Opinion
01-12-1887
LONG DOCK CO. and others v. MORRIS & E. B. CO. and others.
Cortlanclt Parker, for complainants. J. D. Bedle, for defendants.
Bill for relief. On final hearing on pleadings and proof.
Cortlanclt Parker, for complainants.
J. D. Bedle, for defendants.
BUNYON, Ch. In 1884 the Morris & Essex Railroad Company, being desirous of acquiring for its use certain land which it had the power to condemn,agreed with the Long Dock Company, the owner of the fee therein, and the Erie Railway Company, the lessee thereof, under a lease from the Long Dock Company to the New York & Erie Railroad Company, the predecessor of the Erie Railway Company, and to whose rights under the lease the last-named company succeeded, for the purchase thereof. By the agreement the Long Dock Company and the Erie Railway Company agreed to sell the land to the Morris & Essex Railroad Company at a price to be fixed by proceedings to be taken by that company for the condemnation thereof. The Morris & Essex Railroad Company, with the consent of the other two companies, entered at once into the possession of the property. The proceedings in condemnation were taken by the Delaware, Lackawanna & Western Railroad Company, lessee of the Morris & Essex Railroad Company, and the price of the land and the damages for the taking thereof were fixed therein at $70,470. Subsequently the Long Dock Company and the Erie Railway Company and Hugh J. Jewett, receiver, appointed by this court for the creditors and stockholders of the latter company, executed a deed for the property (the receiver having duly obtained permission from this court to do so) to the Morris & Essex Railroad Company, and tendered it, on or about the first of November, 1877, to that company, and demanded payment, but it refused to pay the money on the ground that it could not safely do so without a release of the mortgage incumbrances upon the property. This suit is brought to compel the Morris & Essex Railroad Company and the Delaware, Lackawanna & Western Railroad Company to accept the deed, and pay the money, with the interest thereon, to the Long Dock Company.
The defendants are The Morris & Essex Railroad Company, the Delaware, Lackawanna & Western Railroad Company, and the holders of the mortgages upon the property. None of the holders of the mortgages object to the payment of the money to the Long Dock Company. Those of them that have answered, submit their interest in the matter to the decision of this court. The property is covered by two small mortgages, and by a mortgage for $3,000,000 and interest, given May 25, 1863, by the Long Dock Company and the Erie Railway Company to John Earl Williams and Dudley S. Gregory, trustees. There are two mortgages given by the New York & Erie Railroad Company, and held by J. Bancroft Davis as surviving trustee, one given in 1858, and the other in 1859; two given by The Erie Railway Company to the Farmers' Loan & Trust Company, as trustees, one in 1870 and the other in 1874; and another given in 1878 to that company by the New York, Lake Erie & Western Railroad Company, the successor of the Erie Railway Company; and another also given after the mortgage of 1863 by the same company to the United States Trust Company.
The mortgage given by the Long Dock Company and the Erie Railway Company declares that it is provided and agreed between the parties thereto that the Long Dock Company reserves and retains for itself, to be exercised by consent of the Erie Railway Company, and also reserves for that company, (which is to have the right when it shall become the owner of the mortgaged premises,) the right to sell, release, and dispose of, free from the lien of the mortgage, any part of the land covered by the mortgage not occupied by or (in the opinion of the Erie Railway Company) needed for the track or depot of that company, or the ferry to be maintained over the Hudson river; and that any conveyance of the lands which the Long Dock Company is thereby permitted to convey, free from the mortgage made, with a recital or covenant that the land is conveyed or released free from the lien of the mortgage, (and it is declared and provided that no other conveyance whatever shall convey the lands free from such lien,) shall convey the land free and discharged of any lien created by the mortgage; and that as to such land the mortgage shall thereafter be void, except as in the conveyance may be provided. And the Long Dock Company and the Erie Railway Company therebybind themselves that in case and whenever any of the lands shall be conveyed or released by virtue of those provisions, free from the lien of the mortgage, they will apply the proceeds of the sale to the purchase and extinguishment of the bonds secured by the mortgage, or of 500 prior bonds thereinbefore referred to, (secured by a mortgage made in 1857,) or invest them in trust upon good and sufficient securities by bond and mortgage upon real estate worth double the sum loaned, or in the public stocks or bonds of the United States, or will purchase therewith other lands or real estate as authorized by their charter, which lands and real estate shall forthwith be mortgaged to secure the payment of the bonds before mentioned, or will expend them in making improvements upon the other mortgaged land not released from the mortgage; and it is further provided that such money, when so invested, and the proceeds thereon, shall form a sinking fund for the payment and purchase or security of the bonds thereby secured, or of the other 500 bonds, and for no other purpose whatever. It is also provided that the proceeds may be applied to the extinguishment of any liens which may be then unreleased upon the mortgaged premises.
