Hello all: When we look at freight cars sometimes we notice on the upper corner some stenciling indicating the car has been financed by an outside source. Is there a book that covers this subject as to who they are and their relationship to the railroads. Thanks for your insightful replies.
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Good question, looking forward to see what the forumites know about this.
I don't think anyone's ever done a book on the subject? As I understand it, the cars (and locomotives) that a railroad buys are normally bought via loans, essentially like a mortgage agreement, that spreads out the amount due over a number of years. Usually the financing is through a bank or trust company that is lending the railroad the money for the purchase. I believe there have been situations where a government agency was involved, lending money for new equipment to help revitalize railroads during slack periods.
I believe that WJSTX has it right.
If a mortgage or deed of trust or any other lien document against property is not properly filed in a particular location, then in most instances, the lien is still valid and enforceable against any person or entity that has actual knowledge of the lien before they buy the property or lend money against it and want to place their own lien on it. (There are exceptions to this rule, such as a consumer who buys consumer products from a business that in the ordinary course of business is a vendor of such products, as when you buy groceries at a grocery store. You know that a bank has a lien against the store building and its contents, but you take free of the lien when you buy the groceries.)
You may have noticed if you have worked in big machine shops or other industries that have huge expensive operating fixtures, that there is very often a metal placard permanently affixed to the machine, that says something like "This fixture is subject to a purchase money security interest in favor of XYZ Bank." These placards are required under the term of the massive Loan Agreement, and banks actually send people out to inspect them once a year.
The reason that this is done is that fixtures can be detached from the buildings and sold as used machinery, and the lender wants to make sure that if a prospective buyer comes to look at the fixture, that he is on actual notice of the lenders lien, and can't later say he didn't know about the lien and bought free and clear of it. It is the same concept as to why states require that liens on cars and trucks must be conspicuously stated on the Title to the vehicle. If you buy a car, and the seller hands over his Title, endorsed to you, BUT the Title still has a Notice of Lien on it, then you take subject to the lien. The Lienholder has rights in the vehicle that are superior to yours. You can't claim to be a bona fide purchaser for value without notice (a "BFP").
The placards are also typically required when a lender lends purchase or refinancing funds for new or used aircraft. These are typically affixed in a prominent location in the pilot's cabin. (An aircraft can be flown to a foreign country in South America in a matter of a couple of hours.)
So, I am only guessing that if Chase Bank lends $100 million dollars to CSX to buy a fleet of rail cars, then you can see why they would want to put some type of notice of their financial interest or lien on the side of the car. As you can imagine, the cars may be rolling in and out of 50 states, and well as Canada or Mexico, so the Bank would want to be sure to give actual notice of their interest on the cars, in case their filed lien document is defective, or accidently expires or is filed in the wrong location.
This would also apply to governmental agencies lending purchase money.
And, I would also imagine, that if a federal or state agency gives free money ("support") to an entity to buy equipment, then that agency wants to give notice of that on the equipment, strictly for public relations purposes. In effect, a "look at what we did" notice.
Hope this helps.
Mannyrock
Here's a good discussion of the topic.
I learn something new every time I come to the forum
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