advisory committee, for the purpose of electing such a committee, it was resolved that such committee, when elected, should continue in office until others should be chosen. That meeting was holden on the 23d day of January, 1864, and the first advisory committee of three was then elected. In 1865 a like advisory committee was elected, and after that, and down to 1870, a committee consisting of two of the first and one of the second mortgage bondholders, as provided in the decree of 1866, was annually elected. It does not appear that any advisory committee was elected after 1870, but the persons elected in that year continued to act as such committee. This constitutes all of the history of the property that it is deemed needful for present purpose to notice. The receivers appointed upon the petition of the Vermont and Canada R. R. Co. in 1861, and those succeeding them by appointment of the Court of Chancery, in connection with the persons and their successors whose appointment was authorized by the decree of August 16th, 1867, and who were, with the receivers, constituted a board of management, remained in possession of said roads and property, and run, operated and managed the same down to the time when the Central Vermont R. R. Co. was appointed receiver and manager, on the 21st day of June, 1873.

Upon the facts above stated and the evidence introduced bearing upon the questions in issue, the rights of the respective parties are to be determined. And first, as to the mortgage bondholders: No question is made as to the validity of both issues of said bonds, or as to the trust deeds that were given to secure them. The only question is, what security the holders of said bonds now have upon which they are entitled to rely for their payment. It is claimed for the holders of said bonds that the securities originally given remain intact; that they are unaffected by anything that has transpired since in the creation of the various classes of indebtedness which are represented in the bill as funded, trust and floating debts. It is claimed by the orators that the holders of the funded, trust and floating debts have priority to the right of the bondholders, and that the property should first be made chargeable for the payment of those obligations. It is admitted that while the receivers, under the decree of 1861, were administering the property which was the subject-matter of their receivership for the uses and purposes indicated by that decree, all debts properly contracted by them as receivers, or which were authorized by the court to which they were accountable, and which appointed them, would constitute a first lien upon the property they were administering. We have seen that the purpose and object to be answered by that decree in continuing the management, possession and control of said railroads in the receivers, was to earn income with which to pay the rent due, and which might grow due to the Vermont and Canada R. R. Co., so that until that object was fully

accomplished, or the receivers were discharged by the parties or order of the court, they would continue strict receivers, and be entitled to the rights and protection which the law accords to such receivers. The first equipment bonds were issued under the decree of September 7th, 1865, and it is claimed by the orators that there was $97,000 of rent then due to the Vermont and Canada R. R. Co. that the receivers had been ordered to pay out of net income, and hence that that series of bonds amounting to $700,000 was a receivership debt. It is claimed by the defendants that the payment of the $97,000 then due to the Vermont and Canada R. R. Co. had been so provided for by the decree of 1864 that the receivers were relieved from all duty respecting it, and that after the decree of 1864 there was no occasion or necessity for the continuance of the receivership, and that it was then legally terminated; but, in our judgment, the right of the holders of those bonds, as well as all of those that were subsequently issued, to priority of security to the holders of the first and second mortgage bonds, does not depend upon the question whether the bonds so issued were strict receivership debts or not.

In the petition that resulted in the compromise decree of 1864, the Vermont Central R. R. Co., the trustees under both mortgages, the committee of the first mortgage bondholders and certain mortgage bondholders were made defendants. Ample notice was given of the pendency of the petition. In the decree which was signed, provision was made in the eleventh article for the appointment of the advisory committee before mentioned, to represent the interests of the first mortgage bondholders, which article was amended in the decree of 1866, by providing that two of said committee should annually be chosen by the first mortgage bondholders and one by the second. Ample notice was given to the trustees of both mortgages, and the committee of the first mortgage bondholders, of the pendency of the petition praying for authority to issue the first equipment loan bonds, and no objection was made to the granting of the prayer of the petition. Notice was given to the trustees of the second mortgage, and the committee of the first and second mortgage bondholders, of the pendency of the petition asking for authority to issue the second equipment loan bonds, and they appeared at the hearing; and it does not appear that they, or either of them, objected to the prayer of the petition being granted. No notice appears to have been given of the pendency of the petition under which the decree was made authorizing the third equipment loan, but it does appear that the committee of the first and second mortgage bondholders, and certain other persons largely interested in the trust property, did appear upon the hearing of the petition and made no objection thereto. No notice was given of the pendency of the petition asking for authority to issue the fourth equipment loan bonds, but it appears that the committee of the first and second

mortgage bondholders appeared at the hearing, and assented to the making of a decree authorizing said loan. The committee of the first and second mortgage bondholders were notified and appeared, and either assented or offered no objection to the making of the several decrees under which the bonds were issued that were negotiated by the receivers and managers. If the action of said committee in what was done by them was binding upon the bondholders whom they professed to represent, the receivers and managers had full authority, as far as said bondholders were concerned, to issue the bonds authorized by said decrees.

