in the usual course of such a business. And the power to sell in the usual course of the business would be widely different from the power to mortgage for the security of debts. Selling in such case would be allowed for the benefit of the business and ’ of the mortgage security; the property sold would disappear from the road; and in order to keep the road in operation the directors would be obliged to purchase other property to supply its place. This, it is quite apparent, would be altogether a different thing from the power to mortgage the property of the corporation for debts, new and old, and retain possession of it to continue the operations of the road. An analysis of the act and an examination of the several parts, when taken together and compared with each other, lead to the conclusion that the Legislature intended to grant the power of mortgaging all the property and all the rights and franchises of the corporation, including the right to property subsequently acquired. We have not been able to discover anything in the act which directly contradicts, or by any necessary implication excludes this construction. There are express grants of particular powers in different parts of the act, from which the argument is drawn, that nothing more than is there expressed was intended to be granted elsewhere. For instance, in one clause authority is given to mortgage all or part of the real or personal property of the road. But it is quite plain from other provisions that this was not intended to be the limit of the authority conferred. The provisions for the sale and transfer to the purchasers under the mortgage of all the rights and franchises are practically inconsistent with such a narrowed construction of the act. The material and substantial provisions of the act cannot be carried into effect without construing it to give the power of mortgaging the road, and all its rights and franchises, as an entire thing, and subsequently acquired property, as an incident to the general subject of the mortgage, and an accession to it. — 516 — The general design and object of the act favor the same construction. The corporation already had power under the general law to mortgage their property then in possession, and for that purpose had no need of special legislation. The act must have intended to enlai’ge that power, and authorize the road to make a mortgage substantially different from such as are allowed at common law; and that intention would not be answered if the act should be so construed as to limit the power of mortgaging to property then owned by the road. The act is entitled “ An act to aid in the construction of the Portsmouth and Concord Railroad.” The road was unfinished, and the money borrowed on the security of the mortgage was to go into the road, to assist in the enterprise and undertaking. The statements of the bill show that at the time when the mortgage to the trustees was made, all the personal property of the road had been already mortgaged to these complainants for the security of other debts. There is nothing in the case which furnishes any ground to infer that the road had then any unincumbered property capable of being mortgaged. If so, and the mortgage to the trustees could attach on nothing but property then belonging to the road, all that the bond-holders would have under their mortgage for security of their demands would be a right in equity to redeem property of the road already mortgaged for other debts. This, we think, is not the security upon which the bondholders supposed they were lending their money, nor the security which the Legislature intended to give them by the act. The general design must have been to give those who advanced money to complete the road on credit of the_ mortgage specially authorized by the act, a substantial and available security, and a preference over other subsequent creditors. But if all subsequently acquired property might be mortgaged to secure other debts, new and old, and those mortgages were upheld against the bond-holders, money might be obtained on such security to carry on the road, to pay interest on the bonds, or even to pay dividends, and when possession should be taken for the bond-holders, perhaps at the end of ten or twenty years, — 517 — they might have little for their security but the franchise and road-bed ; for much of the iron and other materials since affixed to the road are covered in terms by the complainants’ mortgages, and claimed under them. If other creditors of the road had stood on such terms with the directors and managers as would enable them to obtain mortgages of the newly acquired property, as it fell from time to time into the hands of the corporation, the bond-holders, instead of having a preference, would have been the last creditors likely to realize anything from their security, in case the road should turn ou't to be insolvent. The object of the act being to give the bond-holders a substantial and available security for their money, and a preference over other creditors not previously secured, can only be answered by so construing the law as to give the bond-holders security upon the road itself, as the general subject matter of their mortgage, and upon the changing and shifting property of the road as part and parcel, by accession, of the thing mortgaged. The question is certainly not free from difficulty ; but whether we look to the particular provisions, or follow what we must understand to have been the general object and design of the law, we are on the whole brought to the conclusion