Court Opinion

ID: 6674768
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:14:54.207656+00
Date Added: 2024-06-11T16:00:27.083254
License: Public Domain

The opinion of the court was delivered by
Ebaser, A. A. J.
The action in the above case in which James S. Gibbes and others are plaintiffs, was commenced May 6th, 1872. On May 25th, 1872, an order was made by his Honor, Judge Melton, “ that until further order of this court the said ■Greenville and Columbia Railroad [Company] be enjoined and restrained from paying out or in anywise transferring and delivering to any person any of the moneys, property or effects of the •said company, except so far as the same may be necessary to the ■keeping up and to the operating of the road of said company.”
On June 11th, 1872, the action in the name of the attorney-general was commenced. A motion was made for a receiver and other relief and Judge Melton, by consent of counsel for the company and certain creditors, on July 2d, 1872, ordered “ that any and all judgment creditors of the said company be restrained and enjoined from enforcing their said judgments against the property of the said company.” The same order contained this further provision : “ 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, continué in the possession and management of the property of all kinds of said company, and in like manner continue to conduct and carry on the business of said company ; that they make report to this court at such time as this court may require, of the property of all kinds of 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 said company and of the interest of all parties concerned, pending litigation.”
Affairs continued in this situation until November 23d, 1878, •when Judge Pressley made an order in which it is said: “ I eon-*528sider that the said order of Judge Melton 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, imperative on 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. It is, therefore, ordered that James Conner, Esq., be, and he is hereby, appointed receiver of all and singular the property and assets, rights, credits and franchises of the corporation defendants, the Greenville and Columbia Railroad Company; that he do forthwith demand and receive possession thereof, * * * and the same safely keep and preserve, subject' to the control, order and direction of the court, with power and authority to manage and operate said railroad, to receive the income and earnings thereof, and of the same to disbu/rse whatever may be necessary for the expenses of running said road, and with all the other and further power and authority as may be conferred by the decree of this court hereafter to be filed. It is further ordered that all and singular the creditors of the said the Greenville and Columbia Railroad Company be, and they are hereby, enjoined and restrained, * * * from enforcing judgments against said company.”
After this order was made, James Conner, as receiver, took charge of the road and all the property of the company and for some' time conducted the operations of the road very successfully, and, after meeting all current expenses of his administration and investing a considerable sum out of the income in necessary rolling stock, &c., had on hand and has turned over to the master of this court a considerable sum arising from income.
By the order of the court the road and all its outfit and all the property of the company have been sold by the master. The sum realized was sufficient to pay all the first mortgage bonds and the guaranteed bonds. The second mortgage bonds constituted a third lien on the property, and after exhausting the proceeds of the sale and all the surplus of income, there would still be a large deficiency in the amount necessary to pay these bonds.
The petitioners in the cases before the court are not lien cred*529itors. They claim, however, that they have a right to be paid out of the income ; that their claims were expenses incurred during the period in which the railroad, was in the hands of a receiver, or if not a receiver eo nomine, in the hands of persons appointed by, responsible to, and acting under the orders of the court which had enjoined the enforcement of judgments against the property of the company.
The petitioners have unnecessarily complicated their cases by suing them to judgment in the Court of Common Pleas, in which they are severally parties plaintiffs and “The Greenville and Columbia Railroad Company ” defendants.
The first three cases were claims for injuries done to passengers, June 1st, 1874. The amount of the judgments are for Brown and wife, $8137.15; Redwood, $2636.85; and Cummings, $2650.90. The last case was for injury resulting in the death of John T. Layne, an engineer in the employ of the company, or rather of those who, under the order of the court, had charge of the road and directed its operations. The injury resulted from a defective boiler. In this case there was a judgment by consent of the counsel of the administratrix and the counsel of the managers of the road. “ The president and directors ” had the company represented by counsel in these cases and, so far as appears, raised no objection to the appearance on the part of the company. It'is not clear that there could have been any valid objection raised to a suit against the company, as only the enforcement of judgments was enjoined.
