Commissioners of Buncombe Company v. Tommey

The Spartanburg and Asheville Railroad Company — a corporation created by the consolidation, in the year 1874, of a railroad company of the same name, organized under the laws of South Carolina, and of the Greenville and French Broad Railroad Company, of North Carolina — executed, under the date of October 1, 1876, a deed of trust, whereby, for the purpose of securing the payment of its bonds, with interest coupons attached, it conveyed its franchises, railroad, rights, lands, and property, real and personal, in trust for those who should become holders or owners of such bonds. The deed contained a provision by which the principal of all the bonds should become due after continuous default for six months in the payment of semi-annual interest upon them, or upon any of them. Such a default having occurred in respect of the installments of interest due January 1, 1878, the present suit was brought for the purpose of enforcing, in satisfaction of the entire amount of said bonds and coupons, the lien given by the before-mentioned deed. Certain parties-Garrison, Fry & Deal, Clayton, and Rice & Coleman were made defendants, because, as creditors of the railroad company, they claimed, respectively, a lien upon property covered by the mortgage superior to that asserted in behalf of the bondholders. Garrison alleged that, being a mechanic, he contracted, December 1, 1876, and June 2, 1877, with, and afterwards built for, the railroad company two trestles in Polk county, North Carolina, his work being completed February 18, 1878; Fry & Deal, (the first named being a mechanic,) that they furnished materials and work upon trestles in the same county, under a contract made with the company on June 2, 1877, and fully executed June 17, 1878; Clayton, that he performed work (grading, etc.) upon the company's road in the same county, under a contract made with it prior to the mortgage, but not executed until after its date; and Rice & Coleman, that they did work and labor, and furnished materials, on the company's road in Henderson county, North Carolina, such work beginning June 1, 1876, and ending May 1, 1878.

The decree below, ordering a sale of the mortgaged property, must have proceeded upon the ground that, under the laws of North Carolina, these defendants acquired no lien whatever upon the property of the railroad company. The contention here is that some of the defendants acquired a lien as well under a statute passed in 1873, regulating sales under mortgages given by companies upon all their works and property, as under the act called the workmen's lien law of 1870; and that one of the defendants has a lien under the former, while others have liens under the latter statute. The main inquiry now is whether the court below correctly interpreted those statutes. It is necessary, to a clear understanding of the case, that their provisions be examined in detail.

By the constitution of North Carolina of 1868, the general assembly of that state was required to 'provide, by roper legislation, for giving to mechanics and laborers an adequate lien on the subject-matter of their labor.' Art. 14, § 4.

Subsequently, by an act approved March 28, 1870, entitled 'An act for the protection of mechanics and other laborers, materials,' etc., it was provided 'that every building built, rebuilt, repaired, or improved, together with the necessary lots on which said building may be situated, and every lot, farm, or vessel, or any kind of property not herein enumerated, shall be subject to a lien for the payment of all debts contracted for work done on the same or material furnished,' (section 1;) that 'any mechanic or citizen, who shall make, alter, or repair any article of personal property, at the request of the owner or legal possessor of such property, shall have a lien upon such property so made, altered, or repaired, for his just and reasonable charge for his work done and material furnished, and may hold and retain possession of the same until such just and reasonable charges shall be paid,' etc., (section 3;) that 'all claims under $200 may be filed in the office of the nearest magistrate, if over $200, in the office of the superior court clerk in any county where the labor has been performed or the material furnished,' (section 4;) that proceedings to enforce the lien created must be commenced in the courts of justice of the peace, and in the superior courts, according to their jurisdiction; and, upon judgment being rendered in favor of the claimant, an execution for the collection and enforcement thereof may issue in the same manner as upon other judgments in actions arising upon contracts for the recovery of money. Pub. Laws, N. C. c. 206, p. 253; Battle's Revisal, N. C. c. 65, p. 563.

By a general statute, approved February 8, 1872, entitled 'An act to authorize the formation of railroad companies and to regulate the same,' provision was made for the formation, by any number of persons, not less than 25, of corporations for the purpose of constructing, maintaining, and operating railroads. This statute contains 66 sections, and prescribes the mode in which a company may be organized under it; what its articles of association shall contain; what shall be the amount of its capital stock, and in what way subscribed; when it shall become a corporation, with the powers and privileges therein granted; to what extent its stockholders shall be liable for the debts of the company; when it shall be liable to laborers for the amount due them from contractors for the construction of any part of the road; the mode in which it may, by condemnation, acquire real estate needed for the purposes of its incorporation; an annual report to the governor showing its operations and conditions in every respect; when and under what circumstances the legislature may alter or reduce its rates of freight, fare, or other profits; and many other duties respecting the operation and management of its railroad and other property. Pub. Laws N. C. 1871-72, c. 138; Battle's Revisal, c. 99.

Corporations formed under that statute are given power to do various things, involving the raising and expenditure of money, and also 'from time to time to borrow such sums of money as may be necessary for completing and finishing or operating their railroad, and to issue and dispose of their bonds for any amount so borrowed, and to mortgage their corporate property and franchises to secure the payment or [of] any debt contracted for the purposes aforesaid,' etc. The statute further declares that 'all existing railroad corporations within this state shall respectively have and possess all the powers and privileges' therein specified.

On the twelfth of February, 1872, the general assembly of North Carolina passed another statute providing for the formation of 'private corporations for any purpose not unlawful' by three or more persons. Pub. Laws N. C. 1871-72, c. 199. At its subsequent session an act was approved, March 1, 1873, entitled 'An act to regulate mortgages by corporations, and to regulate sales under them.' As the present case depends largely upon the construction to be given to the provisions of that statute, its first and third sections the second and other sections being immaterial in the determination of any question here involved) are given entire, as follows:

'Section 1. If a sale be made under a deed of trust or mortgage executed by any company on all its works and property, and there be a conveyance pursuant thereto, such sale and conveyance shall pass to the purchaser at the sale not only the works and property of the company as they were at the time of making the deed of trust or mortgage, but any works which the company may, after that time and before the sale, have constructed, and all other property of which it may be possessed at the time of the sale other than debts due to it. Upon such conveyance to the purchaser, the said company shall, ipso facto, be dissolved, and the said purchaser shall forthwith be a corporation by any name which may be set forth in the said conveyance, or in any writing signed by him and recorded in the same manner in which the conveyance shall be recorded.'

'Sec. 3. When such corporation shall expire or be dissolved, or its corporate rights and privileges shall have ceased, all its works and property and debts due to it shall be subject to the payment of debts due by it, and then to distribution among the members according to their respective interests; and such corporation may sue and be sued as before for the purpose of collecting debts due to it, prosecuting rights under previous contracts with it, and enforcing its liabilities and distributing the proceeds of its works, property, and debts among those entitled thereto: provided, that all debts and contracts of any corporation, prior to or at the time of the execution of any mortgage or deed of trust by such corporation, shall have a first lien upon the property, rights, and franchises of said corporation, and shall be paid off or secured before such mortgage or deed of trust shall be registered.' Pub. Laws N. C. 1872-73, c. 131; Battle's Revisal, c. 26, §§ 46, 48.

S. F. Phillips, for appellants.

''Wm. E. Earle'', for appellee.

Mr. Justice HARLAN, after stating the facts in the foregoing language, delivered the opinion of the court: