I If I Ti • I'l ~"rnrr •miiiftfniiii'niiiir fltW AND The Lawyers O^opfRA TivE Publishing rRoCHCSTCR. N.Y. UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY A tri:atise ON THE LAW OF RECEIVERS BY JAMES L. HIGH FOURTH EDITION BY SHIRLEY T. HIGH OF THE CHICAGO BAR, EDITOR OF THE FOURTH EDITION OF HIGH ON INJUNCTIONS CHICAGO CALLAGHAN AND COMPANY 1910 Entered according to Act of Congress, in the year 1876, by JAMES I,. HIGH, In the office of the I^ibrarian of Congress, at V/ashington. Entered according to Act of Congress, in the year 1886, by JAMES I,. HIGH, In the office of the I^ibrarian of Congress, at Washington. Entered according to Act of Congress, in the year 1894, by JAMES I.. HIGH, In the office of the I, 833, 834. Favorite v. Deardoff, 798. Fawcett v. Supreme Silting, 66, 371. Fay V. Erie & Kala'mazoo Railroad Bank, 428, 441, 989. Featherstone v. Mitchell, 743. Fellows V. Heermans, 10, 32, 41. Felton V. Ackerman, 310, 312. Felton V. Felton, 942, 949. Fenton v. Lumberman's Bank, 116. Ferguson v. Dent, 962. Fernald v. Spokane & B. C. T. Co., 70. Ferrior, In re, 878. Ferry v. Bank of Central New York, 441, 975, 991. Fessenden v. Woods, 629, 631. Fidelity Insurance, T. & S.-D. Co. V. Roanoke Iron Co., 378. Fidelity T. & S. V. Co. v. Mobile S. R. Co., 499. Fidelity Title & T. Co. v. Schenley, 232. Field V. Jones, 180, 182, 616, 985, 986. Field V. Ripley, 128. Fields V. United States, 333. Fifield V. Northern Railroad, 539. Fifth National Bank v. P. & C. S. R. Co., 456, 975. Fifth National Bank v. Pierce, 792. Fifty-four First Mortgage Bonds, In re, 100, 489. Filkins v. Nunnemacher, 272. Finance Co. v. Charleston, C. & C. R. Co., 96, 100, 509, 514, 517, 527, 542. Finch V. Houghton, 825. Fincke v. Funke, 703. Fingal V. Blake, IZZ, 734. TABLE OF CASES CITED. XXIX [BEFEKENCES AKE TO PAGES.] Fink V. Montgomery, 26, 691. Finney v. Guy, 274, 395. Finnin v. Malloy, 625. First National Bank v. Barnum Wire & Iron Works, 39, 976, 977. First National Bank v. Bunting, 314. First National Bank v. Cook, 159, 624, 642, 663, 934. First National Bank v. Dovetail B. & G. Co., 386. First National Bank v. Ewing, 504, 505, 508, 509, 518, 526, 566, 567. First National Bank v. Gage, 588, 617. First National Bank v. Illinois Steel Co., 795, 806, 807, 818. First National Bank v. Mack, 53, 56. First National Bank v. Oregon Paper Co., 917, 924, 955. First National Bank v. United States E. T. Co., 53. Fischer v. Superior Court, 129, 131. Fish V. Olin, 448. Fish V. Potts, 439, 779. Fisher v. Graham, 731. Fisher v. Trust Co., 95, 129, 378. Fitch V. Wetherbee, 223. Fitzburgh v. Everingham, 579, 580, 900. Fitzgerald v. Fitzgerald & M. C. Co., 60, 66. Fitzner v. Noullet, 231. Flagler v. Blunt, 15, 18. Fleming v. Carson, 684. Fleming v. Fleming Hotel Co., 322. Fleming v. Patterson, 195, 197. Flentham v. Steward, 297, 309. Fletcher v. Dodd, 952. Flint V. Webb, 581, 582. Flippin V. Kimball, 300. Flood V. Lord Aldborough, 970. Florence Gas, E. L. & P. Co. v. Hanby, 53, 215, 343. Florida Coast Co. v. Young, 42. Fluker v. Emporia City R. Co., 353. Flynn v. Third National Bank, 358. Fogarty v. Bourke, 21, 582, 583. Fogarty v. Burke, 617. Fogg V. Supreme Lodge, 421. Ford V. Gilbert, 933, 955. Ford V. Rackham, 778, 968. Ford V. Taylor, 13, 129. Fordyce v. Dixon, 296. Fordyce v. Du Bose, 563. Fordyce v. Kansas City & N. C. R. Co., 517. Foreman v. Central Trust Co., 540, 543. Forrester v. B. & M. C. C. & S. M. Co., 356, 937. Forsaith Machine Co. v. Lumber Co., 223. Fort Payne Coal & Iron Co. v. Webster, 248, 249. Fort Payne F. Co. v. Fort Payne C. & I. Co., 348. Fort Wayne Electric Corporation v. Franklin E. L. Co., 433. Fort Wayne, M. & C. R. Co. v. Mellett, 162. Fosdick V. Car Company, 521. Fosdick V. Schall, 509, 510, 511, 519, 520. Foster v. Barnes, 233. Foster v. Foster, 778, 953. Foster v. Rincker, 624. Foster v. Row, 393. Foster v. Townshend, 261, 781. Fountain v. Mills, 986. Fowler, In re, 852. Fowler v. Beckman, 198. Fowler v. Jarvis-Conklin M. Co., 99, 977. Fowler v. Lamson, 395. Fowler v. Osgood, 271, 274. Fox River Paper Co. v. Western Envelope Co., 297. Foxwell V. Van Grutten, 718, 739. Francklyn v. Sprague, 330. XXX TABLE OF CASES CITED. [REFERENCES ARE TO PAGES.] Frank v. Denver & R. G. R. Co., 499. Frank v. Morrison, 253, 270, 408. Frank v. New York, L. E. & W. R. Co., 549. Frankle v. Jackson, 560. Franklin National Bank v. White- head, 385. Fraser v. City Council, 869. Fraternal Guardian's Estate, 343. Frazier v. Barnum, 616. Fredenheim v. Rohr, 61, 129. Freeholders v. State Bank, 100. Freeman v. Winchester, 244, 248, 249, 501. Freer v. Davis, 719. Frelinghuysen v. Baldwin, 455. French Bank Case, Z1 , 342. French v. Gifford, 129, 130, 919, 932, 933. French v. Union Pac. R. Co., 71. Frick V. Fritz, 934. Fricker v. Peters & C. Co., 130, 132. Fripp V. The Bridgewater Co., 839. Fripp V. The Chard R. Co., 481, 483. Frisbee v. Trimanus, 741, 742. Frisbie v. Bateman, 819, 822, 823, 844. Front Street Cable Ry. Co. v. Drake, 529. Frowert v. Blank, 67. Fuggle V. Bland, 33. Fuller V. Jewett, 549. Fuller V. Taylor, 580, 602. Fullerton v. Fordyce, 537, 544. Furlong v. Edwards, 6, 607, 805, 992. Gableman v. Peoria, D. & E. R. Co., 88, 550. Gadsden v. Whaley, 872. Gage V. Smith, 617. Gainey v. Gilson, 238. Gaither v. Stockbridge, 322, 533. Gallagher v. Gingrich, 922, 956, 962. Galluchat, Ex parte, 864. Galster v. Syracuse Savings Bank, 319. Galway v. United States Steam Sugar Refining Co., 363. Gardiner v. Tyler, 915, 924. Gardner v. Blane, 138. Gardner v. Caldwell, 3, 163, 167. Gardner v. Howell, 34. Gardner v. London, C. & D. R. Co., 464. Gardner v. Smith, 649. Garland v. Garland, 91, 98. Garner v. Southern B. M. & L. Assn., 74. Garniss v. Superior Court, 741. Garr v. Hill, 778. Garretson v. Weaver, 683, 906. Garrett v. City of Memphis, 579, 587. Garrett v. London & L. F. Ins. Co., 61. Garver v. Kent, 248, 249. Gas Light & Banking Co. v. Haynes, 389, 408. Gates V. McGee, 70, 348. Gayle v. Johnson, 4. Gaylord v. Fort Wayne, M. & C R. Co., 74, 75, 486. Gaynor v. Blewett, IIZ. Gehr v. Mont Alto Iron Co., 166. Geisse v. Beall, 172, 173, 202. Gelpeke v. Milwaukee & Horicon R. Co., 88, 177. General Electric Co. v. Whitney, 323. George Mather's Sons* Co., In re, 167. Gere v. Dibble, 159, 160, 609, 623. German National Bank v. Best, 950, 965. German National Bank v. Farmers & M. Bank, 393. Gibbins v. Howell, 784. Gibbons v. Mainwaring, 135. TABLE OF CASES CITED. XXXI [KEFEBENCES ABE TO PAGES.] Gibbs V. David, 767. Gibert v. W. C, V. M. & G. S. R. Co.. 479, 505, 523. Gibson V. Martin, 131. Gibson v. Peters, 447. Gibson V. Sexson, 57. Gila Bend R. & I. Co. v. Gila Water Co., 228, 229. Gilbert v. Hewetson, 209. Giles V. Stanton, 518. Gill V. Balis, 255. Gillet V. Fairchild, 255, 266. Gillet V. Moody, 385, 400, 401. Gillet V. Phillips, 291, 402, 419. Gillett V. Higgins, 656, 691. Gilman v. Ketcham, 277, 279. Gilmore v. Herrick, 548. Gilreath v. Union Bank & Trust Co., 129, 132. Girard Insurance & Trust Co. v. Cooper, 468, 533. Gladdon v. Stoneman, 864. Glenn v. Gill, 188. Glenville Woolen Co. v. Ripley, 375. Glossup V. Harrison, 149. Glover v. Thayer, 545. Goddard v. Clarke, 840, 843. Goddard v. Stiles, 639, 640. Godfrey v. Ohio & M. R. Co. 550. Goff V. Gofif, 619. Gold Hunter M. & S. Co. v. Holle- man, 110. Goldman v. Manistee Circuit Judge, 130. Goldschmidt v. Oberrheinische Met- allwerke, 621. Gooch V. Haworth, 176. Goodale v. Fifteenth District Court, 760. Goodhue v. Daniels, 796. Goodman v. Whitcomb, 682. Goodnough v. Gatch, 299, 300. Goodyear v. Betts, 18, 598. Gordon v. Anthony, 647. Goshen Woolen Mills v. City Na- tional Bank, 36. Goss V. Carter, 281. Goss V. Southall, 264. Gottlieb V. Miller, 624. Gould V. Tryon, 21, 582, 583. Goulding V. Bain, 660. Gouthwaite v. Rippon, 608, 799. Gowan v. Jeffries, 691. Grabbe v. Moffit, 945. Grady v. Richmond & D. R. Co, 308. Graebner v. Post, 410. Graff V. Bonnett, 632, 649. Graffenried v. Brunswick & Albany R. Co., 294. Graham v. Carr, 917. Graham v. Mutual Aid Society, 159. Graham Button Co. v. Spielmann, 400, 402. Grand De Tour Plow Co. v. Rude Bros. Mfg. Co., 42. Grand Trunk Ry. Co. v. Central Vt. R. Co., 517, 521, 531. Grandin v. La Bar, 129. Grant v. Bryant, 923. Grant v. City of Davenport, 186, 889. Grant v. Los Angeles & P. R. Co , 937. Grant v. Phoenix Life Ins. Co., 794, 808, 818. Grant v. Superior Court, 937. Grant v. Webb, 41. Grantham v. Lucas, 608. Gravenstine's Appeal, 111, 346, 893. Gray v. Chaplin, 21, 22, 352, 353, 884. Gray v. Gaither, 862. Gray v. Grand Trunk W. Ry. Co., 557. Gray v. Lewis, 246. Gray v. Oughton, 35. Graydon v. Church. 272, 283, 284. Great Western Mining & M. Co. v. Harris, 271, 273. XXXll TABLE OF CASES CITED. [EEFEEENCES AEE TO PAGES.] Great Western R. Co. v. Birming- ham & Oxford Junction R. Co., 881. Great Western T. Co. v. Gray, 408, 410. Great Western Telegraph Co. v. Lowenthal, 624. Greeley v. Missouri Pac. Ry. Co., 37. Greeley v. Provident Savings Bank, 166, 922. Green v. Bookhart, 650. Green v. Bostwick, 635. Green v. Green, 172, 176. Green v. Hicks, 603. Green v. Walkill National Bank, 444. Green v. Winter, 245. Greenawalt v. Wilson, 53. Greene v. Star C. &. P. Car Co., 24. Greene v. Williams, 8. Gregg V. Mercantile Trust Co., 517, 526, 528. Gregg V. Metropolitan Trust Co., 530. Gregory v. Gregory, 26, 702, 718, 721, 724. Grenfell v. Dean and Canons of Windsor, 993. Gresley v. Adderley, 839. Greville v. Fleming, 13. Gridley v. Conner, 656, 706. Griesel v. Schmal, 269. Griffen v. Long Island R. Co., 268. Griffin v. Griffin Iron Co., 349. Griffin v. Henderson, 16. Griffith V. Blackwater B. & L. Co., 322. Griffith V. Griffith, 144, 173, 176, 335, 752. Groeltz v. Cole, 228. Grogan v. Egbert, 67, 189. Grosscup V. German S. & L. So- ciety, 167, 168. Grote V. Bing, 118. Guarantee Trust & S. D. Co. v. P., R. & N. E. R. Co., 499, 500. Guaranty Trust Co. v. Galveston C. R. Co., 74, 515. Guardian Savings Institution, In re, 150. Guardian Savings Institution v. Bowling Green Savings Bank, 211. Guernsey v. Powers, 763. Guild V. Meyer, 676. Guihnartin v. Middle G. & A. R. Co., 591. Gunby v. Armstrong, 53. Gunby v. Thompson, 34, 764. Gunn V. Blair, 853. Gunning v. Sorg, 192. Gurden v. Babcock, 970. Gutsch V. Mcllhargey, 331. Guy V. Ide, 827. Gwynne v. Memphis A.-A. Co., 664. Gypsum P. & S. Co. v. Adsit, 94. H. Haas V. Chicago Building Society, 126, 806, 807. Habenicht v. Lissak, 617. Hackensack Water Co. v. De Kay, 232. Hackett v. Snow, 787. Hackley v. Draper, 221, 229. Hade v. McVay, 287. Hagedon v. Bank of Wisconsin, 436. Hagenbeck v. Hagenbeck, 852. Hager v. Stevens, 48, 352, 353, 751. Haggarty v. Pittman, 591, 593, 897. Haigh V. Carroll, 810, 811, 972. Haigh V. Grattan, 931. Haight V. Burr, 695. Haines v. Carpenter, 858, 860. Hale V. Allison, 271, 272, 274, 276, 392, 395. Hale V. Coffin, 392, 395 Hale V. Cushman, 398. Hale V. Frost, 516. Hale V. Hale, 700. TABLE OF CASES CITED. XXXlll [KEFEHENCES ABE TO PAGES.] Hale V. Hardon, 272, 274, 395. Hale V. Harris, 284. Hale V. Nashua & Lowell Railroad, 505. Hale V. Tyler, 272, 392, 395. Hale-Berry Co. v. Diamond State Iron Co., n2. Hall V. Hall, 23, 681. Hall V. Jenkinson, 761. Hall V. Nieukirk, 357, 430. Hall V. Smith, 939. Hall V. Wayne Circuit Judge, 26, 39. Hallam v. Tillinghast, 455. Halsted v. Forest Hill Co., 208. Hamacker v. Commercial Bank, 945. Hamberlain v. Marble, 748. Hamburgh Manufacturing Co. v. Edsall, 12, 13, 746, 880. Hamill v. Hamill, 709. Hamilton, In re, 290. Hamilton v. Accessory Transit Co., 369. Hamilton v. Brewster, 144. Hamlin v. Wright, 636, 637. Hammer v. Kaufman, 99. Hammerly v. Mercantile T. & D, Co., 530. Hammock v. Loan & Trust Co., 109. Hammond v. Cline, 392. Hamor v. Taylor-Rice E. Co., 385. Hampton v. Buchanan, 356. Hampton v. Norfolk & W. R. Co 529. Hampton Roads R. & E. Co. v. Newport News, etc., Co., 87, 163. Hancock, In re, 24. Hand v. Railroad Co., 493, 955. Hand v. Savannah & Charleston R. Co., 505, 506. Hanna v. Hanna, 13, 25. Hanna v. State Trust Co., 166, 378. Hanon v. Weil, 38. Hanover Fire Insurance Co. v. Ger- mania Fire Insurance Co., 95. Hanson v. Davison, 274. Hanson v. Stephens, 938. Hardin v. Hardin, 828. Hardin v. Sweeney, 246, 249. Harding v. Garber, 806. Harding v. Glover, 675, 685. Harding v. Nettleton, 540. Hard wick v. Hook, 253, 263. Hardy v. McClellan, 24. Hargrave v. Hargrave, 758, 913. Harland v. Bankers & Merchants Telegraph Co., 248. Harman v. Foster, 952. Harman v. McMuUin, 3. Harmon v. Wagener, 861. Harrell v. Kent, 248, 249. Harrigan v. Gilchrist, 5, 217, 224, 299, 325, Zn, 386, 918, 919, 92l[ 955, 957. Harrington v. Foley, 965. Harris v. Beauchamp Brothers, 33, 620. Harris v. Root, 985. Harris v. Sangston, 980. Harris v. Sleep, 930. Harris v. United States S. F. & L Co., 806, 807, 818, 825. Harrison v. Boydell, 970. Harrison v. Dignan, 214. Harrison v. Fitzgerald, HZ. Harrison v. Warren Co., 8. Harrup v. Winslet, 858. Hart V. Marshall, 883. Hart V. Tims, 586. Hart V. Tulk, 12,Z. Harvey v. Allen, 458. Harvey v. Lord, 449. Harvey v. Varney, 63, (HI, Harwell v. Potts, 24. Hatch V. Daniels, 34, 980. Hatcher v. Massey, 848. Hatfield v. Cummings, 53, 238. Haugan v. Netland, 135, 837. Hause v. Newel, 272. Havemeyer v. Superior Court, 374. Havens & Geddes Co. v. Harris 697. XXXIV TABLE OF CASES CITED. [REFERENCES ARE TO PAGES.] Haverly v. Elliott, 57. Hawkins v. Gathercole, 617. Hawkins v. Luscombe, 125. Hayden v. Shearman, 72>7. Hayden v. Thompson, 446. Hayes v. Brotzman, 253, 270. Hayes v. Dickinson, 802. Hayes v. Heyer, 689. Hayes v. Jasper Land Co., 6, 14, 355. Hayes v. Kenyon, 391. Hayner v. Fowler, 636. Haywood v. Cope, 880.. Hazard v. Durant, 271. Hazelrigg v. Bronaugh, 194. Hazeltine v. Granger, 790. Head v. Miller, 242. Heard v. Murray, 129. Hearn v. Tennant, 197. Heath v. Missouri, K. & T. R. Co., 550. Heathcot v. Ravenscroft, 674, 904. Heatherton v. Hastings, 664. Heavilon v. Farmers Bank, 113. Heermans v. Clarkson, 218. Heffron v. Gage, 8, 153, 307. Heffron v. Rice, 50, 916, 919, 944. Heflebower v. Buck, 665, 688. Hegewisch v. Silver, 139. Heinze v. Butte & B. C. M. Co., 13, 44, 759, 760. Heinze v. Kleinschmidt, 755. Hellebush v. Blake, 63. Helme v. Littlejohn, 248, 249, 252, 270, 700. Helmore v. Smith, 194. Hembree v. Dawson, 934. Hendee v. Connecticut & P. R. R- Co., 456. Henderson v. Reynolds, 129, 131, 133. Henderson v. Walker, 539. Hendrie & Bolthoff Co. v. Parry, 216, 947, 950. , Hendrix v. American F. L. M. Co., | Hilliker v. Hale, 271, 394. 