These claims are all pressed in this case not on account of their rank as judgments, but on account of the cause of action on which those judgments are based. It would have been more regular to have based the claim in this court at once on these several causes of action. This, however, would have opened the cases anew and led to a very long and expensive investigation. It is as well, therefore, and perhaps the duty of this court to disregard the mere form and treat the judgments as they seem to have been regarded by all parties as sufficient evidence of the nature of the claims and the amounts due on them severally. These claims were referred to the master, were reported on unfavorably and the report confirmed by the Circuit judge, and this *530appeal is from his ruling. Claims for cotton lost and also counsel fees for professional services rendered after the commencement of the proceedings by the creditors against the Greenville and Columbia Railroad Company, have been paid out of the income made by the'receiver, James Conner, but it does not follow that these claims, which are contested by the lien creditors, should also be paid out of the fund ; they must stand on their own merits.
These claims arose during the management of the road by “ the president and directors,” under the order of the court and before the appointment of “ Receiver Conner.” The president and directors did not turn over to Receiver Conner any surplus of income and it was claimed by the petitioners and conceded for the purposes of these cases that a considerable amount of the income during the administration of the president and directors was paid out as interest on the bonds held by the lien creditors. The fact was not settled by the presiding judge, but it seems not to have been seriously questioned in the argument, and in the view taken by this court of these cases it is not material what the fact is. The question of a diversion of the income to interest becomes important when claims which ought to be paid out have not been paid and such income has been diverted to the payment of interest, and the question is whether such income so diverted should not be restored out of the sale of the property. In this case there is no such question. There is a considerable sum turned over by the receiver to the master and now under the control of this court.
If the order of the court of July 2d, 1872, created a receivership in fact, then the mere transfer of that office to Receiver Conner certainly cannot have the effect of invalidating claims which were good under the first administration. The management of the court is one even' if it becomes necessary to change the receiver once, twice or oftener. Claims against receivers would stand on a very unstable basis if they could be defeated by a change which could so easily be made. The questions, therefore, are these:
1. Was the order directing “ the president and directors of the Greenville and Columbia Railroad Company ” to continue in the possession and management of the property of all kinds of the *531«company ” and “ to conduct and carry on its business under the ■order of and subject to this court,” and “ to make report,” that orders * * “ may from time to time be moved ” for “ pending litigation,” the appointment of a receiver ? If not in name was it so in substance ?
2. What are tbe relations of such a receivership to third parities with whom it may have transactions in reference to the ¡property and business of the corporation shippers, passengers, «employees, &c. ?
It is true, that this order of July 2d, 1872, was somewhat •anomalous. It was without bond .that the president and directors of the Greenville and Columbia Railroad Company were intrusted with valuable property, but they were not the owners ■of the property, and it was competent for the Circuit judge to ■dispense with the security, and if, in his judgment, they were proper persons for the appointment, it was in his discretion to make it. It is true that it was no individual by name that was appointed, but it was an organized board whose identity was provided for and secured by the rules laid down for preserving the vitality of the corporation whose exponent it was. It is, •perhaps, a peculiar appointment, but it was competent for the •court to make it. See High on Rec. 66, 67, 68, 81, as to persons to be appointed.
All the essential powers of a receiver were conferred by this orr •der. It is the business of the receiver “ to receive and preserve the property” pendente lite — “ the court itself having the care of the property by its receiver.” The receiver has no powers other than those conferred on him by the order of his appointment, or «such as may be derived from the established practice of Courts •of Equity. High on Rec. 1.
These officers, “ the president and directors,” were ordered to continue in the possession and management of the property ” and “ conduct and carry on the business of the company,” and “ make reports,” that further “ orders ” may be made. In the ■order of Judge Pressley, of November 23d, 1878, James Conner was appointed receiver eo nomine and he was required “ to demand and receive possession of all the property of the company, ■to keep and preserve the same, subject to the control, order and *532direction of the, court, with power and authority to manage and operate the said railroad, to receive and disburse the income, the-' disbursements to be confined to the expense of running the-road.” In the first case the sweeping power is given “ to conduct and carry on the business of the company, and in the latter the power is somewhat limited in the matter of expenditures of income. Every essential feature of a receivership was created by the order of July 2d, 1872, and the office ought to have been, so called, and to be treated so now after the property has been, at the instance of the creditors, held for eight years in the same way as if it had been in name as it was in substance, a receivership. Fifty-four Bonds ease, ante 304.
Having come to the conclusion that the property of the Green-ville and Columbia Railroad Company has been in the hands of' receivers since the order of July 2d, 1872, and the road operated by the receivers, it remains to determine what are the liabilities of the receivers.
