Covington Drawbridge Company v. Shepherd (62 U.S. 112)/Opinion of the Court

As property, a franchise may be divided, leased, mortgaged, sold; (Gunning on Tolls, 106, 110; 6 Barn. and Cress., 703, 5, 875; 3 Maule and Sel., 247; 1 Comp. and Jervis, 57;) and it is property by grant, taken subject to the general laws of the land, in force at the time of the grant, at least.

The question now arises: 'Is a franchise subject to execution at law by the laws of Indiana?' 'The property, rights, credits, and effects, of the defendants, are subject to execution.' (2 vol. Rev. Stat. of 1852, sec. 134, 433.) There is only one exception, and that does not exempt a corporation debtor or its franchise. By sec. 438, a debt can be levied upon and sold only when 'given up by the defendant;' but no property, either corporeal or individual, is exempted, except a limited amount of personal property, in favor of families; and such has at all times been substantially the law of the State of Indiana. Franchises are not personal property, and of course could not be sold in England by a ''fi. fa.'' goods and chattels. But undoubtedly the rents and profits of ferries, and markets, and mills, and the rents and profits of other real estate, have always been subject to seizure in England.

In Indiana, on a judgmentagainst the owner of a ferry, if you sell the land, the ferry right will pass to the purchaser, with the land, as it is appendant thereto, and cannot exist without it. So with the sale of a mill, where the seat has been condemned, the purchaser takes the property with the privileges of keeping up the dam and taking tolls under the State law. But in Indiana there must be an appraisement of the property, and that assessment will be of the real estate and the right to exercise the franchise, the rents and profits being first valued, and first sold, as the franchise held by an individual, in a mill or ferry, is subject to sale with the property, and descends to heirs. Why does not the same principle apply to a toll bridge, held by a corporation, where the legal tolls are fixed by law, as in this case? The decision of the court in the case of the West River Bridge, (6 How., 533,) is referred to as directly in point.

If it were shown that corporations in Indiana are exempt from the execution laws of the State, and as such protected in their property from levy and sale, and that consequently they form an exception to the general laws that govern other debtors, relieving them from the payment of their debts, there would be an end of the question; but as such is not the case, it is submitted that their property, including the franchise, is subject to appraisement and sale, as was done in this case at law, and therefore the appellees have no equity on that ground alone, and the decree of the Circuit Court should have dismissed the bill at the cost of the complainants below.

I maintain, further, that the appellants, being the execution defendants at law, are the only party that can raise the question, whether this property can be sold at law; and as they insist that it shall be so sold, and as it has been so sold, it does not lie with the appellees, the execution plaintiffs, to say that the property in question was not subject to be sold at law. They do not deny but that it has been levied upon at their instance, and appraised and sold, and the levy and appraisement returned; nor is it material to the question whether the purchaser shall pay for the property and receive a deed or certificate of purchase, or not, as a venditioni exponas can issue upon the return, at any subsequent time, pending which, and before another sale, the levy, appraisement, and return, are a prima facie satisfaction of the judgments. Therefore there can be no equity in the case, and the decree of the Circuit Court should be reversed, with directions to the court to dismiss the bill.

Mr. Thompson's reply to the latter points was as follows:

The fourth assignment of errors, that the court erred in overruling the demurrer to the original bill, in effect raised for the consideration of the court the whole question in the case, viz: Has the court of chancery jurisdiction to appoint a receiver of the rents and profits of a corporation defendant which is insolvent, or has no available real estate except that which is derived from the use of its franchise? That the court has such power, and that it has at all times been exercised for the advancement of justice, the repeated decisions of the courts will show.

The case of Fripp v. The Chard Railway Company, is an authority for all we ask here.

21 Eng. L. and Eq. Rep., 53.

It appears from the bill in this case, and it is not denied, that all the possible ways or means which the complainants have of making their debt or judgments is out of the defendants' bridge. That is all the property the defendants have. They say, 'there is the bridge; take it.' If it was clear that the plaintiff could regard the bridge as real estate, and sell it under the Indiana execution laws, by exposing the rents and profits to sale, and that the purchaser could enjoy those rents and profits upon the purchase; or, if the purchaser of the bridge could keep it up, and receive the tolls, then the plaintiffs might have an adequate remedy at law.

Nebeker, in his answer, put in under oath, states that the company has no right to the soil upon which the bridge stands; it is at most in the allegation of the bill but a mere easement nothing that the execution or plaintiffs could make out of it, by sale. If the bridge is real estate, then the rents and profits are to be sold; if personal, then the rents and profits could not be sold. What kind of property is it?

The complainants say that the bridge is valueless, except in connection with the franchise-the right to take tolls. Nebeker answers, that he is advised and believes that the franchise cannot be sold nor exercised by third persons, except by consent of the corporation.

