Brown v. Maryland (114 U.S. 598)/Opinion of the Court

An ordinary mortgagee of real estate, who has not taken possession under his mortgage, is not entitled to the rents and profits as against the mortgagor or his attaching creditors; and the same rule holds good in the case of a mortgage by a railroad, canal, or bridge corporation of its tolls and revenues, which provides a mode in which the mortgagee shall take possession, and, until that mode is availed of, leaves the tolls and revenues in the control of the mortgagor, to be disposed of as he sees fit. Galveston R. R. v. Cowdrey, 11 Wall. 459; Gilman v. Illinois & M. Tel. Co. 91 U.S. 603; American Bridge Co. v. Heidelbach, 94 U.S. 798. But by the statutes of the state of Maryland relating to the Chesapeake & Ohio Canal Company, and the mortgages executed pursuant to those statutes, the application of the tolls and revenues of the canal was not left to the disposal of the corporation. The state of Maryland, regarding the construction and maintenance of the canal as an object of great importance and benefit to the public, had lent to the canal company large sums of money, and subscribed for a majority of its stock, and, to secure its loans and investments, had taken from the company mortgages upon the canal and all its tolls and revenues.

By the statute of 1844, c. 281, the state authorized the company, in order to obtain additional means, to issue bonds secured by mortgage to trustees of its net tolls and revenues; the state waived its own lien upon the gross revenues so far only as to subordinate it to the lien of that mortgage; subject to that lien, the state took a new mortgage as additional security for the repayment of its original loan to the company; and the statute, under and pursuant to which these two mortgages were executed, and to which each was made subject, expressly provided that the company should have authority to use and apply so much of the gross tolls and revenues as might be necessary to keep the canal in repair, to provide the requisite supply of water, and to pay salaries and current expenses. The necessary effect of this arrangement was for the promotion of the public object as well as for the ultimate benefit of the mortgagees, to appropriate the tolls and revenues in the first instance to the payment of necessary repairs and expenses.

The debt of the judgment creditor in this case was a general debt of the company, and not a bond secured by the trust mortgage, nor a debt contracted for repairs of salaries, or other current expenses. It is alleged in the bills, and admitted by the demurrers, that the creditor, at the time of contracting his debt, had notice of all the charges, liens, and duties affecting the tolls and revenues, and especially of the provision by which they were appropriated, in the first instance, to the payment of necessary expenses. And the money of the corporation, which he seeks to apply to the payment of his debt, is needed for those expenses. It follows that the judgment creditor has no equity, and that the state of Maryland, and the trustees for bondholders, whose security will be affected by the diversion of this money from its lawful object, are entitled to injunctions. This conclusion accords with the adjudication of the court of appeals of Maryland in Brady v. State, 26 Md. 290, and with the opinions expressed by that ourt in earlier and later cases. Boyd v. Chesapeake & Ohio Canal Co. 17 Md. 195; Virginia v. Same, 32 Md. 501. Decree affirmed.