State v. Northern Central Railway Co.

Bowie, C. J., delivered the opinion of this court. The rights and liabilities of the parties to this cause, springing from and depending, in a great measure, upon the Acts of the General Assembly, in the proceedings referred to, we deem it necessary to a proper understanding of the character and magnitude of the interests involved, to prefix a summary of their provisions. By an Act of the General Assembly of Maryland, passed on the 10th of March 1854, entitled, “An Act to authorize the consolidation of the Baltimore and Susquehanna Rail Road Company with the York and Maryland Line Rail Road Company,” &c., the stockholders of the Baltimore and Susquehanna Rail Road Company were authorized to unite and consolidate their company, or corporation, with the York and Maryland Line Rail Road Company, the York and Cumberland Rail Road Company, and the Susquehanna Rail Road Company in the State of Pennsylvania, so as to form and constitute one ²⁰⁶ company or corporation, to be called, “The Northern Central Railway Company,” upon certain conditions therein expressed, among others, “that all existing contracts, engagements and liabilities of the Baltimore and Susquehanna Rail Road Company shall continue to bind said company and its property, as fully as before the consolidation therein authorized, or that the said existing contracts, engagements and liabilities shall be duly adopted and assumed by the consolidated company.” •On the same day, by an Act, entitled, “'An Act to provide for the sale of the interest of the State of Maryland in the Baltimore and Susquehanna Rail Road Company, and for the completion of the Northern Central Railway,” <fc., it was enacted, “that whenever the corporation, authorized by this General Assembly to be created by the consolidation of the Baltimore and Susquehanna Rail Road Company^,” and the other companies above mentioned, to be known by the name of the Northern Central Railway Company, “shall have been duly established and erected, in conformity with the Act of this General Assembly, and an Act of the General Assembly of Pennsylvania, authorizing the same, and shall execute and acknowledge, and cause to be recorded in due form of law, in the city of Baltimore, and in all the counties of Maryland and Pennsylvania, in which the same may'' be, a mortgage to the State of Maryland of the entire line of railroad belonging to the said, company, from Baltimore to Sunbury in Pennsylvania, with all the revenue or tolls thereof, to secure to the State of Maryland the payment of the annuity of $90,000, and shall, in all respects, comply with the provisions of this Act,” then the treasurer of the State was authorized to execute and deliver to said company and its assigns, in perpetuity, a conveyance and release of all the estate and interest of the State of Maryland, in the then Baltimore and Susquehanna Rail Road Company, and all its property, whether as stockholder, creditor or mortgagee. It was further enacted, that the consolidated company, in the execution of the mortgage, should covenant and bind itself to pay to the State of Maryland from its ²⁰⁷ date, the annuity of $90,000 per annum, payable into the treasury of the State in quarterly payments; that the annuity should be extinguishable at any time within ten years thereafter, upon the full payment of one million five hundred thousand dollars, with all interest that may be due; that the mortgage should contain the usual conditions in such deeds, with a clause to authorize the sale of the mortgaged, property, at any time after three months subsequent to a default of the company to pay the whole amount of the annuity,- which may fall due in any one year-, and upon the execution of the said mortgage and its delivery to the treasurer, then the said treasurer should execute the conveyance and release above mentioned.