The railroad company was a common carrier, and, as if in anticipation of events which have come to pass, the charter of the company, (N. A. Stat. 1845, p. 328, § 13,) provided for'the right to let or farm out to others, the right of transportation of person, produce, &c., and that the company, in the exercise of this right, and the persons to whom this right of conveyance and transportation should be let, shall, in so far as they act on the same,, be regarded as “common carriers.” It would be an easy.way to defeat the wise purposes of the legislature if, on the application of a mortgage creditor, the railroad and all the important and valuable franchises of the company could be put, by an order-in chancery, in the hands of a receiver, who could, for years, as-in the case before the court, conduct the operations of the railroad, and enjoy the franchises of the company, entrusted to it on considerations of an enlightened public policy and escape the responsibilities of the common carrier. The convenience of transportation of persons and property, secured by this responsibility constituted in large measure the inducement to the legislature to-exercise the right of eminent domain, and transfer to railroad companies valuable franchises, and in some cases against their will, the property of private citizens. The current of opinion *533seems to be very decidedly in favor of the view that receivers, are common carriers. It is said in High on Reo., § 398: “ Receivers in possession of, and operating a railroad under appointment of a Court of Equity, may be held liable as common carriers for negligence in the performance of their duties.” In Jones on Rail. Seo., § 511, we find these words: “ But considerations of public policy may likely lead to the adoption of the rule that a receiver shall not be allowed to exercise the rights and powers of a common carrier without being also held subject to a common carrier’s duties and liabilities.” And this we hold to be the better doctrine.
The case of Davenport v. Railroad Company, 2 Wood 519, was one for the recovery of damages for a personal injury, and in it Judge Wood says: “It was regarded as too clear for argument that if the road had been run by the president and directors when the injury was sustained, such a claim could not possibly have priority; but the receivers act merely in place of the president and directors, except so far only as the court may otherwise direct.” In one sense the receiver does so act, but in another sense, especially in that sense which is important in these issues, he does not so aot. The receivership is the transfer of the property to a new owner, who begins his Vork cut off from the past, with new duties and new obligations. The court could order a sale at once and let new and absolute owners take the property and assume their proper liabilities to third parties. If, instead of doing this, a receiver is appointed, he represents, technically, the interests of an insolvent corporation, but technically and substantially the interests of creditors, who ought not to be allowed to enjoy the franchises and property of the corporation without its responsibilities.
The intimation is given by Chief Justice Waite, in Fosdick v. Schall, 9 Otto 254, that cases may arise in which it would be proper to apply a part of the proceeds of the sale of the mortgaged property to the payment of expenses incurred during the receivership. While the opinion in that case throws a flood of light on the subject of the payment of the expenses of a receivership and the mode of these payments, as well as the general relations of all creditors to the income, there is nothing in the *534ease specially applicable here, as in the view taken by this court,, there is a fund arising from the income during the time the property has been under the control of the court, in the hands of its appointees, out of which can be paid the claims of petitioners.
Under the order of July 2d, 1872, the president and directors-were instructed “ to conduct and carry on the business of the company.” This is language certainly broad enough to authorize the payment for losses and damages usually paid for by a railroad company, if any order on the subject was necessary. If there has been a receivership of this railroad since July, 2d 1872,, and receivers are common carriers, there can be no doubt of the liability of the receiver in all these cases.
In Kinney v. Crocker, 18 Wis. 74, it was held that a state-court could entertain jurisdiction of an action against a receiver appointed by the United States court for injury to the plaintiff in that case, from negligence of the employees. In Meara’s Adm’rs v. Holbrook, 20 Ohio St. 137, it was held that a receiver was liable for injury to an employee. These doctrines are, of themselves, in accord with the best reason and public policy, and sufficiently sustained by authority in cases where the whole field is new and comparatively unexplored.
If the receiver is liable, and there is nothing to show and no-intimation that there was any personal fault so as to make him personally liable, the claims ought to be paid out of the fund in court. No question of jurisdiction between two courts has arisen here as in most of the cases on this subject.
It is, therefore, adjudged and decreed that the decree of the Circuit judge be reversed, and that the case be remanded to the Circuit Court, that proper orders may be made for the payment of the claims of these petitioners, in accordance with the views herein expressed.
McIyee. A. J., and Aldkich, A. A. J., concurred.