136 809. Hinckley, In re, 927 Henn v. Walsh, 33, 658, 688, 902, 906. Henning v. Raymond, 248, 252. Henning v. Sampsell, 550, 551. Henry v. Henry, 673, 929, 943, 946, 954, 956, 958. Henry v. Kaufman, 319, 332. Henshaw v. Wells, 110, 845. Herbert v. Greene, 819, 821. Herman v. Dunbar, 967, 993. Herndon v. Hurter, 938. Heroy v. Gibson, 581, 582. Herrick v. Miller, 224, 796. Herrick's Minors, In re, 148, 149. Herring v. New York, L. E. & W. R. Co., 462. Hervey v. Fitzpatrick, 858, 865. Hewitt V. Traders' Bank, 444. Hibbert V. Jenkins, 104, 855. Hickey v. Parrott S. & C. Co., 217, 919, 920, 921. Hickox V. Holladay, 985. Hicks V. Hicks, 876. Hicks V. I. & G. N. R. Co., 550, 563. Higgins, In re, 499. Higgins V. Bailey, 702. Higgins V. Gillesheiner, 636. Higgins Oil & Fuel Co. v. Snow, 756, 759, 760. Highland Avenue & B. Ry. Co. v. C. E. Co., 43. Highland Ave. & B. R. Co. v. Thornton, 50. Highley v. Deane, 964. Hiles V. Case, 525. Hiles V. Dunn, 704. Hiles V. Moore, 126, 833, 835. Hill V. Arnold, 859. Hill V. Gould, 353. Hill V. Robertson, 818, 824. Hill V. Taylor, 766. Hill V. Western & A. R. Co., 636. TABLE OF CASES CITED. XXXV [BEFEnSNCES ABE TO PAGES.] Hinckley v. G., C. & S. R. Co., 971. Hinckley v. Pfister, 343. Hinckley v. Railroad Co., 916, 927, 951. Hirsch, Elson & Co. v. Israel, 598. Hitchen v. Birks, 65. Hitz V. Jenks, 45, 842. Hlawacek v. Bohman, 749. Hoare v. Stephens, 804. Hobart v. Ballard, 660, 661. Hobart v. Bennett, 225. Hobhoiise v. Hollcombe, 774. Hobson V. Sherwood, 772. Hodges V. McDuff, 746. Hoffman v. Bank, 314, 989. Hoffman v. Schoyer, 674. Hoge V. Hollister, 807. Holbert v. Chilvers, 792. Holbrook v. Ford, 272, 309, 310, 638, 639. Holbrook v. Receivers of American Fire Insurance Co., 419. Holcombe v. Executors of Hol- combe, 925. Holcombe v. Johnson, 336. Holden's Administrators v. Mc- Makin, 36, 697, 698, 907. Holdrege v. Gwynne, 591, 897. Holland v. Cork & Kinsale R. Co., 482, 616. Holland Trust Co. v. International B. & T. Co., 11. Hollenbeck v. Donnell, 819, 821. Hollier v. Hedges, IIZ. Hollifield V. Wrightsville & T. R. Co., 545. Hollins V. Iron Co., 591. Hollis, Ex parte, 200. Hollis V. Bryant, 748. Hollister v. Barkley, 34, 9S0. Holmes v. Bell, 812. Holmes v. Holmes, 750. Holmes v. Millage, 33, 620. Holshouser v. Cooper Co., 166. Home Fire Ins. Co. v. Dutcher, 45. Home P. S. F. Association, In re, 212. Home Savings & Trust Co. v. Polk District Court, 35. Homer v. Barr P. E. Co., 249, 272. Hone, In re, 217. Honegger v. Wettstein, 306. Hood V. First National Bank, 21. Hook V. Bosworth, 793. Hooper v. Central Trust Co., 378. Hooper v. Winston, 3, 208, 943, 952. Hoover v. M. & G. L. R. Co., 565, 566. Hope Mutual Life Ins. Co. v. Tay- lor, 272, 275, 652. Hopkins v. Connel, 524. Hopkins v. Taylor, 399. Hopkins v. Worcester & Birming- ham Canal Proprietors, 481. Hoppe V. Fountain, 758. Horlock V. Smith, 156. Horn V. Bohn, 963. Horn V. Pere Marquette R. Co., 156, 164. Horner v. Bell, 744. Horner v. Dey, 819. Hornsby v. Eddy, 537, 539. Horton v. White, 754. Hottenstein v. Conrad, 10, 38, 113, 662, 881. Houlditch V. Lord Donegal, 64, 887. Houston V. Redwine, 257. Houston & Texas C. Ry. Co. v. Crawford, 556. Hovey v. McDonald, 219, 972. How V. Jones, 954, 955, 971. Howard V. Chesapeake & O. R. Co., 272. Howard v. Lowell Machine Co., 979. Howard v. Palmer, 118, 628. Howard v. Papera, 862. Howard v. Whitman, 432. Howard Co. v. Strother, 166. Howarth v. Angle, 397. Howarth v. Lombard, 281, 397. XXXVl TABLE OF CASES CITED. [references are to pages.] Howe V. Jones, 129, 964. Howe V. Deuel, 342, 343, 892. Howe V. Willard, 197. Howell V. Dawson, 33. Howell V. Hough, 4. Howell V. Ripley, 21, 840. Howes V. Davis, 924, 945, 954. Hoyt V. Thompson, 66, 277, 422. Hoyt V. Thompson's Executor, 66 Hubbard v. Guild, 645. Hubbard v. Hamilton Bank, 436. Hubbard v. Hubbard, 591, 897. Hubbell V. Avenue Investment Co., 795. Hubbell V. Dana, 264, 309. Hudson V. Plets, 628. Huellmantel v. Huellmantel, 619. Huerstel v. Lorillard, 743. Huet V. Lumber Co., 355. Huff V. Bidwell, 129. Hugh V. McRae, 430. Hughes V. Hatchett, 764. Huguenin v. Baseley, 11. 729, 881. Hulings V. Jones, 51, 956. Hull V. Caughy, 38. Hull V. Thomas, 191, 197, 198. Hulse V. Wright, 591, 593. Hulst, In re, 81. Humphreys v. Allen, 567, 571. Humphreys v. Hopkins, 189. Hungerford v. Cushing, 111. Hunt V. American Grocery Co., 348. Hunt V. Columbian Insurance Co., 67, 275, 277. Hunt V. Illinois Central R. Co., 313. Hunt V. Whewell, 395. Hunt V. Wolfe, 3, 5, 262, 776. Hursh V. Hursh, 109, 787. Hutchins v. Langley, 286. Hutchinson v. American P.