Atlantic Coast Line Railroad v. Cone

53 Fla. 1017

• Court: Supreme Court of Florida
• Decided: January 15, 1907
• Status: Published

Opinion

Whitfield, J.

(after statmg the facts) : It appears by the transcript that on February 10th, 1902, Andrew Bradley brought an action in the circuit court for Columbia county against the Savannah, Florida & Western Railway Company, a corporation, owning and operating a line of railroad through Columbia county, Florida; that said company owned certain described lands in Columbia county; that on April 10th, 1902, the Savannah, Florida & Western Railway Company executed an agreement of consolidation and merger with the Atlantic Coast Line Railroad Company; that on October 26th, 1903, a judgment was rendered in the above action against the Savannah, Florida & Western Railway Company, and in favor of Andrew Bradley for $161.70 with interest and costs and expenses taxed at $102.46; that an execution issued on said judgment was levied upon the described real estate, and the same was advertised for sale; that upon a bill filed by the Atlantic Coast Line Railroad Company an injunction was issued restraining the sale. An answer and a cross bill were filed.

The contention that the demurrer to the cross bill was good because it appears that the .plaintiff in the cross bill obtained his judgment against the Savannah, Florida & Western Railway Company after the merger, and therefore no lien existed on the property when the merger took place, cannot be sustained. The cross bill alleges that the Atlantic Coast Line Railroad Company received and holds the property levied on subject to the judgment and execution, and that by the act of consolidation and merger, and under the laws of Florida, the Atlantic Coast Line Railroad Company agreed and is required to pay the judgment and agreed to hold said property in trust for the payment of all obligations, debts and liabilities of the said Savannah, Florida & Western Railway Company.

The consolidation and merger agreement made pursuant to law referred to in the original hill afforded sufficient privity for the bringing of the cross bill against the. Atlantic Coast Line Railroad Company to subject the property received by it from the debtor company to satisfaction of the judgment. 6 Am. & Eng Ency. Law (2nd. ed.) 820; Langhorne v, Richmond Ry. Co., 91 Va. 369, 22 S. E. Rep. 159; Montgomery and West Point R. R. Co. v. Boring, 51 Ga. 582. The cross bill relates to the subject matter of the original bill and it seeks equitable relief; it is, therefore, permissible. Ledwith v. City of Jacksonville, 32 Fla. 1, 13 South Rep. 454; Griffin v. Fries, 23 Fla. 173, 2 South. Rep. 266; Price v. Stratton, 45 Fla. 535, 33 South. Rep. 644.

The cross bill alleges the judgment, the possession by the defendant of property subject to the judgment, the undertaking of the defendant to S0‘ hold the property, and that the judgment lias not been satisfied. These and other allegations of the cross bill are sufficient to sustain it as against the demurrer.

The court on final hearing dissolved the injunction, and entered a decree that the Atlantic Coast Line Railroad Company do pay within 20 days the amount of the judgment rendered in the action at ' law against the Savannah, Florida & Western Railway Company with interest and costs, and in default thereof a sale be made of the land levied on or so much thereof as shall be sufficient to satisfy the judgment; if such land is insufficient other property received by the Atlantic Coast Line Railroad Company from the Savannah, Florida & Western Railway Company shall be sold to satisfy the judgment. The decree also held the judgment obtained by Andrew Bradley against the Savannah, Florida & Western Railway Company to be a “lien upon all the property, franchises and privileges merged or consolidated into the said Atlantic Coast Line Railroad Company, from the said Savannah, Florida & WesternRailway Company.” Is this decreé subject to the errors assigned on it?

