Myer v. Car Company
102 U.S. 1 (1880)

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U.S. Supreme Court

Myer v. Car Company, 102 U.S. 1 (1880)

Myer v. Car Company

102 U.S. 1

Syllabus

A railroad company in Iowa, after executing a mortgage to secure its bonds, which was duly recorded, covering all the property which it then possessed or might thereafter acquire, entered into a written contract with A., leasing for a specific period and at a stipulated sum, payable monthly, certain cars whereof he was the owner. It also reserved but did not exercise the privilege of purchasing them at the original cost at any time during the existence of the contract. A. retained the right to rescind the contract, if the company failed to pay the interest on its bonds. While the contract was in force, the mortgagee filed his bill of foreclosure. The court appointed a receiver, who took charge of the road and used the cars in operating it. The contract was never recorded.

Held:

1. That the contract was binding between the parties thereto, and the failure to record it did not, under the statute of Iowa, render the cars subject to the lien of the mortgage.

2. That A. was entitled to the possession of them, and to compensation for their use by the receiver, payable out of the fund to the credit of the suit.

This was a bill, filed May 4, 1875, to foreclose a mortgage executed May 12, 1871, by the Davenport and St. Paul Railroad Company, to secure the payment of certain of its bonds. The mortgage was in the usual form, covering, with other property specifically set forth, the road, bridges, and superstructure of the railroad, with all branches, side-tracks, additions, turnouts, rights of way, depot grounds, and other lands then owned or thereafter to be acquired by the company;

Page 102 U. S. 2

all depots, car-houses, car-shops, machine-shops, and all other buildings whatsoever, then erected or thereafter to be erected; also all kinds of machinery and tools then held and owned or thereafter to be acquired by the company for use in connection with the railroad, including all cars or other rolling stock or equipment and all materials for use in constructing, operating, repairing, or replacing any part or parcel of said railroad or any part of its appurtenances; also all property and franchises connected with or relating to the railroad, or any part of its business in any wise whatever, which was then held or thereafter to be acquired by the company, &c.

The company subsequently entered into the following contract:

"Articles of agreement concluded this first day of October, A.D. 1873, by and between the Western Car Company, party of the first part, and the Davenport and St. Paul Railroad Company, party of the second part, witnesseth:"

"That for and in consideration of the promises and agreements of the said second party hereinafter mentioned, the said first party hereby hires to said second party ninety railroad cars, as follows, viz., eighty box cars, Nos. 121 to 200 (inclusive), and ten stock cars, Nos. 301 to 310 (inclusive), said ninety cars having been the property of the Western Car Company Association, and by them delivered to the party of the second part at dates previous to Feb. 15, 1873, as per receipts of said second party, and the ownership of said cars having afterward been transferred to the party of the first part, all of said cars being marked X/W."

"It is understood and agreed by the parties hereto that the said ninety cars are to be used by said second party in its regular business of transportation over its own and other railroads for the term of five years from the date of this contract, which shall be renewed on the expiration of said five years on like agreements and conditions as those of this contract upon the request of either of the parties hereto, a written notice of such request to be given by the party making it on the other party not less than one year previous to the expiration of said five years. In consideration whereof the said second party hereby promises and agrees:"

"First, to pay the said first party as rental for the use of each of said cars twenty dollars for each and every month during the existence of this contract and its renewal, if renewed, said payments to

Page 102 U. S. 3

be made to such person on behalf of said first party as it shall designate in writing from time to time, and until otherwise so designated to the secretary of said first party, and the receipts of such payments of said person so designated, or said secretary of said first party, as the case may be, shall be the only evidence of such payments said first party shall require of said second party therefor."

"Second, in case any of said cars shall be destroyed or so disabled by accident or otherwise as to be unfit for safe and proper use at any time during the existence of this contract or the renewed contract if renewed, the said second party shall at its own expense immediately replace such destroyed or disabled cars with an equal number of like cars of equally good material, construction, and value, in all respects as were those so destroyed or disabled before the destruction or disabling of the same, and shall have said replacing cars numbered, lettered, and marked as were the said destroyed or disabled cars. Each and all of said replacing cars shall become and be the property of said party of the first part the same as were the destroyed or disabled cars they shall have replaced."

"Third, the said second party shall, at its own expense, maintain and keep each and all of said ninety cars during the existence of this contract and its renewal, if renewed, in good repair and in safe and proper running order, and at its own expense furnish all the material for and make all renewals of said cars from time to time, as they shall be needed, to put and keep them in proper condition for regular use, said material to be in every respect equal in quality to the material for like purposes originally used in the construction of said cars, and at the termination of this contract or the renewed contract, if renewed, return said cars to the party of the first part in proper condition and repair for the immediate and active use thereof."

"It being understood and agreed between the parties to this contract that said second party may and hereby reserves the privilege of purchasing said cars at any time during the existence of this contract, or the renewal thereof, if renewed, by paying, or securing to be paid to said first party, to its satisfaction, the original cost thereof."

