Lynn v. Mount Savage Iron Co.

34 Md. 603, 1871 Md. LEXIS 89

• Court: Court of Appeals of Maryland
• Decided: June 23, 1871
• Status: Published

Opinion

Alvey, J.,

delivered the opinion of the Court.

The object of the bill in this case is to enforce specific execution of certain covenants entered into by the Mount Savage Iron Company of Allegany county, with some of the complainants and those who are represented by the others of them, dated the 8th of September, 1849, and to obtain an injunction to restrain said company and the Cumberland and Pennsylvania Railroad Company, from the further alleged violation of such covenants. The Mount Savage Iron Company and the Pennsylvania Railroad Company are the only defendants to the bill; and the latter company having answered, the injunction was refused, and it is from the order refusing the injunction that the present appeal is taken.

The answer of the one defendant, under oath, having been put in before the application for the injunction wars acted on, it must appear either that merits are confessed, or that some substantial and material averments of the bill are left undenied, to entitle the complainants to the injunction as against the defendant answering. 3 Danl. Ch. Prac., 1883; Magnay vs. Mines Royal Co., 3 Drew., 130. Where the injunction has been issued upon the sworn averments of the bill alone, it is the universal practice to dissolve it upon the coming in of the answer, if all the circumstances upon which the equity of the bill is founded be denied. And it is the equally well settled practice to refuse the injunction where the application is made after the coming in of the answer denying the equity of the bill. Ad. Doct. Eq., 356, and authorities collected in note.

A.s the case is disclosed upon bill and answer, we think there is sufficient ground for the refusal of the injunction, apart from all other questions, in the want of proper parties. The Chesapeake and Ohio Canal Company, and Walsh and McKaig, the owners of the new, wharf on the canal basin, are shown to have such an interest in the subject-matter of the litigation, as to require that they should have been made parties defendants. No such relief as that prayed for by the bill could be given without affecting the interest of those parties, and the plainest principles of justice require that their interest should not be adversely affected in their absence, and without an opportunity to be heard. We shall not, however, dispose of the case as now presented upon this ground alone, but shall examine and decide such of the more prominent questions involved as are supposed to be material to the relief prayed by the complainants.

The Mount Savage Iron Company was originally incorporated, by the Act of 1846, ch. 297, as the Lulworth Iron Company, and by the subsequent Act of 1847, ch. 57, its name was changed to that of the Mount Savage Iron Company. This corporation was invested with all the powers, privileges and rights, proper and necessary tor carrying on the manufacture of iron, and of articles of which iron is a component part, and for opening, working, transporting to market and vending the produce of its lands, mines and manufactories, and also for the purchasing and holding all such property, real, personal or mixed, as it might require for the purposes specified; and with full power and authority “ to make and enter into all manner of contracts in relation to the business and property aforesaid.” And by the 6th section of the act of incorporation, “for the purpose of enabling said corporation to transport the produce of its mines and manufactories to market and elsewhere, in the cheapest and most expeditious manner,” it was invested with all necessary powers and privileges for “locating, establishing and constructing a railroad or railroads, with the necessary appurtenances, beginning the same at or near the mines or manufactories of the said corporation, and running to a convenient point or points at or near the town of Cumberland, or to such other point or points as may best, suit the convenience and interest of said corporation.” And, by proviso to the same section, full right and privilege is reserved to the citizens of the State, or to any company incorporated by the State, to connect with such railroad or railroads, upon certain conditions; and the corporation is required to transport on its railroad all persons and property, at the same rates of toll and prices of transportation as the Baltimore and Ohio Railroad Company are allowed to charge and receive. Power is also reserved to the legislature to regulate, modify or change the control, use and estate of the railroad authorized to be constructed, in such manner as it should deem equitable towards the corporation, and necessary to the accommodation of the public.

