Court Opinion

ID: 9336350
Source: CourtListenerOpinion
Date Created: 2022-12-15 21:50:28.063713+00
Date Added: 2024-06-11T17:15:12.439670
License: Public Domain

PARLANCE, District Judge
(after stating the facts as above). All the claims in dispute in this case are just and proper in themselves, the only contest being as to their rank. The theory upon which the appellants have proceeded, both in the lower court and in this court, *905is that the expenses of the receivership, and the debts for labor and supplies incurred by (he Augusta Mining & Investment Company during the six months which preceded the appointment of the receiver under the Reinhart bill, should be paid out of the income and revenues of the corporation, and not out of the corpus, and also that the mortgage bonds are entitled to a priority over all such expenses and debts. The appellants are bondholders of the corporation, who have undertaken to proceed independently of the trustee of their bonds, and, it would seem, in opposition to the trustee’s views of the correctness of the decree appealed from. These appellants are, in the main, the same parties who instituted or joined in the Reinhart bill, under which the receivership was inaugurated. The bill which they filed to obtain from the court the appointment of a receiver shows that the corporation was insolvent, and that it was even unable to earn its charges and expenses. If we are to believe the appellants, they asked the lower court to do an apparently impossible thing, and the court undertook to do it. The appellants’ contention amounts to saying that the court, looking solely to the income and revenues of a corporation which was shown to be insolvent, and even unable to meet its charges and expenses, engaged in the task of maintaining and carrying on the business of the corporation, and of paying, not only its running expenses, but also its debls for labor and supplies incurred during the six months which preceded the appointment of the receiver. The Reinhart bill even prayed that the receiver be empowered to equip and operate other ore banks than those which were then being operated. It could not be contended seriously that, if the orders of the lower court had borne only on such revenues as might be expected from a corporation in the ruinous condition in which the Reinhart bill alleged that the Augusta Mining'& Investment Company was, any one could have been found to lend money to the receiver. It may then be fairly said that Reinhart and others are attempting to show that they asked the court to undertake the receivership under impossible conditions. There were no limitations placed upon the temporary receiver as to payment out of revenues, in the order authorizing him to borrow money. This order’ was specially consented to by Reinhart and others. They then applied for the appointment of a permanent receiver, and upon that application the temporary receiver was appointed as permanent receiver, the previous order authorizing the temporary receiver to borrow money was affirmed, and the permanent receiver was directed to pay all debts for labor and supplies incurred during the six months preceding Ms appointment, not only from earnings and income, but also from such moneys as he was or might he authorized by the court to borrow for the purpose. Subsequently the Manhattan Trust Company, trustee of the mortgage, caused the receivership to he extended to the foreclosure suit, and it is plain that the trustee adopted all prior proceedings' and orders. The decree of foreclosure again made it evident that the debts and expenses paid by the receiver were to outrank the mortgage. The appellants did not complain of the decree; and it should be specially noticed that the Manhattan Trust Company, which, as trustee of the mortgage, represents *906the appellants as well as all other bondholders, has never complained of the action of the lower court in postponing the mortgage to the debts and expenses paid by the receiver. The trustee did not complain of the foreclosure decree, nor did it except to the, master’s report, nor has it appealed from the decree of February 28, 1898. It is not even intimated that the trustee has ^been derelict in its duty to protect the interest of the bondholders.' It is plain that the trustee has acquiesced in the correctness of the decree appealed from.
Fosdick v. Schall, 99 U. S. 235, and other cases, have been cited to us by appellants’ counsel, who urge that, under the doctrine of those cases, the lower court had no power to postpone the mortgage to the debts and expenses paid by the. receiver. The case before us is not one in which the principles of the cited cases come into play. The present case is simply one in which the matters complained of have been consented to by the parties. There is no error in the decree appealed from, and it is therefore affirmed.