Polhemus v. Fitchburg Railroad — 21 N.Y. St. Rep. 117

Majority

p. 117

Maria T. Polhemus, Resp’t, v. The Fitchburg Railroad Company, App’lt.

(Supreme Court, General Term, Second Department,

Filed December 10, 1888.)

Headnote

Railroad companies—Consolidation of—Mortgage bonds—Laws 1869, Chap. 917, § 5—Action against new company.

Under Laws 1869, chapter 917, § 5, authorizing the consolidation of railroad companies, and providing that all debts and liabilities of either company, except mortgages, shall attach to the new corporation, and be enforced against it and its property, to the same extent as if created by it, .an action may he maintained against the new company on bonds and coupons of one of the former companies, although they are secured by a mortgage on the property of the original debtor company.

Appeal from a judgment entered on the verdict of a jury rendered by the direction of the court at a Kings county circuit.

J. H. Peck (Esek Cowen, of counsel), for app’lt; Hasten & Nichols (Charles E. Pattison and Arthur H. Master, of ^counsel), for resp’t.

The Troy and Boston Railroad Company, a New York corporation, made its mortgage for SI,500,000, to secure its bonds issued to that amount. The plaintiff holds ten coupons representing past due interest on five of these bonds. The Fitchburgh Railroad was a Massachusetts company. The two roads would make a continuous line and to effect that object the two corporations •consolidated their respective corporations-into one which was called the Fitchburgh Railroad Company. Such consolidation in authorized by chapter 917, Laws of 1869. The plaintiff brought this action to recover of the new company a judgment for the amount of her coupons and this company deny that it is liable to pay the same.

The question presented is as to the true and legal construction of section 5 of chapter 917, Laws of 1869, which is in these words: “ The rights of all .creditors of and all liens upon the property of either of said corporations, parties to said agreement and act shall be preserved unimpaired, and the respective corporations shall be deemed to continue in existence to preserve the same, and all debts and liabilities incurred by either of said corporations, except mortgages, shall thenceforth attach to such new corporation and be enforced against it and its property to the same extent as if said debts or liabilities had been incurred or contracted by it.

No suit, action, or other proceeding now pending before any court or tribunal, in which either of said railroad companies is a party, shall be deemed to have abated or been discontinued by-the agreement and act of consolidation as aforesaid, but the same may be conducted in the name of the existing corporation to final judgment, or such new corporation may be by order of the court, on motion, substi

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tuted as a party. Suits may be brought and maintained against such new corporation in the courts of this state, for all causes of action, in the same manner as against other railroad corporations therein.” .

It will be seen by this section all debts of either of the corporations consolidated shall attach to the new corporation “ except mortgages.” Are the bonds and coupons then included in the term mortgages, or are they debts of the Troy and Boston railroad which attach to the new corporation? I think it was the design of the legislature to make the bonds debts enforcible against.the new corporation. As a matter of settled law in respect to all mortgage securities, the debt is the bond obligation or note of the debtor. It is indeed secured by a mortgage, but the debt can he sued as against the debtor without enforcing the mortgage. By the act “ all debts and liabilities ” of either company are preserved against the new company. The words “except mortgages” manifestly mean to restrict the lien of the mortgage to its lien on the route of the company which gave it. It would make great complication to extend it over the part of the new company which had not been included in it. The debts of each company are enforcible against the joint company, but a purchaser in foreclosure, will not be able to buy more than the company which gave the mortgage, included in it. In other words the property acquired by consolidation, would not be subject to the mortgage, but the debts secured by it would be enforcible against a consolidated company.

The judgment, should, therefore, be affirmed, with costs. Dykman and Pratt, J., concur.