GUARANTY TRUST CO. OF NEW YORK et al. v. ATLANTIC COAST ELECTRIC R. CO. (Circuit Court of Appeals, Third Circuit. June 1, 1905.) Nos. 8 and 9. 1. STREET RAILROADS-MORTGAGES-DATE-CONSTRUCTION. Where the authority for the execution of a street railroad mortgage, and bonds secured thereby, not given until October 7, 1896, required the mortgage and bonds to be antedated as of July 1, 1896, and they were so antedated, as between the mortgagor and mortgagee the mortgage would be considered as a conveyance of property on the day the mortgage and bonds were dated. 2. SAME-AFTER-ACQUIRED PROPERTY-LIEN. A street railway mortgage given to secure bonds recited the form of the bonds, and declared that they were secured by a mortgage on all the certain railroad and other property, real and personal, and franchises of the railroad company, then owned or thereafter acquired by it. The mortgage conveyance clause limited its lien on after-acquired property to rights acquired by lease from other railroad companies, as "should be connected with or appurtenant to" the railroad of the mortgagor, specifically described. Held, that the mortgage lien embraced rights acquired by lease made after its date to the mortgagor by other railroad companies owning roads connected with the mortgagor's railroad and operated in connection therewith, the capital stock of and a lease from a new corporation organized merely for the purpose of holding title to the road of another company similarly operated, all of which was owned by the mortgagor, together with a line of railroad subsequently constructed by the mortgagor, and operated in connection with its system. 3. SAME SUBSEQUENTLY ACQUIRED LIENS. Where a street railway mortgage given to a trustee to secure bonds covered after-acquired property, and the trustee was requested to issue 110 of the bonds so secured for the purchase of the assets of a connecting street railway company sold at a receiver's sale, which it did, and such assets were conveyed to a new corporation, all of the stock of which was delivered to the mortgagor, and operated by it in connection with its system, such trustee was charged with notice that the assets so purchased were, in equity, subject to the mortgage, and hence the trustee could not acquire a superior lien on such assets by a subsequent pledge of the stock of such corporation to secure a loan subsequently made to the mortgagor. Appeal from the Circuit Court of the United States for the District of New Jersey. For opinion below, see 132 Fed. 68. Before ACHESON, DALLAS, and GRAY, Circuit Judges. GRAY, Circuit Judge. These are cross-appeals from the decree of the Circuit Court of the United States for the District of New Jersey, foreclosing a mortgage made by the Atlantic Coast Electric Railroad Company, a corporation of the state of New Jersey, to the Guaranty Trust Company of New York, a corporation of the state. of New York, trustee, dated July 1, 1896, to secure an issue of bonds, known as General Mortgage 5 Per Cent. Bonds, to the amount of $500,000. A committee of these bondholders, who were allowed to intervene in the Circuit Court, have appealed from a portion of the decree which adjudicates that the Guaranty Trust Company, the mortgagee, has individually, and not as trustee, a lien upon certain shares of stock pledged to it superior to the lien of the mortgage securing said bonds. The defendant railroad company appeals from certain other portions of the decree adjudging that the mortgage is a lien upon certain leasehold interests and upon an extension of the line of railway described in the mortgage. The material facts as disclosed by the record are as follows: The general mortgage under foreclosure is dated July 1, 1896. It was acknowledged October 8, 1896, and recorded October 13, 1896. The resolution, authorizing the execution and delivery of the mortgage, was adopted October 7, 1896. On that date, the interest of the Atlantic Coast Electric Railroad Company, the defendant, in the different lines of the system it was operating, was as follows: (1) The original line owned and operated by it under its incorporation, extended from a point in Asbury Park to the north side of Brighton avenue in Long Branch. (2) The line of road from Brighton avenue north to Atlantic avenue was that of the West End & Long Branch Railway Company, all of whose capital stock, viz., $100,000, was owned by the defendant company. All the property of the West End Company was leased to the defendant company, by instrument dated August 3, 1896. (3) A short line with a loop extending from Atlantic avenue to Pleasure Bay Landing, was owned absolutely by the defendant company. (4) The lines in Asbury Park were those of the Seashore Electric Railway Company, a corporation of the state of New Jersey, 1,500 shares of whose capital stock, out of a total issue of 2,000 shares, were owned by the said defendant company. The property of the Seashore Electric Railroad Company was leased to the defendant company, by instrument dated August 3, 1896. It will be observed that the leases of the Seashore & West End Railroads, above mentioned, were made August 3, 1896, prior to the execution and delivery of the mortgage on October 7, 1896, but after its date, July 1, 1896. All of the above-mentioned properties were already subject to a first mortgage of the defendant company, dated April 27, 1895, made to the Knickerbocker Trust Company, to secure an issue of first mortgage bonds of the aggregate amount of $1,000,000. With this mortgage, however, we are not here concerned. It appears, therefore, that from and after August 3, 1896, and on until its acquisition of the Asbury Park & Belmar Street Railway Company, in May, 1898, the defendant company substantially owned, controlled and operated a line or system of railways, extending from Pleasure Bay Landing southwardly to the lines of the said Asbury Park & Belmar Street Railway Company. After the last-mentioned date, when, in the manner hereinafter more particularly described, the defendant company acquired the railway of the Asbury Park & Seagirt Railway, there was a further extension of its line southwardly, and it practically owned and operated the system or line thus extended. It afterwards constructed and owned what was called the Belmar Extension, about a mile and a half long, connecting with what was formerly the Asbury Park & Belmar Road, and constituting a continuation of its line. At the beginning of the foreclosure suit, therefore, the line or system operated, owned and controlled by the defendant company, extended from Pleasure Bay Landing through the short line owned by the defendant company, to the line of the West End & Long Branch Railway Company, over said line to the original line of the defendant company, then over and through the line of the Seashore Electric Railroad Company in Asbury Park, to the line of the former Asbury Park and Belmar (now the Asbury Park & Seagirt) Road, and then over the Belmar extension of the latter road to its terminus. The subjoined diagram, furnished in the brief of the defendant company, will serve to exhibit the relative positions of these several lines, though not their relative length: 5. 1. 2. 3. Belmar Exten-Asbury Park & Seashore Elec-Atlantic Coast West End & Atlantic Coast sion. Seagirt Road, tric Railway Electric Rail- Long-Branch Short Line all of whose Company, 1,500 road Company Railway Com- from Atlantic Constructed stock has been shares of whose (defendant pany, all of Avenue to and owned by issued to de-stock out of company). Bay defendant fendant com- 2,000 shares, is company pany and prop-owned by de erty leased to fendant com said company.pany. Leased company Au- whose stock, Pleasure to defendant The appellants, the intervening bondholders, claim that the lien of the mortgage securing their bonds, covers all the property of the line or system thus indicated and described, whether acquired by the defendant company before or after the date of the mortgage, by virtue of certain after-acquired property provisions in the said mortgage, alleged to be sufficient for that purpose. By the cross-appeal of the appellant company, it is contended that, by a proper construction of the language and terms of the mortgage, its lien only extends to the original Atlantic Coast Electric Railroad Company and to the short line from Atlantic avenue to Pleasure Bay Landing, owned at the time by the defendant company (being Nos. 1 and 3 of the diagram), and to such property as was strictly appurtenant thereto, which, it is contended, would not include the other lines. of railway above mentioned, and indicated in the diagram as Nos. 2, 4, 5 and 6. There is no controversy as to the complainant being entitled, as trustee, to a decree for the sale of the mortgaged property. The only questions to be considered here, as in the court below, relate to the extent of the lien of the mortgage. As we think there was no error in the decree of the court below, so far as it related to those properties embraced in the railway system or line of the defendant company, other than that of the Asbury Park & Seagirt Railway, we cannot do better than refer to, and adopt as our own, that part of the opinion of the learned judge of the court below, which deals with the mortgage lien on this property. It is as follows: “Admittedly, the mortgage covers all the properties specifically described in it. But does it also extend to and embrace the following properties acquired by the defendant company after the date of the mortgage-the leasehold interest in the West End & Long Branch Railroad, the leasehold interest in the Seashore Electric Railroad, the leasehold interest in the hotel property at Pleasure Park Bay, the capital stock of and the leasehold interest in the Asbury Park & Seagirt Railroad, and the line of railway extending through Belmar? The defendant insists that none of these lastmentioned properties are subject to the lien of the mortgage; the complainant insists that all of them, except the capital stock of the Asbury Park & Seagirt Railroad, which the complainant claims to hold in its individual capacity as collateral security for the payment of the defendant's promissory note, are subject to its lien; and the bondholders, who are represented by special counsel, insist that all of the properties, including the stock of the Asbury Park & Seagirt Railroad, are subject to its lien. "Although the authority for the execution of the bonds and mortgage was not given until October 7, 1896, and the mortgage was not recorded until October 13, 1896, the resolution authorizing their execution required them to be antedated July 1, 1896. They were so antedated. As between mortgagor and mortgagee, therefore, the mortgage will be considered as a conveyance of property on July 1, 1896. This was the plain intention of the defendant company, and property acquired by that company between the date of the mortgage and the time of authorizing its execution, or of recording it, as well as that acquired after such authority or record, must be deemed to be future-acquired property. If, then, the mortgage covers any future-acquired property at all, the mere fact that two leasehold interestsone in the West End & Long Branch Railroad Company and the other in the Seashore Electric Railway Company-were acquired after the date of the mortgage but before the authority for its execution was given, will not exIclude them from the lien thereof. * * * "The mortgage is inartistically drawn. Whether it was the intention of the defendant company to subject to the lien of its mortgage after-acquired properties like those above mentioned must be ascertained from an examination of the various clauses in the mortgage concerning after-acquired properties. On such examination it appears that the mortgagor conveyed to the mortgagee 'all the right, title and interest of the railroad company [the mortgagor] now owned, or hereafter in anywise acquired by it, in and to all and singular the lines of railroad and railroad tracks and routes and other property, real and personal, hereinbelow described.' Then follows, first, a specific description of the