In examining the question as to the power and authority of said committee, it is necessary to consider the facts, as developed by the evidence, which induced the parties in interest to require that permanent provision should be made for their appointment. Down to the compromise decree of 1864 the bondholders were simply creditors of the corporation; they had no voice in its management, or right to influence or control its action. Their right to be represented and to participate in the management of the property which was pledged for the payment of their bonds, was recognized, and the provision in that decree for the appointment of such committee was to protect the interest of the first mortgage bondholders. They were constituted an advisory board in respect to the management of said roads and property, with the right to advise the trustees and receivers in respect thereto. They were also constituted auditors of the accounts of the trustees and receivers, and those accounts, when approved by them, were to be passed and allowed without further proceedings; but the right to object to any part of said accounts was reserved to the trustees of the second mortgage and the Vermont and Canada R. R. Co.; and upon such objection being filed the accounts objected to were to be examined and passed upon according to the usual course. As long as the mortgage bondholders availed themselves of the provisions in the decrees of 1864 and 1866, and elected and continued in office the committee provided for by them, they were legally and equitably bound by all that said committee may have done in the execution of the duties imposed upon them by virtue of their office. The bondholders delegated to said committee authority to do what they might individually and collectively have done in the premises. The issuing of the bonds was a matter pertaining to the management of said roads and property, and about which said committee had the right to advise the trustees and receivers; the committee either assented to, or did not object to, the issuing of said bonds by the receivers and managers and in their capacity of receivers and managers. The history of the case shows that both classes of bondholders directly or indirectly received a portion of the avails of said bonds, thus adopting and ratifying to that extent the acts of the receivers and managers in issuing and negotiating them. It probably would

not be claimed that if the bondholders had individually assented to the issuing and negotiating of said bonds upon the representations made in the petitions upon which the decrees were made giving authority to issue them, and which the court found to be true, that they could afterwards question the right of the receivers and managers to issue them in that capacity; and in view of the power and authority given to the committee by the decree of 1864, and what has since transpired in the matter of adopting and ratifying the action of the committee, we think that the bondholders are bound by their action in the premises as fully as if they had individually assented. The bonds were negotiated by the receivers and managers, and it is alleged in the bill that the avails were used for the purposes designated in the decrees authorizing their issue. The interest was paid on them out of the income of the trust property down to 1876.

The receivers and managers were not discharged by the court until the appointment of the Central Vermont R. R. Co., and no persistent attempt has been made to have them discharged by the bondholders or any one else interested in the property. They were recognized as receivers and managers by all the parties interested in the property, by the Legislature of the State, and in all courts where questions have been adjudicated affecting the rights and liabilities of those interested in the property. Purchasers of the bonds relied upon the apparent authority of the receivers and managers to issue them, and upon the security that such obligations ordinarily give. Which has the superior equity? such purchasers or the mortgage bondholders? It is claimed that the persons claiming to be receivers and managers were not strict receivers, and hence that the obligations which they gave cannot in a court of equity be treated as receivers' debts; but in our judgment it is immaterial whether they were strict receivers or not. The bondholders suffered them to appear to be receivers, and to issue negotiable bonds as such, and where one of two innocent parties must suffer by the act of a third, he who gave the power or opportunity to do the act must bear the burden of the consequences. If there was any defect of authority on the part of the receivers, the acquiescence of the bondholders in what has been done by them is as effectual as the most formal authorization in advance or ratification afterwards, would have been. So that, as between the bona fide holders of the bonds that have been issued and negotiated under the so-called orders and decrees and those that have been received in exchange for them, and the Vermont Central R. R. Co., and the mortgage bondholders, the former have the superior right and must be first paid.

We come next to the consideration of the claims of the stockholders of the Vermont and Canada R. R. Co. The contracts entered into between the Vermont and Canada Co. and the Vermont

Central Co., in 1849 and 1850, have been substantially stated. The history of the litigation that ensued between the parties to those contracts, and which resulted in the decree of 1861, is elaborately stated in the report of the case in 34 Vt. 1. The validity of said contracts, and the right of the Vermont and Canada Co. to the security given by the contract of 1850 for the rent agreed to be paid, was then established. It is important, in determining what the present rights of the Vermont and Canada stockholders are, to state somewhat in detail the questions, and how they arose, that were then adjudicated. Neither the Vermont Central R. R., nor its income, was pledged for the Vermont and Canada's rent under the contract of 1849. Under the contract of 1850 it was agreed that if the rent reserved to the Vermont and Canada R. R. Co. should be in arrear and unpaid for the space of four months after due, it should be lawful for the Vermont and Canada Co. to take possession of and use and run both roads, and receive all tolls, fares and income receivable for the use of the said roads, and after paying all reasonable expenses of running and working said roads, and making such repairs of the same and the buildings and structures connected therewith, and the expense of all such engines and cars as might be necessary, to apply the residue of said receipts to the payment of rent then in arrear and unpaid, whether it shall become payable before or during the time while so in possession. The Vermont and Canada Co. reserved the right of resorting to an action at law to recover any rent in arrear if it should choose to do so. There was a further stipulation in that contract, which it is claimed by the Vermont and Canada R. R. Co., was, in legal effect, a mortgage by the Vermont Central R. R. Co. to the Vermont and Canada R. R. Co. of its road and franchise as security for said rent. The Vermont and Canada R. R. Co. brought its bill in equity praying that it might be let into possession of both roads, or that the court would aid it in securing the income of the same pursuant to the contract of 1850; or that if it did not seem fit to the court to make an order putting it in possession, that the court would appoint some suitable person or persons, to be the receiver or receivers and the manager or managers, of said roads and property. It was under this prayer that the court, in 1861, ordered and decreed that the possession, control and management of said roads and property should be continued in the then receivers, subject to the order and direction of the court. It was upon the application of the Vermont and Canada R. R. Co., and to render the security given by the contract of 1850 available that the order was made, and the receivers were ordered to pay over to the Vermont and Canada R. R. Co. on the first days of June and December in each year, such sums es might accrue from the earnings of said roads and property, until the sums then due and growing due to them under the contracts of 1849 and 1850, should be fully paid and satisfied.