Court Opinion

ID: 9306326
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:17:17.417616+00
Date Added: 2024-06-11T17:13:55.546670
License: Public Domain

Ross, District Judge.
This suit was commenced to foreclose a mortgage, executed by the defendant corporation tó secure the payment of certain of its bonds. At the commencement of the suit a receiver was appointed to take possession of the property involved in it pending the litigation, and he has since been, and now is, in its possession. The defendant motor road company is contesting the validity of the bonds, and an application is now made to the court on its behalf to direct the receiver to pay out of the moneys in his hands certain sums to the counsel of the defendant corporation for services rendered and to be rendered the corporation in such contest, and also to pay the salary of the secretary of the corporation, and its office expenditures incurred since the taking of possession of the property by the receiver. It is said in support of the motion that it is absolutely necessary that such payments should be ordered to enable the defendant corporation to make its defense to the action, and in order that it may maintain its existence as a corporation. That may be so; but, if it is, it constitutes no valid ground ■for the interference'by the court with the vested rights of the complainant. “The bonds and mortgage sued on are prima facie valid, and because of the alleged insolvency of the defendant corporation, and the insufficiency of the property mortgaged to pay them, the court took the property. into its possession to protect and enforce the rights of the mortgagee. If the bonds and mortgage are in fact valid, it is the right of the mortgagee to demand that all of the property included in the mortgage, less the costs of the court, and the expenses necessarily and properly incurred by the receiver in its management, operation, preservation, and betterment, shall be applied to the satisfaction of the lien. *107To divert any portion of the property to the payment of any other claim or demand is to that extent to impair the vested right of the mortgagee to have his lien paid and discharged out of the mortgaged property. Some timely observations upon this subject will be found in the case of Kneeland v. Trust Co., 136 U. S. 89, 10 Sup. Ct. Rep. 950. And the conclusion here reached will also be found supported by the text writers. See High, Rec. (2d Ed.) p. 331 et seq.; Beach, Rec. pars. 376, 752; Gluck & B. Rec. pp. 296, 297. Motion denied.