KNEVALS v. FLORIDA CENT. & P. R. CO. et al., 66 F. 224

LOCKE, District Judge (after stating the facts). The contention of the complainant in this suit is that the lots in question did not appertain to the railroad at the time of the sale of the railroad property on the (itli of January, 1882, and therefore did not pass to the purchaser, hut remained the property of the Florida Central Railroad Company and its stockholders.

The grounds of the defense are: First, that the complainant has no standing in a court of equity, but that he should have brought an action of ejectment to try title at law; second, that the property in question, the lots in Jacksonville, did appertain to the railroad, and passed by the sale under the deed of foreclosure; and, third, that complaiuant is estopped from setting up title.

Although it was strongly contended by the defendant that the complainant was not entitled to the remedy prayed for in a court of equity, but that he should resort to an action of ejectment in a court of law, we fail to find the point discussed at length in the able brief of the complainant, and it was but lightly touched upon in the oral argument.

The two grounds upon which it is presumed that; the suit has been brought in equity rather than law are: First, that the complainant alleges that he was acting as trustee, with but an equitable title in part of the stock upon which he was suing; and, second. that he was attempting to recover property of a dissolved corporation.

Tlie allegations of the bill would appear to give to the alleged trustee some equitable right in 4,400 shares of the stock, .which might justify an appeal to a court of equity, hut we fail to find any evidence of the substitution of the 5,100 shares of stock to replace the pledge of the $138,000 of bonds, or any promise or agreement to make such substitution. The right of substitution was reserved by the borrowers, Reed, Willard, and Rody, and no equitable or other interese was conveyed to Donnel, Lawson, and Simpson in the stock of the Florida Central Railroad Company until such substitution was made.

The possession of 700 shares, and no more, creates rather a presumption that the substitution was never made, and particularly when taken in connection with the fact that the 138 bonds pledged were still in possession of Donnell, Lawson & Simpson as late as July, 1882, after the sale of the. road, and the apparent utter worthlessness of the stock, and when the bonds may have been presumed to have some value, as the Transit road was still a running road. But if any pledge had been made, and an assignment to complainant of the shares so pledged, Mr.

Lawson, the assignor, says it was an absolute assignment, with no equities reserved. This was also the nature of the assignment from Reed, and the character of complainant as equitable trustee disappears, and he stands as legal assignee, with no equities intervening. It is not that a trust may be indirectly, or in some way, connected with the suit, or that complainant or defendant may call himself a trustee for some third party, that gives to a court of equity jurisdiction. It is only where a trust or trust estate is the subject-matter of the suit, as such trust estate, that a trustee can resort to equity.

In this case, until the property in question should come into the control or possession of the trustee, it could in no way be considered a trust estate. Rfo relation of trustee and cestui que trust exists between complainant and defendant herein. The relation of trustee, alleged to be existing between complainant and his assignors of the stock in whose behalf he is suing, does not so make him a trustee, in regard to this property, as to enable him to resort to a court of equity. In Knox v.

Smith, 4 How. 315, the complainant sought to protect himself against what he held to be a fraudulent trust deed, but the court failed to find anything which authorized a court of equity to take jurisdiction of the case. In Fussell v. Gregg, 113 U. S. 550, 5 Sup. Ct. 631, complainant alleged equitable title, but desired possession. The court held that a court of equity could not give that redress. In Killian v. Ebbinghaus, 110 U. S. 568, 4 Sup.

Ct. 232, complainant alleged himself to be a trustee, and brought suit for possession of property, and an account of rents and profits, but the supreme court decided that, he claiming the legal title, and the defendant being in possession, the issue could only be tried, in an action at law. In Hipp v.

Babin, 19 How. 271, although the complainants were suing for the use of others as well as themselves, or, in other words, were acting in the capacity of - trustees to obtain possession of the property sued for, the court held that the suit, being for the possession of land which they claimed by legal title, as against others in possession also claiming by legal tide, was properly for a law court, and a court of equity had no jurisdiction in the matter.

This suit is virtually one to determine the legal title to land in the possession of defendant, and cannot, therefore, on account of the character of complainant or cause of action, be considered in a court of equity. The second ground upon which it may be considered that a court of equity might entertain jurisdiction of the case is that the complainant was seeking to recover the property of a dissolved corporation.

