Page:Federal Reporter, 1st Series, Volume 8.djvu/146

 1S2 fedbbaIj bepobteb. �carry with them the mortgage, cannot, as I think, admit of a doubt. That being so, it is difficult to see how the pledgee, before sale, can be in a worse condition than a purchaser. �Corning now to the consideration of the particular cases, I find that they may properly be divided into four classes : �(1) Debts actually owing at the date of second mortgage, October 1, 1872; (2) notes for unsecured bonds, actually taken iip and retired ; (3 j debts bear- ing date after October 1, 1872; (4) debts connected with the purchase of cer- tain securities of the Green ville & Columbia Eailroad. �As to the first and second classes, nothing need be added to what I have already said. They include all the cases embraeed in sehed- ules 7 and 8 of the master's report. �As to the third class, whioh includes the cases found in schedule 8, while they are, apparently, debts contraoted after the second mortgage, I think they are, in reality, only a continuation of those which existed before. The floating debt seems to have been, for a long time, a oontinuing thing» The amount now owing is subtan- tially what it was when the mortgage was made. The creditors have changed, but not the debt. One note bas been paid, directly or indi- rectly, by putting out a new one. It may not be possible, in all cases, to tell whether a debt to one was paid directly with money borrowed from another, but it is certain t.hat, from a fund made up in part from new borrowings, old loans have been oancelled. The object of the mortgage was to extinguish the existing debt. This is not done by simply changing the creditors. It may be true that the plan adopted by the company bas, in faet, perpetuated the debt instead of extin- guishing it, but it is clear that extinguishment was contemplated by what was done. If, in the end, the debt had been cancelled by the use of the bonds in this way, there can be no doubt that the lien of the bonds so used would be good. I cannot believe that the pledgee loses bis rights simply because the plan bas proved a faiiure. �As to the fourth class, the evidence shows that, before the execu- tion of the mortgage, the South Carolina Eailroad Company had, by the use of its unsecured bonds or otherwise, become the owner of a controlling interest in the stock of the Green ville & Columbia Eail- road Company. The restrictions under which the mortgage was created represent that the large and oppressive debt of the company was incurred, in part, "for acquiring controlling interests in impor- tant Connecting roads, in danger of passing into unfriendly hands." The Greenville & Columbia road was an important feeder to the South Carolina Company. It.owed a large debt to the Commercial Ware- ��� �