A railroad mortgage covers the road, al though the route differs from that originally laid out. It covers, also, a right of way ac quired subsequently to the mortgage, though here the mortgage would be strictly con strued, and while held to apply to property used for railroad purposes, it would be held not to apply if not so used ; Porter v. Steel Co., 122 U. S. 267, 7 Sup. Ct. 1206, 30 L. Ed. 1210. It covers terminal facilities upon a line of railroad constructed or to be con structed between the named termini, togeth er with all stations, etc.; Central Trust Co. v. Kneeland, 138 U. S. 414, 11 Sup. Ct. 357, 34 L. Ed. 1014. See TERMINAL FACILITIES. It applies not only to legal titles but also to equitable rights and interests subsequentiy acquired either by or for the company ; Wade v. R. Co., 149 U. S. 327, 13 Sup. Ct. 892, 37 L. Ed. 755; Bear Lake and River Water Works and Irrigation Co. v. Garland, 164 U. S. 1, 17 Sup. Ct. 7, 41 L. Ed. 327 ; it em braces the lease of a belt line around a city acquired after the execution of the mort gage ; Columbia Finance & Trust Co. v. Ry. Co., 22 U. S. App. 54, 60 Fed. 794, 9 C. C. A. 264. It does not cover uncalled capital ; [1897] 1 Ch. 406. Where the property ac quired is at the time subject to existing liens, these liens are prior in right to the lien of the mortgage ; U. S. v. New Orleans R. Co., 12 Wall. (U. S.) 362, 20 L. Ed. 434 ; Central Trust Co. of New York v. R. Co., 81 Fed. 772. See FUTURE ACQUIRED PROPERTY. And if property was fraudulently acquired, the ven dor may rescind as against the mortgagee.
Another rule resting upon the quasi-pub lic character of a railroad is that which pro hibits' creditors from levying an attachment or execution upon the railroad, or parts of it, even subject to the mortgage. To permit such action would be to permit the disin tegration of the railroad and the destruc tion of the power to discharge the public ob ligation of the corporation.
Foreclosure. The mortgage deed of trust usually contains provisions for enforcing the rights of bondholders in case of default of the mortgagor. - It usually provides for (1) Entry by the trustee. This is seldom now resorted to, since by operating the property, the trustee becomes liable as the mortgagor would have been, and as default implies that the property has been operated at a loss, the trustee will seldom consent to exercise this right, and never unless sufficiently indemni fied by the bondholders. (2) Trustee's sale of the property after prescribed advertise ment, which is seldom resorted to. (3) The usual method of procedure is by a bill of foreclosure, usually accompanied by a prayer for a receiver (see supra; RECEIVERS) and for the ascertainment of liens or claims against the property. No provision in the mortgage can exclude the right of a trustee to apply to a court of equity for foreclosure.
The provision usually found that a majority, or a specified proportion, of the bondholders may by an instrument in writing waive the right to declare that a default has occurred, will be sustained by the court, though such provision is not favored, as being inimical to the rights of a minority. Provisions unrea sonably limiting the right to foreclose are void. When a provision required the request of one-fourth of the bondholders to compel the trustee to begin foreclosure, the fact that three-fourths of the bonds were held by a company operating the mortgagor company was held to justify action by a single bond holder ; Linder v. R. Co., 73 Fed. 320. In case the trustee refuses to act, a bondholder may bring suit for foreclosure on behalf of himself and such others as may join; New York Security & Trust Co. v. Ry. Co., 74 Fed. 67; id., 77 Fed. 525 ; in such case the re fusal of the trustee must be set out and the trustee should be made a party defendant ; General Electric Co. v. Electric Co., 79 Fed. 25; First Nat. Bank v. Trust Co., 80 Fed. 569, 26 C. C. A. 1.
Mortgage bondholders have no right to foreclose or to intervene in a suit by the trus tee to foreclose the mortgage, he being the proper person to do it, unless negligence, in competency, or improper conduct of the trus tees injuriously affecting their interests, is established ; Wiltsie, Mtg. Forecl. § 127, where the cases are collected.
If a single bondholder has the right to in stitute proceedings he is bound to act for all standing in a similar position ; New Orleans P. Ry. Co. v. Parker, 143 U. S. 42, 12 Sup. Ct. 364, 36 L. Ed. 66. See PARTIES.
Railroad foreclosure suits are begun gen erally in the federal courts, thus securing the appointment of the same receiver or re ceivers for the entire property, and avoiding, to a certain 'extent, possible prejudice in a state court. For the latter reason, perhaps, the same jurisdiction is sought in many cas es of corporations other than railroads. The jurisdiction of the federal courts in such cases depends on the citizenship of the par.
ties. Federal courts sitting in equity cannot be ousted of jurisdiction to enforce a right of an equitable nature by a state statute which prescribes an action at law to enforce such right ; Sheffield Furnace Co. v. With erow, 149 U. S. 574, 13 Sup. Ct. 936, 37 L. Ed. 853. See JURISDICTION.
Where a federal court has jurisdiction and possession of the property of a railroad com pany, it acquires jurisdiction of a subsequent suit to foreclose a mortgage on the same property, irrespective of the citizenship of the parties thereto ; Morgan's La. & T. R. & S. S. Co. v. Ry. Co., 137 U. S. 171, 11 Sup. Ct. 61, 34 L. Ed. 625 ; Carey v. Ry. Co., 52 Fed. 671.