Section 2218 of the Revised Statutes of 1892, section 2812 of the General Statutes of 1906, provides that “any railroad * * * company in this state shall have the power, and authority is hereby granted, to make and enter into contracts with any railroad * * * company which has constructed or shall hereafter construct any railroad * * * within this state or in another state, as will enable said companies to run their roads in connection with each other, and to merge' their stock, or to consolidate with any company within or without this state, or to lease and purchase the stock and property of any other company, and hold, use and occupy the same in such manner as they shall deem most beneficial to their interests. * * * Parallel or competing lines may not consolidate their several franchises, lines or railroad or the management thereof, without special permission from the state railroad commission, and all such consolidations, or attempted consolidations, without permission as aforesaid, shall be ultra vires” The consolidation here is not of parallel or competing lines. The articles of agreement, consolidation and merger admitted and used in evidence for both parties by agreement show that they were executed on April 10, 1902. The agreement enumerates certain lines of railroad belonging to each of the contracting companies and includes as belonging to the Savannah, Florida & Western Railway Company “the line of railway extending from Lake City, Florida, to its junction,” &c., and provides that “said Savannah, Florida & Western Railway Company and all of its capital stock, property and franchises, are hereby merged, united and consolidated with said Atlantic Coast Line Railroad Company, and its capital stock, property and franchises, so as to form a merged, united and consolidated company, which will have, hold, possess and enjoy all and singular the said capital stocks, propeidy and franchises of every kind whatsoever and wheresoever situated, at the date of these presents, and at the date of the consummation of this merger, union and consolidation, held, possessed or enjoyed by either of the parties hereto, or to which they .are or either of them is or may hereafter be entitled either at law or in equity.” Other terms of the agreement pertinent here are: “Third. The Savannah, Florida & Western Railway Company shall at any time, upon the request of the consolidated company, its successors or assigns, make or cause to be made and delivered a deed of conveyance and transfer of all and singular the property and franchises of every nature and kind whatsoever and wheresoever situated of the Savannah Company, to and into the consolidated company, its successors and assigns, and shall execute and deliver such other conveyances and transfers as may at any time become necessary or proper.

Fourth. 'The consolidated company isha.ll take the property of each of companies parties hereto, subject to all existing mortgages or other liens thereon, including the consolidated mortgage of the Savannah Company, dated April 1, 1902, which has been executed and delivered but not yet recorded, and under which $12,451,000 of four per cent, bonds have been issued and are a charge upon the property therein described, and the consolidated company shall and does assume and become responsible to pay all the debts and liabilities of each of the companies parties hereto, to the same extent as, but to no greater or other extent, than said parties are each respectively bound and liable to pay such debts and liabilities.”

The original bill for injunction alleges that by virtue of the consolidation and merger the Atlantic Coast Line Railroad Company became the sole owner in fee simple of the. property levied upon. The answer of Andrew Biradley under oath, the oath not being waived, contains the usual general denial and it also specifically • denies that the Atlantic Coast Line Railroad Company, by virtue of the consolidation and merger, was or is the owner in fee simple of the property referred to, and avers that if the Atlantic Coast Line Railroad Company owns said property it is as a trustee, and holds the same in trust for the benefit of the creditors and all persons holding lawful claims against the Savannah, Florida & Western Railroad Company at the time of the consolidation and merger. By the articles of consolidation and merger the capital stock, property and franchises of the Savannah. Florida & Western Railway Company are merged, united and consolidated with the capital stock, property and franchises of the Atlantic Coast Line Railroad Company so as to form a merged, united and consolidated company, which will have, hold, possess and enjoy all and singular the said capital stock, property and franchises of every kind whatsoever and wheresoever situated, at the date of the agreement, consolidation and merger, held, possessed or enjoyed by either company. The articles further provide that the consolidated company shall take the property subject to all existing mortgages and other liens, and that the consolidated company assumes all debts and liabilities of the two companies and that the Savannah, Florida & Western Railway Company shall at any time upon request of the consolidated company make or cause to be made and delivered to it a deed of conveyance and transfer of all and singular its property and franchises. The articles of consolidation contain no words of conveyance and there is no showing that such a deed of conveyance and transfer has been made, therefore, so far as it appears from the record, the Savannah, Florida & Western Railway Company has the legal title to the property levied upon by virtue of the judgment and execution against the Savannah, Florida & Western Railway Company in favor of Andrew Bradley. By virtue of the agreement of consolidation and merger the Atlantic Coast Line Railroad Company took and held possession of and used the property, but the legal title to the property was not conveyed or transferred by such agreement, nor did the consolidation or merger relieve the property from liability to the execution issued on a judgment against the company holding the legal title to the property even if the equitable title, if any, of the Atlantic Coast Line Railroad Company to the property could be subjected in equity to the payment of the judgment.

The articles of consolidation and merger did not destroy the corporate existence of the Savannah, Florida and Western Railway Company sa as to affect the suit of Andrew Bradley. See Rev. Stats, of 1892, section 2153; Shackleford v. Mississippi Cent. R. R. Co., 52 Miss. 159; 3 Purdy’s Beach on Private Corp., section 1274 ; 2 Elliott on Railroads, sections 335, 338; 6 am. & Eng. Ency. Law (2nd ed.) 822; 10 Cyc. 311.

The sworn answer of Andrew Bradley to the original bill is sustained by the articles of consolidation and merger filed by both parties, and the answer is not overcome by other evidence. So far as appears from the record the legal title to the property levied upon is in the Savannah, Florida and Western Railway Oompany, and it was subject to the execution issued on a judgment rendered against said company in the action by Andrew Bradley. This being so, the injunction was properly dissolved.

