Irving Bank-Columbia Trust Co. v. New York Rys. Co.

292 F. 429, 1923 U.S. Dist. LEXIS 1314
CourtDistrict Court, S.D. New York
DecidedApril 24, 1923
StatusPublished
Cited by5 cases

This text of 292 F. 429 (Irving Bank-Columbia Trust Co. v. New York Rys. Co.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Irving Bank-Columbia Trust Co. v. New York Rys. Co., 292 F. 429, 1923 U.S. Dist. LEXIS 1314 (S.D.N.Y. 1923).

Opinion

MAYER, Circuit Judge

(after stating the facts as above). The Columbus & Ninth Avenue Railroad Company (hereinafter called Columbus Co.), a New York corporation, executed its first mortgage dated August 24, 1893, to New York Guaranty & Indemnity Company, as trustee, to secure the payment of bonds in the total amount of $3,000,-000, maturing September 1, 1993.

Plaintiff is the successor trustee in place of New York Guaranty & Indemnity Company.

The granting clause of this mortgage conveys:

“All and singular the railroads and railroad property, real estate and chattels real of every name and nature owned or constructed or hereafter owned, constructed or acquired by the party of the first part, in the city of New York. Together with the privileges, rights and franchises now owned by the railroad company or which shall hereafter be owned or acquired by it, and all lands and leasehold interests now or hereafter owned or acquired for railways, depots or stations within the said city, and all buildings erected or which hereafter may be erected thereon, and all the locomotives, tenders, cars, carriages, tools, chattels, machinery, and equipment now owned or hereafter to be owned by the railroad company or in any way belonging or appertaining to the railroad company, together with all and singular the tenements, heredit- ' aments and-appurtenances thereunto belonging or in any wise appertaining, and the reversion and reversions, remainder and remainders, rents, issues and [431]*431profits thereof, and also all the estate, right, title, interest, property, possession, claim and demand whatsoever, as well in law as in equity of the railroad company of, in and to the same and every part and parcel thereof, with the appurtenances.” (Italics mine.)

Article 11 provides, in part:

“The several covenants, premises and agreements by the railroad company herein contained shall be binding as well upon its successors and assigns.”

On December 12, 1893, three railroad corporations — (1) South Ferry R. R. Co.; (2) Broadway Ry. Co.; and (3) Houston, West Street & Pavonia Ferry R. R. Co. — were consolidated, and the new consolidaed corporation was called Metropolitan Street Railway Company— hereinafter called Met. Co. No. 1. On May 28, 1894, Metropolitan Crosstown Railway Company and Lexington Avenue & Pavonia Ferry Railway Company were consolidated with Met. Co. No. 1 under the name of Metropolitan Street Railway Company — hereinafter called Met. Co. No. 2. On November 12, 1895, Columbus Co. and Met. Co. No. 2 were consolidated under the name of Metropolitan Street Railway Company — hereinafter called Met. Co. No. 3.

After this consolidation, Met. Co. No. 3 executed two mortgages, the first to the Guaranty Trust Company of New York, dated February 1, 1897, and the second to the Morton Trust Company, dated April 1, 1902. These mortgages were later foreclosed, under decrees of the Circuit Court of the United States for the Southern District of New York on April 6, 1910, and on May 31, 1910, all the property and franchises of Met. Co. No. 3 were sold to a reorganization committee under a reorganization plan which provided for the transfer and delivery of the property and franchises to a new company. The New York Railways Company was formed under this plan and took over the properties. It thereafter executed two mortgages, the proceeds of which were used to retire the underlying bonds of the two above-mentioned mortgages of Met. Co. No. 3. These two new mortgages of the New York Railways Company were: (a) The first real estate and refunding mortgage, dated January 1, 1912, to Guaranty Trust Company of New York, as trustee; and (b) the adjustment mortgage of the same date, to Farmers’ Loan & Trust Company, as trustee, which mortgage is subject to the prior lien of the first real estate and refunding mortgage.

These consolidations (and a note of various mortgages) are conveniently arranged in the chart prepared by Mr. Poor and hereto annexed, as Appendix A. [See end of case.]

The specific claim which is made by plaintiff in paragraph 13 of its complaint is that upon the above-mentioned merger and consolidation of Columbus Co. and Met. Co. No. 2 the lien of the Columbus Co. mortgage thereby attached to all the property of Met. Co. No. 3 and also attached to all property thereafter acquired by Met. Co. No. 3 to the same extent as if the mortgage had been contracted by it.

The Legislature in permitting the merger and consolidation of corporations could impose any and all conditions it pleased, so long, of course, as such conditions did not impinge upon constitutional rights.

When, therefore, Met. Co. No. 3 was formed, the lien, for instance, [432]*432of the South Ferry R. R. Co. mortgage could not be disturbed by the Columbus Co. mortgage. Had the Legislature attempted to place the Columbus Co. mortgage on an equality with the South Ferry mortgáge, obviously, such an enactment would have been unconstitutional. If the South Ferry mortgage had an after-acquired property clause, then plainly the Legislature had no power to impose any condition precedent, contemporaneous with or subsequent to consolidation which in any manner would impair the integrity of the contract expressed in the South Ferry mortgage or, in other words, any condition which would diminish the lien of that mortgage. If, then, it were to be held that the lien of Columbus Co. mortgage attached, by virtue of the statute, to all property of Met. Co. No. 3, at date of consolidation and all property thereafter acquired, infinite complications are at once suggested of which the following are only a few illustrations: Is the lien of South Ferry mortgage subsequent to the lien of Columbus Co. mortgage on the property mortgaged by Lexington Ave. Co., or are they on a.parity?' What, similarly, is the status of the Lexington Ave. mortgage? Suppose on the same day Company A. executed a mortgage on lot No. 1, Company B. on lot No. 2, and Company C. on lot No. 3; each mortgage having the most comprehensive after-acquired property clause conceivable. Later these three companies consolidate into Company D. Under the statute, is the lien of Company A.’s mortgage on lot No. 3 on a parity with the lien of Company B.’s mortgage on lot No. 3, and are they both subject to the lien of Company C.’s mortgage on lot No. 3 ? The complications resulting from plaintiff’s theory are illustrated in the chart prepared by Mr. Sunderland and Mr. Hadley, hereto annexed as Appendix B.

• Notwithstanding the remarks of Landon, J., in Janes v. Fitchburg Railway Co., 50 Hun, 310, at page 312, 3 N. Y. Supp. 165, as to legislative draughtmanship, the fundamental canons of statutory construction must be adhered to in order to keep decisions as orderly as possible.

It must be assumed, as matter of law, that the Legislature realized the possibility of complications of the character suggested, and therefore that, if its intent had been as urged by plaintiff, it would have attempted at least to set out in the statute a constitutional scheme of arraying the liens of mortgages existing at the time of consolidation and of fixing their status in respect of property later acquired by the new consolidated corporation.

It must, of course, be remembered that consolidation is effected by the voluntary acts of two or more corporations, to which acts mortgage lienors are not parties.

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292 F. 429, 1923 U.S. Dist. LEXIS 1314, Counsel Stack Legal Research, https://law.counselstack.com/opinion/irving-bank-columbia-trust-co-v-new-york-rys-co-nysd-1923.