claiming liens upon the mortgaged premises could be settled and adjusted.

41

A claim for materials furnished an insolvent railway company, which is not a lien by virtue of any statute, is not entitled to payment out of the funds in the hands of a receiver, arising from a sale of the property at the instance of prior-mortgage bondholders, until the bonds are paid. Judge Drummond, in making this decision, said, by way of illustration: "It is precisely like the case of a man who furnishes to the owner of a farm the means of carrying it on; but there is another party who has a lien upon that farm, and it is sold in order that the party who has the prior lien may be paid. Now, the fact that the mechanic or laborer has furnished the means of carrying on the farm would not authorize him to come into a court of equity and cut off the prior lien which exists on the farm, and prevent it from being paid. These parties ought to be paid. They have a just claim against this road. But it is against an insolvent corporation, and they ask parties who have a prior right and lien to pay them, because those with whom they have dealt cannot do so."

A contract between a railway company and a bridge company, made subsequent to the mortgage, whereby the former company guaranteed that the tolls of the latter company for the use of its bridge across the Ohio River should amount annually to a certain sum, does not affect the rights of the mortgagee, and the bridge company cannot require that the order of sale shall require the purchaser to carry out and execute the terms of this contract.42

When another road has, by contract, the right to run over a road in the hands of a receiver, upon the payment of a stipulated rent, and the rent is not paid to the receiver according to the terms of the contract, he may, after proper notice, sever the connection between the roads.43

One who has loaned money to a railway company, to enable it to pay interest on its coupon bonds, has no equity

41 Denniston v. Chicago, Alton & St. Louis R. R. Co., 4 Biss. 414. 42 Newport & Cincinnati Bridge Co. v. Douglass, 12 Bush, 673, 712. 43 Elmira Iron & Steel Rolling Mill Co. v. Erie Ry. Co., 26 N. J. Eq. 284.

entitling him to be paid out of funds in the hands of a receiver of the road appointed in behalf of the bondholders.44 A loan, however, made for this purpose, upon the agreement or understanding that the lender should be treated as the assignee of the holders of the coupons, might have the effect to subrogate the lender to their rights, and entitle him to hold the coupons as part of the debt secured by the mortgage.

With the consent of the court the receiver may pay out of the funds in his hands sums collected by the insolvent company in trust for connecting railroad companies, to which the money belonged. The withholding of these moneys. would not only have been a breach of trust, but would probably result in the refusal of these companies to keep up business relations with the company or its receivers, and a consequent loss of business to the road; and, therefore, the payment is justifiable as a business measure, to keep up the traffic of the road.45

The funds in the hands of a receiver are chargeable with the retainer and professional services of an attorney employed by the trustees under a mortgage of a railway to foreclose the mortgage, although the suit, without the fault of the attorney, is not prosecuted with effect, and the funds in the hands of the receiver have been obtained from a new suit, prosecuted by other trustees; as, for instance, where the prosecution of the first suit was prevented by the outbreak of the civil war, and, the trustees who authorized the suit having died, new trustees were appointed upon the termination of the war, who commenced a new foreclosure suit.46

VI. Whether a Receiver is liable for the Negligence of his Employés.-There is much diversity of opinion upon the question whether a receiver is liable for the negligence of his

44 Newport & Cincinnati Bridge Co. v. Douglass, 12 Bush, 673, 714. 45 Meyer v. Johnston, 53 Ala. 237, 353.

45 Cowdrey v. Galveston, etc., R. R. Co., 93 U. S. 352; s. c., 9 Am. Ry. Reg. 361.

employés in the same manner and to the same extent that a railway company, operating its road, is liable. On the one hand, a receiver, in operating the road, is said to exercise the powers and rights of a common carrier, and to be subject to all the duties and liabilities of a common carrier.47 Whether the receiver is regarded as the officer of the law, or the representative of the proprietors of the corporation, or its creditors, or as combining all these characters, he is entrusted with the powers of the corporation, and must, therefore, necessarily be burdened with its duties and subject to its liabilities. There can be no such thing as an irresponsible power, exerting force or authority without being subject to duty, under any system of laws framed to do justice. It is an inseparable condition of every grant of power by the state, whether expressed or not, that it shall be properly exercised, and that the grantee shall be liable for injuries resulting directly and exclusively from his negligence in its use.48 In a recent case in Kentucky, in which, however, the question under consideration was not involved, Mr. Justice Lindsay, upon the functions of a receiver as a common carrier, said:

"The receiver of a line of railways is not the mere passive agent or officer of the court, charged with the simple duty of preserving the property entrusted to his care, and of collecting the rents and profits arising directly out of the thing mortgaged and holding them until the rights of the citizens shall be determined. His duties comprise the management and operation of the roads. He, ex necessitate, becomes a common carrier, and, in order to preserve the mortgaged property, is compelled to discharge the duties of a quasi public corporation."49

47 Blumenthal v. Brainerd, 38 Vt. 402; Paige v. Smith, 99 Mass. 395 ; Klein v. Jewett, 26 N. J. Eq. 474; Meara v. Holbrook, 20 Ohio St. 137; 5 Am. R. 633. See remarks of Bleckley, J., in Henderson v. Walker, 55 Ga. 481; also, Kinney v. Crocker, 18 Wis. 74; Allen v. Central R. R. Co. of Iowa, 42 Iowa, 683.

