Case Name: IN RE FIFTY-FOUR FIRST MORTGAGE BONDS. GIBBES v. GREENVILLE AND COLUMBIA RAILROAD COMPANY; STATE, EX RELATIONE ATTORNEY-GENERAL, v. SAME
Court: Supreme Court of South Carolina
Jurisdiction: South Carolina
Decision Date: 1881-06-29
Citations: 15 S.C. 304
Docket Number: CASE No. 1045
Parties: IN RE FIFTY-FOUR FIRST MORTGAGE BONDS. GIBBES v. GREENVILLE AND COLUMBIA RAILROAD COMPANY. STATE, EX RELATIONE ATTORNEY-GENERAL, v. SAME.
Judges: MoIver, A. J., concurred.
Reporter: South Carolina Reports
Volume: 15
Pages: 304–322

Head Matter:
CASE No. 1045.
IN RE FIFTY-FOUR FIRST MORTGAGE BONDS. GIBBES v. GREENVILLE AND COLUMBIA RAILROAD COMPANY. STATE, EX RELATIONE ATTORNEY-GENERAL, v. SAME.
1. Under action pending in tbe name of tbe state for tbe foreclosure of a mortgage upon tbe property of a railroad corporation, and tbe appointment of a receiver, and on tbe motion of tbe attorney-general for sucb appointment, an order was passed by tbe court in the words following: “As the state cannot be required to give security as other plaintiffs, it is ordered, that the president and directors of tbe Greenville and Columbia Eailroad Company, under tbe order of and subject to this coqrt, continue in tbe possession and management of tbe property of all kinds of the said company; and in like manner continue to conduct and carry on tbe business of the said company; that they make report to this court, at sucb times as this court may require, of the condition of the property of all kinds of the said company, of its earnings and profits and expenditures, to the end that sucb orders may, from time to time, be moved for, as may be necessary and proper for the protection of tbe property of the said company, and the interests of all parties concerned, pending litigation.” Held, that this order constituted the president and directors of the corporation receivers, and that they continued in the management of the road and its business, as officers of the court and not of the company. Simpson, C. J., dissenting.
2. A referee in the cause reported $241,000 of this company’s past-due bonds, secured by the lien of a first mortgage, as still outstanding, to which finding no exceptions were taken, and the report was approved by the Circuit Court. After the appointment of the receivers, fifty-four of these first mortgage bonds were purchased by these officers — some before the report of the referee, and some afterwards, but all before the approval of the report — and entered upon the books of the corporation as investments, and not as paid, and for several years reported to the company as still outstanding, and they were then re-issued for value. Held, that these fifty-four bonds had not been paid, and in the hands of their purchasers, were secured by the lien of the first mortgage. Simpson, C. J., dissenting.
3. Appeal from a decree rendered in term time dismissed — a copy of the exceptions not having been furnished to the trial-judge within ten days after the rising of the court. Ex parte Clyde, 14 S. C. 385, recognized and followed.
Before HudsoN, J., Richland, July, 1880.
Hon. A. P. Aldrich, judge of the Second Judicial Circuit, sat at the hearing of this appeal in the place of Associate Justice McGowan, who had been of counsel.
This case involves a contest between creditors of the Green-ville and Columbia Railroad Company. It is therefore a branch of the parent-case reported 13 S. O. 228, but raises points not there considered.
On May 6th, 1872, James S. Gibbes and other creditors of the Greenville and Columbia Railroad Company, filed their complaint against this corporation and other defendants, praying that the rank and lien of the several mortgages on the property of the company be declared, and the order fixed in which they should be paid, and so forth. On June 11th, 1872, the attorney-general of South Carolina filed his complaint in the name of “ The State of South Carolina by the attorney-general,” against this same corporation, and others, its creditors, praying that the rights of the state under an act of the general assembly be declared and its interests protected, a mortgage held by the state be foreclosed, a receiver appointed, and suing and judgment creditors be enjoined, &c.
