Front Street Cable Ry. Co. v. Drake

HANFORD, District Judge. Recent decisions of the circuit court of appeals for the Ninth circuit, reversing judgments of this court, which allowed claims for damage's caused by negligence in the operation of mortgaged railroads to he paid as preferential claims, leave to this court no discretion. The claim to priority in every such case must he disallowed. Farmers’ Loan & Trust Co. v. Northern Pac. R. Co., 24 C. C. A. 511, 79 Fed. 227; Farmers’ Loan & Trust Co. v. Nestelle, 25 C. C. A. 194, 79 Fed. 748. The petitioner, however, has introduced evidence tending to prove that, after the date of the mortgage upon the property of the Front Hh-eet Gable-Railway Company, the turntable at the southern terminus of the railway, and the track originally placed in Front street between said turntable and Cherry street, were taken up. and a new track and cable railway was constructed from the foot of Cherry street through Commercial street to King street, and a new turntable constructed there, and it is claimed that the mortgage does not cover this extension. The mortgage, however, does cover all after-acquired equipments and the franchises of the company. It will be impossible to operate the railway if the extension should be severed from that part of it which was constructed and in use prior to the date of the mortgage, and it will be impossible to sell the extension separately from the rest: of the Front Street Gable-Railway property, without impairing (he value of both parts to such an extent as to destroy the security.. I hold that the security of the mortgage bondholders cannot be impaired by additions to the mortgaged property. If the owner of a house or building should give a mortgage upon it, and after-wards build an addition to such house or building, or otherwise increase the value of the mortgaged premises by betterments which could not be severed from the property as it existed at the time of giving the mortgage, without destroying the security, certainly the mortgagee would be entitled to claim a lien upon the entire premises, 258 including the additions and betterments. The mortgage in this case had attached prior to the inception of any right of the petitioner. Therefore, according to the decisions of the circuit court of appeals for this circuit, he cannot claim priority oyer the mortgage.