"It is understood and agreed between the parties hereto that to preserve the evidence of the ownership of said cars in the said first party, they shall be severally marked or lettered as follows, viz., W, which shall be in addition to any marking or lettering of said

Page 102 U. S. 4

cars said second party may make for its convenience. In case the said second party shall fail at any time during the existence of this contract, or the renewed contract, if renewed, to promptly pay the interest or the principal of any of its bonds or other liabilities when the same shall have respectively become due, the said first party may, if it so elect, terminate this contract immediately after such default by written notice of the president of said first party to the president or secretary of said second party, personally served on said president or secretary or sent to either of them by the United States mail, and the said second party agrees on the service of said written notice as aforesaid to deliver forthwith to said first party the actual possession as the owner thereof of each and all of said ninety cars, and those with which said second party shall have replaced the same, each and all of which cars shall, on such delivery, be in proper condition and repair for the immediate and active use thereof."

"THE WESTERN CAR COMPANY"

"By B. E. SMITH, Pres't"

"Attest:"

"E. C. SMITH, Sec'y"

"THE DAVENPORT & ST. PAUL R.R. CO."

"By GEO. H. FRENCH, Pres't"

"Attest:"

"J. S. CONNOR, Sec'y"

The court appointed a receiver, who took charge of the road and said cars.

The Western Car Company filed an answer and a cross-bill claiming title and right of possession to the cars, and compensation for the use of them by the receiver. The Western Car Company Association originally leased ninety cars to the railroad company, and became a corporation under the name of The Western Car Company, under a charter granted by the State of Delaware. An agreed statement was filed in the court below setting forth the following facts:

The cars were delivered to the railroad company under a conditional contract or lease with the Western Car Company Association, between Feb. 8, 1872, and Feb. 15, 1873; $22,179.02 was paid for the rent thereof prior to Oct. 1, 1873, under a similar lease or contract to that of Oct. 1, 1873; the Western Car Company was formed at or prior to Oct. 1, 1873, and the foregoing contract was executed between it and the railroad company; the words

Page 102 U. S. 5

"having been the property of the Western Car Company Association, and by them delivered" to the said railroad company, mentioned in that contract, refer to the delivery above named, and the car company claims title to and rent for the cars under the contract of Oct. 1, 1873. The trustees of the bondholders claim title under the mortgage dated May 12, 1871, which was duly recorded. The contract of Oct. 1, 1873, was never recorded. The receiver has paid no rent for the cars, and they were marked as stated in that contract.

The cars were all in use by the railroad company, and were constantly passing, in and for its business to Chicago and back, on the Chicago and Northwestern Railroad, and in carrying and earning freight for the Davenport and St. Paul road up to the time of the receiver's appointment. Some parties, in a proceeding against the Chicago and Northwestern Railroad Company, garnished the cars, and the court below made an order on that company to deliver them to the receiver. Before the order was executed, the car company applied to the court to direct a payment of rent to them by the receiver. When the court refused to do so, that company, through the same attorneys who applied for rent, replevied fifty-eight of the cars from the Chicago and Northwestern Railroad Company by writ from the Circuit Court of the United States for the Northern District of Illinois. B. E. Smith was, Oct. 1, 1873, president of the car company and of the Davenport Railway Construction Company, and a stockholder in the Davenport and St. Paul Railroad Company. At that date, George H. French was president of the latter company, and secretary of the Construction Company.

It was further agreed that if the court decided that the car company was entitled to the cars, the amount of rent was to be fixed by a reference to such competent person as the court might select.

Page 102 U. S. 6

The court found that the said ninety cars leased by the railroad company from the Western Car Company at all times had been and then were the property of the latter company, and that it was entitled to the immediate possession thereof. The court thereupon adjudged that the complainants' bill be dismissed as against the car company.

The court further found that of the said ninety cars fifty-six had come into the possession of the car company under and by virtue of said writ of replevin; that thirty-four of them were then, and had been since the filing of the bill, in the possession of the receiver appointed by the court, but that two of them were subject to the lien of the deed of trust under which the complainants claim. It was adjudged and decreed that the receiver immediately surrender and deliver up unto the car company the remaining thirty-two cars.

It having been stipulated by the parties that the value of the use of the said thirty-two cars, since and while they were in the possession of and in use by the receiver of the court, was $10 per car for each month since March, 1875, a period of twenty-six months, it was further adjudged and decreed that the car company do have and recover for such use the sum of $8,320, and the receiver was ordered and directed to pay over the said moneys to the said company.

Myer and Dennison, the trustees named in the mortgage, thereupon appealed to this court.

Sect. 1922 of the Revised Code of Iowa of 1873 is as follows:

"That no sale, contract, or lease, wherein the transfer of title or ownership of personal property is made to depend upon any condition, shall be valid against any creditor or purchaser of the vendee or lessee in actual possession obtained in pursuance thereof, without notice, unless the same be in writing, executed by the vendor or lessor, acknowledged and recorded the same as chattel mortgages."

It is a transcript of an act having for its title

"An Act requiring conditional sales of personal property to be executed, acknowledged, and recorded like mortgages of personal property to be of any validity as against bona fide purchasers, executions, and attaching creditors. "

Page 102 U. S. 9

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