This company, with these corporate powers and franchises, had, prior to September, 1849, acquired and held large bodies of coal and other mineral lands in the valley of Jennings’ run, in Allegany county, and had erected and in operation thereon large rolling-mills and other works for the manufacture of iron, and had constructed or purchased, and was operating a line of railroad, which extended from their works at Mount Savage to the depot of the Baltimore and Ohio Railroad Company at Cumberland, which was, at that time, the only terminus of such road at the Cumberland end thereof; and over this road the company was transporting the products of its own works and mines, and freight for other persons. Up to this time the Chesapeake and Ohio canal had not been finished to Cumberland, but was nearly approaching completion to that point. And in view of such completion, the Mount Savage Iron Company, on the 8th of September, 1849, entered into the agreement with the complainants for the erection of wharves, and the right of way for railroad tracks thereto, on and over the lands of the latter, bordering on the river Potomac, and in near proximity to the canal, for the purpose of making convenient communication with canal transportation.

A wharf was erected, the railroad track or tracks laid, and the other improvements, contemplated by the agreement, were placed upon the land of the complainants by the Mount Savage Iron Company, and that company entered upon the use and enjoyment thereof at once, and continued to use and enjoy the same, in the mode and manner as provided for in the agreement, until the year 1854, when it assigned all its interest and estate in the wharf, and other improvements, placed upon the land of the complainants, together with all right it possessed under the agreement of whatever kind or nature, to the Cumberland and Pennsylvania Railroad Company; and since which time the latter company has been in the use and enjoyment of the wharf and other improvements, in the same manner as formerly used and enjoyed by the Mount Savage Iron Company. The agreement of the 8th of September, 1849, contains many clauses and stipulations, but there aim only two which are immediately involved in this case. By the first of these, it is expressly stipulated that certain other described jiroperty belonging to the complainants, and binding on the river Potomac, “ shall not be used by them, or by any other person or company, in a manner or for a purpose to compete with the Mount Savage Iron Company, in the transportation of coal from the regions of Braddock’s and Jennings’ run ; and in opposition to, or in competition with, or diminution of, the value of the wharfage and improvements herein contemplated, so far as the same depend on, or are connected with said transportation of coal from said regions.” The agreement then proceeds to declare that “ this stipulation is in no way to limit or affect the right of said parties, of the first part (the complainants) to use, sell or convey said other property for wharves, warehouses, coal yards, or other purposes connected with the coal trade, from the Westernport region, and other trade on said canal and river, and the Baltimore and Ohio Railroad, west of Cumberlaud, and not from Braddock’s or Jennings’ run region. The object of the restriction above stated being merely to prevent rivalry and competition, and thereby diminished profits from the transportation and wharfage of the coal from'said Braddock’s and Jennings’ run region.” The next stipulation involved, and which is the last in the agreement, is that upon which the complainants mostly rely, and that is, that the Mount Savage Iron Company “further agrees and binds itself to make the terminus of its road on said piece or parcel of land, its only terminus on the Chesapeake and Ohio canal, or its basin, and not to extend the present terminus of its road at the present depot of the Baltimore and Ohio Railroad Company, any further than it is now.”

And the grievance now complained of, as stated in the bill, and which is the only ground for the relief prayed, is, that the Mount Savage Iron Company and the Cumberland and Pennsylvania Railroad Company, or one of them in concert .with the other, for some weeks prior to the filing of the bill in this case, “have been engaged in carrying coal over the line of the Mount Savage Iron Company, as it existed at the date of the agreement, to the wharf, on the line of a basin, constructed by McKaig and Walsh, and forming a basin of the Chesapeake and Ohio canal, and there delivering the same into canal boats for transportation over the canal; the said companies or company using, for the purpose of said carriage, a section of the track of the railroad of the Baltimore and Ohio Railroad Company, connecting with the terminus of the railroad of the Mount Savage Iron Company at the depot of the said Baltimore and Ohio Railroad Company, at Cumberland, as it existed at the date of said agreement, and with the railroad tracks on the wharf of the said McKaig and Walsh; by which means large quantities of coal which would otherwise be carried over the line of said road, and be delivered at the wharves constructed by the Mount Savage Iron Company, on the aforesaid parcel of land, owned as aforesaid by your orators, are diverted from the said line of railroad and wharves, and thus the profits which the said parties to the said agreement of the first part anticipated, and which were intended to be assured to them by the execution of the agreement, have been greatly lessened.” The bill further charges that the conduct of the companies, or such one of them as may be actually using and operating the railroad of the Mount Savage Iron Company, is in effect the making of another terminus of such road on the Chesapeake and Ohio canal, and its basin, and is an extension of that road beyond its terminus at the depot of the Baltimore and Ohio Railroad Company, as it existed at the date of the agreement, and is, therefore, a breach of the covenant made by the Mount Savage Iron Company-