that it authorized the directors to mortgage, not only the property then belonging to the road, but all the franchises and rights of the corporation, and, in substance, the road and corporation itself. That if the directors made such a mortgage, as incident to the franchise and corporate rights mortgaged, subsequently acquired property, immediately upon its vesting in the corporation, would, as an incident and by accession, become part of the thing originally mortgaged, and of the mortgage security. The right to take and hold property being one of the franchises mortgaged, the corporation would have no power to take or hold property, except by virtue of that franchise and under the mortgage by which the franchise was covered. We are of opinion, then, that the act authorized the corporation to mortgage the whole road as an entire thing, with all its corporate rights and franchises, and incidentally, and by way of — 518 — accession, all the subsequently acquired property of the road. Did the directors in fact make such a mortgage ? The deed recites that the directors, in pursuance of the act and of the vote of the stockholders, had appointed the trustees “ to take and hold security on all the property of said company, and all its rights, franchises, powers and privileges, in mortgage and in trust,” and then the Portsmouth and Concord Railroad “ give, grant, sell, convey and mortgage” to the trustees “ the railroad of said corporation, together with all its rights, franchises, powers and privileges in the towns, &c., as it is now constructed and improved — with all the lands, buildings and fixtures thereto belonging, and which may hereafter thereto belong, with all the rights, franchises, powers and privileges now belonging to, or held, or which may hereafter belong to or be held by said corporation, together with the locomotive engines, &e., and all the other personal property of said corporation, as the same is now in use, or may hereafter be changed and renewed by said corporation; to have and to hold the said railroad franchise and estates aforesaid, whether real or personal, with all the privileges and appurtenances, legislative grants, powers, rights and privileges, now or hereafter granted, thereto belonging.” The deed conveys the railroad and the franchises and rights of the corporation, as well as the property, and it takes effect immediately upon all. The deed in terms conveys lands subsequently acquired, and personal property as then in use, and as it should thereafter be changed and renewed. The last clause, if other parts of the act and deed required it, might be limited in construction to the case where specific property mortgaged was sold and other property substituted in its place; but the broader meaning is at least as natural, that all the shifting and changing personal property of the road should be covered by the mortgage, and has the advantage of agreeing with the provision of the deed that lands subsequently acquired should be held under the mortgage, and with the necessary inference, drawn from the mortgage, of the rights and franchises of the corporation. And then under the mort — 519 — gage deed the trustees are empowered to take possession of the road, and sell the same, and their deed passes to the purchasers, not the property owned by the road at the time of the mortgage, but “ all the property, real, personal and mixed, rights, powers, franchises and privileges of this corporation.” Taking the whole deed together the intention is very apparent to mortgage, not merely property then belonging to the road, but the road itself and all its franchises, as one entire thing, and, as an incident and accession, all property of the corporation afterwards acquired. And such we think was" the legal operation of the deed under the act. We have met with but few authorities that bear directly on this question, and in forming our opinion have been obliged to rely mainly on the application of general principles. The case, however, of Willink v. The Morris Canal & Banking Co., 3 Green Ch. 377, cited and relied on by the counsel for the bond-holders, though not like this in all its circumstances, is strongly in point. In that case the Legislature of New-Jersey passed an act authorizing the corporation “ to hypothecate, by way of trust mortgage, or otherwise, the Morris Canal, with all its privileges, appendages and appurtenances, and all the property and chartered rights of said canal.” To secure payment of a loan, the corporation made a mortgage to trustees “ upon all and singular the Morris Canal, with all the privileges and appurtenances thereto belonging,” describing particularly the parts and appurtenances of the canal. Neither the act of the Legislature, nor the mortgage made under it, provided in terms that lands or other property of the canal subsequently acquired should be held under the mortgage. The court held that the mortgage covered the entire canal, and real estate subsequently acquired. We are unable to see, if land and real estate, acquired after the mortgage, passed under it as incident to the conveyance of the canal and its rights and franchises, why, upon the same ground, the personal estate should not take the same course. The principle of Willink v. The Morris Canal goes far to cover the whole ground of the present case. — 520 — The bill states that a large sum has been expended since the mortgage to the trustees, beyond the amount realized on the bonds, in adding to the value of the road; and that the property mortgaged to Haven and Pierce, except