48 Klein v. Jewett, supra. Per Van Fleet, V.-C.

49 Douglass v. Cline, 12 Bush, 608, 628. Per Lindsay, J.

Chancellor Cooper, of Tennessee, while granting that it may be considered as an open question whether the receiver of a railroad, appointed by a court and operating the road under its direction, is liable for injuries done upon the road to person or property, holds that a receiver appointed by the governor of the state, under a law providing for such appointment, is a public agent, and, as such, is not liable for the wrongs or negligence of his employés, but only for his own wrongful acts or delinquencies.50

Under a statute of the state of Georgia allowing an employé of a railway company to recover damages against the road for a personal injury done him through the negligence of another employé in the same service, it was held that the employé of a receiver is not an employé of a railroad company within the terms of that statute, so as to make the receiver liable to action in such case.51

The Court of Appeals of New York, however, in a recent case,52 held that a receiver operating a road in his official capacity was not liable in an action for negligence causing the death of a passenger, where no personal neglect was imputed to him, either in the selection of agents or in the performance of any duty, but where the negligence charged was that of a subordinate, whom he necessarily and properly employed in compliance with the order of the court. His position was regarded as analogous to that of a public officer charged with public duties, in the performance of which he is compelled to act, in part, by others. The court concede that trustees and mortgagees in possession of roads, and operating them for the benefit of the bondholders, are liable for injuries sustained by reason of the negligence of persons employed by them.

50 Hopkins v. Connel, 2 Tenn. Ch. 323, citing Mersey Dooks' Trustees v. Gibbs, L. R. 1 H. L. 93.

51 Henderson v. Walker, 55 Ga. 481; Thurman v. Cherokee R. R. Co., 56 Ga. 376.

52 Cardot v. Barney, 63 N. Y. 281, Chief Justice Church dissenting. The Supreme Court of Indiana, in Bell v. Indianapolis, Cincinnati & Lafayette R. R. Co., 53 Ind. 57, decide that, to a complaint against a railroad company for injuries received by the plaintiff, it is a sufficient answer that when the injuries were inflicted the railroad was in the hands of a receiver.

They are regarded as the owners of the roads and the real principals, receiving the earnings and having the benefit of the services of the employés, and the fact that they act in a representative capacity is unimportant. The employés are their servants, and whether they operate the road as mortgagees in possession, trustees, or lessees is not material, so long as they take the earnings for themselves or for those they represent.53 But the court declare that there is no principle upon which a receiver or other officer of a court, merely obeying the orders of the court, having no interest in the prosecution of the work, and deriving no profit from it, should be answerable except for his own acts and neglects.

The views enunciated in this decision were applied by the Supreme Court of New York to the case of an injury received by the plaintiff upon the Ogdensburg & Lake Champlain Railroad, a New York corporation, but leased to the defendant and others as receivers of the Vermont & Canada Railroad Company, a Vermont corporation, placed in their hands by the Court of Chancery of that state.54 The receiver was held not to be liable, because, in making the lease, he acted officially and as the agent of the Vermont corporation.

Under another view of the subject, although a judgment may be obtained against a receiver for negligence on the part of employés, yet the judgment cannot be enforced as against the mortgagees. The appointment of a receiver does not derange the priority of existing liens upon the property,

53 Citing, and distinguishing upon this ground, Ballou v. Farnum, 9 Allen, 47; Lamphear v. Buckingham, 33 Conn. 237; Barter v. Wheeler, 9 N. H. 9; Rogers v. Wheeler, 43 N. Y. 598; Sprague v. Smith, 29 Vt. 421.

54 Kain v. Smith, 11 Hun, 552. Learned, P. J., dissenting, said: "Whatever may be the defendant's liability in respect to the management, in Vermont, of the road of which he is supposed to be receiver, when he comes into this state and obtains complete control of a railroad, not by virtue of his appointment as receiver, but by a contract which he voluntarily made; when he takes possession of this railroad and agrees to assume the duties of the company as a common carrier; and when he receives the earnings, to be disposed of as he directs, he is, as it seems to me, the owner and proprietor, during the time agreed upon, of the property, and the master of the persons employed by him in performing the duties thus assumed."