lines of railroad owned by the defendant company on July 1, 1896. Secondly, the description embraces 'all lands and real estate buildings, improvements, tenements and hereditaments, now owned by the railroad company, or hereafter at any time or howsoever acquired by it, which are or may be connected with or appurtenant to the above described and hereby mortgaged railroad and routes.' Thirdly, the description embraces 'all and every franchise [including the franchise to be a corporation], right, privilege and easement of whatsoever kind or nature, now or hereafter at any time or howsoever owned, acquired, possessed, enjoyed or exercised by the railroad company, either by virtue of any act of the Legislature of the State of New Jersey, or ** of any contract or lease between the railroad company and any other railroad or other corporation which are or may be connected with or appurtenant to the above described and hereby mortgaged railroad and routes.' The description further embraces 'all and singular the liberties, privileges and franchises connected with or relating to the said railroad, routes and real and personal property hereto [hereby] mortgaged * * with all and singular the hereditaments, easements and appurtenances to the above described and hereby mortgaged railroad routes and real and personal property, franchises and premises, or any part thereof, now or hereafter belonging or in any wise appertaining.' "The defendant insists that these clauses relating to future-acquired property are limited to the railways specifically described in the mortgage and to properties appurtenant to such specifically described railways, and that they do not include subsequently acquired leases or stocks, or even the line of railroad constructed through Belmar. To determine the question, the meaning of the words 'connected with or appurtenant to' must be ascertained. The phrases 'connected with' and 'appurtenant to' are not necessarily synonymous. The railroad of the West End & Long Branch Railway Company is physically connected with that of the defendant company at the northerly end of the latter company's main line, and the railroad of the Seashore Electric Railway Company is physically connected with that of the defendant company at the southerly end of the latter company's main line. The defendant company secured leases upon these two lines of railroad and has been operating them in connection with its own road. In Columbia Finance & Trust Co. v. Kentucky Union Railway Co., 60 Fed. 794, 9 C. C. A. 264, it appears that the defendant company in that case executed a mortgage upon its line of railroad, which is specifically described therein, and also upon 'the lands, real estate, telegraph lines, railroad tracks, side tracks, bridges, and all other things of whatever kind, belonging or in anywise appertaining, or which have been or may be acquired or provided for use upon or in connection with said railroad, * and also all locomotives * and other chattels now or hereafter belonging to or appertaining to said railroad, and all property, both real and personal, of every kind and description, which shall hereafter be acquired for use on said railroad, and all the corporate rights, privileges, franchises and immunities, and all things in action, contracts, claims and demands of the said party of the first part, whether now owned or hereafter acquired, in connection or relating to the said railroad.' Here, it will be observed, the clauses relating to after-acquired property were also limited to the preceding specifically described line of railroad. Yet it was held that the lien of the mortgage covered a leasehold interest in another connecting railroad acquired by the defendant company after the execution of the mortgage. * "In the mortgage now being foreclosed, every 'right' of the defendant company, acquired after the date of the mortgage by lease from any other railroad company, was by express terms included in the lien of the mortgage, provided such 'right' should be 'connected with or appurtenant to' the railroad therein specifically described. As already stated, the defendant company has been operating the leased railroads in connection with its own road. It has been in possession of and has been exercising the rights acquired by the leases. These rights, if not appurtenant to, are, within the fair meaning of the language of the mortgage, 'connected with' the defendant's railroad. Unless such construction be adopted, the clause of the mortgage relating to rights acquired by lease seems to have no force or effect whatever. If there be doubt as to the true meaning of this clause, or of any other of the clauses relating to after-acquired property, the construction put upon them by the parties to the mortgage at the time of its execution, and the acts done by those parties, may be resorted to as aids in ascertaining their true meaning. 1 Gr. Ev. § 293; Bradley v. Packet Co., 13 Pet. 89, 10 L. Ed. 72; Reed v. Merchants' Mutual Ins. Co., 95 U. S. 23, 24 L. Ed. 348. And in Central Trust Co. v. Kneeland, 138 U. S. 414, 11 Sup. Ct. 357, 34 L. Ed. 1014, the court resorted to the language of the prospectus, issued for the purpose of inviting investors to purchase the bonds of the Toledo, Delphos & Burlington Railroad Company, and to the language of the resolution of the directors of the company, authorizing the execution of the mortgage intended to secure those bonds, for the purpose of confirming the construction given by the court to the after-acquired property clause of the mortgage. In the case now in hand we find the resolution of the directors of the defendant company, passed October 7, 1896, embodied in full the form of bonds intended to be secured by the mortgage and expressly approved that form. We also find that the same form of bonds is quoted in full in the recitals of the mortgage. These bonds declared that they were secured by a mortgage conveying to the trustee (the complainant in this case) 'all the certain railroad and other property, real and personal, and franchises of said railroad company, wheth |