The present appeal brings before us for examination a decree of the Circuit Court rendered April 25, 1877, adjudging that the county of St. Louis had an equitable lien or charge upon the earnings of the Pacific Railroad of Missouri, to whomsoever the same may be transferred or conveyed, prior and paramount to any mortgage or other lien thereon, to the extent of $4,000 per month, payable monthly, from the first day of April, 1876, and $1,000 payable in each month of December, to meet the interest upon $700,000 of bonds issued by the county of St. Louis in the year 1875, and by it loaned to the Pacific Railroad Company, such payments to continue until the bonds are fully paid by the company.
The decree declared the lien to exist, and to be enforceable on the railroad property and franchises, against the funds in the hands of the receiver in this suit as well as the purchaser under the mortgage foreclosure sale to be hereafter referred to.
The learned judge who heard this cause in the Circuit Court rested the decree upon the proposition of law that 'if a debtor by a concluded agreement with a creditor sets apart a specific amount of a specific fund in the hands, or to come into the hands, of another from a designated source, and directs such person to pay it to the creditor, which he assents to do, this is a specific appropriation binding upon the parties and upon all persons with notice who subsequently claim an interest in the fund under the debtor.'
Was there an agreement of the character indicated in this statement?
That is the first question to which we shall direct our attention.
The Pacific Railroad Company was incorporated by the legislature of Missouri in the year 1849, with power to construct a line of railway from St. Louis to Kansas City, a distance of nearly three hundred miles. For the purpose of aiding in the construction of the road, the State from time to time loaned its bonds to the company. They amounted in the year 1855 to more than $7,000,000, and were secured by a first mortgage upon the property, franchises, and income of the company, with power of sale upon default in meeting the interest and principal of the bonds. Less than two hundred miles of the road was completed at the beginning of the recent civil war, and during its continuance but little progress was made in the work of construction.
By an act approved Feb. 10, 1864, the company was authorized to borrow money 'for the completion of the main road to Kansas City,' and, for that purpose, to issue its bonds to the amount of $1,500,000, 'to be secured by a first mortgage on the main line of the road west of Dresden,'-so much of the bonds as were necessary to be applied to the completion of the road from its then terminus to Kansas City, and to no other purpose. For that object, and to that amount and extent only, the State, by the express words of the act, relinquished her first mortgage lien and right of forfeiture upon the road west of Dresden, retaining, however, a second lien and mortgage thereon,-such second lien and mortgage to become forthwith, upon the payment in full of the principal and interest of the bonds authorized by that act, the first lien and mortgage, in every respect and as fully as those held by the State.
The act created the office of fund commissioner, to be filled by appointment of the governor, subject to confirmation by the Senate. It declared that such office should 'continue until the bonds issued for the completion of the road, and the State bonds loaned to said railroad company, with interest thereon, are fully paid out of the earnings, or exchanged for the first-mortgage bonds of said road,' as thereinafter provided. The fund commissioner became entitled, and it was made his duty, to take possession of the $1,500,000 of bonds authorized to be issued, negotiate the same, and their proceeds, together with the gross earnings of the road, from whatever source, to control and apply as directed in the act.
Without referring to other provisions of the act, it is sufficient to say that the State, through the fund commissioner, acquired, for its security, complete control of the earnings and income arising from the property.