The prayer of the bill is, among other things, that an injunction may issue, “to prevent the defendants, and each of them, from carrying and delivering coal which shall or may be carried over the railroad owned by the Mount Savage Iron Company, as it existed on the 8th of September, 1849, or any part thereof, to any point beyond the terminus of the said railroad in the depot of the Baltimore and Ohio Railroad Company, as it existed on the day aforesaid, or in any wise aiding or assisting by the use of their motive power or rolling stock, or otherwise, in the carrying and delivery of such coal beyond the said terminus.”

Kow, treating the case as between the complainants and the Mount Savage Iron Company, upon the undisputed facts as disclosed by the bill and answer, have the former a right to the relief sought as against the latter, under the contract? And to determine this question we must first ascertain to what subject-matter the contraed relates, and what conduct on the part of the Mount Savage Iron Company was intended to be prohibited by it.

At the date of the contract the railroad of the Mount Savage Iron Company extended no farther westward than the location of its main works at Mount Savage; nor had that pompany any power to construct a railroad beyond that point. By its charter the railroad was to begin at or near its mines or factories, and run to some convenient point or points at or near the town of Cumberland. It was not authorized to extend the road into the George’s creek valley, and its operation was confined to the transportation of the coal and other mineral products of the Braddock’s and Jennings’ run regions. It is to those regions that the contract refers, as the locations from which the coal was to be transported to the wharves erected on the land of the complainants. And understanding such to be the field of the road’s operation, Avhile providing against competition in the trade from those regions, the parties expressly declare that no stipulation contained in the contract should in any way limit or affect the right of the complainants to use, sell or convey their adjoining property, fronting on the river, for wharfs, warehouses, coal yards, or other purposes connected with the coal trade from the Westernport region, and not from the Brad dock’s or Jennings’ run region. Thus plainly showing that it was only the trade from this latter region that was in the contemplation of the parties at the time, and so far as the trade from other regions or sections was concerned, and particularly the Western port region, the parties were left entirely unrestrained by the contract: That being so, if it be true, as stated in the answer, that all the coal that has been transported over the road that formerly belonged to the Mount Savage Iron Company at the date of the contract, and taken to the wharf of Walsh and MeKaig, on the canal basin, has been brought from the George’s creek valley, or the Westcrnport region, it is difficult to perceive upon what principle the complainants can suppose themselves aggrieved. The principle of construction is well settled, that to fairly understand the meaning and intent of the contracting parties, reference must be had to the condition of things existing at the date of the contract. Courts should read the contract as the parties understood it, and, in order to do that, they should avail themselves of the light of all the surrounding circumstances. And applying this rule of interpretation to the contract before us, even if its terms and obvious intent were less plain than they are, we could not fail to perceive that the contract was never intended to apply to the coal trade that might thereafter be opened from the Westernport or George’s creek region. And although it is not pretended that the contract contains any express affirmative stipulation on the part of the Mount Savage Iron Company, that all the coal that might be transported by it, should be taken to the wharves on the complainants’ land, it is, nevertheless, insisted that the covenant by the corporation, to make the terminus of its road on the land of the complainants its only terminus on the Chesapeake and Ohio canal, and not to extend its then terminus at the depot of the Baltimore and Ohio Railroad Company, towards the canal, plainly implies a covenant to take to the complainants’ wharf all the coal transported by the railroad of the Mount Savage Iron Company for transshipment on the canal; and that too without reference to the location or region from which it may be transported. In this general proposition, however, to the extent contended for, we do not agree. This latter covenant must be construed with reference to the subject-matter in the contemplation of the parties at the time, and must not be given a scope and operation which was never designed it should have. As we have said, the contract only contemplated and was intended to apply to the trade from the regions in which the road was operating at the time. The largest application, therefore, that could be given to this restrictive covenant, is to prohibit the establishment of any depot or terminus of the road other than those mentioned, to which the coal and other freight from the regions of Braddock’s and Jennings’ run could be taken. The corporation had power under its charter to make the eastern terminus of its road at any “ convenient point or points at or near Cumberland, or at such other point or points as should best suit the convenience and interest of the said corporation;” and, according to our construction of the contract, it only restricted itself in the exercise of the -power of selecting the points of termination as to the trade from the particular sections mentioned. If, by subsequent legislation, the corporation had been empowered to extend its road, into other sections, or to become general carriers without reference to any particular private object of incorporation, we do not for a moment suppose that it would be so far bound by this covenant as to be prevented from adopting such other depot or terminus of its road, as would better suit its own and the public’s interest and convenience. As to the produce of its own mines and manufactories, it is clear, it was perfectly competent to the corporation to bind itself to ship them from any particular wharf; but as to such freight as the railroad was bound to carry for others than the corporation itself, and as common carriers, it is very questionable indeed whether such a covenant as that under consideration, even in its restricted form, would be enforced by a Court of Equity. Railroad companies accept and hold their privileges and franchises with reference to the public interest as well as their own; and, indeed, they are, as was said by a learned English Chancellor, trustees of the public, in an important sense of that term. No contract, therefore, unless plainly authorized by their charter, if it is likely to be detrimental to the interest of the public, can obtain the sanction of a Court of Equity. Monopolies, and compacts for the prevention of competition in trade, can never, as a general thing, be promotive of the public good, and hence they are not favored by Coui’ts'of Justice; and the covenant in question has rather too much of that obnoxious element in it to meet with much favor at the hands of a Court' of Equity upon an application for specific execution. It is not deemed necessary, however, to decide this particular question here, as there are other questions involved quite decisive of the case before us.