-C. Co., 14. Hutchinson v. Crutcher, 444. Hutchinson v. Green, 74. Hutchinson v. Hampton, 932. Hutton V. Lockridge, 127. Hyatt V. McMahon, 399. Hyde v. Lynde, 286, 389, 400. Hyde Park Gas Co. v. Kerber, 14, 353. Hyman v. Kelly, 818, 826. Hyslop V. Hoppock, 134. I. I. & G. N. R. Co. V. Ormond, 550, 563. Idaho Gold Reduction Co. v. Crog- ham, 263. Iddings V. Bruen, 176, 226, 579, 626. Iglehart v. Bierce, 249, 253, 258, 283. Illinois Steel Co. v. Putnam, 158. Illinois Trust & Savings Bank v. Doud, 509, 525. Illinois Trust & Savings Bank v. Pacific Ry. Co., 53, 565, 972. Illinois Trust & Savings Bank v. Smith, 328. Imperial Mercantile Credit Asso- ciation V. Newry & Armagh R. Co., 117, 482. Industrial Mutual D. Co.'s Receiver V. Taylor, 386. IngersoU v. Cooper, 248, 251. Insurance Commissioner v. C. M. Ins. Co., 211, 414, 421. Insurance Commissioner v. United F. Ins. Co., 431. International & G. N. Ry. Co. v. Bender, 539. International Trust Co. v. Decker Bros., 18, 378. International Trust Co. v. Town- send B. & C. Co., 512, 530. International Trust Co. v. United Coal Co., 50, 363, 378, 379, 591, 915, 916, 954. Investment Co. v. Ohio & N. W. R. Co., 565. Ireland v. Eade, 213, 967. Ireland v. Nichols, 740, 985, 986 TABLE OF CASES CITED. XXXVll [BEFBRBNCBS ABE TO PAGES.] Iron Hall v. Baker, 358, 429. Irons V. Manufacturers National Bank, 451. Irwin V. Everson, 660. Irwin V. Granite S. P. Assn., 66, 373. Irwin V. Lewis, 17. Irwin V. McKechnie, 545. J. J. I. Case Plow Works v. Finks, 305, 545. Jackson v. De Forest, 663, 664, 665, 683, 701. Jackson v. First State Bank, 225. Jackson v. Hooper, 818, 821. Jackson v. Jackson, 876. Jackson v. Lahee, 674. Jackson v. Roberts, 412, 418. Jackson v. Sheldon, 595, 596, 679, 898. Jackson v. Van Slyke, 417. Jacksonville Ferry Co. v. Stockton, 129, 132. Jacobs V. Gibson, 815. Jacobs V. Jacobs M. Co., 353. Jacobs V. Miller, 111. Jacobs V. Turpin, 389. Jacobson v. Allen, 391. Jacobson v. Landolt, 162. Jacox V. Clark, 885. Jaffray v. Raab, 935. Janeway v. Green, 851. Jasper Land Co. v. Wallis, 357, 358. Jay, Ex parte, 646. Jay V. De Groot, 263. Jay's Case, 306, 889. Jefferson v. Edrington, 772. JefTerys v. Dickson, 803. JeflFerys v. Smith, 759. Jenkins v. Briant, 969. Jenkins v. Jenkins, 864. Jenks V. Horton, 743. Jenner-Fust v. Needham, 804. Jerome v. McCarter, 377. Jewett V. Miller, 224, 226. John V. John, 721. Johnes v. Claughton, 163, 185, 888, 889. Johns V. Johns, 106, 122, 123, 862. Johnson, Ex parte, 537. Johnson v. Central Trust Co., 990. Johnson v. Farnum, 591. Johnson v. Garrett, 935. Johnson v. Gimter, 211. Johnson v. Lehigh V. T. Co., 322. Johnson v. Martin, 139, 263. Johnson v. Powers, 240, 316. Johnson v. Southern B. & L. Assn., 277, 430, 431. Johnson v. Tucker, 579. Johnson v. Woodruff, 606. Johnston v. Hanner, 37. Johnston v. Henderson, 744. Johnston v. Robuck, 324. V. Jolland, 104, 855, 875, 952. Jolly V. Arbuthnot, 803. Jonas H. French, 170. Jones V. Arena Publishing Co., 381. Jones V. Bank of Leadville, 24, 429. Jones V. Blun, 53, 143. Jones V. Boyd, 762. Jones V. Dougherty, 122, 124, 600. Jones V. Frost, 735. Jones V. Goodrich, 64. Jones V. Graves, 129. Jones V. Jones, 716. Jones V. Keen, 919, 923. Jones V. Moore, 167. Jones V. North P. F. & O. Co., 39. Jones V. Pugh, 604, 606, 731. Jones V. Purcell, 93, 189. Jones V. Schall, 24. Jones V. Schlapback, 547. Jones V. Weir, 686. Joost V. Bennett, 946. Joralmon v. IMcPhee, 936, 937. Jordan v. Beal, 736, 764. Jordan v. Jordan, 96, 110. Jordan v. Miller, 655. -^ Jordan v. Wells, 296. XXXVIU TABLE 07 CASES CITED. [REFERENCES ARE TO PAGES.] Joselove v. Bohrman, 684. Joseph Dry Goods Co. v. Hecht, 129, 592. Joslin V. Williams, 57. Joslyn V. Athens C. & C. Co., 936. Journeay v. Brown, 44, 599. Juckett V. Fargo, 228. Judd V. Bankers & Merchants Tele- graph Co., 74, 80. Justice V. Kirlin, 248, 249. K. Kaighn v. Fuller, 980. Kain v. Smith, 549. Kaiser v. Kellar, 3, 4, 320. Kanawha Coal Co. v. Ballard & W. C. Co., 18. Kansas Pacific Ry. Co. v. Bayles, 324, 495. Kansas Pacific R. Co. v. Wood, 552. Kansas Rolling Mill Co. v. A., T. & S. F. R. Co., 38. Karn v. Rorer, 568. Katsch V. Schenck, 691, 693. Katz V. Brewington, 691. Kavanagh v. Bank of America, 312. Keach, In re, 647. Kean v. Colt, 18, 22, 124. Keeley v. Union Pac. Ry. Co., 307. Keen v. Breckenridge, 294, 296, 297. Keenan v. Shannon, 747. Keene v. Gaehle, 336. Keep V. Michigan Lake Shore R. Co., 74, 476, 485, 814, 818, 830. Kehler v. Jack Mfg. Co., 591. Kehr v. Hall, 260. Keihl V. City of South Bend, 87. Kellar v. Williams, 3, 708. Kelley v. Boettcher, 14, 26. Kellogg V. King, 17. Kelly, In re, 525. Kelly V. Butler, 1Z1 . Kelly V. Fargo, 348. Kelly V. Rutledge, 745, 980. Kelly V. Steele, 719. Kelly V. Trustees, 461, 476. Kelso V. American I. & I. Co., 38. Kempson v. Kempson, 198. Kennedy v. Gibson, 446, 448, 452. Kennedy v. I., C. & L. R. Co., 294, 299, 541, 542. Kennedy v. St. Paul & Pacific R. Co., 485, 490, 492, 565, 567. Kennedy v. Thorp, 641, Kenney v. Ranney, 332. Kent V. Lake Superior Canal Co., zn. Keogh V. McManus, 841. Kerchner v. Fairley, 818. Kerr v. Brandon, 99, 150. Kerr v. Potter, 660, 902, 903. Kerr v. White, 