Barnard v. Norwich & W. R.

CLIFFORD, Circuit Justice. Assignees in bankruptcy, except in cases of fraud, take only such rights and interests in the property of the bankrupt as he himself had, and could have himself claimed and asserted at the time of his bankruptcy, and they are affected with all the equities which would affect the bankrupt himself if he were asserting those rights and interests. No person can sell a thing he does not own, unless as the duly authorized agent of the owner. Nemo dat quod non habet. Nor can he convey in praesenti property not in existence, the rule being that every such deed or mortgage is inoperative and void. Authorities to support these propositions are not wanting, but the law will permit the grant or conveyance to take effect upon property when it is brought into existence, and comes to belong to the grantor, in fulfilment of an express agreement, if the agreement is founded on good and valuable consideration, unless it infringes some rule of law, or will prejudice the rights of third persons. Pennock v. Coe, 23 How. [64 U. S.] 117. Whenever the parties by their contract intend to create a lien or charge, either upon real or personal property, whether then owned by the assignor or contractor or not, or if personal property, whether it is in esse or not, it attaches in equity as a lien or charge upon the particular property as soon as the assignor or contractor acquires a title thereto against the latter, and against all persons asserting a claim to the same under him, either voluntarily or with notice, or in bankruptcy. Mitchel v. Winslow, [Case No. 9,673.] Tested solely by the words of the instrument above referred to, it might well be contended that the grant must be limited to the railways then chartered and located on indicated lines within certain described termini, but the terms of the indenture go on immediately to enlarge the grant beyond the locations then existing by adding the words “as said railroads are now or shall be located, constructed, or improved under or by virtue of any powers now granted, or that may hereafter be granted or obtained, to locate, construct, or use a railroad on any of said indicated lines.” Subsequent locations, if within the indicated lines, are clearly within the express words of the grant. Reasonable doubt upon that subject cannot be entertained, and the indenture proceeds to convey all the lands that are included, or which may be included in those locations, made or to be made, and all lands which may be acquired within the same terminal points, with one exception, to wit, the terminal lands at Boston and Fishkill which are outside the location, which it seems were reserved for a separate mortgage to secure an additional loan. Support to the view that the conveyance was intended to include railways to be located and constructed within the terminal points, of the most conclusive character, is derived from what follows in the same indenture, by which the grantors first enumerate as objects of present conveyance “all their lands, tracks, lines, rails, bridges, ways, depots, stations, water-tanks, shops, buildings, piers, and wharves, erections, fences, walls, fixtures, privileges, franchises, rights, leases, and charters,” and then superadd, under the same words of grant, “all the like estate, roads, railroads, and structures, matters and things pertaining or belonging thereto, that may be hereafter acquired or constructed, or belong to, or be controlled by the” granting corporation. Search is made in vain for anything to limit or qualify that language. Instead of that, the succeeding paragraph of the grant confirms the theory that the grantors intended that the mortgage should include after-acquired property of the same kind as that they possessed, as well as everything owned by them, then in possession, belonging to the great enterprise in which they were engaged. Evidence of that intent is also found in the sweeping paragraph which follows in the same instrument, in which the grantors, after having conveyed all the like estate hereafter acquired, proceed to add, “Together with all the tolls, income, issues, and profits to be had from the same, and all rights to receive and recover the same, and every thing necessary for the complete use of the road. Also, all the locomotives, engines, tenders, cars, carriages, t#ols, shops, fixtures and machinery, and all the coal, wood, and other fuel belonging or appertaining to said railroad, or that may at any lime hereafter belong or appertain to the same, as it may be changed by use and new acquisitions; also, all the estate, real, personal, and mixed, of any of the foregoing descriptions, or of any other kind which may be hereafter acquired by the party of the first part, and be used, or intended to be used, in the construction and operation of the said railroad.” Arrangements of various kinds were made by the said railroad company, and on the 9th of February, 