On June 18th, 1872, Judge Melton, on motion of the attorney-general for the appointment of a receiver, and by consent of other counsel, filed his order wherein he restrained creditors from suing, or enforcing their judgments, appointed John S. Green referee to call in creditors “ to make proof before him of their several and respective claims,” and to “ take testimony as to the liens set up against the said company, their order of priority, and the amounts respectively secured by such liens,” and to make report to the court. The order further provided : “ As the state cannot be required to give security as other plaintiffs, it is ordered that the president and directors of the Greenville and Columbia Railroad Company, under the order of, and subject to this court, continue in the possession and management of the property of all kinds of the said company, and in like manner continue to conduct and carry on the business of the said company ; that they make report to this court, at such times as this court may require, of the condition of the property of all kinds, of the said company, of its earnings, and profits, and expenditures, to the end that such orders may, from time to time, be moved for, as may be necessary and proper for the protection of the property of the said company, and the interests of all parties concerned, pending litigation.”
On November 15th, 1872, Mr. Green, the referee, reported, inter alia: “ 1st. First mortgage bonds — Furman, trustee. Outstanding, $241,000.” ' To this part of the referee’s report there was no exception taken by parties then before the court, or after-wards brought in by amended pleadings.
On May 13th, 1878, Judge Shaw passed an order directing that the substituted trustees of the first and second mortgages, be made parties, with leave to them “ to file exceptions to the reports of the referees in the above-entitled cases.” 'Amended complaints were filed in both cases in August, 1878, and they both alleged that there were still outstanding “ $241,000 of first mortgage bonds.” W. A. Clark, substituted trustee of the second mortgage, answered the amended complaint of Gibbes and others, but did not deny this allegation. He also excepted to the report of Referee Green, but not to the number of outstanding first mortgage bonds. This was in August, 1878.
The order of Judge Pressley, of November 23d, 1878, appointing a receiver, is substantially stated in the opinion. He considered that the order of Judge Melton made the president and directors of the company “ officers of this court and responsible to it in the character of receivers.” Judge Pressley’s decree bears date September 6th, 1879. He says: “ The report of the referee shows that holders of $241,000 of first mortgage bonds did not exchange them for those authorized by this act.” He finds as a conclusion of fact: “ 4. After payment of said debts, the first mortgage bonds outstanding, and those held by the state, with all unpaid interest thereon, are the first lien on said property.” Hé directs further inquiry as to the amount of several classes of bonds, but none as to the amount of outstanding first mortgage bonds. (The full decree may be read, if desired, in 13 8. C. at page 229.) This decree was affirmed on appeal, but the points involved here were hot embraced in the exceptions there taken.
On November 29th, 1879, Judge Mackey passed an order •directing the sale of the road on April 15th, 1880; and one other order referring it to N. B. Barnwell, the master of the court,' to call upon the bondholders of this company, including those secured by the first mortgage, to produce their bonds and “ make proof of the same, and of the amount of principal and interest due on the same,” and that the master classify the bonds so proved in the following classes: 1. First mortgage bonds not exchanged for bonds guaranteed by the state and now outstanding in the hands of persons holding the same.”
In the matter of a claim for counsel fees, Judge Mackey passed a third order in this cause, in which, inter alia, “1. It is adjudged that the order passed by Judge Melton, in the case of State, ex rel. the Attorney-General, against the Greenville and Columbia Bailroad Company, on the 18th day of June, 1872, did constitute the officers of the company the. receivers of this court for the operation of the road and the protection of the ■defendant’s property.”
At a reference held before Mr. Barnwell, master, under Judge Mackey’s order, the National Bank of Greenville, William Knobe-loch, T. J. Bobertson and others, produced first mortgage bonds, fifty-four in number, which, it was conceded, were included in Beferee Green’s “ $241,000 first mortgage bonds outstanding but they were objected to by other creditors, holding securities of an inferior lien, upon the ground that they were paid. The facts were, that these bonds all fell due July 1st, 1863, and March 1st, 1864, were purchased with funds of the company by its treasurer, under directions of the president, between March 7th, 1872, and January 6th, 1874, and re-issued in October, 1875, and in January, 1877, as collateral security for loans made to operate the road, or sold for the same purpose. “ These bonds were purchased just as other securities were purchased, and were entered upon the books of the company as investments; we were not prepared to retire any bonds,” is the testimony of the treasurer. From April, 1874, to May, 1878, inclusive, these bonds were reported in the treasurer’s annual report as outstanding.