61. Kidder v. Beavers, 296. Kilgore v. Hair, 98. Kilpatrick v. Horton, 915, 938 Kimball v. Gaflford, 187. Kimball v. Ives, 389. Kimberly v. Blackford, 264. Kimberly v. Goodrich, 264. Kimberly v. Stewart, 264. Kimmerle v. Dowagiac Mfg. Co., 920, 929, 955. King V. Armstrong, 448. King V. Cochran, 249, 261, 281, 396, 397. King V. Cutts, 3, 208, 248, 251. King V. O. & M. R. Co., 192, 499. King V. Pomeroy, 453. King V. Wooten, 165. Kinney v. Crocker, 86, 294, 297, 541. Kipp V. Hanna, 744. Kirby v. Ingersoll, 691, 692. Kirker v. O wings, 146, 942. Kirkpatrick v. McElroy, 214, 700. Kittanning Insurance Co., Petition of, 429. Kittredge v. Osgood, 159, 430. Klee V. Steele Co., 591. TABLE OF CASES CITED. XXX IX [KEFEIiENCES ABE TO PAGES.] Klein v. Gavenesch Co., 322. Klein v. Independent B. Assn., 349. Klein v. Jcwctt, 524, 537, Knabe v. Johnson, 314. Kneeland v. American L. & T. Co., 507, 522, 575. Kneeland v. Bass Foundry & Ma- chine Works, 507. Kneeland v. Luce, 567, 573. Knickerbocker v. Benes, 337. Knickerbocker v. McKindley C. & M. Co., 50, 51. Knickerbocker Bank, In re, 103, 376. Knickerbocker Life Insurance Co. v. Hill, 815. Knight V. Duplessis, 64, 734, 862. Knight V. Knight, 859. Knight V. Nash, 41, 582. Knight V. Plimouth, 330. Knighton v. Young, 732, 911. Knode v. Baldridge, 674. Knott V. Receivers of Morris Canal & Banking Co., 210. Konrad, In re, 592. Koontz V. Northern Bank, 232, 782. Kountze v. Omaha Hotel Co., 794, 818. Kretschmar v. Stone, 244. Kriesle v. Campbell, 180, 181. Krohn v. Weinberger, 8, 120, 124. Kron V. Dennis, 739. Kronberg v. Elder, 285. Kyme v. Digman, 214. Lackawanna Iron & Coal Co. v. Farmers' L. & T. Co., 526. Lackmann v. Supreme Coimcil, 68. La Cliaise v. Lord, 595, 596, 898. Ladd V. Harvey, 110, 111, 854. Lafayette Bank v. Buckingham, 385, 981. Laing v. Williams, 28. Lake National Bank v. Wolfebor- ough S. Bank, 43, 74. Lake Shore & M. S. R. Co. v. Fel- ton, 164. Lake Shore & ]\I. S. R. Co. v. Tay- lor, 198. Lamar Insurance Co. v. Gulick, 410. Lamaster v. Elliott, 755. Lamb v. Rowan, 220. Lammon v. Giles, 935. Lanauze v. Belfast, Holy wood & Bangor R. Co., 745, 840. Lancashire v. Lancashire, 718, 723. Lancaster v. Asheville St. Ry. Co., 14. Land Title & Trust Co. v. Asphalt Co., 311. Landers v. Felton, 88. Lane v. Macon & A. Ry. Co., 520. Lane v. Sterne, 191, 192. Lane v. Townsend, 962. Lane v. Washington Hotel Co., 50, 934. Lang V. Macon C. Co., 621. Langdon v. Vermont & Canada R. Co., 491, 571. Langford v. Langford, 62, 192, 202, 800, 887. Langley v. Hawk, 864. Lanier v. Gayoso Savings Institu- tion, 288. Lansing v. Manton, 613. Laramie National Bank v. Stein- hoff, 195. Largan v. Bowen, 989. Larsen v. Winder, 129, 130. Latham v. Chafee, 6, 123, 848, 849. Lathrop v. Knapp, 262. Latimer v. A. & B. R. Co., 464. Latta V. Catawba Electric Co., 400. Laughlin v. United States Rolling Stock Co., 378. Lavender v. Lavender, 985. Law V. Ford, 689. Law V. Glenn, 803. Lawrence v. Greenwich Fire Insur- ance Co., 351. Lawrence v. McCready, 390, 413. xl TABLE OF CASES CITED. [eefeeences aee to pages.] Lawrence Iron-Works v. Rock- bridge Co., 26. Lawson v. Ricketts, 993. Lazear v. Ohio Valley S. F. Co., 215. Leach v. Tisdal, 106. Leary v. Columbia R. & P. S. N. Co.. 591. Leathers v. Shipbuilders Bank, 437. Leavitt v. Yates, 11, 18, 25, 351, 881, 882. Leddel's Executor v. Starr, 110, 872. Ledoux V. La Bee, 166, 192. Lee V. Cone, 187. Lee V. Powell Bros. & Sanders Co., 994. Le Grand v. O'Neill, 117. Lehigh C. & N. Co. v. Central R. Co., 300, 493, 494. Le Hote v. Boyet, 380. Leney v. Callingham, 726. L'Engle v. Florida Central R. Co., 472, 982. Lenoir v. Linville I. Co., 421, 989. Lenox v. Notrebe, 7, 19. Levenson v. Elson, 849. Levi V. Karrick, 47, 174. Levin v. Florsheim, 35. Levy V. Cavanagh, 185. Levy V. Ely, 595, 596, 898. Lewis, In re, 197. Lewis V. American N. S. Co., 74, 75, 277. Lewis V. Campau, 39. Lewis V. Clark, 277. Lewis V. Lindeen Steel Co., 380. Lewis V. Singleton, 197. Libby v. Rosekranz, 228, 385, 423. Lichtenstein v. Dial, 919, 922, 923. Liggett V. Glenn, 75. Ligon V. Bishop et al., 605. V. Lindsey, 62, 63, 887. Link Belt Machinery Co. v. Hughes, 322, 324, 964. Links V. Connecticut River B. Co., 294, 408. Linville v. Hadden, 67, 345. Litchfield Bank v. Church, 242. Litchfield Bank v. Peck, 241, 242. Little Warrior Coal Co. v. Hooper, 129, 348. Littlefield v. Maine Central R. Co., 294. Litzenberger v. Jarvis-Conklin Trust Co., 517. Livingston v. Bank of New York, 432, 440. Livingston v. Olyphant, 257. Livingston v. Pettigrew, 321. Lloyd, In re, 98, 99. Lloyd V. Chesapeake, O. & S. W. R. Co., 846. Lloyd V. Lord Trimleston, 720. Lloyd V. Passingham, 604, 718, 719, 910. Lloyd V. Trimleston, 734. Lock V. Turnpike Co., 550. Lofsky V. Maujer, 794, 797. Lombard v. Wade, 971. Loney v. Penniman, 704. Long Branch & Sea Shore R. Co., In re, 