Cox v. Central Vermont Railroad

73 N.E. 885, 187 Mass. 596, 1905 Mass. LEXIS 1064

• Court: Massachusetts Supreme Judicial Court
• Decided: April 4, 1905
• Status: Published

Opinion

Knowlton, C. J.

The question in these cases is whether the Boston and Maine Railroad, summoned as trustee, shall be charged upon its answers. The eases have been pending many years, and different answers have been filed at different times, and various proceedings have been had to determine the liability of the trustee. On December 1, 1902, an answer was filed in addition to and in amendment of the former answers, which purports to give with much fulness the facts in regard to the various questions now before us. We are of opinion that the previous proceedings do not affect the rights of the parties to rely upon this answer, in connection with the other answers, as stating facts upon which the cases should be decided!

Many of the statements are made upon information and belief! These statements, in the absence of anything in the record to control them, must be taken as true. Willard v. Sturtevant, 7 Pick. 194, 197. Bostwick v. Bass, 99 Mass. 469. Clinton National Bank v. Bright, 126 Mass. 535. Emery v. Bidwell, 140 Mass. 271, 274. Seward v. Arms, 145 Mass. 195.

It appears that the trustee had in its possession $16,521.42 which was due to the defendant on account of business done by' other railroad companies whose railroads formed, with the railroads of the defendant and the trustee, continuous lines, of which only the railroad of the defendant joined that of the trustee. The total charge for all this business was collected either at the place of starting or at the place of destination, and was accounted for to the companies that were entitled to it. For the sake of convenience it was a custom of each company having money to pay to the others, to pay to the one whose railroad adjoined its own, not only the amount due that company, but also all sums belonging to the other companies beyond, and the company receiving the money retained what was due to it and forwarded the residue. Accounts were kept by each only with the companies owning the railroads next adjoining its railroad on each side of it, and the trustee kept an account only with the defendant, crediting to the defendant and paying it not only the sums due to it, but also the sums due on account of such business to the other companies, and no distinction was made in the accounts or items between money paid to the defendant as belonging to it and money paid to it belonging to the other companies. Under these facts, money credited to the defendant on account of the earnings of railroads beyond its lines it would take only as the agent and trustee of such railroads. This part of the case is covered by the decision in Chapin v. Connecticut River Railroad, 16 Gray, 69, which is shown by an examination of the papers on file to be identical with this case in its material facts. See also Seward v. Arms, 145 Mass. 195. For this money the trustee cannot be charged.

The answer shows that $2,154.18 was held by the trustee, which was due to the defendant on account of earnings from business done on the Ogdensburg and Lake Champlain Railroad. This road the defendant was operating under a lease with many special covenants, given by that corporation to the Consolidated Railroad Company of. Yermont, and assigned by a formal assignment and by another elaborate instrument of transfer to the defendant. Under the original lease all of the gross receipts from the business and traffic of the railroad and other property were to be received by the lessee, and were to be disposed of by it in the manner stated. The lessee then covenanted to keep and maintain the railroad and its equipments and all property pertaining to it in good order and condition, making renewals of cars and engines and other things needed; to pay all taxes and assessments upon the property, and to pay expenses of meetings of directors and stockholders of the lessor, to assume and pay the expenses of pending litigation, to fulfil outstanding contracts and obligations of the lessor, to assume all obligations of the lessor that might afterward be incurred by statute or at common law as common carrier, warehouseman or otherwise, and indemnify and save harmless the lessor from all costs, damages or loss by reason of any failure to fulfil these obligations, and by reason of any claim that might arise from the maintenance and operation of the railroad and other property, to keep policies of insurance in force for the benefit of the lessor upon the buildings, bridges and docks of the lessor and other property then kept insured by it, and, in the discretion of the lessee, to keep in force such policies of insurance as it might deem advisable to protect it from loss by virtue of its liability as a common carrier. The lessee was also to keep accurate accounts of its earnings and income from the railroad and other property, and of its expenses and disbursements concerning the same, open to the inspection of the lessor, and was to furnish the directors of the lessor whenever called upon with accurate accounts and statements of the receipts and disbursements concerning the railroad and other property, to the end that the directors might, from time to time, determine the amount of net earnings applicable to the payment of interest on certain bonds outstanding against the lessor.

The lessee then covenanted with the lessor that the gross earnings, income and receipts from the business of the railroad and other property, should be disposed of, first, for the payment of the obligations hereinbefore mentioned, and the other expenses of the maintenance, operation, use, development and improvement of the railroad and other property, and the payment of certain floating indebtedness specified in a schedule, second for the payment of interest on certain first mortgage bonds outstanding against the lessor, and afterwards to the payment of interest on certain other bonds of different classes, and then that the residue and remainder should be divided equally between the parties.