The master, by his report of May 10th, 1880, (upon the matters involved, fully stated in the opinion,) found that these fifty- four bonds were not entitled to the lien of the first mortgage. Upon exceptions by the holders of these bonds to this report, Judge Hudson filed his decree in open court July 27th, 1880', by which the master’s report was confirmed, except in a particular not considered by this court.
The holders of these bonds served the following exceptions:
1. For that his Honor held that the status of the fifty-four bonds was not res judicata.
■2. For that his Honor held that the action of the railroad company, in taking up and re-issuing said bonds, extinguished their lien, notwithstanding the provisions of the act of January 28th, 1861.
3. For that his Honor held that the said bonds were not entitled equitably to rank with the guaranteed bonds.
4. For that his Honor held that neither the status of the president and directors of the railroad company, resulting from the order of June 18th, 1872, nor their intention in taking up said bonds pendente lite, prevented the usual effect of such bonds being taken up by an obligor and mortgagor.
5. For that his Honor overruled the exceptions made by these exceptants to the report of the master, submitted on May 10th, 1880, in relation to the fifty-four bonds, of which those proven by exceptants formed a part.
6. For that his Honor did not hold that, under all the circumstances of the case, the holders of the fifty-four bonds were, in the marshaling of securities for the purpose of distribution of the assets of the railroad company, equitably entitled to the position of bona fide holders for value, without notice of defects.
Notices of appeal and these exceptions were duly served and furnished. Mr. Fisher, receiver, also appealed upon a ground which it was unnecessary for this court to consider under the conclusions reached by them, but he failed to serve the presiding judge with copies of his notice and exceptions within ten days after the rising of the court.
Mr. J. P. K. Bryan, for National Bank of Greenville, appellant.
Tbe question of the validity of these bonds is res adjudieata. 1 Bieh. Eq. 1; 12 Rich. Eq. 138; 7 8. C. 134; 14 8. C. 225. The individual bondholders are bound, as their trustees were parties to the cause. 3 Otto 160; 10 Otto 611. A Court of Fquity will keep an encumbrance alive or consider it extinguished, as will best serve the purposes of justice and the actual and just intention of the parties. 18 Ves. 384; 6 Johns. Oh. 423. But' the company never paid these bonds — they were taken up by the receivers. The president and directors, by Judge Melton’s order, were made receivers. High on Receivers, § 184; Kerr on Receivers 136, 169, 170; 20 Bern. 349; 54 Barb. 216. As receivers, these officers were not the legal representatives of the corporation. Kerr on Receivers 2, 168, 196, '206; 7 How. 331, and particularly Whitley v. Lowe, 25 Beav. 431.
Mr. J. H. Rion, for T. J. Robertson, appellant.
Mr. James Simons, for William Knobeloch, appellant.
Mr. D. T. Corbin, for J. H. Fisher, receiver, appellant.
Mr. S. W. Melton, for W. A. Clark, trustee, respondent.