It was further provided by said Act, that the said mortgage, so far as it shall comprehend and include that portion of the road of the consolidated company, which now belongs to the Baltimore and Susquehanna Rail Road Company, and which was heretofore mortgaged to the State of Maryland, shall be,- in all re-' spects, entitled to the same priority which' now appertains to the existing mortgage on the property of the said Baltimore and Susquehanna Rail Road Company, and that said mortgage, so far as it shall comprehend and include all that portion of the road of the consolidated company, not now belonging to the Baltimore and Susquehanna Rail Road Company, shall be entitled to a priority over any liens upon the same, bearing date and recorded after the the first day of March 1854, “it being the intent of this Act, in releasing to the consolidated Company the mortgage or mortgages heretofore given to the State by the Baltimore and Susquehanna Rail Road Company, and taking another mortgage, to retain in the new mortgage the same priority of lien which the State now holds on that part of the road heretofore mortgaged as aforesaid, and also to obtain the additional security of the mortgage, by the consolidated company, of its interest in all the remaining portion of the road, between Baltimore and Sunbury.'” Vide Act of 1854, ch. 260, secs, 1, 2, 3. On the 27th of January 1855, the Northern Central Railway ²⁰⁸ Company by their deed,reciting and referring to the Acts of Maryland and Pennsylvania, as authorizing the same, assigned, transferred and conveyed, unto the State of Maryland, for the considerations therein mentioned, “the entire line of railroad belonging to said company,' from Baltimore to Sunbury in Pennsylvania, with all thé revenue or tolls thereof,” covenanting to pay to the treasurer of Maryland,- an annuity of $90,000, in quarterly payments, in the manner provided and required by the Act of 1854, ch. 260’, and in default thereof', the State of Maryland was thereby authorized to sell the above mortgaged premises, and dll the estate, right, title, interest, property, claim and demdnd at law or in equity, as well of the State of Maryland as of the Northern' Central Railway Company, in dnd to the said mortgaged premises, and every part thereof, aS'is provided by the third section of the Act of 1854, ch. 260. Thé State filed its information on the 18th of December I860-, in the Circuit court for Baltimore city, suggesting that the Northern Central Railway Company was then in arrear $>92,500', of the principal annuity, besides interest;—that it realized profits more than sufficient to pay the State, which, in violation of its covenants, were misapplied, and appropriated to the payment- of junior .obligations,- and especially to the payment of interest on' bonds,- amounting to $>2,500j000, issued long' after the mortgage, and it apprehended the company intended to apply its future earnings,-and earnings then in hand, in- payment of interest on said bonds";—that the company had no effects out of which the State could realize its aforesaid claims, except the property mortgaged, and had no adequate means to enforce the payment of arrears,'except by sequestrating the tolls and revenue. The information prayed that the company be enjoined from applying'the tolls and revenue to any other purpose, save only to the cost of working the railway, and maintaining the same in good order; and that a receiver may be appointed to take charge of said railway and other mortgaged premises, and work the same, and apply the revenues thereof, under the direction ²⁰⁹ of this court, to the arrear of the aforesaid annuity now dne, or hereafter to be due; and that the said railway, and other, the mortgaged premises, be sold for the payment of the entire claim of the State, estimated at $1,500,000; and' for other relief.

An injunction having issued,- as prayed, the respondents, the Northern Central Railway Company, filed their answer on the 27th of February 1861,- in which, after admitting' the mortgage, the arrears of the annuity,- they allege “no subsequent payments have been made on account of said- annuity, owing to the fact of all the net receipts of said road béing absorbed by other legitimate and more urgent objects.” “And it further saith, that the bonds, subsequent in priority to the annuity, upon which it has paid the interest, were bonds given for construction, and that it was considered a matter of necessity to make such payment, in support of its credit, which would have been utterly ruined by a default, but which, by this means,- was so sustained, as not to drive it to the extremity of making ail its purchases for cash: an extremity which it is not too much to say,-would have practically brought the company’s operations to a stand.” The respondents further say, the State has -not the first lien on the road in Maryland or Pennsylvania, but there are $150,000, prior liens on the former, and $700,000, prior liens on the latter;—that the State had no right to file the information, on the day it was filed, and objects that, this court hath no jurisdiction of the case made by the information,-and prays to have the benefit of the objection, as fully as it could have by any form of pleading. The injunction granted, upon filing the bill, or information, was, on motion of the complainant, and with the consent of the Northern Central Railway Company, dissolved, without prejudice to the equity of the complainant, to move that the same shall be reinstated at any time thereafter, and the motion for a receiver was postponed. The complainant, afterwards, moved to reinstate the injunction and appoint a receiver, whereupon the respondents, the Northern Central Railway ²¹⁰ Company, obtained leave to file a supplemental answer, which being filed, the application for an injunction and receiver, after-argument, was overruled and denied. The respondents (the appellees) insist:— 1st.

That taking the bill and answer together, there was no-default on the part of the company, at the time of the application. 2d. Throwing out of consideration-the answer,-there is no-jurisdiction in equity to grant on the bill alone the injunction, or appoint a receiver. 3d. The case should be dismissed^ for want of jurisdiction-to entertain the appeal. The last position, lying at- the threshold, (and being decisive of the action-of the court,) will be considered first.