1869, they leased for the term of one hundred years the railway of the Norwich and Worcester Railroad Company, together with all lands on which said railway is or shall be located within the described terminal points, and which are connected with the uses of said railway, and all the rights, easements, franchises, and privileges, in connection therewith, or which [846] are appurtenant thereto, and all the turnouts, branch tracks, depot grounds, stations, depots, superstructures, erections, and fixtures used therewith and belonging thereto, and the lands and premises on which the same are situate and standing, now used and belonging, and to be used or belonging, or in any wise appertaining to said railroad, together with all and singular the real estate, tenements, hereditaments, and appurtenances of the said railway company, together with and also the right to ask, demand, and receive, for their own use and benefit, all the tolls, profits, income, and rent, and charges which may or can be legally demanded or received, for the transportation of persons or property upon or over the said railroad, or any part thereof, or resulting in any wise from the operations and working of said railroad, or the use and occupation of the demised property, or any part thereof, together with the use of all the personal property of the said company, used or to be used upon or in connection with said leased railroad, with the dividends and profits of the steamboat stock owned by the said railroad company, and “the shares in the stock of said company.” Much discussion of the question whether the Boston, Hartford, and Erie Railroad Company had authority at the time to enter into that indenture is wholly unnecessary, as it is admitted that their act in so doing was fully ratified and confirmed by the laws of the states of Massachusetts and Connecticut. See Laws Mass. 1866, p. 142; Laws Conn. 1869, p. 264. Even the complainants concede that it was competent for the state legislatures to ratify and confirm the lease, and, the court being of the same opinion, the point may be dismissed without further consideration. Tested alone by the terms of the lease, wholly independent of the indenture of mortgage aforesaid, it is clear that the conclusion must be that the right of possession and use of the leasehold estate, real, personal, and mixed, passed to the respondent lessees named in the lease, which is a proposition virtually admitted by both the parties in this controversy. Intervening facts, however, are necessary to be considered in order to a complete understanding of the matters in dispute. Both parties concede that the Boston, Hartford, and Erie Railroad Company was adjudged bankrupt, and that the complainants, on the 21st of October, 1S70, were duly appointed assignees of the estate of the bankrupt corporation, and the record shows that the complainants, as such assignees, claim that the estate of every kind acquired by the said lease passed to the corporation whose estate they represent under the bankrupt act. Opposed to that, the individual respondents claim that the leasehold estate, demised and leased to the bankrupt corporation, passed to them as the legal trustees of the bondholders under the indenture known as the Berdell mortgage. Pursuant to the theory of the bill of complaint, the complainants pray that the individual respondents and the respondent corporation may account to the complainants for all moneys, rents, issues, and profits received by them, and that they respectively may pay to the complainants all such sums as shall be found due on such accounting, and that they may be ordered to deliver to the complainants the said leasehold interests, and to release and convey to the complainants whatever apparent or nominal title they may have to such leasehold interests. Service was made, and the respondents Hart and Clark appeared and filed an answer. They admit that the Boston, Hartford, and Erie Railroad Company was duly incorporated; that the corporation executed the indenture known as the Berdell mortgage; that the individual respondents are the sole surviving trustees under the same, and that the mortgage is a valid mortgage, duly authorized and ratified by the said several states; that the said corporation and the Norwich and Worcester Railroad Company entered into the agreement of lease as alleged in the bill of complaint; that the corporation lessee under that lease was subsequently adjudged bankrupt, and that the complainants were appointed assignees of the estate of the bankrupt corporation. Moneys, it may be assumed, were received by the lessors of that railroad, from the traffic, rents, and profits of the same, but the individual respondents deny that it was the duty of the said lessors to account for or pay over the same to the complainants, and they assert that they claim that the said lease and the benefit thereof passed to the trustees under the said indenture of mortgage, and