Seeing, then, upon a fair construction of the agreement, what are the rights of the complainants as.against the Mount Savage Iron Company, what are their rights as against the Cumberland and Pennsylvania Railroad Company, the assignee, and, at this time, the sole and exclusive owner of the •road owned and used by the Mount Savage Iron Company at the date of the agreement ?

The Cumberland and Pennsylvania Railroad Company was incorporated by the Act of 1849, ch. 469, with authority to construct and operate a separate and independent road from that of the Mount Savage Iron Company; and, unlike the latter company, it is exclusively a railroad company, unconnected Avith mining or manufacturing operations. It is a general carrier of passengers and freights, and has the usual railroad powers and franchises, and is, of course, subject to the ordinary .principles that govern common carriers of its class. One main object of its incorporation and construction was the facility it might afford to the development of the coal trade of that section of the State, and in which the State itself was, and is still, largely interested. It is now one of the main instrumentalities by which the coal trade on the Chesapeake and Ohio canal is maintained, and its operation, therefore, is alike important to the coal companies and the Chesapeake and Ohio Canal Company. By its original charter, this corporation was authorized to construct a railroad from the town of Cumberland to some suitable point on the dividing line between the States of Maryland and Pennsylvania, with power to make lateral roads in any direction whatsoever. By supplements to its charter, it was authorized to purchase existing railroads, or to take the same in payment of capital stock subscribed; and, under these powers, it constructed, and acquired by purchase, a continuous line from the town of 'Westernport up the George’s creek valley to Frostburg, and from thence to the town of Cumberland. By the Act of 1853, ch. 96, section 5, authorizing the company to accept any existing railroad in payment of stock, any incorporated company then existing in Allegany county, Avas authorized to subscribe to the capital stock of this company, and in pursuance of this authority, the Mount Savage Iron Company subscribed for stock, and in payment thereof, assigned to the Cumberland and Pennsylvania Railroad Company the line of railroad running from the foot of the Frostburg mountain to the town of Cumberland, and which forms a part of its continuous line from Westernport to Cumberland. The deed of assignment'is dated the 2d of January, 1854, and by Avhich, besides the road, all the interest, right and estate of the Mount Savage Iron Company in and to the Avharf property, together with all the rights and benefits secured to and held by it under the agreement of the 8th of September, 1849, arc assigned to the Cumberland and Pennsylvania Railroad Company. In the use and operation of the road, therefore, the Mount Savage Iron Company has no interest or control Avhatever, except as stockholder in the Cumberland and Pennsylvania Railroad Company. To what burden, then, is this latter company subject, under the agreement of the 8th of September, 1849, by reason of the assignment by the former company ?

