Pennock v. Coe - 64 U.S. 117 (1859)
U.S. Supreme Court
Pennock v. Coe, 64 U.S. 23 How. 117 117 (1859)
Pennock v. Coe
64 U.S. (23 How.) 117
A railroad company authorized to borrow money and issue their bonds, to enable themselves to finish and stock the road, may mortgage as security not only the then-acquired property, but such as may be acquired in future.
Although the maxim is true that a person cannot grant what he has not got, yet in this case a grant can take effect upon the property when it is brought into existence and belongs to the grantor in fulfillment of an express agreement founded on a good and valid consideration when no rule of law is infringed or rights of a third party prejudiced. The mortgage attached to the future acquisitions as described in it from the time they came into existence and were placed on the road.
Hence where second mortgagees and holders of bonds of a second issue brought suit upon those bonds, recovered judgment, issued execution, and levied it upon a part of the rolling stock, which was not in existence when the first mortgage was given, the judgment creditors must be postponed to the claims of the first mortgagees.
In the present case, a reasonable interpretation of the statutes creating the corporation would justify it in making the road where it was made.
A bondholder of a class covered by a mortgage to secure the class of bonds issued in case of insolvency of the obligors cannot, by getting judgment at law, be permitted to sell a portion of the property devoted to the common security, as this would disturb the pro rata distribution among the bondholders, to which they are equitably entitled.
The bill was filed in the circuit court by Coe, mortgagee of the road of the railroad company in trust, for securing the payment of its bonds, to enjoin the execution of a judgment recovered at law against the company by Pennock and Hart, two of the defendants.
The facts of the case are stated in the opinion of the Court.
After the case was ready for a hearing, at September term, 1857, the circuit court passed the following decree:
"This cause came on to be heard upon the bill of the complainant, the joint answer of Joseph Pennock and Nathan F. Hart, the separate answer of the Cleveland, Zanesville & Cincinnati Railroad Company, the replication to said answer, the exhibits and testimony, and the motion of said Pennock and Hart to dissolve the injunction heretofore allowed in this case, and was argued by counsel. On consideration whereof, the court do overrule said motion, and the entire facts in the case being before the court, and the arguments of the counsel upon the motion to dissolve said injunction embracing the entire merits of the case, the court do order, adjudge, and decree, that said injunction be made perpetual, and that the said Pennock and Hart be forever restrained from selling, or causing to be sold, by the marshal, the locomotives, tenders, and cars, mentioned in said bill, to satisfy the judgment recovered by them against said railroad company therein described."
From this decree, Pennock and Hart appealed to this Court.