that they, as such trustees, are entitled to require said lessors to account and pay all such moneys to them, as after-acquired property, under the indenture known as the Berdell mortgage. Other grounds of claim and of defence are set up in the pleadings growing out of the decree of the state court, but, in the view taken of the case, the whole merits of the controversy must turn upon the question whether the leasehold interest acquired by the lease passed to the trastees under the mortgage as after-acquired property. Plainly, if those interests did pass to the trustees as after-acquired property, the bill of complaint must be dismissed, and, if they did not, it is equally clear that the complainants are entitled to a decree, and in that view it follows that the other issues of law may be dismissed without further consideration. Argument to show that the parties intended to create a lien or charge upon property of the kind enumerated subsequently acquired, as well as upon property in existence and in actual possession, is hardly necessary, as the affirmative of the proposition is supported by the express words of the indenture of mortgage, the rule being that when parties intend to create a lien upon property not [847] then, in actual existence, it attaches in equity as soon as the person who grants the lien acquires the possession and title of the same. Mitchel v. Winslow, [Case No. 9,673;] Pen-nock v. Coe, 23 How. [64 U. S.] 117. Privileges, franchises, rights, leases, and charters are included in the mortgage, as well as lands, tracks, lines, rails, bridges, ways, depots, stations, water-tanks, shops, buildings, piers, wharves, erections, fences, walls, and fixtures; and the instrument following that specific enumeration proceeds to provide “also all the like estate, roads, railroads, and structures, and matters and things pertaining or belonging thereto, that may be acquired or constructed, or be controlled by the granting party, together with all the tolls, income, issues, and profits to be had from the same, and every thing necessary for the complete use of the railroad.” Language more explicit and comprehensive could not well be chosen, and the instrument proceeds to another enumeration, and specifies all the locomotives, engines, tenders, cars, carriages, tools, shops, fixtures, and machinery, and all the coal, wood, and other fuel belonging or appertaining to the said railroad, or that may at any time hereafter belong or appertain to the same as it may be changed by use and new acquisitions. More specific terms of inclusion, it would seem, could not be employed, and yet the grantors, as if to make certainty doubly sure, add as follows: “also, all the estate, real, personal, and mixed, of any of the foregoing descriptions, or of any other kind which may be hereafter acquired by the granting party and be used, or intended to be used, in the construction and operation of the said railroad.” Leases are specifically named as matters conveyed by the mortgage, and the express words of the instrument are, that all the estate, real, personal, and mixed, of any of the descriptions mentioned, or of any other kind which may hereafter be acquired by the grantors, or be used or intended for use, in the construction or operation of the said railroad, shall also pass to the mortgagees under the mortgage. Suppose that is so, the rule established by the two leading cases already cited shows that the complainants cannot recover. It must be so, unless the rule promulgated in those cases is overruled, which cannot be done for at least two reasons, (1) because the rule is a sound one; (2) because it is supported by many other decisions, to a few of which only reference will be made. Dunham v. Cincinnati, P. & C. R. Co., 1 Wall. [68 U. S.] 267; Galveston R. R. v. Cowdrey, 11 Wall. [78 U. S.] 481; U. S. v. New Orleans R. Co., 12 Wall. [79 U. S.] 364; Butt v. Ellett, 19 Wall. [86 U. S.] 547; Willink v. Morris Canal & Banking Co., 3 Green, Ch. [4 N. J. Eq.] 393; Smithurst v. Edmunds. 1 McCart, Ch. [14 N. J. Eq.] 411; Pierce v. Emery, 32 N. H. 503. Many other authorities support the proposition that, whenever parties by their contract intend to create a positive lien or charge, either upon real or personal property, whether owned by the assignor or contractor or not, or, if personal property, whether it is then in being or not, the contract attaches in equity, as a lien or charge upon the particular property, as soon as the assignor or contractor acquires a title thereto. Seymour v. Canandaigua & N. F. R. Co., 25 Barb. 284; Curtis v. Auber, 1 Jac. & W. 531; Langton v. Horton, 1 Hare, 556; Field v. Mayor, 2 Seld. [6 N. Y.] 185. Apply the established rule to the case, and it is clear that the complainants cannot recover, and in that view the court is of the opinion that it is not necessary to examine the other questions discussed at the bar. Decree that the bill of complaint is dismissed, with costs.-