The contention of the trustee is that all the gross earnings of this railroad which the defendant collected in its management of the property, it received and held as a trustee, and that the money in its hands was not subject to attachment for its debts or liabilities incurred in the business or otherwise. We are of opinion that this contention is not correct. The defendant was in the possession and control of the railroad. It was bound to the lessor by a variety of covenants which created a direct liability at law. It was its duty, as the lessee in possession of the railroad, to conduct the business, and in so doing to contract-debts from day to day in the operation of the railroad, as if it were the owner. It was its duty to pay these debts, and the payments were to be deducted from the gross earnings to determine the net earnings in which the lessor had an interest. Upon the theory of the trustee in this case the defendant was acting as a trustee in the possession and operation of the railroad, and in the collection of every bill for the transportation of merchandise, and in incurring every debt that it contracted in the course of the business. Upon this theory, every one who had a valid claim, small or great, whether in contract or in tort, growing out of its possession and operation of the railroad, was a cestui que trust under the instrument, and could bring a suit in equity to have the trust enforced against the gross earnings for his benefit. We do not think that this is the true construction of the instrument. We are of opinion that the debts contracted in operating the railroad were primarily the lessee’s debts, and that the lessee was expected to collect the earnings as primarily its own moneys, keeping accurate accounts of what it received and paid out. Much of the indebtedness contracted, which the defendant had a right to pay, depended to a large extent upon the exercise of its discretion. It hardly could have been intended that there should be a specific trust affecting the gross earnings in reference to the payment of every item of the operating expenses. The general provisions of the instrument indicate that the lessee was to conduct the business as a proprietor and not as a trustee, and that its possession and control should be that of a lessee bound> by the covenants of the instrument.

If at any time the lessee should be guilty of such a breach of its contract as would put in peril the rights of the lessor, probably the lessor would have a remedy in equity for the protection of its interests. But in reference to such a condition there is a provision for a re-entry and termination of the lease by the lessor, similar to that contained in common leases. We are of opinion that so long as the defendant was left in possession and control of the property and assets, it could receive the gross income as its own money and use it for the payment of its own debts, holding itself accountable to make payments under its covenants. The cases of Grand Trunk Railway v. Central Vermont Railroad, 78 Fed. Rep. 690, Grand Trunk Railway v. Central Vermont Railroad, 81 Fed. Rep. 60, and Welden National Bank v. Smith, 86 Fed. Rep. 398, all of which relate to this instrument, do not seem to us inconsistent with this view. Of course after the property came into the hands of a receiver appointed by a court of equity, the court would marshal and appropriate income which accrued to the receiver, according to the requirements of the contract under which he held. We are of opinion that the trustee is chargeable with this sum, as money subject to attachment for the defendant’s debts.

The sum of $10,686.71, due to the defendant on account of earnings of the Consolidated Railroad Company of Vermont, stands in much the same way. The defendant had a lease of this railroad and the property pertaining to it' for ninety-nine years. Its provisions, differing somewhat in details, are very similar to those of the lease which we have just been considering. It contains a provision for an entry and a termination of the lease ift case of breach of covenant continued for three months after a notice in writing from the lessor. We are of opinion, for reasons just stated, that the money received for gross earnings of the railroad, so long as the lessee was in undisturbed possession in the performance of its covenants under the.lease, was to be taken and held as its own money and accounted for to the lessor. We are of opinion that the trustee is chargeable for this sum also.

The remaining question is whether the trustee is chargeable on account of the cars of the defendant which it had in its possession. Of these, two, which were marked with the defendant’s name, belonged to the- Burlington and Lamoille Valley Railroad Company, and twenty-five others so marked belonged to the Ogdensburg Car Company. The plaintiffs do not contend that the trustee should be charged for these cars. One hundred and seventeen of the other freight cars and three passenger cars and two baggage cam were a part of the property-leased to the defendant by the Consolidated Railroad Company of Vermont witli its railroad, on June 30,1884, by an instrument already referred to. They were also covered by a prior mortgage made by the last mentioned corporation and the Vermont and Canada Railway Company to the American Loan and Trust Company, which included their respective railroads, to secure the payment of certain bonds, which mortgage was then in full force, although it has since been foreclosed by a sale of the property. The only title of the defendant was, therefore, that of a lessee for ninety-nine years under an instrument containing many covenants, among which was a covenant to keep this property in good condition and replace it with other like property when worn out, and a covenant giving the lessor a right at any time, after a short notice, to enter and take possession and terminate the lease for a breach of covenants. Such a title is not an ownership which subjects the property to attachment, in the absence of statutory provisions giving a right of attachment.