Purchase by a debtor of his own obligation with his own funds, and payment of such obligation, are convertible terms. Byles on Bills 54; 2 Pars, on Cont. 715; 4 Weis., H. & G. 13; 2 Bail. 203; Dan. on Neg. Inst., § 1285. The extinguishment of the debt extinguishes the mortgage; re-issuing the debt cannot revive the mortgage as against intervening encumbrances. 10 Rich. Eq. 487; 2 Jones on Mort., §§ 889-948; Herm. on Morh, § 173; 6 N. T. 449; 5 Oow. 671; 20 K Y. 395; 2 Allen 118; 3 Id. 339; 3 Mete. 55; 33 N. H. 532; 15 Vt. 374. The necessary conditions of res adjudieata do not exist. 7 T. R. 56; 3 Cl. & F. 510; 114 E. C. L. 255. This question was never considered. These officers were never appointed receivers — they were merely permitted to retain possession for the company. Why was not the word “ receiver ” used ? If receivers, where is their authority to purchase and sell bonds ? The holders are clearly not bona fide holders without notice, for the bonds were past due and dishonored. 50 N. Y. 158; 8 S. G. 305.
June 29th, 1881.

Opinion:
The opinion of the court was delivered by
Aldrich, A. A. J.
Other branches of these causes have been before this court. I have not had the benefit of the argument therein, but proceed to present the questions submitted as they appear to me at the present hearing.
June 18th, 1872, Judge Melton made an order on a motion to-appoint a receiver.
1. Restraining creditors of the Greenville and Columbia Railroad Company from instituting writs, and judgment creditors from enforcing their judgments.
2. That the president and directors of the company, " under the order and subject to this court," continue in possession and conduct and carry on the business of the company, and " make report to this court at such times as the court may require of the-condition of the property of all kinds of the said company, of its earnings and profits and expenditures, to the end that such orders may, from time to time, be moved for as may be necessary and proper for the protection of the property of the said company and the interest of all parties concerned pending litigation."
3. That Mr. Green be appointed referee, to call in, by advertisements in the newspapers, the creditors of the company, "to take testimony as to the liens set up against the said company, and the amounts respectively secured by such liens."
Under this order Mr. Green held references and submitted his report, dated November 15th, 1872. In this report he classifies the priority of liens as follows:
1. First mortgage bonds outstanding, $241,000.
2. Guaranteed bonds outstanding, $1,419,071.55.
3. Second mortgage bonds outstanding, $1,200,000.
June 11th, 1872, Mr. Attorney-General Chamberlain filed a complaint on the part of the state, in which-he prays "that a receiver be appointed of all the property, assets and effects of the defendants, to hold and keep the same subject to the further order of this court."
May 13th, 1878, Judge Shaw filed an order to amend the- complaint by making H. H. De Leon, trustee, a party, which was done August, 1878.
November 23d, 1878, Judge Pressley, after hearing argument in the cases, as amended, filed a judgment, in which he says: "I consider that the said order of Judge Melton," (June 18th, 1872,) " did make the officers of the Greenville and Columbia Railroad Company officers of this court and responsible to it in the character of receivers, but they have not executed the proper bond, nor have they filed their accounts or performed the other duties required by that order. It . is, therefore, incumbent upon me to put an end to that condition of the property, and to place it more substantially in the hands and under the custody and order of this court." He appoints Mr. Conner receiver.
September 6th, 1879, Judge Pressley filed his decree, holding " that the statutory liens, under the acts of 1861,1866 and 1869, were securities for the payment of the bonds therein authorized, not mere indemnities to the state, and, therefore, it had no right to waive them in favor of the second mortgage." From this decree there was an appeal by De Leon, trustee, and Clark, trustee, but no exception was taken to that portion of the order of November 23d, 1878, which adjudged that the order of Judge Melton, June 18th, 1872, " did make the officers of the Green-ville and Columbia ^Railroad Company officers of this court, and responsible to it in the character of receivers."
March 24th, 1880, this court, Mr. Justice McGowan delivering the opinion, dismissed the appeal and affirmed the Circuit decree.
November 29th, 1879, Judge Mackey made an order for the sale of the road; and, on the same day, filed another order directing holders of bonds to make proof of the same before the master, who is directed to " classify the bonds guaranteed by the state."
December 19th, 1879, Judge Mackey filed his decree, in which he decides: "It is adjudged that the order of Judge Melton, June 18th, 1872, did constitute the officers of the company the receivers of this court for the operation of the road and the protection of the defendant's property," &c.
