Thompson v. White Water Valley Railroad Company

The Cincinnati, Indianapolis & Lafayette Company went into the possession of the property thus leased, and proceeded to have the remaining portion of the line of the road between Cambridge City and Hagerstown constructed. For that purpose, the lessee, on the 7th of December, 1867, entered into a contract with Benjamin E. Smith and Henry C. Lord by which these gentlemen agreed to construct the remaining portion of the line; and the lessee agreed, in consideration of such construction, to issue to them, or to such parties as they might name, obligations of the company to the amount of $205,000, divided into shares of $100 each, which obligations were to be transferable on the books of the company like shares of stock, and the principal thereof was to be irredeemable, but bear interest at the rate of 8 per cent. per annum, payable semi-annually. The contract with these parties recited the right of the lessee company to the perpetual use and possession of the railroad from Harrison to Hagerstown, and the right to construct the uncompleted portion of the road, and have the benefit of all donations made for that purpose; and provided that, in payment for the construction of the uncompleted portion, the lessee was to issue its obligations to the amount of $205,000, as before mentioned. Under this contract the line of railway between Cambridge City and Hagerstown was completed, and the lessee company remained in its possession from July, 1868, to May 1, 1871, receiving the income thereof, and gave its certificates for the obligations mentioned to Lord and Smith to the amount of $205,000. While the work upon this section of the road was in progress, it was agreed between the contractors and the lessee company that the holders of the certificates for the obligations should have a perpetual lien upon all the earnings of the line constructed by them, to secure the payment of the semi-annual interest, as stipulated; and on the 23d of April, 1868, such lien was given by resolution of the board of directors of the lessee company. On the 10th of July, 1869, the lessor company and the lessee company united in executing and delivering a mortgage to Smith and Lord upon the section of railroad built by them, in trust to secure the holders of the certificates mentioned. On the 12th of July, 1869, the board of directors of the White Water Valley Railroad Company, by a resolution entered on its records, ratified the contract of lease, and directed its president to execute, or join in the execution of, any writing necessary or proper to give effect to the agreement for the lien on the earnings mentioned. On the 1st of May, 1871, the two corporations, the lessor and the lessee companies, agreed that the original contract of lease should be canceled, and that the road of the White Water Valley Railroad Company should be returned to it. In pursuance of such agreement, the lease was canceled, and thereafter the White Water Valley Railroad Company operated the property, receiving its revenue and earnings, amounting, as charged in the bill, to the sum of $100,000. It was agreed between these two companies that, in part consideration for the surrender of the road from Hagerstown to Cambridge City, the White Water Valley Railroad Company should recognize the priority of the lien of all the holders of the certificates, and should either pay or discharge the interest thereon continuously thereafter, or make other satisfactory arrangements with such holders; or, failing therein, should surrender to the lessee company the possession of the railroad between those places, and cease to operate the same, or to receive its earnings. The bill charges that the White Water Valley Railroad Company has taken and maintained possession of the section of the railroad mentioned since the 1st day of May, 1871, up to the commencement of the suit, and been in the receipt of all its earnings, and has disregarded its obligations to the holders of the certificates. The bill, therefore, prays that an account be taken of the income and earnings of the said branch, and that out of the same the amount due the complainants on their certificates be directed to be paid, and that in default of payment the lien be foreclosed and the property sold. Answers were filed to this bill, and replications to them, and proofs were taken. Pending the progress of the case, the White Water Railroad Company, a corporation under the laws of Indiana,-a different corporation from the White Water Valley Railroad Company,-was permitted to intervene in the case. It seems that after the commencement of this suit the trustees in the mortgage of August 1, 1865, brought suit for the foreclosure of the mortgage executed to them, and obtained a decree for the sale of the entire road mortgaged, which included the whole of the road from Harrison, in Dearborn county, to Hagerstown, in the county of Wayne, embracing that portion extending between Cambridge City and the town of Hagerstown; and under such decree said property was sold, and the White Water Railroad Company became its purchaser. In its answer to the bill of complaint, that company set up the proceedings had in the foreclosure suit, the decree for the sale of the property mortgaged, and its purchase of the same. The court below decreed in its favor, holding that the whole of that railroad, including the portion lying and extending between Cambridge City and Hagerstown, was thus acquired and owned by the White Water Railroad Company, and that the only equitable relief to which the complainants were entitled was a possible right to redeem from said mortgage, and gave to the complainants 30 days in which to commence proceedings for such redemption, and ordered that in default of such proceedings the bill should be dismissed. The complainants declined to take any proceedings for that purpose, and the bill was accordingly dismissed; and they have appealed to this court.

C. B. Matthews and ''D. Thew. Wright'', for appellants.

W. H. H. Miller, for appellees.

Mr. Justice FIELD, after stating the facts as above, delivered the opinion of the court.