the iron, was paid for by money lent to the road by the complainants and others named in the several mortgages. But we do not' see how any equity can be founded on these statements, which could affect our decision. There is no statement that the bond-holders have sufficient security without coming on the property mortgaged to the complainants. The bill concedes that the bond-holders are bona fide creditors for money lent under the act. All the parties that claim security on this property are meritorious creditors, and ought to be fully paid, if the road has means; and if the road is insolvent and able to pay but part, the only question that can be entertained on this bill is, which of the parties has secured the legal preference. The case ef the iron imported in the ship General Berry requires a separate consideration. The iron belonged to the railroad, subject to the lien of the United States for duties; and the mortgage to the trustees, upon the principle which we have stated, would cover the iron, subject to that lien; and the mortgage subsequently made to the complainants, so far as it went to secure other debts besides the sum afterwards advanced to discharge the lien, must be postponed to the claim of the bondholders. The interest of the United States in the iron consisted in the right to retain it till the duties should be paid. If the government voluntarily gave up possession, the lien would be gone, at least as to third persons. On the 26th of June, 1851, when the complainants took their mortgage, the iron was subject, in the first place, to the lien for duties, amounting, as I understand it, to $4,399.85, and also to the mortgage previously made for security of the bondholders. If there had been an agreement between the road and Pierce and Haven that they should pay the duties, receive the iron, and retain possession till the money advanced was repaid to them by the road, perhaps their lien, while they — 521 — retained possession, would be good against the trustees and their mortgage; because their mortgage would give them no more than the road had, which was a right to the iron, subject to the lien for duties ; but the interest of the United States in the iron would be lost when they parted with possession, and they could transfer no higher right to the complainants; and when they, pursuant to the agreement contained in their mortgage, allowed the iron to go into the possession and control of the general owners, and to be applied to their use, the lien, as to the trustees and bond-holders, was gone. The claim of the plaintiffs on the iron cannot, we think, be maintained on the ground that the lien of the government was transferred to them on payment of the duties, and retained by them under their agreement with the road, because, on well established principles, when they voluntarily parted with possession the lien was gone. When the iron was mortgaged to the complainants, it was subject to the prior mortgage of the trustees, and all that the road had was an equity of redemption subject to that mortgage. The railroad had nothing that they could convey or deal with in any way, except that equity. And they could make no bargain respecting the iron that would bind the trustees without their assent. The bargain that the road might take the iron and lay it in the track, and the complainants have a right to take it up and remove it if the money advanced for the duties was not repaid within the time limited, though it would create no lien on the iron, as against third persons, who had not received notice and did not assent, would be a good and binding contract between the parties ; and if the trustees had notice of the agreement and assented to it, we are of opinion that it would bind them and the bond-holders. LeGard v. Hodges, 1 Vesey, Jr., 477; Lyde v. Mynn, 1 Milne and K. 683. Notice to trustees, who take a conveyance for the mere purpose of upholding an estate, without having any previous connection with the title, is not always nor perhaps usually regarded as notice to the cestuis que trust. But the trustees under this act must be considered in the light of agents for the negotiating — 522 — the loan ; they act for those who lend their money on the security of the mortgage; they are charged with the duty of protecting the interests of the bond-holders, who are unconnected individuals, having no ready means of acting together except through the trustees, whom the law appoints to act for them. Notice to the trustees would be all that could be given in this case. If the bill had stated that the trustees knew of this agreement and assented to it, the complainants would have had a claim which would be -recognized in equity; but the bill contains no such statement. If the plaintiffs are advised that the trustees knew of the agreement, and assented to it, the bill may be so amended as to show that state of facts. The mortgage, however, and registration, would not be constructive notice of the agreement inserted in it. And perhaps the trustees would not be bound by the mere fact of notice as such. But if they all knew of the agreement, and their assent can be proved as matter of fact, by direct evidence, or by inference from notice and other circumstances, we think the contract would bind them and the bond-holders. The demurrer must be overruled, as it is taken to the whole bill, and the complainants are entitled to part of the relief for which they pray. The demurrer may, however, be amended so as to apply to part only of the bill, and the defendants answer to the residue.