Court Opinion

ID: 8855585
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:29:12.601577+00
Date Added: 2024-06-11T17:05:38.692800
License: Public Domain

LURTON, Circuit Judge,
after stating the facts as above, delivered the opinion of the court.
The assignment of error upon which the rightness of the decree below must turn is that which complains of the action of the court in not allowing rentáis against the receiver, and out of the corpus of the fund arising from the sale of the mortgaged property of the railway company upon the basis of the stipulation of the contract between the railway company and the depot company. Confessedly, the property of the railway company, at the date at which that contract was made, was, and is now, utterly insufficient to pay the creditors secured by mortgages which long antedated that lease arrangement. Any claim for rentals as between the lessor ánd lessee is therefore an unsecured claim, and not entitled to be paid until the secured creditors have been first fully satisfied. The income.derived by the receiver from the operation of the railway company is not more than sufficient to pay the necessary operating expenses, and any allowance for rentals of the depot property must come out of the corpus of the mortgaged property, and to that extent diminish the payment of the creditors secured thereon by mortgage. The appellant, however, seeks a preference over the mortgage creditors by reason of the fact that the receiver of the railway company was placed in possession of the property of the depot company, and remained in the use and occupation of that property for a period of about 10 months. This, it is contended, operated as an adoption of the lease, and an assumption by the receiver of the obligations and *91stipulations therein in respect of rent while he should remain in possession. A receiver appointed by a court of equity does not take or hold as an assignee. He is the mere hand of the court appointing him, and his custody is that of the court, and is for the benefit of all who may ultimately appear entitled under the decrees of the court. The mere fact that Chamberlain was appointed receiver of the property of the railway company, including its leasehold interest, did not make him liable for the covenants of the lease under which the railway company held the property of the depot company. Neither did the mere fact that he took possession of the depot company’s property operate as an adoption of the lease. Whatever the doubt at one time entertained as to the effect of a receiver taking possession of leasehold property under an order of a court of equity, it is now well settled that such a receiver may take and retain possession of leasehold interests for such reasonable time as will enable him to intelligently elect whether the interest of his trust will be best sub-served by adopting the lease, and making it his own, or by returning the property to the lessor. Oil Co. v. Wilson, 142 U. S. 313-322, 12 Sup. Ct. 235; Railroad Co. v. Humphreys, 145 U. S. 82, 12 Sup. Ct. 787; Kneeland v. Trust Co., 136 U. S. 89, 10 Sup. Ct. 950; Thomas v. Car Co., 149 U. S. 95, 13 Sup. Ct. 824; United States Trust Co. v. Wabash W. R. Co., 150 U. S. 287, 14 Sup. Ct. 86; Park v. Railroad Co., 57 Fed. 803; Farmers’ Loan & Trust Co. v. Northern Pac. R. Co., 58 Fed. 257; New York, P. & O. R. Co. v. New York, L. E. & W. R. Co., Id. 268.
The depot company was a party defendant to the suit in which the receiver was appointed; and appears to have made no objection to the appointment of a receiver, nor to have made any application to the court for a restoration of its property. The suggestion that the retention by the receiver of the possession of this property for 10 months was unreasonable and unnecessary to enable him to make an intelligent election is, we think, untenable in view of the circumstances of this case. The evidence shows that the contract rent stipulated for in the lease was quite extravagant, and that the earnings off the railway company under the receiver were wholly Inadequate to justify an assumption of the terms of that contract. This fact appears to have been clearly understood by both the receiver and the officers 'of the depot company. So, it is clearly established that the receiver at no time had the slightest intention of adopting the lease, and that he remained in possession as long, as he did only because of pending negotiations actively kept alive by the officers of the depot company concerning an agreement as to a reasonable rent. It is unnecessary to go into the details of the evidence touching these negotiations. It is sufficient to say that until a receiver was appointed under another and independent proceeding, for the property of the depot company, that the active officers and agents of the depot company, including one Erb, who was the sole stockholder of the depot company, were exceedingly anxious that the receiver should continue in possession at any reasonable rental, rather than the property should lie idle and suffer by disuse. These negotiations concerning the terms upon which the railway *92receiver should remain in possession continued down to the 20th day of hior ember, 1892, when W. W. Milam was appointed receiver for the depot company under an order which recited that the depot and terminal facilities were then being used by the Chattanooga Union Railway Company and the Chattanooga Southern Railway Company, and which directed that the possession and control of the receiver then appointed “should not interfere with the rights of said railroad companies to the use of said depot so far as the same are secured to the said companies by virtue of any existing contract by and between the depot company and said railway company, unless otherwise ordered or directed hereafter by this court.” It is well to here observe that this order was not made in a case to which the railway company or its receiver was a party, and therefore it in no way operated as an adoption of the terms of any contract between the railway company and the depot company touching rentals for the property of the latter. The evidence skews that the receiver thus appointed thought it preferable that Chamberlain, the railway company’s receiver, should occupy the depot' rent free, rather than that the property shouid be abandoned, and that he agreed that this might be done if the court would make an order sanctioning it. This order, when requested, was opposed by Mr. Barr, counsel for the complainant trustee in the foreclosure suit against the depot company; whereupon the premises were at once surrendered to the receiver for the depot company. The circumstances all tend to establish very satisfactorily that the retention of possession by the receiver did not indicate an intention to adopt the lease, or to retain possession against the will of the depot company. Upon the contrary, the clear inference is that the possession was retained practically by consent of the depot company, and under an implied understanding that the receiver should occupy subject to a reasonable rent. That the parties were unable to agree upon a reasonable rentál does not operate as an adoption of the unreasonable stipm lations of the lease. The evidence abundantly establishes the reasonableness of the rental alloAvance made by the master, and confirmed by the court. The decree is accordingly confirmed.