Auditor Manson testifies: " It was not the intention of Mr. Magrath to pay these bonds; we were not prepared to retire any bonds; these bonds were entered as an actual investment in company's books, and were purchased as any other securities were purchased by the company as an investment of company funds; these bonds were used for the purpose of raising money to operate the road by pledging them as collaterals for loans."
He also proves that from 1874 to 1878, the $241,000 of first mortgage bonds were reported to the company as " first mortgage bonds then outstanding."
The note to Knobeloch for $9000, and the two notes to the National Bank of Greenville for $5000 each, are secured by " first -mortgage bonds past due."
Mr. Barnwell, master, reports upon the testimony: "These fifty-four bonds are not entitled to the security of the mortgage to C. M. Furman, and they are not, in the hands of the present holder, first mortgage bonds of the Greenville and Columbia Railroad Company." He also reports: "These bonds having been proven before John S. Green in 1872, a referee in one of these cases, their validity cannot now be questioned. As to this view, it only applies as a matter of fact to a portion of them; as a matter of law, I feel called upon by the order of this court to treat all bonds as unproved until they are submitted to me and are proved before me, to my satisfaction, to be what they purport to be. I have, therefore, passed on these bonds as I have done on all others, without regard to whether or not they had been passed upon by Referee J. S. Green. It is also claimed for them that in fact a great many of these bonds were not reissued by the company, but by a receiver of this court. As I am fully of the opinion that there was no receiver of this road until the appointment of James Conner as receiver," &c.
To this report exceptions were filed on the part of Knobeloch, Palmer, Robertson and National Bank of Greenville.
July 27th, 1880, Judge Hudson filed his decree, in which he overrules the exceptions, except those of the National Bank of Greenville. From this decree the cause now comes to this court on appeal.
The railroad interest, although in its infancy, has attained such vast proportions, commercial, financial and, I may add, political, that it becomes us to proceed with great caution in prescribing the rules of law by which these corporations are to be governed. The questions constantly arising are of such novel aspect that it can hardly be said any fixed rules of construction have yet been established. By combinations and skillful management they have acquired an influence that seriously affects the interest of society in all its relations. This court cannot legislate, but in giving construction to the acts of the legislature granting charters and privileges, it will be careful to adopt such rules as will most effectually guard the public from imposition, while it preserves the chartered rights of the corporations. In the interest of society a vast power has been concentrated in these enterprises; the right of eminent domain has been invoked in their behalf, and it becomes us to see, that while all their just and chartered rights are preserved, the public shall not be damaged.
Two questions arise here:
First. The proper construction of the order of Judge Melton of June 18th, 1872.
Second" When these fifty-four bonds were taken up by President Magrath, was it with the intent to retire them, or was it for the purpose of an investment, to afford him negotiable securities by which he could hold in hand the current earnings of the road to meet its current expenses ?
Judge Melton's order was passed on a motion for a receiver. It provides that the president and directors, " under the order and subject to this court," shall continue in possesssion of the road; conduct and carry on its business; make a report to the court of its condition, earnings, profits and expenditures. It appoints a referee to report the order and priority of the liens against the company, and restrains judgment and suing creditors. Now if this order did not make the president and directors receivers, for what purpose was it made ?
