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

the mortgage.credtors they cannot be called
upon to make restitution. The same argu.
ment might have been made, and probably
was made, IN Frost as. Hall. There
the mortgage. e.creditors bad received
nothing for nearly three years. Here
they received a large amount OF interest
There, rs here, the gross earnings OF the
road were sufficient to pay all the operating
expenses Of the road, with a large net in
come besides, which was applied to float
ing debt OF previous years, thus diverting
The funds both from the mortgage-creditor
and the currcnt-deDt creditor. The defect
In the argument OF the learned counsel Is
In supposing that The gross earnings OF the
company are divided into two fuDds-one
for the payment OF the mortgage-debt ere
ditor and The other for the supply and
lqbor.creditor, whereas all the earnings con-
stitute but one fund, to no part OF which
the mort is entitled until the
current debts incurred in operating the
road arc first paid.
But let it be conceded that there are two
funds OF the character indicated; with
what Justice can il be GAINED that one OF
them rather tban the Oth1r has been misap-
piled? Why should we say that the current
debt fund has been diverted rather than the
mortgage. debt fund.- A rule OF that sort
once established places IL In The power Of
the compauy's officers 10 defeat the acknOw-
ledged equity Of the curreni-debt creditor
by wasting or misapplying the assets.
When the earnings of the road are di-
verted 10 pay bonded interest, TO purchase
equipments. and TO make valuable Improve
menis. il the supply and labOr-creditOr to
be told thar he is without remedy because
the company has also mislpplied a part Of
its revenues in paving It's general creditor
OF previous years!
The reply to all such suggestions is two
fold: First. The equity OF the supply and
labOr-credtor attaches 10 every part of the
current revenue, as well that which is paid
for equipments and Improvements as that
paid 10 the general creditor. Second. The
mortgage. creditor being directly benefited
by the equipments and improvements upon
the road, cannot complain il the C0ur' uses
the net income In its hands to repay " ha,
has been thus diverted from the supply and
labor creditor.
According to Fo>dick rs. Schall, the
officers of the company are iE a sense the
trustees Of the earnings for the benetf OF
different classes OF creditors; and II they
give to one class that which property be-
longs to another the Court has the power 10
restore the parties TO their original rights.
and thus do what the cOmpdnp tSeJ Ought
10 do If Il receirer ShOuM not he appointed.
IL ba> been further sad tblt to apply the
equity OF the cuFren'-dcbt creditors 10 this
case we have to trace il through The trans
actions Of years 10 find our when and where
the mIsappiicalion Of funds was made, and
upon whom the e.pOnsl6ility Is 10 be fast
ened.
The same objection might have been
urged in Hall rs. FrOsl, and yet the Su-
preme Court found no difficulty IN applying
TO that case the principles laid down in
Fo,dick rs. Schill. But. a. a matter OF
fact, the difficulty is more imaginary than
real. Nearly all the debts in controversy
were contracted in the fiscal wear 'ermi-
mating the 30lh OF September, 1915. and The
diversion occurred IN that year and sab
sequent thereto down TO the time OF the
appointment sf the receiver.
The report OF the president Of the COM
pany, already adveTted 10, and The other
documentary evidence show unmi>takably
TO what purpose and for whose benefit a
large amount OF the earnings were applied.
This has been already explained, and need
not be repeated here.
The learned counsel for the appelleeS, in
discussing the equities OF The parties lill'
CANT, tells us that The employees OF the com
pany stood by and saw without objection
the revenues OF the road diverted TO The
pay ment II the general creditors, and now
call upon the mortgage creditors for re>tl'
tuition.
II it csn he supposed that these employ &.
knew anything Of the condition of the com
pany, it is difficult to see how they could
prevent diversion OF the funds.
They clearly could not demand the ap-
poiniment Of receiver. It will not be se-
riously inSis' ed that each one OF them ought
to have instituted his ac'ion or warrant
whenever there vas any delay or default ~
paying the wages OF each accruing from
time to Time.
What would be the condition OF a roil.
road company HAS involved in perpetual
lhigaion With its army Of emnlOve', with
its funds under process OF 9arni>hment,
and its stores and necessary supplies sub
ject To levy and sale under intcrmnlbie
executions!
From what source could the company ob.
tain It's labor and ma erial absolutely essen
tlal to the successful operation of the road.
when IL il once understood that no man
could safely trust to its power Of payment
IL is mar'er OF common nOtOriery that
these employe. arc but 100 often DELAYED IN
receiving their hardlycarned wages be-
cause the revenues Of the road are taken
for the payment OF more pressing demand,
or for the purchase OF equipments and for
necessary improvements.
But for the labor and supplv-crcditor the
road must stop operation, resulting in The
loss OF lis trade and It's diversion 10 Other
chlnuels. the general deterioration OF the
property OF The company, ana lasting IN
Jury TO the mOrtga creditor.
II The latter, through the instrumentality
OF q receiver, obtains possession OF road
properly appointed and equipped, yielding
valuable revenues, II is due in great inca
sure 10 the class OF men whose claims are
the subject Oi controversy here. The mort
gage.creditOr knows all these things. lie
certainly cannot be ignOian Of The con-
iinued default in the payments Of The Interest
due him-a fact OF nsclf sufficient 10 at
tract hiS attention and eXcire his plcions.
And vel he leaves the company for years in
the uninterrupted possession and control OF
the earnin~s OF The road, and VIGOROUSLY
obtaining credit from third persous for sup
plies and labor upon the falth OF these
earnings. when, under such crcum-
stances, the creditor calls upon court OF
equity TO intercept the revenues Tor his
benefit, he cannot complain tnat debts thus
contracted shall first be paid, within limits
so iu,t and reasonable as are now pre-
scrlbed by the courts.
Il must not be forgotten that 1t is not
merely the mortgage-crediOr and the stock
holder VINO are interested in this species OF
property, but the pnDlic also are concerned.
The railroads constitute the grand feature
OF modern civiliZ ition. Their intiu' nee
- everywhere fei:-ln an improved a2ri-
culture, IN the development and pro-