The Circuit Court of Indiana has adopted the statute of that State, requiring the appraisement of property upon execution sales. If the property is real estate, the rents and profits have to be appraised as well as the fee; and the fee cannot be offered as long as the rents and profits are sufficient, at two-thirds their appraised value, to pay the debt. If the bridge is personal property, then two-thirds of $70,000 would have to be paid for the bridge, which the purchaser could not lawfully maintain one hour over or upon that public highway, the Wabash river. So that the court can see that this bridge company has brought the complainants to a 'dead lock,' and they have no other adequate remedy but a receiver.

The grant in this case being to three persons, if they sell out their bridge, or it is sold out by execution, the bridge becomes the property of a private individual, and the charter of the defendants is forfeited, and the existence of the company will be, by the act, terminated.

In the matter of Highway, 2 New Jersey, 293.

In the case of Macon and Western Railway v. Parker, (9 Geo., 377,) it is doubted whether a railroad is subject to levy and sale. It is said it would expose the property to sacrifice, be detrimental to the interests of creditors, and defeat the objects and intentions of the Legislature in granting the charter. In North Carolina (State v. Rives, 5 Iredell, 297) it is held, that the tangible property of a railroad could be sold, but that its franchise could not. A turnpike road cannot be sold on execution.

Ammans v. New Alexander Turnpike Co., 13 Rawle, 210.

In this case, the grant was to the corporators for the benefit of the public. The public were to use the bridge, and these corporators were intrusted with the important duty of keeping and maintaining it over the navigable waters of the Wabash river, so as not to obstruct the navigation thereof.

There is no equity with the defendants. It is evident they were baffling and trifling with the complainants. They are in the possession of a large annual sum of rents and profits, worth, in the opinion of the appraisers, $7,000 per annum, and sworn by Nebeker to be from $620 to $1,817 per quarter. With these moneys the plaintiffs' judgments could readily to paid, were it not for the unconscientious resistance of the defendants.

The decree of the court, in appointing the receiver, was of the most favorable character to the defendants. It provided for conforming, in every respect, with the charter of the defendants; and by it the complainants were constrained to wait for their pay until it was earned in tolls at the bridge. Not many debtors can impose upon their creditors such delay as that; but so it is, by their peculiar charter the plaintiffs have no other remedy.

Mr. Justice CATRON delivered the opinion of the court.

In December, 1854, Shepherd and others recovered a judgment against the Covington Drawbridge Company, for upwards of six thousand dollars. At the same time, Davidson recovered a judgment against the same company for upwards of a thousand dollars.

The corporation was created by an act of the Legislature of Indiana, and built a drawbridge over the Wabash river, in that State, pursuant to its charter; was sued for a tort in the Circuit Court of the United States for Indiana district, where the recoveries were had. Executions at law were regularly issued, and at March term, 1855, of that court, were returned by the marshal, 'nothing found.' Alias writs of fl. fa. were taken out and levied on the bridge as real estate, and in November, 1855, the marshal proceeded to sell the rents and profits of the same on Davidson's judgment for the term of one year, at the sum of $4,666.62, Davidson, the execution creditor, becoming the purchaser. The agent of Shepherd and others instructed the marshal not to sell the bridge on their judgment, and he returned the special facts. Davidson demanded possession of the bridge from the corporation, so that he might obtain the tolls, but the keeper of the bridge, and a principal owner of the stock, refused to surrender possession. In May, 1856, Shepherd, and those interested in the large judgment jointly with Davidson, filed their bill in equity in the Circuit Court of the United States for the district of Indiana, against the bridge company and Richard M. Nebeker, as keeper, agent, and manager, of the bridge; praying that the court should appoint a suitable receiver to take possession of the same, and receive the tolls and income, and apply them to discharge the judgments at law, after defraying expenses. The court made the decree prayed for, from which the bridge company appealed to this court.

The first objection made to the decree is, that it does not appear by the bill that the defendant is properly described as incorporated by the State of Indiana. The bill alleges that 'The Covington Drawbridge Company, of Covington, is a corporation and citizen of the State of Indiana;' and it is also insisted, that the judgments at law are void, because jurisdiction was not given to the United States courts by the averment of citizenship in either of the declarations. The judgment at law, in Shepherd's case, was brought before this court at the last term, when it was held that the averment of citizenship here objected to was sufficient. (20 Howard, 227.) That decision is conclusive of the two foregoing exceptions.