The cross bill was brought to subject the property of the Savannah, Florida & Western Railway Company, in the possession of the Atlantic Coast Line Railroad Company, to the judgment rendered against the former company in favor of Andrew Bradley. The cross bill alleges that if the Atlantic Coast Line Railroad Company now owns and is in possession and control of the said property, capital stock, franchises and privileges, that it received and holds the same subject to Bradley’s judgment and execution; that the Atlantic Coast Line Railroad Company, in and by said' act of consolidation and merger, undertook, obligated, promised and agreed, and under and by virtue of the laws of Florida authorizing such consolidation and merger, became and was and is required to pay off and discharge said judgment; that pursuant to said agreement of consolidation and merger the Atlantic Coast Line Railroad Oompany undertook, covenanted, promised and agreed to receive, hold and use the said property, franchises, &c., in trust for the payment of, and subject to all the obligations, debts and liabiliities of tbe said Savannah, Florida & Western Railway Company. The answer of the Atlantic Coast Line Railroad Company to the cross bill, not sworn to, the oath being waived, admits that at the time of the commencement of the action by Andrew Bradley against the Savannah, Florida & Western Railway Company said company was the owner in fee of the property levied upon, and admits that the Atlantic Coast Line Railroad Company claims ownership of said property by reason of the consolidation and merger, but denies that it received and holds said property subject to Bradley's judgment and execution; admits the consolidation and merger, but denies that said defendant undertook, covenanted, promised and agreed to receive and hold the property and franchises of the Savannah, Florida & Western Railway Company in trust for the payment of and subject to all of the obligations, debts and liabilities of the Savannah, Florida & Western Railway Company; and says it holds the property described under and by virtue of articles of agreement, consolidation and merger entered into on April 10, 1902, as aforesaid, by which consolidation and merger the consolidated company took the properties of both companies subject to all existing mortgages or other liens thereon, but not otherwise.

The legal title to the property did not pass to the Atlantic Coast Line Railroad Company by the articles of consolidation and merger. The consolidated company is not by the articles of merger a purchaser for value and without notice of the property of the Savannah, Florida & Western Railway Company, but it takes the property subject to the liens against it and also subject to the claims of lawful creditors of the latter company. The articles of consolidation and merger expressly make the property taken thereunder by the Atlantic Coast Line Railroad Company subject to the liens existing on it. The law makes the property so taken subject to all liabilities of the company to which it belonged. The consolidated company here assumed all such liabilities by the merger contract. The assets of the surrendering company may be followed in equity as trust funds, into the possession 'of ¡the consolidated company which tak-es with notice of the trust and not as a purchaser for value and without notice. 3 Purdy’s Beach on Private Corporations, section 1287; Montgomery & West Point R. R. Co. v. Branch, 59 Ala. 139; Noyes on Intercorporate Relations, section 79; Morrison v. American Snuff Co., 79 Miss. 330, 30 South. Rep. 723; Harrison v. Union Pac. Ry. Co., 13 Fed. Rep. 522.

The judgment obtained by Bradley in his action was not against the Atlantic Coast Line Railroad Company on its liability under the consolidation agreement for the indebtedness of the Savannah, Florida & Western Railway Company; but the action was brought against the latter company before the consolidation, and so prosecuted to judgment after the consolidation. The transcript shows that after the consolidation the Atlantic Coast Line Railroad Company, by the same counsel who> represented the Savannah, Florida & Western Railway Company in the action, asked leave of the court to file a plea in abatement, the purpose of'which was the substitution of the former company, in place of the latter company, as the defendant in the action brought by Andrew Bradley, but the court denied the application. The creditor had a right to proceed against the debtor company. 6 Am. & Eng Ency. Law (2nd ed.) 1822; 10 Cyc. 309.

The Atlantic Coast Line Railroad Company, by virtue of the consolidation and merger, claims the ownership in fee simple of the property levied on, discharged of the indebtedness of Andrew Bradley, which had not been reduced to judgment so as to be a lien at the time of the merger. The articles of consolidation and merger put in evidence by both parties to this suit show the legal title to the property did not pass to the Atlantic Coast Line Railroad Company under the merger agreement, and that the liability assumed by the latter company was not confined to liens, but extended to all the liabilities of the Savannah, Florida & Western Railway Company. As to the liability for debts in cases of consolidation, see Bloxham v. Florida Cent. & P. R. Co., 35 Fla. 625, 17 South. Rep. 902; Morrison v. American Snuff Co., 79 Miss. 330, 30 South. Rep. 723; Compton v. Wabash, St. L. & P. Ry. Co., 45 Ohio St. 592. 16 N. E. Rep. 110; 18 N. E. Rep. 380; 6 Am. & Eng. Ency. Law (2nd ed.) 815, 822; Langhorne v. Richmond City Ry. Co., 91 Va. 369, 22 Southeastern Report 159.