It is contended by the complainants that the burden and restriction of the covenants, on the part of the Mount Savage Iron Company, attached to the entire road itself, as it existed at the date of the agreement, and that such burden and restriction adhere to and follow the road into the hands of the assignee, its present holder, who is bound to use the road only as the Mount Savage Iron Company could use it, under the agreement, and in no other way. We are not, however, of that opinion.

In Spencer’s Case, 5 Coke, 16, which is the leading case on this subject, the action was covenant by the lessor against the assignee of the lessee, on a covenant by the lessee for himself, his executors and administrators, that he, his executors, administrators or assigns would build a new brick wall on the demised premises; and it was for not making the wall that the action was brought. And the Court, among other resolutions, resolved, 1st. That when the covenant extends to a thing in esse, parcel of the demise, the thing to be done by force of the covenant is in a manner annexed and appurtenant to the thing demised, and shall run with the land, and shall bind the assignee, although he be not bound by express words; as if the lessee covenant to repair the houses, this is parcel of the contract, and extends to' the supporting of the thing demised: but, because the covenant in that case was in respect of a thing which was not in esse at the time of the demise made, but to be newly built after, and therefore bound only the covenantor, his executors or administrators, and not the assignee, the covenant did not, by the law, annex. 2d. But if the lessee had covenanted for himself and his assigns, that they would make a new wall upon some part of the thing demised, that forasmuch as it is to be done upon the land demised, that it should bind the assignee; for although the covenant doth extend to a thing to be newly made, yet it is to bo made upon the thing demised, and the assignee is to talco the benefit of it, and therefore shall bind the assignee by express words. These in short are the first two resolutions in that celebrated case, and the distinction there taken between the cases where the assignee is bound, although not named, and where he can only be bound by the express words of the covenant, has been recognized and acted on in modern cases. Bailey vs. Wells, 3 Wils., 25, 27; Vernon vs. Smith. 5 B. & Ald., 1.

In this case, the covenant does not stipulate for the covenantor and its assigns; and as in Spencer's Case, the stipulation for the erection of the wharves and other improvements on the complainant’s land, was in reference to things not then in esse; nor was the implied covenant to ship coal over the wharves that might be thereafter built, of a nature to attach to the road of the covenantor, in the hands of an assignee; certainly not without express words to that effect, if even then. Eor suppose, instead of such an assignment as was made, the road, as it existed at the date of the contract, had been assigned to one party, and all the right, title and estate acquired by the Mount Savage Iron Company under the agreement had been assigned to another and a different party, what would have been the predicament of'the complainants? They 'would clearly have no right to enforce the covenant against the assignee of the road, with whom they would have no privity, and whose road would have no connexion whatever with their estate. Nor could they insist upon the execution of such a covenant by the assignee, of the right and interest; under the contract, as he would not have the road with which it could be done.

The case having the closest analogy in its facts to the present, is that of Hemingway vs. Fernandes, 13 Sim., 228. There A., a land owner, entered into articles of agreement with B., the lessee of a neighboring colliery, by which he agreed to grant to B. a lease of part of the land for the purpose of forming a railway for the conveyance of coal to certain wharves, and B., for himself and his assigns, agreed with A., his heirs and assigns,, to convey upon the railway all the coal to be gotten, from the colliery, or from any other lands or grounds in the township, and to pay to A., his heirs and assigns, two pence for every ton of coal so conveyed. B. assigned his interest in the colliery, and in the lands taken under the articles of agreement, for forming the railway, together with the use of the railway, to C. And it was held, that the agreement to convey all the coal upon the railway ran with the land, and, consequently, that it was binding on C., the assignee; but it was so held upon the express ground that the covenantor had covenanted for himself, and his assigns in terms ; the Vice-Chancellor saying that it seemed to him that the case did expressly fall within the second resolution in Spencer’s Case.