The consideration whether by a creditor's bill corporate property and franchises can be subjected to pay the debts of the corporation, by taking possession and administering its affairs, and drawing to the court its revenues, is a question of great importance and some difficulty. In advance of this question, it is insisted here that there exists in Indiana an adequate remedy at law; that Davidson's judgment is satisfied by the levy and sale of the tolls of the bridge; and Davidson having obtained a remedy by fl. fa., Shepherd may do the same. To ascertain whether Davidson obtained satisfaction by the marshal's sale, we must inquire what property was sold, and what title to it acquired, that could be made available by possession and the receipts of tolls.

The Covington Drawbridge Company was duly incorporated to build a bridge across the Wabash river where it was navigable for steamboats, and not subject to be bridged by an individual assuming to exercise a mere private right. The corporation had conferred on it a public right of partially obstructing the river, which is a common highway, and which obstruction would have been a nuisance, if done without public authority. This special privilege, conferred on the corporation by the sovereign power, of obstructing the navigation, did not belong to the country generally by common right, and is therefore a franchise; and, secondly, the authority of taking tolls from those who crossed the river on the bridge was also a franchise, and freedom to do that which could not be lawfully done by one without public authority; this franchise could only be conferred by the Legislature directly, or indirectly through public agents and tribunals, in pursuance of a statute. The bridge is part of a road, and an easement, like the road; and the privilege of making the bridge, and taking tolls for the use of the same, is a franchise in which the public have an interest; the corporation, as owner of the franchise, is liable to answer in damages if it refuses to transport individuals on being paid or tendered the usual fare; the law secured the tolls as a recompense for the duty imposed to provide and maintain facilities for accommodating the public. Whether the timbers and materials of this bridge could be sold at auction by the marshal, by virtue of a fieri facias in his hands, as was held could be done by the laws of North Carolina in the case of the State v. Rives, 5 N. C. R., 297, we are not called on to decide in this case, as here the annual tolls were sold, and not the bridge itself.

By the laws of Indiana, lands and tenements cannot be sold under execution, until the rents and profits thereof for a term not exceeding seven years shall have been first offered for sale at public auction; and if that term, or a less one, will not satisfy the execution, then the debtor's interest or estate in the land may be sold, provided it brings two-thirds of its appraised value. The tolls, under the idea that they were rents and profits of the bridge, were sold for one year, according to the forms of this law. The tolls of the bridge being a franchise, and sole right in the corporation, and the bridge a mere easement, the corporation not owning the fee in the land at either bank of the river, or under the water, it is difficult to say how an execution could attach to either the franchise or the structure of the bridge as real or personal property. This is a question that this court may well have to the tribunals of Indiana to decide on their own laws, should it become necessary. One thing, however, is plainly manifest, that the remedy at law of these execution creditors is exceedingly embarrassed, and we do not see how they can obtain satisfaction of their judgments from this corporation, (owning no corporate property but this bridge,) unless equity can afford relief.

By the laws of Indiana, stocks in a corporation may be sold by virtue of an execution against the owner of the stocks, which the sheriff may transfer to the purchaser; but this law does not help these complainants; they did not proceed against the stocks; their judgment at law did not affect individual property, but corporate property. The question whether a railroad company's property, including the franchises, can be subjected to the debts of the corporation by a decree in equity, is treated very fully by Redfield on Railways, ch. 32, section 2, p. 571; there the substance of the decisions affecting the doctrine is given in cases where there were liens by mortgage. The subject was well examined by the Supreme Court of Georgia in the case of the Macon and Western Railroad Company v. Parker, 9 Geo. R., 378. The contest there involved claims of creditors. When speaking of the necessity of equity exercising jurisdiction, the court say 'that the whole history of equity jurisprudence does not present a case which made the interposition of its powers not only highly expedient, but so indispensably necessary in adjusting the rights of creditors to an insolvent estate as this did.' The road was sold according to the decree; but, to settle the difficulty as to the sale of a franchise without the consent of the power granting it, upon application, an act was passed by the Legislature, creating the purchaser and his associates a body corporate, with the powers and privileges of the old company. In England, the practice is, to order a receiver to be appointed to manage the corporate property, take the proceeds of the franchises, and apply them to pay the creditors filing the bill.

Blanchard v. Cawthorn, 4 Simons's R., 566.

Tripp v. The Chard Railway Company, 21 E. Law and E. R., 53.

All that we are called on to decide in this case is, that the court below had power to cause possession to be taken of the bridge; to appoint a receiver to collect tolls, and pay them into court, to the end of discharging the judgments at law; and our opinion is, that the power to do so exists, and that it was properly exercised. It is there ordered that the decree below be affirmed, and the Circuit Court is directed to proceed to execute its decree.

Mr. Justice DANIEL dissented, for want of jurisdiction of the courts of the United States over corporations.

Marshall v. Balt. and Ohio R. R. Co., 16 How. Reports.