The principle upon which courts of equity take jurisdiction of causes in which it is sought to follow the property of dissolved corporations, in behalf of creditors of that corporation, is that such property, where held by a legal title, is charged with an implied trust to pay such indebtedness. But it cannot be claimed that this property is so charged.

The complainant, as assignee of a pledgee of such stock, can have no greater rights in bringing suit, than could his assignor or the pledgee, and certainly such pledgee can have no greater rights than 'his pledgor, as no party can convey to others greater rights than lie has himself. Trask v. Railroad Co., 124 U. S. 515, 8 Sup. Ct. 574. Nor can the stockholders of a company, as snch, have greater rights in obtaining possession of corporation property than the corporation might have, if in existence.

When it appears that the interest: which the complainant has in the shares of stock, instead of being equitable, as alleged in the bill, has become legal by a conveyance and assignment, as shown by the evidence, every equitable feature disappears from the suit,, and, whatever equities might be urged as be? tween the complainant and his cestuis qni trustent, as between him and the defendant there is but the enforcement of a legal title. Hayward v. Andrews, 106 U. S. 672, 1 Sup. Ct. 544. In the case of Howe v.

Robinson, 20 Fla. 352, cited by complainant in the support of his right, it was the lien of a prior judgment that was sought to be enforced, and not a legal right. But in this case we fail to find any equitable title whatever. We consider, therefore, that it would he beyond the jurisdiction of a court of equity to grant the relief prayed, although it might be competent to appoint a receiver for tiie purpose of bringing an action at law to determine the legal title.

Whether this court should reverse the judgment below dismissing the bill, and direct such appointment, and that the case be permitted to proceed, depends upon the other questions involved. It has been considered by both parties that the question as to whether these lots in question appertained to the railroad, and therefore passed by the sale, is the important one in the case.

Our views do not coincide with those of the complainant, that the burden of proof upon this point is upon the defendant to show that the property passed by the sale, but. the sale being proven and being general, purporting to convey all the property, rights, and franchises of the railroad, and the possession having passed with the sale, and the property being now, and having been for years, in the control of the defendants, and a great part of each lot occupied for railroad purposes, we consider the burden to be upon the complainant to show that it came within some exception, and did not pass.

It is contended by the complainant that the language of the fifth

section of the decx*ee ordering the sale only mentioned the railroad, and ordered that that alone be sold. But all parts of the decree must be considered together, and, in the third section, it declared that the complainants in that case had a first lien upon “the railroad, and all property, rights, and franchises thereto appertaining,” and it cannot be accepted that, after declaring such a lien, the order to sell was intended to cover less than had been specified as being contained in it.

The 'term “railroad,” with no further specifications or modifications, we consider may well be taken as covering the entire property of the company connected with the use and purpose of the road. And particularly' do we consider it should be so understood in this case, and extend, certainly, as far as the lien has been declared. It is also claimed by the complainant that the language of Mr.

Justice Bradley, in his opinion in the Schutte Case, in which the decree of foreclosure and sale was rendered, recognized as valid the exception found in the resolution of the board of directors in authorizing such bonds, excepting from the lien “the lots in the city of Jacksonville not used for depot purposes.” We cannot accept this view of the case, nor do we consider that in quoting the language of the resolution he had any intention of giving force to that portion of it.

The language .of the statute was that the bonds should be a statutory lien on the part of the road for which the state bonds were delivered, and on albproperty of the company, real and personal, appertaining to that part of the line. Rio resolution of the board of directors limiting the character or extent of the lien was embodied in the bonds, nor could it affect the lien given by this statute, if they saw fit to issue them. Mr. Justice Bradley expressly states that the lien was created by the -statute, and in no way, do we consider, intimates that the action of the board of directors influenced that lien.

He said: “Of course, it would be for the Florida Central Railroad Company to prescribe the conditions or considerations on or for which it would .issue such bonds.

It had the power to do it.” Then adds: “If done, and the exchange should be made, * * * this would not relieve the Florida Central Railroad Company from its obligations arising upon its bond.” The conditions and considerations might be considered in issuing them; that is, there was no power to compel them to issue them, and they might dictate their disposition, but when once issued, and exchanged for state bonds, no condition could relieve them from the lien of the statute under which they were exchanged.