But the more controlling authority with us is the case of Keppel vs. Bailey, 2 M. & K., 517, a case in which all the previous authorities are elaborately reviewed by Lord Chancellor Brougham. There, certain parties having formed themselves into a company for the establishment of a railroad called the Trevil, the two Keppels, who held the Beaufort iron works under a long lease, had covenanted with the proprietors of the railroad and their assigns, that they, and their assigns, would procure all the limestone wanted for the iron works from the Trevil quarry, and carry it along the Trevil railroad, paying a certain toll. The Keppels assigned their lease of the iron works to the defendants, who began to construct a railroad to other lime quarries, situated eastward of the Trevil quarry; and on a bill for an injunction to re.sti'ain them from using that or any other new road, it was held that the covenant did not run with the laud so as to bind the assignees at law, and that a Court of Equity would not, by holding the conscience of the purchaser to be affected by the notice of the covenant, give such covenant a more extensive operation than the law allowed to it. And upon the main question, whether the covenant was of a nature to run with the Beaufort iron works, so as to bind the assignee, the Lord Chancellor said: “ Assuming that the Keppels covenanted for their assigns of the Beaufort works, could they, by a covenant Avith persons Avho had no relation AA'hatever to those Avorks, except that of having a lime quarry and a railAvay in the neighborhood, bind all persons avIio should become owners of those Avorks, either by purchase or descent, at all times, to buy their lime at the quarry, aud carry their iron on the railway; or could they do no more, if the covenant should not be kept, than give the covenantees a right of action against themselves, and recourse against their heirs and executors, as far as those received assets? Consider the question first upon principle — there are certain known incidents to property and its enjoyment; among others, certain burdens Avlierewith it may be affected, or rights Avhich may be created, or enjoyed Avith it, by parties other than the OAvner; all AA'hieh incidents are recognized by the JaAV. But it must not therefore he supposed that incidents of a novel kind can be devised and attached to property, at the fancy or caprice of any OAvner. .It is clearly inconvenient, both to the science of the law and to the public weal, that such a latitude should be given. There can be no barm in alloAving men the fullest latitude in binding themselves and their representatives, that is, their assets, real and personal, to answer in damages for breach of their obligations. This tends to no detriment, and is a reasonable liberty to bestoAv; but great detriment would arise, and much confusion of rights, if parties were allowed to invent hoav modes of holding and enjoying real property, and to impress upon their lands and tenements a peculiar character, Avhich Avonld folloAV them into all hands, however remote.” Ilis opinion was vrery decided, that the covenant did not adhere to the Beaufort iron works, and, consequently, the assignee Avas not bound by it.

But it has been suggested that the authority of this case of Keppel vs. Bailey, is questionable, and that it is not consistent Avith other decided cases. So far, however, from such being the case, we find that it is constantly referred to by approved writers on the subject as a leading case, and its authority has been most pointedly sanctioned by the recent case of Ackroyd vs. Smith, 10 C. B., 164.

(Decided 23d June, 1871.)

We are of opinion, therefore, that the covenant here in question does not run with or adhere to the railroad of the Mount Savage Iron Company, as it existed at the date of the agreement, so as to bind it in the hands of the assignee. The Cumberland and Pennsylvania Railroad Company purchased this road under express authority of the legislature, and it is entitled to hold and use it under the powers and franchises conferred upon that company by its charter, without being in any way fettered by the covenant of the former owner of the road. The complainants may have their right of action against the Mount Savage Iron Company for -a breach of covenant, if there has been a breach committed, but ¿hey cannot have the covenant specifically executed. It is true, if any attempt were made by the assignee of the Mount Savage Iron Company to use and apply the wharves and, other improvements on the land of the complainants, in a manner and to a purpose different from that intended, a Court of Equity would restrain such improper use and appropriation. In such case, the question would be, not whether the covenant ran ■with the land, but whether the party should be allowed to use and appropriate the land in a manner wholly at variance with the contract entered into by its assignor, and with notice of which it purchased. That is the principle of the case of Talk vs. Maxhay, 2 Phill., 774; but it is not involved in the present application.

We shall, therefore, affirm the order refusing the injunction ; but as the bill prays, in the alternative, for the rescission and cancellation of the contract, and the surrender of the property, which raises a question not now proper to be decided, we shall not dismiss the bill, but remand the cause, that further proceedings may be had with a view to the determination of the question as to the alternative relief.

Order affirmed and cause remanded.