There is no contention that the Atlantic Coast Line Railroad Company is not under the consolidation and merger liable foi; the debts of the Savannah, Florida & Western Railway Company; but it is- contended that the former company should have been made defendant in the action brought by Andrew Bradley in which the judgment now sought to be enforced was obtained. This might be true in order to impose a direct liability on the Atlantic Coast Line Railroad Company, but the cross bill does not seek to do this. Andrew Bradley had a right to- proceed against the Savannah, Florida & Western Railway Company for its debt to him. Having obtained a judgment against the latter company Bradley has a right to subject the property of the company to the satisfaction of the judgment. This he seeks to do by the execution and by the cross bill. The purpose of the cross bill and the effect of the decree are" not to impose upon the Atlantic Coast Line Railroad Company a liability for the judgment, but to subject the property in its possession belonging to the Savannah, Florida & Western Railway Company to the satisfaction of the judgment. So far as appears by this record the Savannah, Florida & Western Railway Company has the legal title to, and a beneficial interest in, the property, and it can be sold under the execution to satisfy the judgment. Whatever interest the Atlantic Coast Line Railroad Company acquired in the property by virtue of the articles of consolidation and merger, it was subordinate to- the claims of the creditors of the Savannah, Florida & Western Railway Company, the former company not being a purchaser for value and without notice. It if be true that such interest cannot be sold under execution it may be subjected in equity to the payment of . the judgment, and this is all the cross bill and decree purport to do.

The decree does not adjudicate a liability against the Atlantic Coast Line Railroad Company, but directs that company to pay the judgment obtained against the Savannah, Florida & Western Railway Company, and in default thereof the property of the latter company in the possession of the former company shall be taken to satisfy the judgment. As to this proceeding the Atlantic Coast Line Railroad Company has had its day in court. It demurred to and answered the cross bill upon which the decree is based and participated in the taking of testimony and the final hearing. The allegations of the cross bill that the property of the Savannah, Florida & Western Railway Company in the possession of the Atlantic Coast Line Railroad Company is subject to the judgment obtained by Andrew Bradley against the former company are sustained by the articles of consolidation and merger introduced in evidence by both parties. The Atlantic Coast Line Railroad Company claims title to- the property by virtue of the consolidation and merger, and the articles of consolidation and merger do not ¡sustain the cl-aim as to the legal title. If the Atlantic Coast Line Railroad Company acquired any title by virtue of the articles' ¡of consolidation and merger and . by taking possession of the property thereunder with a right to call for a conveyance of the legal title, such title was an equitable one and it is subject to the judgment of Andrew Bradley against the Savannah, Florida & Western Railway Company, therefore the decree so subjecting the property is not in that respect erroneous.

The right of Andrew Bradley to have an execution issued on his judgment levied on the lands' in Columbia county, the legal title to which was in the judgment debtor, the Savannah, Florida & Western Railway Company, is given by statute. See 2 Freeman ¡on Executions, section 173. He also had a right to proceed in equity to have the equitable or other title claimed by the Atlantic Coast Line Railroad Company to the property subjected to his judgment, particularly if the legal remedy is inadequate. Of course he can have only one satisfaction of his judgment. Vicksburg & Y. C. Tel. Co. v. Citizens’ Tel. Co., 79 Miss. 341, 30 South. Rep. 725; Noyes on Intercorporate Relations, section 87; 10 Cyc. 308; Harrison v. Arkansas Valley Ry. Co., 4 McCrary (U. S. C.) 264; 1 Freeman on Executions, section 125a.

No property to which the Atlantic Coast Line Railroad Company has the legal title was levied on, and no cause is shown to invalidate the levy of the execution on the particular property of the Savannah, Florida & Western Railway Company, even though such property is in the possession of the Atlantic Coast Line Railroad Company by virtue of the merger and may be subjected in equity to the payment of the debts of the Savannah, Florida & Western Railway Company.

The decree is affirmed.

Shackleford, C. J., and Cockrell, J., concur; Taylor, Hocker and Parkhill, JJ., concur in the opinion.