The 21st and 25th sections of Article 5 of the Code, and the-interpretation of the latter section, in the case of Steigerwald vs. Winans, 17 Md. Rep., 62 , have been referred to, in support of the motion to dismiss the appeal. We are saved the necessity of examining these, by the special Act passed at the present session,. entitled “An Act authorising the Court- of Appeals to hear and determine, at the present term thereof,- the appeal of the State of Maryland, on the information of the State of Maryland, against The Northern Central Railway Company.” It is too late to question the power of the Legislature, to confer-on the Court of Appeals the right to hear appeals in special cases; but such a law, to be constitutional, must leave the judicial functions of the court untrammelled. Prout vs. Berry, 2 Gill, 149 . The Act above cited,- does not divest any. right or- infringe upon the judicial powers of the court.

It refers to it all such questions as may fairly be presented by the transcript, touching the construction and operation of themortgage from thesaid company to the State, and the equity of the State to be relieved by the issuing of an injunction and appointing a receiver as prayed, and “the right of the company to off-sets or discounts as claimed in. said.cause.”- All these questions were necessa ²¹¹ rily involved in the decision of the court below; the enumeration of them neither enlarged nor restricted the powers of this court, nor invested it with original iurisdiction. The revision of the interlocutory orders and decrees affecting rights, of courts of original jurisdiction, is as much an appellate power, as the revision of their final decrees. The judgment of a court of law is the legal result of the facts admitted by the parties or found by the jury, and so too, ihe decree of a court of chancery is the result, according to principles of equity, arising from the facts found in the bill, answer, proceedings and proofs. Such is the acknowledged foundation of all final judgments and decrees; but interlocutory judgments and decrees affecting rights, must, so far as they go, have a similar basis; because no court of judicature can arbitrarily make a partial any more than a total disposition of the rights of things, and persons without such a foundation.

The judge can go no further than to apply the rule to the case, or to pronounce the law upon the facts either partially or wholly. This application constitutes the judgment, and, when authorised by law, it is the duty of the appellate court to determine whether it is erroneously applied or pronounced. We have only to refer to the practice of the English Courts, and to the legislation on the subject of appeals from interlocutory orders, which is familiar to the profession, to furnish numerous examples. The Act for an appeal in this case, being, in our judgment, constitutional, it devolves upon us to determine whether the bill and answers taken together, present a case for an injunction and receiver, and what property is subject to the complainant’s lien.

It is manifest from the Acts of Assembly above referred to, the bill, answers and exhibits, that in the consolidation of the several companies therein named, and the merger of the Baltimore and Susquehanna Rail Road Company in the Northern Central Railway Company, all the existing contracts of the Baltimore and Susquehanna Rail Road Company were to continue to bind the said company and its property, ²¹² and that they were adopted and assumed by the consolidated company, that in consideration of the release of the State of its mortgage or liens, on the property of the Baltimore and Susquehanpa Rail Road Company, the Northern Central Railway Company w.as to mortgage the entire line of railroad, from Baltimore to Sunbury, with all the revenue and tolls thereof; that the consolidated company should covenant and bind itself to pay the annuity to the Treasury of Maryland in quarterly payments, and in addition to the ¡usual covenants, the mortgage should contain .a power to .sell the interest of all parties to the same. The bill alleges that the quarterly payments of the annuity are in arrear to the amount of $92,500; that the defendants are in possession of the road, realizing large profits over and above the co3t and charge of working, managing and keeping the same in repair, and that the excess of profits has been more than sufficient to satisfy the State’s annuity; that the defendant, in violation of i.ts covenants, has applied from time to time, large sums of money, parcel .of said excess of profits, to the payment and satisfaction of other debts junior in lien and obligation. The original and supplemental answers admit these allegations, but the latter introduces new matter not responsive to the bill, and which is nut properly before us at this stage of the cause, as will be hereafter shown. The respondents, in attempting to excuse their default on the plea of necessity, exhibit such a degree of extreme pecuniary pressure, as made it the imperious duty of the court to assert its legal rights in order to protect, if not to preserve, the large amount loaned to the respondents.

If the condition of the company was such, that the misapplication of its pledged toils and revenues, was necessary to a support of its credit, which would have been otherwise litterly ruined, or the operations of the company practically brought to a stand, the crisis was such, as to require a creditor having only a second lien on a part of the respondents’ property, and a third and fourth on other parts, which lie beyond the jurisdiction of the State, to ²¹³ be vigilant in the assertion of its rights, and appeal to the preventive and conservative powers of a court of equity for their protection. The plea to the jurisdiction of the court below, is not tenable, either on the ground that the respondent’s property lies in part in another State, or