New England Water Works Co. v. Farmers' Loan & Trust Co.

GROSSCUP, Circuit Judge (after stating the facts as above) delivered the opinion: The case turns chiefly, on two questions: Piad the Circuit Court jurisdiction of the cause; and, jurisdiction being assumed, did the court rightly decree that within the meaning of the mortgage to Caldwell, [525] and the mortgage to the Farmers’ Loan and Trust Company, the new pumping station, with its connecting mains, were after acquired property covered by the mortgages. We are of the opinion that the court had jurisdiction. The whole case created by the bill of the Farmers’ Loan and Trust Company, it is true, was the foreclosure of its mortgage, involving thereby all the questions that foreclosure would raise. But within that case as a whole — standing apart from the other questions and from the parties involved therein — was the controversy, between the Farmers’ Loan and Trust Company on one side, and the Boston Water and Light Company, and its mortgagee, on the other, whether the mortgage covered the new pumping station, with its connecting mains, or not. To our minds, that controversy is a separable controversy. It involved, not all the questions involved in the foreclosure suit, but only one of them. It involved, not all the defendants to the foreclosure suit, but only the Boston Company, the International Company, and possibly the New England Company, under the latter’s promise to pay the interest on the Boston Company’s bonds. It had no relation to the questions, the interests, or the parties in the foreclosure suit as a whole, except to add something, that otherwise would have been extraneous, to the property available to the payment of the mortgage debts. And it is a controversy determinable, in and of itself, without reference to the other questions involved in the foreclosure case. To such separable controversy, the party on one side was a citizen of New York, and on the other side, citizens of states other than New York. The United Water Works Company, a citizen of New York, is not a necessary party; for apart from its being a general creditor, it had no interest in any of the property of the New England Company, except such as grew out of the judgment lien; and the judgment lien of the United Water Works Company did not extend to the new pumping station and mains; for, in the absence of statute to the contrary, judgment liens do not extend to equitable interests; and the New England Company had, at most, only an equitable interest in the new station and mains. Morsell et al. v. First National Bank, 91 U. S. 357, 23 L. Ed. 436. There is no statute in Illinois that changes this common law rule. The parties to this separable controversy, therefore, having such diversity of citizenship as permits of removal, and the controversy being removed by a party entitled to make the removal, the whole foreclosure suit came with it into the court below. The arguments at bar, in this connection, lose sight of the difference in the language employed by the statute in relation to removal of separable controversies, and the language relating to the removal of cases generally. True it is, that to remove a case from the state into the federal courts on account of diversity of citizenship, the defendant — that is to say, as interpreted* by the Supreme Court, all the defendants — must join in the removal. On the contrary, the removal of a separable controversy may be effected “by one or more of the defendants.” Chicago, Rock Island & Pacific R. R. Co. v. Martin, 178 U. S. 247, 20 Sup. Ct. 854, 44 L. Ed. 1055. This brings us to the question whether the new pumping station, [526] with the connecting mains, within the meaning of the mortgages in suit, are after acquired property; and if so, what equities, if any, have intervened that prevent the enforcement of the equitable lien of the mortgages thereon. The mortgages purport to grant, as security to the bonds, all the pipes laid in the streets of the city of Alton, including their extensions; the franchises and their extensions; the real estate on which the pumping station was located; and all pipes of every name, nature, or description, which were used, or which would be used, in operating the water company. It is apparent from these provisions of the mortgage, and from the transactions already detailed in the issuing of bonds under the mortgage, that the mortgage transaction contemplated, not simply -an existing water works system to remain as it then was, but a growing system, that would, from time to time, require new expenditures for extensions. And the bonds, for which provision in the mortgage was made were meant, not simply for the then present needs, but for such additional needs as would be occasioned by the future growth and extension of the city. The mortgage transaction, in short, was one that looked forward, as well as to the present; providing, primarily, for the financing of the future as well as of the present. What constitutes, in case of such a mortgage, “after acquired property,” turns upon the question whether the particular property, said to be after acquired within the meaning of the mortgage, fairly and reasonably comes within the contemplated additions and extensions for which financial provision has been made. Wade v. Chicago, Springfield, etc., R. R. Co., 149 U. S. 337, 13 Sup. Ct. 893, 37 L. Ed. 755. With this test in mind, the case before us is without difficulty. The Alton and New England Companies were under franchise agreement to furnish the people of Alton with water. Unquestionably this engagement required that the people of Alton should be furnished, so far as that was possible, with water not unhealthful. The old pumping station had ceased to meet that requirement. The removal up the river, therefore, to a point where healthful water could be obtained, was but the fulfillment of a franchise obligation. The new station was erected on land purchased by an officer of the New England Company, and as such officer; and was equipped in its main essential, the Corliss engine, with property belonging to the New England Company, removed from the old station; and the evidence satisfies us that the provision for bonds under the then existing mortgages, honestly carried out, would have met the expenditures necessitated by such removal. To these facts can be added another: The new pumping station, with its connecting mains, had no relation, substantially, to any new scheme of water distribution, or to the distribution of water over any territory not embraced in the New England Company’s system. The sole function of the new station, with its connecting mains, was to supply the old company with the quality and quantity of water that, to fulfill its public undertaking, the old company was obliged somewhere to obtain. The old company remained the water company of the city, obliged, under its franchise, to distribute healthful water. The new [527] station was but a new mouth and throat to this old system. The organization of the Boston Company, and the creation in its name of the new pumping station with the connecting mains, was nothing less, and nothing more, than an attempt by Vennor, through corporate manipulation, to sever from this old water company, the mouth and throat through which, alone, that company could fulfill its franchise obligations. Here, then, in a sentence, is the whole case: A mortgage on a necessarily expanding water works system — looking forward, as well as to the present, and contemplating that the new property, as fast as created, shall be drawn under the mortgage; a requirement that new property be created,' constituting, in connection with the old property removed, the mouth and throat of the whole enterprise; and, finally, the actual creation of such new property, having no function other than to act as mouth and throat for the old. Can any one doubt, that under such circumstances the new property, whatever may be the legal form given to it, is equitably but after acquired property, within the meaning of the mortgage? Does not such a case, on its physical aspects alone, constitute a case of after acquired property? Thus viewed, we need not concern ourselves with the question whether the new station was actually built out of bonds issued under the prior mortgages, or not. It is enough that the mortgage bond issue contemplated just such extensions. Nor need we concern ourselves with the question whether the bonds issued by the Boston Company to the International Company have been sold or not. The status of the new station as after acquired property does not, on facts such as are disclosed here, turn on the source from which the money was actually obtained. It is enough, that upon the physical facts visible to the whole world, and the provisions of the mortgage open to the whole world, there is made out a case that, within any fair interpretation of the mortgage transaction, necessarily includes the new pumping station and mains as an integral part of the water works system mortgaged, and therefore, equitably, a part of the property mortgaged. The decree of the Circuit Court is affirmed.