Nothing said by him can, in our opinion, be construed into an intimation whether those lots were or were not property appertaining to the railroad,- and such view would be utterly inconsistent with the language of the decree, which should have excepted them from sale if that was his view of the law. The question, then, is, did these lots appertain to the railroad"? In considering- rhis question, tliere is nothing that can appeal to a court of equity as a reason why they should not be considered as so appertaining to said railroad, and be reserved from the sale.

The proceeds of sale of the bonds for which the lien was declared had come into the hands of holders of the stock of the Central Railroad. The party moving the resolution in which the exception was made, M. tí. Littlefield, representing 3,350 shares of the stock at that meeting', and Edward Houston, representing 1,310 shares of the stock, received the bonds, and disposed of them in accordance with an agreement between themselves, and used the proceeds. These lots were partly paid for with funds thus procured.

Even in the absence of a positive lien, a court of equity-might well hold them subject to an equitable lien in favor of the holder of the bonds whose money could be traced to them. When the road was sold it was hopelessly bankrupt, and its stock, particularly that represented by the complainant, was in the hands of those Who had purchased it subsequent to the decree of. foreclosure, and with full knowledge of all the facts.

There were a large number of debts outstanding against the company, even after the sale of its property, and there are no equitable grounds why there should be anything left for the stockholders. This, though, cannot affect the validity or invalidity of the sale. In the various cases which have arisen where the question was whether or not certain property was appurtenant to the railroad, it has come up in different ways. In some it has been a question of exemption from taxation, and then it has been claimed that it required a strict construction.

In others it has been a question between mortgagees and unsecured creditors, in others between purchasers and lienholders, and in such cases a liberal construction has been given. ¡But, in each of these cases, -whether or not the property was appurtenant to the railroad has been held to be a question of fact, and, where the trial was at law, to be submitted to the jury. Railroad Co. v. Livermore, 47 Pa. St. 465.

The general term of a ‘‘railroad,” as ordinarily used, includes many kinds of property-, both real and personal, and cannot, with any degree of propriety, be confined to the track, or the land, simply, necessary- to lay the track upon. It is not necessary to consider whether the land can pass as appurtenant to land, for it is unquestionable that land may pass as appurtenant to a railroad. It is claimed that nothing can be appurtenant to the railroad unless it is necessary for its operation.

Here the term “necessary” may be used with several significations and limitations, and we do not consider that its most restricted and confined use should be accepted in this connection. It can at no time be claimed that a strip of land 100 feet wide, or 200, as is frequently granted by charter, is absolutely necessary for the laying of a track and the operation of a railroad; and yet it is considered that it is reasonably necessary and appurtenant to the road and all passes with it.

A careful examination of the numerous authorities cited satisfies us that any piece of land that may be considered reasonably necessary for the present operations of the road, or contemplated and prospective extensions or- improvements, and held for that purpose, may, within the scope of the decisions, be beld to appertain to a railroad. . We find no case to which such principle may not be applied without conflict. In Railroad Co. v.

Livermore, supra, the lots of land, across the mere edge of some of which the tract was laid, but which were not in any other way used for railroad purposes, but which had been held for many years, and the original intention of occupancy abandoned, were held by a jury not to be appurtenant to the railroad, and that finding approved.

In that case the conduct of those interested, from the time of the mortgage and the sale up to the .time of the suit, was reviewed, and, in closing, the court says: “These remarks are not to show a ratification of a void sale, but, by the united conduct and understanding of all the parties, that no actual appropriation of the lots has ever been made, and that the sale was valid.” The same examination in this case would, we think, show, by the united conduct and understanding of all parties, that there was an actual appropriation of the lots to railroad purposes, and, although not all were required for immediate use, such appropriation has never been abandoned, or the idea entertained that any portion of the property had been or would be separated from the railroad, as held for actual use, and not for speculative purposes.

We cannot accept the view that nothing passed by the ■mortgage sale except that property which was the property of the road at the time of the enactment of the statute. The railroad was a continuing property, and after-acquired property and rights which became merged into it, and appropriated for its purposes, became subject to its lien. The lots were purchased for the purpose of furnishing terminal facilities where a contemplated extensive system of roads was intended to reach the deep water of an Atlantic port.