It will be remembered that on June 11th, 1872, Mr. Chamberlain, then attorney-general, filed his complaint praying: " That a receiver be appointed of all the property, assets and effects of the defendants, to hold and keep the same subject to the further order of this court." Seven days after, Judge Melton filed his order of June 18th, 1872. Was not that in response to the prayer of the complaint filed by the attorney-general on the part of the state ? Did it not invest the president and directors with all the attributes of a receiver ? We need be at no loss to determine who is, a receiver since Gadsden v. Whaley, 14 S. C. 210. Mr. Justice McGowan, after reviewing all the authorities, happily defines him as " an executive officer of the court, to administer the assets of the estate under the direction of the court, which may, for the purpose of preserving the property, restrain the executor from intermeddling with the management of the estate and compel him to give up the control of it to the receiver; but such appointment and administration do not remove the executor or administrator or destroy his character as the legal representative of the estate. The authority of a receiver rests only in the orders of the court by which he is appointed. By virtue of any general authority as receiver he has no right to sue or be sued or defend." Now here were the president and directors of this road, on a prayer to appoint a receiver, directed to take charge of the property, manage it, report its earnings and expenditures, a referee appointed to call in creditors and report the priority of liens, and creditors, swing and judgment, restrained. From this order there was no appeal: it stood as the judgment of the court from 1872 to 1S78. On November 23d, 1878, Judge Pressley filed a judgment, in which he said: "I consider that the order of Judge Melton made the officers of the Green-ville and Columbia Railroad Company officers of the court and responsible thereto in the character of receivers." From this there was no appeal. Then Judge Mackey, December 19th, 1879, filed his decree, in which he said : " It is adjudged that the order of Judge Melton did constitute the officers of the company the receivers of this court for the operation of the road and the protection of the defendant's property." From this there was no appeal. Nor do we hear their character as receivers questioned until the coming in of the report, May 10th, 1880, in which Mr. Barnwell, the master, reports there was no receiver until the appointment of Mr. Conner. Judge Hudson does not pass on this question, as he holds that whether receivers or officers of the company, the purchasers of past-due obligations can only rank as holders of unsecured bonds. I have not drawn on the wealth of authority contained in the arguments of the distinguished counsel who have presented these cases; that would extend this opinion unnecessarily, and the references will be found in the report. We conclude, therefore, and so adjudge, that the order of Judge Melton, June 18th, 1872, appointed the president and directors of the company receivers of the court.
Which brings us to the second inquiry. When these fifty-four bonds were " taken up," was it payment, and- when re-issued were they deprived of the protection of the original security ? This is a question of right and intent. It may well be questioned, if, under the order of the court appointing the president and directors receivers, they had authority to pay and retire the bonds secured by the first mortgage. They were required to carry on the business of the company — make report of its condition, earnings, profits and expenditures — for what purpose ? That the court may make such orders as may be moved for, to protect the property and the interest of all parties concerned. The court was as anxious to preserve the liens and securities of the bondholders and other creditors as it was to preserve the property of the company which protected them. It was not to create dispute and litigation, for, to prevent this, creditors of all classes were enjoined. The receiver is the officer of the court, as Mr. Justice McGowan emphatically says, "its hand" to manage the property under the direction of the court for the best interest of all concerned. No preferences are to be shown, no practices tolerated that will give advantage to one class of creditors to the detriment of another class, but the whole business is to be managed on the basis of the broadest equity. Hence large discretion is allowed him in the financial manipulation of the assets; he may call in or put out the securities of the company as, in his judgment, will best enable him to secure the property to the stockholders and pay off its creditors, subject always to the check of the court. If, in doing this, he takes up bonds one month and re-issues them the next, to save interest and enable him to meet the current expenses on the most economical scale, I do not see that he thereby destroys the lien of the bond taken up, which made it a secure-investment when originally issued and which is supposed to retain its lien as it passes from hand to hand around the financial •circle. To assume this would not only create distrust but destroy the credit of the road, for it cannot be supposed that capitalists will lend money on collaterals, the validity of which involved, constant legal investigation. If he is " the hand of the court," where does he derive his authority to pay a bond, cancel and then re-issue it deprived of the protection of the original mortgage by which it was made valuable and negotiable ? I see nothing in the order to confer such a power. It appears to me to be a most •extraordinary proposition that where a receiver is appointed to protect creditors and property he will be permitted to destroy liens and make new debts on thq faith of thgse very liens which he knows he has extinguished !
