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decided: March 2, 1891.



Author: Brewer

[ 138 U.S. Page 419]

 MR. JUSTICE BREWER delivered the opinion of the court.

The first mortgage had the "after-acquired property" clause in it. It is settled that such a clause is valid, and that thereby the mortgage covers not only property then owned by the railroad company, but becomes a lien upon all property subsequently acquired by it which comes within the description in the mortgage. Pennock v. Coe, 23 How. 117; Dunham v. Cincinnati, Peru &c. Railway, 1 Wall. 254; Galveston Railroad v. Cowdrey, 11 Wall. 459; Thompson v. Valley Railroad Company, 132 U.S. 68. And this is true, not only as to property to which it acquires the legal title, but also as to that to which it acquires only a full equitable title. Toledo &c. Railroad Co. v. Hamilton, 134 U.S. 296.

Where a company is incorporated to construct a railroad between two cities named as its termini, a mortgage given by it which, as expressed, is upon its line of railroad constructed or to be constructed between the named termini, together with all the stations, depot grounds, engine-houses, machine-shops, buildings, erections in any way now or hereafter appertaining unto said described line of railroad, creates a lien upon its terminal facilities in those cities, and is not limited to so much of the road as is found between the city limits of those places. The stations, depot grounds, etc., in the terminal cities appertain to the railroad as fully as similar structures in places intermediate those termini. In the absence of restrictive words, such is the natural import, and therefore must be adjudged the intent and scope of a mortgage containing that description. This first mortgage contains not only the general terms referred to, but after them, and as if it were to avoid any possible doubt, adds: "And all its depot grounds, yards, sidings, turnouts, sheds, machine-shops, leasehold rights, and other terminal facilities now or hereafter owned by the said party of the first part." It would be difficult to make language more full, accurate and descriptive. Willink v. Morris Canal Co., 3 Green Ch. (4 N.J. Eq.) 377; Morris & Essex Railroad v. Central Railroad Co., 31 N.J. Law, (2 Vroom,) 205; Mohawk Bridge Co. v. Utica & Schenectady Railroad, 6

[ 138 U.S. Page 420]

     Paige, 554; Commonwealth v. Erie & Northeast Railroad, 27 Penn. St. 339.There can be no doubt that by this mortgage a lien was created on the terminal facilities in the city of Toledo, and as this mortgage was executed some months before the terminal trust mortgage, apparently it created a prior lien. And if there were no other facts to be considered, the disposition of this case would be easy.

That the parties receiving bonds under this mortgage would understand that they were to have a first lien on all terminal facilities in Toledo then owned or thereafter acquired, is clear. That the railroad company also understood that it owned and was giving a prior lien upon such terminals is evident from the fact that in the year 1879 it executed a mortgage for one million two hundred and four thousand dollars and negotiated six hundred and thirty thousand dollars of the bonds secured thereby, which bonds and mortgages were taken up and satisfied out of the proceeds of the mortgage of January 17, 1880, and in the prospectus, issued for the purpose of inviting investors to purchase those bonds, was this statement:

"Terminal Advantages.

"The Toledo, Delphos and Burlington Railroad has the right of way through and down the very centre of the city of Toledo. It enters the city near the Miami and Erie Canal, and substantially follows the canal to Washington Street; thence down Washington Street to Swan Creek and to Lake Navigation, within three squares of the post-office. This franchise is very valuable and of very great importance to the business of the road, and adds greatly to the pecuniary value of the propcrty of the corporation. No other road entering the city approaches so near to its centre; none whose freight and passenger business is transacted so near to the business of the city. This franchise is considered valuable to the road not only from the fact that it affords unusual business facilities, but because it becomes independent of other corporations and renders its business secure without submitting to a heavy tax on its traffic."

Not only this, but when the mortgage of January 17, 1880,

[ 138 U.S. Page 421]

     was in contemplation, and on December 12, 1879, when its execution was ordered, the resolution of the directors declared: "That for the purpose of borrowing money for the use of the company to enable it to carry out the purposes for which it is organized and was consolidated, . . . and build, complete, equip, pay for right of way and depot grounds, and operate its railroad, it is expedient to prepare, issue and negotiate a series of first mortgage bonds, amounting in the aggregate to $1,250,000," and, "that in order to secure the payment of said issue of first mortgage bonds and the interest thereon, . . . the president shall also forthwith cause to be prepared a mortgage or deed of trust conveying . . . all this company's present and future-to-be-acquired line of railroad, appurtenances, and equipment and income thereof, between said city of Toledo in the State of Ohio and the town of Kokomo in the State of Indiana."

No one can misunderstand these declarations. They expressed to every purchaser of a bond secured by this first mortgage a purpose to vest in him a prior lien on all the property of the railroad company, including its terminal facilities -- a lien superior to every incumbrance thereon. They unite, therefore, with the clear language of the mortgage the expressed intent of the mortgagor. To thwart this purpose, so obvious ...

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