Although stretching along one street something over 1,200 feet, the depth of these 12 lots, or distance back from the street to the water, varied, as appears by the maps filed in the case, from about 125 feet to about 200 feet; and, had the road laid its tracks on the dry land of the lots, they would have been occupied for the entire surface, but, being water lots, the railroad was built out, by wharves and piers and by taking earth from some of the lots and filling in, until much of the railroad business is transacted on the extension of these lots.

The map shows 11 lines of tracks running over and across these lots or their extensions, with passenger station, freight houses, platforms, etc. ■ Has the railroad company, by thus extending and enlarging these lots, and using more generally the extension than the original land, abandoned the original appropriation, and lost the right to have them considered and treated as railroad appurtenances? We consider not. The riparian rights went with them, and have not been separated from them. The very occupying and extending them for railroad purposes was, we consider, an appropriation.

It is true that certain parts of them might be detached and sold without the railroad’s suffering any immediate inconvenience, and the same is probably true of a strip of land 25 feet wide on each side of the track for the entire length of the railroad, but that would not show that it did not appertain to it. The testimony shows that it has never been the intention to abandon the appropriation, but that there has always been in view the time when the entire properly will be required, as not only convenient, but absolutely necessary, ior the purposes oí the railroad.

It has been treated, held, received, and used and occupied, by all having anything to do with it, as appurtenant to the railroad, and we fail to And by the evidence that it, or any portion of ii, should be excepted from the lien of the mortgage or foreclosure and sale. But the remaining ground of defense against this suit we consider more positive than that the lots were appurtenant to the railroad. Subsequent to the decree of foreclosure of the mortgage under which the sale of 1882 took place, Sir Edward J.

Heed purchased, and was, at the time of sale of the road, owner of, 5,110 shares of the stock of the railroad, out of a total of 5,500 shares, and was president of the company. At the sale he purchased the property as sold, and in the organization of the new company, on the 8th day of February, 1882, in the articles of association he recited that he, and those associated with him, had purchased all the franchises, rights, privileges, and property of every description whatever belonging to the Florida Central Railroad Company.

This was a positive recital, made in a public document, to be placed on file as the foundation of the incorporation of a new company, to which Reed conveyed by deed all the property thus purchased, and upon the strength of which bonds to the amount of upwards of $2,000,000 were issued and sold.

We do not find in the record a copy of the deed from Reed to the newly-organized company, the Central & Western, but in the minutes of the boat'd of directors at which it was presented and entered we find that it is stated as having granted all the rights, privileges, franchises, and property of every description belonging to the aforesaid railroads, one of which was the Florida Central. Reed was at this time the sole owner of the shares of stock in whose behalf this suit is brought.

There had, at that time, been no pledge or substitution of any of these shares of stock for the bonds of the Transit Railroad Company, as these bonds were in the hands of the creditors, Donnell, Lawson & Simpson, as late as the 8th July, that year, and by such recital in the articles of the association and the deed of conveyance, and his acquiescence in the possession and control for seven years of said lots, and the numerous transfers of the property, in one of which they are distinctly described as “all the terminal property of said railroad at Jacksonville,” until large amounts of bonds have been issued and sold, into the security of ■which these lots have apparently entered as being railroad property, and so held and occupied, and other interests have intervened, we consider that Reed, or any one claiming by, through, or under him, is estopped from now saying that he only purchased at that sale a part of the property of said railroad, and that a very valuable portion of it yet remains the property of its stockholders, he holding all but one-thirteenth of it.

No one taking from him any interest in these shares subsequent to these recitals can take any greater right than he had. Trask v. Railroad Co., 124 U. S. 515, 8 Sup. Ct. 574. Our conclusion is that upon the first point complainant is not. entitled to the- remedy sought, nor should he have a decree upon either- of the other points, and the decree of the circuit court is affirmed.

But it appearing that the record contains much unnecessary, immaterial, and irrelevant matter, a portion of which, at least, is directly chargeable to the appellee, the costs of the record, and printing the same, 'may be equally divided between the parties to this suit; and it is so ordered. Fed. Cas. No. 12,492a.