The daily dispatch. [volume] (Richmond [Va.]) 1850-1884, 1881-01-14

tue oiuCtis VI tut NVbpduf uit iH e'uSt
trustees OF these earnings, for the beneht
OF the different claims Of creditors, and II
they gave TO one class OF creditors that
which properly belongs 10 another the
Court may. upon an adjustment Of accounts,
so use the income In its hands as TO restore,
II practicable, the parties 10 their original
rights"
These principles, as applied TO railroad
mortgages. thus laid down by The Supreme
Court OF The United States. appear TO have
commended themselves generally 10 the
courts and The profession throughout the
couutrv.
II will be observed that in the opinion OF
the supreme Court The right Of the supply
and labor. creditor to pa"ment from the
funds OF the receiversbip Is not limited, as
some have supposed, to a restoration OF the
amount paid 10 mortgage. creators IN the
way OF interest; bDt whenever II appears
that additional equipments have been pro-
vided for the rOaO, and permanent i'm
DrOrementS made, flom the earnings in the
hands Of the company, leaving the supply
and labOr-debts unpaid, il Is In the power
OF the Court 10 use the income Of the re-
ceiversbip in paying such debts, and thus
restore what has been Improperly diverted.
g. tIat diversion from The lsbor- and sup
,-creditor may occur as well in paying
for equipments and improvements IL In pay
ing the mort teage-cl editors; and this upon
the obvious ground that without supplies
and labor the business Of the road cannot
b. carried on, and The mor'gaec-credIor IN
accepting his security impIiptlc agrees that
the current debts made i'll the ordinary
course OF business shall be first paid from
the current rec pts.
II any reasonable doubt couid be enter
tanned Of The pXicut and meaning Of the de-
cision in FOsdl' k rs. Sehall. il ls set ~ ieSt
by the subsequent case of Hall as. Frost,
decided by the same court short lime after
wards: reported also in . OTTO. page 3S9
In thai ease the court unanimously affirmed
the following principles Is governing in
these eases The net earnings Of the road
while in the possession Of ihe court and oD-
era'Cd by is receiver are not necessarily
and exclusively tGe properly of the mort
gogeeS, but are subject 10 The disposal !
the chancellor in the pawn Mt OF claims
Whcn have superior equities, II such
shall be found to exist and. further that
the peliliOners' claims in lh> case have SUI
periOr tQuIieS to thCS' OF the mortgages.
Let H. see Whlt was the character Of the
debts thus allowed in preference TO the
mortgage liens. The claim OF the Car
Spring Manufacturing Company was for
cjr->pring> aud >pirais sold the railroad
COMPANY in March and Aplil before the re-
ceiyrr was appointed. The claim of Hall,
Aver IL Co. was for supplies to the machinery
department and for material for construc-
ton purposes furnished TWO yelrs or more
before tie appointment Of The receiver.
Tue Supitme Court Of The United States
rejected The claim OH account OF material
for construction pul poses. The case 1S re-
porled docs not show the reasons; hut one
OF The counsel for The appellants states in
his brief il appeals from the original record
" that this material was used IN the con-
structiOn Of an independent branc1 road,
and Therefore the deOt dld not come under
| the influence OF the principle governing this
/ class Il cases.
/ II is not at all material hecause the Su-
preme Court directed payment of The claim
for cir.sDrIn9s and >pnaIs, and OF the claim
/ for supplies to the machinery department
OF the road to he paid from earnings In the
| hauds ~ the receiver in preference 10 tbe
claims Of mortgage ci editors. 1t is not
pretended there waS any diversion IN that
/ case in favor of those creditors, because the
company had paid 10 interest since The year
I 1873.
|
/ in" debt OF II. 900 900. contracted in pre-
Viou. wears. for equipment and constIuc-
lion. rep iirs. wages, taxes. &c., TO which
the net e1rnln9> OF the road, 10 The amount
Of $3.50 600, had been applied by the COM
pany.
If the decision OF the court proceeded
uDon anv IDEA OF division OF the funds, II
was a ulyision for purposes OF equipment,
construction, and repair, and no. for pay
ment Of interest TO the mortgage. credit or
/ Let IL then see what are the points OF re-
| seuhlunce between that clse and the ease
bef re- us.
As already stated. the claims in contrO.
yersy here amount to about S244.l4f, eX-
elusive of in crest, nine teDths OF which ac-
crued m the years 1874 ana 1873.
Between September 80, 1874, and the date
Of the receivers appointment the gross
revenues of the company were sufficient TO
nay all the current expenses or operating
! tie road, IncluCIng the present claims. and
! 10 leave net income OF more than $780,
000. During The same period there was
pad bl the company to us mortgage or
| trust creditors. according To one estimate,
the sum OF S4l2GS2 according 10 another
estimate the SUN If S3l1.150. One more
immediate inquiry, however is with the
year ending September 30, 1870, as during
! that wear 'he claims with which we have TO
| deal accrued.
| II appears that The gross revenues for that
wear were Sl.033. $50. How much was paid
to mortgage CT iedtDrS in tie way OF interest
j. not clear-accordiBg 10 one estimate,
S10i. .5ss: according TO another. Sl96,000.
| large amount was also paid for what IL
known is the Lynchburg and Danyille eX'
tension. The balance of more Than 800, 900
was used by the company in paying It's
floaliDg and unsecured debt.
| II appears that large portion OF this debt
was contracted in the puichase OF equip
mems and in making repars and usefni i'm
proypmenis. Prcslden Barbour, in his an
nual report Of the operations OF the road
for the yelr ending 30'h Of September, 1870,
states .that considerable oujiays have been
made during the year in the form of repalrs
TO the roadway, bridges, aud equipments,
besides several small expenditures for new
WORK aud construction required for The
proper unrkIng Of the road"
He further states that 1.224 tons OF new
lion rail. and 6S,753 crossies have been
put on the track during The year. Several
llroe bridges across the principal rivers
have beeb rebuilt, aud extensive repairs
made to The small bridges on the line. The
mainten9nce Of the property IN good con-
oliion has been regarded a. material to tue
safety OF the trains and the proper working
OF the road, apart from the policy OF pre-
serving il from depreciation.
re necessity Of making these heavy ap-
preparations for repairs has absorbed means
90 a large extent which otherwise would
have been applied pro tdnto in plvment OF
the comDan;'s Indebtedness" This eXplalLs
why il was the lahOr- aud supply-credltOrs