The complainants allege in the bill that, expecting to receive the money awarded for the property and damages in the condemnation proceedings, they expended about the time of the date of the deed they tendered, and since that time, a sum of money larger than the sum awarded, viz., over $300,000, in making improvements upon the unreleased and unreleasable part of the mortgaged premises; and they claim that, having so made such expenditures, they are entitled to receive the amount of the award, with the interest thereon. It appears by the evidence that, since the making of the award, the complainants have indeed expended a large sum of money in improvements upon the rest of the mortgaged premises, but it does not appear that such expenditure was made in the expectation of receiving the money due upon the award. The provision in the mortgage for the expenditure of money, received from the sale of property clear of the mortgage, obviously and by its terms contemplates the expenditure of the money after it shall have been received, and it cannot be held to have been complied with by the expenditure of other money before the receipt of the purchase money of the property sold, unless it was expended under circumstances such as to connect the antecedent expenditure and the purchase money together in such a way as to show that the expenditure was made with the expectation of reimbursement out of the purchase money, and in reliance upon the receipt thereof for that purpose. This case shows no such circumstances. For aught that appears, the expenditure was made without regard to the receipt of the money in question.
The mortgages of 1858 and 1859, given by the New York & Erie Railroad Company to James Brown and John C. Bancroft Davis, trustees, were, as before stated, made before the mortgage from the Long Dock Company and the Erie Railway Company to John Earl Williams and W. S. Gregory, which was made in 1863. They embrace by their terms after-acquired property, and the other mortgages subsequent to the mortgage of 1863 cover the rights of the mortgagors in and to the premises mentioned and described in that mortgage. The Long Dock Company, being the owner of the mortgaged premises, made this lease before mentioned to the New York & Erie Railroad Company in 1856. The lease passed as after-acquired property under the mortgages of 1858 and 1859. So much of the award as is for the interest of the owner of the fee in the land is applicable to the two small mortgages given by the Long Dock Company upon the property prior to the lease, and then to the mortgage given by the Long Dock Company and the Erie Railway Company. So much of the award as is for the lessee's interest in the property is applicable to the other mortgages in the order of priority.
Those mortgages are all upon the interest of the lessee. It is said that the 500 bonds mentioned in the mortgage from the Long Dock Company and theErie Railway Company have been paid. The two small mortgages may be paid off out of the money, and, inasmuch as the other mortgages are not yet due, and the answering defendants submit their rights in the premises to the determination of this court, it will be decreed that the deed from the Long Dock Company be accepted by the Morris & Essex Railroad Company, and that a part of the provision made in the mortgage given by the Long Dock Company and the Erie Railway Company, and hereinbefore stated, for the appropriation of the purchase money of property sold free from the lien of the mortgage, be adopted in disposing of the money awarded in the proceedings for condemnation, or so much thereof as may remain after paying the two small mortgages. The money must be invested in trust, upon good and sufficient securities of bond and mortgage of real estate worth double of amount loaned, or in the public stocks or bonds of the United States, such investment to be held as a sinking fund to be applied to the payment of the remaining mortgages in accordance with the equitable rights of the mortgagees in the fund, or the Long Dock Company may expend the money in improvements of the value thereof upon the remainder of the mortgaged premises. The money should be paid into court, to be paid out for such investment, or when a master to whom the matter may be referred shall have reported, and the report shall have been duly confirmed, that such improvements have been made. The Morris & Essex Railroad Company and its lessee have had possession of the property from the time of the date of the award. They should pay interest at the legal rate for the time being thereupon. Upon the delivery of the deed, they should pay the money into court. No costs of this suit will be awarded to either side.