470, 987. Longstaff v. Hurd, 181, 710. Lonsdale v. Church, 952. Loomis V. McKenzie, 657. Lorch V. Aultman, 159, 222. Lord Fingal v. Blake, 720. Lotte Bros. v. American Silk Co., 91. Lottimer v. Lord, 46, 216, 217, 679. Louisville, New Albany & Chicago R. Co. V. Cauble, 552. Louisville & N. R. Co. v. Central Trust Co., 521. Loven v. The People, 195. Low V. Holmes, 28. Lowe V. Lowe, 878, 950. Lowe V. Riley, 45. Lowe V. Stephens, 645. Lowell V. Doe, 791, 826. Lowenstein v. Finney, 53. Lowry V. Smith, 233. TABLE OF CASES CITED. xU [befekbnces abb to pages.] Luderbach Plumbing Co. v. Its Creditors, 208. Ludgater v. Channell, 146. Lumsden v. Fraser, 770. Lupton V. Stephenson, 96. Lycoming Fire Insurance Co. v. Wright, 277, 413. Lyle V. Commercial National Bank, 13. Lyman v. Central Vermont R. Co., 297, 537, 541. Lyne v. Lockwood, 738. M. Mabon v. Ongley Electric Co., 374 Mabry v. Harrison, 941. Macartney v. Walsh, 780. MacDonald v. O'Toole, 31. Madden, In re, 731. Madgwick v. Wimble, 656, 697, 698. Magan v. Fallon, 335. Magee v. Cowperthwaite, 915, 924. Maguire v. Allen, 135. Maher v. Bull. 708, 907. Mahon v. Crothers, 823. Main v. Giuthert, 831. Maish V. Bird, 136, 800. Makeel v. Hotchkiss, 50, 936. Makins v. Percy Ibotson & Sons, 804. Malcolm v. O'Callaghan, 929. Malcolm v. Montgomery, 110, 136, 600. Malcomson v. Wappoo Mills, 952. Malone v. Buice, 852. Malott V. State, 296. Manchester & L. D. B. Co. v. Par- kinson, 33, 620. Manchester Locomotive Works v. Truesdale, 525. Manchester & Mil ford R. Co., In re, 466. Mandeville v. Avery, 636, 638. Mangle v. Lord Fingall, 781, 912. Manhattan Trust Co. v. Sioux City & N. R. Co., 517. Manker v. Loan Association, 297, 309. Manley v. Rassiga, 266, 636. Manlove v. Burger, 248, 253, 414. Manlove v. Naw, 414. Mann v. Fairchild, 441. Mann v. Caddie, 662, 676. Mann v. German-American I. Co., 10, 24. Mann v. Pentz, 409, 626, 646. Mann v. Stennet, 149. Manners v. Furze, 138. Manning v. Evans, 629, 632. Manning v. Monaghan, 331. Manning v. Mullins, 856. Manufacturers Paper Co. v. Lind- blom, 8, 308. Mapes V. Scott, 739. Mardian v. Wayne Circuit Judge, 39. Marion Trust Co. v. Blish, 286, 411. Market National Bank v. Pacific National Bank, 258. Marr v. Littlewood, 64. Marsh v. Hussey, 966. Marshall v. Lockett, 163. Marshall v. Sherman, 395. Marshall & Ilsley Bank v. Cady, 824. Marten v. Van Schaick, 663, 664, 665, 689. Martin v. Atchison, 297. Martin v. Black, 186. Martin v. Martin, 915, 919. Martin v. N. Y., S. & W. R. Co., 493. Marvine v. Drexel's Executors, 869. Mason v. Hubner, 231. Mason v. Mason, 783, 912. Mason v. Supreme Court, 343. Mason v. Westoby, 33, 804. Mather Humane Stock T. Co. v. Anderson, 521. xlii TABLE OF CASES CITED. [references are to pages.] Mathews v. Neilson, 614, 868. Maudslay, Sons & Field, In re, 62, 203. Maund v. Allies, 708. Maunsell v. Egen, 145, 149. Mauran v. Crown C. L. Co., 938. Maxwell v. Akin, 409. Maxwell v. Peters Shoe Co., 132. Maxwell v. Wilmington D. M. Co., 922. May V. Greenhill, 591. May V. Printup, 74. Maynard v. Bond, 141, 156, 157. Maynard v. Railey, 132, 678. Mayo V. McPhaul, 721. Mays V. Rose, 5, 10, 12, 18, 19, 135, 153, 154, 604, 766, 880, 881. Mays V. Wherry, 752. Maythorne v. Palmer, 885. McAllister v. Harman, 246. McAlpin V. Jones, 277, 279. McAneny v. Superior Court, 619. McAnrow v. Martin, 934, 935, 938, 964. McArthur v. Montclair R. Co., 927. McBride v. Clarke, 942. McCan v. O'Ferrall, 335. McCarter v. Clavin, 18. McCarthy v. Peake, ID, 72, 676, 883, 905. McCaskill v. Warren, 116. McCaslin v. State, 763. McClure v. McGee, 17. McCombs V. Merryhew, 174. McCord V. Weil, 41. McCornack v. Salem Ry. Co., 527. McCosker v. Brady, 849, 986. McCraith v. Quin, 620. McCulloch V. Norwood, 308. McCullough V. Merchants Loan & Trust Co., 100. McCurdy v. Bowes, 569. McDermott v. Crook, 558. McDonald v. Carney, 264. McDonald v. Railroad, 167. McDonald v. Ross-Lewin, 393, 413, 416. McDonald v. State, 455. McDonnell v. White, HZ. McElvey v. Lewis, 684. McElwain v. Willis, 588. McElwaine v. Hosey, 7. McEvers v. Lawrence, 311. McEwen v. Brewster, 632. McGarrah v. Bank, 3, 13, 110. McGhee v. Willis, 561. McGilliard v. Donaldsonville F. & M. Works, 91, 93, 102. McGoldrick v. Slevin, 591, 593. McGowan v. Myers, 181, 182, 631. McGraw v. Union Trust Co., 322. McGregor v. Third National Bank, 313. Mcllhenny v. Binz, 461, 519, 532. Mcllrath v. Snure, 241. Mcintosh V. Perkins, 659. McKay v. Van Kleeck, 54, 70, 183. McKennon v. Pentecost, 210. McKenzie v. Coslett, 935. McKinney v. Ohio & INlississippi R. Co., 552. McKinnon v. Pike County Guano Co., 800. McKinnon v. Wolfenden, 314. McLane v. Placerville & S. V. R. Co., 480, 504, 507. McLaughlin v. Kimball, 391. McLaughlin v. Taylor, 222. McLean v. Lafayette Bank, 135, 74S. McLean v. Presley's Administrator, 791. McLeod V. City of New Albany, 165, 