Now let us consider the condition of things when the receiver took charge of the property under the order of Judge Melton in 1872. The referee, Mr. Green, reports $241,000 (of which these fifty-four bonds were a part) as "first mortgage bonds outstanding." This report is not excepted to and becomes a part of the record. These bonds are annually described, for a series of years, in the reports of the company as bonds thus renewed. Mr. Manson, the auditor, says: " It was not the intention of Mr. Magrath to pay these bonds ; we were not prepared to retire any bonds; these bonds were entered as an actual investment in company's books, and were purchased as any other securities were purchased by the company as an investment of company funds ; íhese bonds were used for the purpose of raising money to operate the'road by pledging them as collaterals for loans." How, then, can it be said this was payment, and debtor and creditor uniting in the same person, the lien of the mortgage was lost ? That is not all. Mr. Magrath was not examined, but his acts speak with great emphasis. He not only published the bonds in his annual reports, which were- distributed, " as first mortgage bonds then outstanding," but he actually incorporated in his notes to Knobe-loeh and the National Bank of Greenville a description of them as " first mortgage bonds past due." After this there was no use to examine Mr. Magrath to say with what intent he took up and re-issued the bonds. If he did not intend to give them the character of first mortgage bonds, he was practicing a hideous fraud on the men who advanced their money on the faith of that security. And it is equally extravagant to suppose, that any man. of ordinary business sagacity would advance his money to a corporation threatened with bankruptcy, in the hands of a receiver,, unless he supposed he was protected by the first mortgage.' Further yet: Judge Pressley, in September, 1879, held " that the statutory liens were securities, not mere indemnities to the state, and, therefore, it had no right to waive them in favor of the second mortgage." From this judgment there was an appeal, which was dismissed. Judge Mackey held that the order of Judge Melton did appoint the president and directors receivers, from which there was no appeal. He ordered the master, Mr; Barnwell, to classify the bonds guaranteed by the state. What bonds ? The bonds reported as " first mortgage bonds " by Referee Green — the bonds decided to be first mortgage by himself and Judge Pressley. Is not the question res judicata ? And yet, when the master comes to classify the bonds, what does he do ? He overrules Judges Mackey and Pressley, treats Referee Green's report with indifference, and actually holds, in face of the adjudications of Judges Pressley and Mackey, that there was no receiver of the road until the appointment of Mr. Conner, Instead, therefore, of classifying the bonds in accordance with the decisions of the court by whom he was instructed, he rules them out as not entitled to the protection of the first mortgage. The act of 1861 provides that " the bonds thus taken up shall stand as security to the state, and thereby give the state the lien under the first mortgage, until all the bonds thus secured by mortgage-shall be retired." As I have said, Mr. Magrath never intended to retire these bonds and deprive them of the protection of the first lien. If, then, he took them up, not to retire them, not to pay them, but as an investment to save interest and meet the current expenses of the road, when he re-issued them, they went into the hands of the purchasers clothed with all the protection given them in their original and first issue.
After all the learning, instructive and interesting, that has been displayed, it does seem to me, from a careful consideration of the several reports, orders, declarations and judgments made herein, that this discussion is more of an intellectual gladiatorial contest on questions of law, arising since the commence ment of the suit, than on the law applicable to the facts at the time of the transaction. But at last the real question is, did President Magrath, who issued these bonds, and the capitalists who advanced their money on the security, regard them as first mortgage bonds ? On this question we have no doubt they were so issued, so regarded, and are entitled to the protection which gave them value when put in the market. And it is adjudged that they are secured by the first mortgage. Let the decree be reformed in conformity to the principles herein announced.
Here is a motion also to dismiss the appeal of Mr. Fisher, receiver, because a copy of the exceptions was not served on the presiding judge within ten days. The points involved in the appeal having been fully argued by counsel, and the case decided, it is a matter of little consequence to the appellant, Fisher, what becomes of this motion. We have no doubt that Mr. Cor-bin, attorney for Mr. Fisher, agreeing to pay, and actually paying his proportion of the expenses in preparing the brief, and the cause being fully settled for argument, supposed he had done all that was necessary. But the rule is finally established in Ex parte Clyde, and cannot be departed from.
The appeal of Fisher, receiver, is dismissed.
MoIver, A. J., concurred.