Tommy v. Spartanburg & Asheville R.

7 F. 429

• Court: U.S. Circuit Court for the District of Western North Carolina
• Decided: July 1, 1881
• Status: Published

Opinion

Bond, C. J.

This is a bill filed by the mortgage trustees and the bondholders, secured by the mortgage against the defendant corporation and others, to-wit, creditors of the defendant corporation claiming mechanics’ liens and statutory liens for labor done on the Spartanburg & Asheville Railroad, to foreclose the mortgage and sell the road pursuant to the terms of the mortgage. The case is for final hearing upon the pleadings, evidence, report of the special master, and exceptions to his report. The material facts reported by the master are not controverted, and are these:

The Greenville & French Broad Railroad Company was incorporated by the legislature of North Carolina, February 13, 1855, and the Spartan-burg & Asheville Railroad Company was incorporated by the legislature of South Carolina, February 20, 1873, and the two companies were consolidated under the name of' the Spartanburg & Asheville Railroad Company, July 31,1874, under the general laws of the two states, and the new company thus formed is clothed with all the rights which were originally conferred upon the separate companies. The defendant company thus organized commenced to build its road from Spartanburg, in South Carolina, to Asheville, in North Carolina, and, having expended its assets, the stockholders resolved, on the ninth day of August, 1876, to issue and sell bonds to the amount of $670,000, and to secure their payment and interest on them by a mortgage upon the consolidated road. The mortgage was duly executed by the company on the first day of October, 1876, and the bonds to the amount of $642,000 were sold or hypothecated, and came into the hands of the plaintiff holders and others for value bona fide. The third section of the. mortgage, which is filed as an exhibit, contains the conditions of it and the powers granted to the trustees, mortgagees thereunder. It was not seriously contended in the argument that the defendant company had not power to make the mortgage, or that the conditions had not been broken at the commencement of this action.

The master so finds, and his report is hereby confirmed.

The defendant creditors claim that they, as contractors and láborers, have a lien upon the road prior and superior to the bondholders, and are first entitled to the proceeds of the sale of the road, if the court should decree a sale.- This is the principle question in the case. These claimants are of two classes: First, those who have filed in the proper court “mechanics’ and laborers’ liens;” second, those who have not filed such liens in the state courts, but claim a lien by statute. Of the first class are Pry & Deal, John Garrison, Eice & Coleman, and T. G. Williamson, whose claims are fully set. out in the master’s report. These claims, we think, ought not to be allowed, except as postponed to the mortgage debt.

It is not necessary, in our opinion, to argue whether or not these lien claims are filed under the provision of the state law. In each case the work was done and the lien filed subsequent to the execution of the mortgage; but we think the statute upon which the claims are based does not apply to railroads. Battle’s Eevisal, c. 65.

*

No case has been cited where any court in North Carolina has held that such a lien was within the purpose or meaning of that statute, although the statute was passed in 1869-70. The act does not mention railroads as the subject of such liens, and the intimation of the supreme court of North Carolina in Whitaker v. Smith, 81 N. C. 340, is the other way. It wras there held that the statute gave a lien to “mechanics and laborers” exclusively, and that an “overseer” was not a laborer, and reference made to 8 Pa. St. 168, where it is held that an engineer is not a “laborer.” The first class of claimants filed their liens as contractors. They are not, in our opinion, mechanics and laborers wdthin the meaning of the North Carolina law as held by its supreme court. The second class of creditors referred to in the master’s report do not claim a lien under chapter 65, Battle’s Eevisal, as the other lien claimants have done, but they do claim that by virtue of chapter 26', § 48, Bat. Bev., all the debts due them, and all contracts with the corporation at the date of the execution of the mortgage, were liens prior to the mortgage.* These debts, at the date of the mortgage, October 1,1876, have been paid, except the sum of $3,316.87, due E. Clayton, with interest from August, 1876, and some smaller sums, all of which are stated in the master’s report. We do not think that under that section the claimants have any lien.

We are of opinion that the statute contemplates debts already incurred and contracts executed at the time of making the mortgage.

It has been suggested to us by counsel, since the argument, that th^ case of Brooks v. Railway Co., 101 U. S. 443, has an important bearing upon this case; but we think the supreme court of Iowa held, as we do now, that a railway was not a building, within the meaning of their mechanic’s lien law, in Nelson v. The Iowa Ry. Co., construing section 1855 of the Code of 1860, which resembles the North Carolina statutes, and reversed their judgment after the law was amended. So far as the claim of E. Clayton is concerned, we think the master’s report must be confirmed. The land was purchased by him after the commencement of the construction of the railroad, with full knowledge that it was to pass over it, and indeed while he was constructing the railroad over it. He is in a court of equity for relief, and he must do equity. The master reports that he is not damaged and he will be allowed nothing. And the same is true of the land claimed by Eice & Coleman.

We see no reason for disturbing any of the findings 'of the master relating to the claims of W. H. Inman, and his report is confirmed, and a decree will be passed in accordance with this opinion.

Note. See In re Kelly, 5 Fed. Rep. 846

Section 1 of the statute provides that “ every building built, rebuilt,. repaired, or improved, together with the .necessary lots on which said building may be situated, and every lot, farm, or vessel, or any hind of property not herein enumera,ted, shall be subject to a lien for the payment of all debts contracted for work done on the same, or materials furnished. ”—[Ref.

Tlie statute provides “ that all debts and contracts of any corporation, prior to or at the time of the execution of any mortgage or deed of trust by such corporation, shall have a first lien upon the property, rights, and franchises of said corporation, and shall be paid ofiE or secured before such mortgage or deed of trust shall be registered.”—[Rep.