In Vermont there are statutes, relating to furniture, cars and engines of railroad companies, which indicate a general purpose of the Legislature to subject them to attachment for debts and liabilities incurred in the management and operation of the railroad. R. L. of Vermont, 1880, §§ 3300, 3353 and 3443. The second of these sections makes all such property a part of the realty which passes under a mortgage when such a conveyance of a railroad is made. But it leaves it liable to attachment and execution against the mortgagor on a claim for an injury sustained on the railroad by negligence of the corporation, or for services rendered, or materials furnished to keep the road in repair, or to operate the same, or for liabilities as a common carrier. This section gives no right to attach such property of a railroad corporation upon a claim against a lessee of the railroad.

Section 3443 is broader, giving a right to attach cars, engines and other property used in the operation and management of a railroad, upon a claim for an injury to person or property by the corporation operating the railroad, provided the property has at any time been owned by the corporation liable for the injury. This section would give a right to attach the cars in these actions, if the cars had at any time been owned by the defendant.

It is contended that the title of the defendant as lessee was an ownership within the meaning of this section. But we are of opinion that this title, which was subject to be terminated at any time on short notice for a breach of covenant, and which was subject to a prior mortgage that made the property a part of the realty held by the mortgagee, and was also subject to a covenant to keep it in good condition for the benefit of the lessor and to return it or other like property in its place at the termination of the lease, was not an ownership within the meaning of this section. It follows, therefore, that as to these cars the defendant had no such title, either at common law or under the statutes of Vermont, as was necessary to subject the property to attachment upon a claim against it.

There are five cars that stand a little differently. These were not acquired by the defendant under its lease, but were bought and put upon the railroad in performance of a covenant in the lease to keep the rolling stock in good condition and to replace it when worn out. Perhaps it might be held that these cars were owned by the defendant at the time of the attachment, or had been .owned by it, and were within the terms of § 3443 above referred to. Assuming this in favor of the plaintiffs, there are other grounds on which the trustee is discharged from liability on account of them. The passenger car number 86 and mail car number 50 were making a regular passage on a train passing over the trustee’s railroad to Boston, and were intended, after completing the passage, to depart again within forty-eight hours upon a regular return passage from Boston over the trustee’s railroad and other railroads, to a railroad of the defendant, and did so depart and make such return passage. The baggage car number 22 was making a regular passage upon another train through New Hampshire under similar conditions. The freight car number 5318 was also in transit, and according to the answer, was then making a regular passage in a train passing over the railroad of the trustee, which was about to stop at different stations on the way, and the fixed times of its departure from such stations were on the same day. These cars were all within the provisions of R. L. c. 167, § 39, and could not be attached, in the absence of a demand by the officer for other property upon which to make the attachment equal in value to the ad damnum in the writ.

It is contended that this section does not apply to an attachment of cars and engines by trustee process. But we are of opinion that it does. There is no exception in the language, and the reason for its-application is as strong in one case as in the other. On service of trustee process the party having possession of the cars and engines could not protect itself against the effect of- allowing them to' go back into the hands of the defendant without holding them and preventing the running of the trains. These cars cannot be held under the attachment.

The only other car referred to in the answer is freight car number 7828 which was on a side track in Vermont. Effect could not be given to an attachment of this car unless the trustee should bring it to Massachusetts, and there, at the proper time, deliver it to the officer holding the execution. The trustee was under no obligation to do this. The R. L. c. 189, § 59, applies only to property which the trustee is bound by contract to deliver at a certain time and place within the Commonwealth. But the rule there stated is analogous to the general principle which is applicable to attachments by trustee process. While we do not determine that under no circumstances can an attachment by trustee process of specific property outside of the Commonwealth be made effectual, we are of opinion that as a general rule, and upon facts like those in this case, such an attempted attachment is invalid. Our courts have no jurisdiction over the property itself while it is in another State, and we have no authority over the trustee to compel him to bring it here. Van Camp Hardware & Iron Co. v. Plimpton, 174 Mass. 208, 211. The trustee cannot be charged on account of the possession of this car.

The result is that the trustee is to be charged according to the order and ruling of the judge of the Superior Court.

So ordered.