208. McMahon v. McClernan, 708. McMahon v. North Kent L Co., 804. McNab V. Noonan, 707. McNair v. Pope, 719, 778. McNeil V. Garratt, 197. McNulta V. Ensch, 557. McNulta V. Lochridge, 89, 547. TABLE OF CASES CITED. xliii [KEFERBNCES ABE TO PAGKS.] McNulta V. Lockridge, 557, 558. M'Crecry v. Beiiueti, 32. Mead v. Burk, 18, 26, 763. Mead v. Orrery, 138, 142. Meaden v. Sealey, 133, 788. Meadow Valley Mining Co. v. Dodds, 36. Meara's Administrator v. Holbrook, 304, 537, 539. Mechanics Bank of Philadelphia v. Bank of New Brunswick, 948. Mechanics National Bank v. Lan- daur, 301. Medynski v. Theiss, 209. Meeker v. Sprague, 301. Meier v. Kansas Pacific R. Co., 3, 467. Meinhard v. Strickland, 591. Melendy v. Barbour, 294, 299, 312, 541. M'Elmoyle v. Cohen, 273. Memphis & Charleston R. Co. v. Glover, 562. Mercantile I. & G. T. Co. v. River Plate T. L. & A. Co., 62. Mercantile Insurance Co. v. Jaynes, 258. Mercantile Trust Co. v. Farmers' L. & T. Co., 322, 325, 533, 534. Mercantile Trust Co. v. Kanawha & O. R. Co., 473, 572. Mercantile Trust Co. v. Lemoille Valley R. Co., 84. Mercantile Trust Co. v. Missouri, K. & T. R. Co., 477, 495. Mercantile Trust Co. v. Southern States L. & T. Co., 182. Mercantile Trust & Deposit Co. v. Southern I. C. Line, 520. Merchants' Bank v. Crysler, 959. Merchants Insurance Co., In re, 5, 81, 83, 154. Merchants & Manufacturers Nation- al Bank v. Kent Circuit Judge, 24, 98, 800. Merchants National Bank v. North- western M. & C. Co., 408. Merchants & Planters National Bank v. Trustees, 74. Meredith Village Savings Bank v. Simpson, 294, 298. Meridian N. & P. Co. v. Diem & W, P. Co., 129, 665. Meriwether v. Garrett, 579, 587. Merrell v. Pemberton, 49, 886. Merriam v. St. Louis, C. G. & F. S. Ry. Co., 37, 461, 478. Merriam v. Victory Mining Co., 378, 381, 971. Merrill v. Elam, 110, 127. Merrill v. First National Bank, 446. Merritt, In re, 239, 890. Mesnager v. De Leonis, 760. Metcalf V. Moses, 683. Aletcalfe v. Commonwealth L. & L. Co.'s Receiver, 167. Metcalfe v. Pulvertoft, 121, 122, 765. Metropolitan National Bank v. Com- mercial State Bank, 53, 54. Metropolitan Trust Co. v. Columbus, S. & H. R. Co., 499. Metropolitan Trust Co. v. Tona- wanda Valley & C R. Co., 565. Metz V. B., C. & P. R. Co., 548, 550. Metzner v. Bauer, 272, 277, 278. Meyer v. Johnston, 461, 491, 565, 568. Meyer v. Seebald, 747. Meyer v. Thomas, 819. Miami Exporting Co. v. Gano, 254. Middleton v. Dodswell, 122, 605, 858, 861. Middleton v. New Jersey West Line R. Co., 490. Mikkelson v. Truesdale, 540. Milbank v. Revett, 755, 757. Miles V. New South B. & L. Assn., 173. Milhous V. Dunham, 782. Miller v. Cavanaugh, 135. xliv TABLE OF CASES CITED. [BEFEKENCES AEE TO PAGES.] Miller V. Jones, 106, 172, 173, 697, 698, 699, 706, 907. Miller v. Kitchen, 354. Miller v. Loeb, 294, 316, 994. Miller v. Mackenzie, 630. Miller v. Shriner, 131. Miller Brothers v. Perkins, 60, 63. Mills V. Fry, 776. Miltenberger v. Logansport R. Co., 492, 504, 505, 506, 514, 515, 520, 840. Milwaukee & Minnesota R. Co. v. Soutter, 461, 462, 489, 809, 969, 979, 991. Milwaukee & St. Paul R. Co. v. Milwaukee & Minnesota R. Co., 84. Minkler v. United States S. Co., 584. Minneapolis Baseball Co. v. City Bank, 392. Minneapolis Western Ry. Co. v. Minneapolis & St. L. R. Co., 246. Minnesota T. M. Co. v. Langdon, 404, 408. Missouri Pacific R. Co. v. Love, 70, 172. Missouri Pacific R. Co. v. Texas & P. R. Co., 494, 537, 543. Mitchell, Ex parte, 568. Mitchell V. Barnes, 730. Mitchell V. Roland, 127. M'Loughlin v. Longan, 772. Moak V. Coats, 629. Moat V. Holbein, 195. Mobile & Ohio R. Co. v. Davis, 563. Moies V. O'Neill, 668. Moise V. Chapman, 286, 398. Molony v. Cruise, 46, 856. Monarch Co. v. Bank. 601. Moncrieff v. Hare, 795. Monitor Furnace Co. v. Peters, 434. Montana, Boston & M. C. C. & S. M. Co. V. Montana O. P. Co., 390. Montgomery, In re, 967. Montgomery v. Enslen, 197, 304. Montgomery v. Merrill, 364, 752, 753, 798. Montgomery v. Petersburg S. & I. Co., 919, 954. Mooney v. British Commercial Life Insurance Co., 215. Moore v. Bank, 13. Moore v. Lincoln P. & S. C. Co., 934. Moore v. O'Loghlin, 259. Moore v. Potter, 193. Moran v. Dillingham, 916. Moran v. Johnston, 127. Moran v. Schaeffer, 492. Moran v. Wayne Circuit Judge, 102. Mordaunt v. Hooper, 718, 721. Morey v. Grant, 659. Morford v. Hamner, 762. Morgan v. County Court, 199. Morgan v. Gibian, 70. Morgan v. Hardee, 916. Morgan v. New York & Albany R. Co., 434, 892. Morgan v. Potter, 139, 263. Morgan v. South M. L. V. Co., 401. Morgan's Louisiana & T. R. & S. S. Co. V. Farmers' L. & T. Co., 526. Moriarty v. Kent, 248, 249. Moritz V. Miller, 128. Morley v. Saginaw Circuit Judge. 497. Morris v. Branshaud, 819. Morris v. Elyton Land Co., 353. Morris v. Taylor, 584. Morrison v. Buckner, 13, 16, 786, 787. Morrison v. Forman, 492. Morrison v. Shuster, 591. Moseby v. Burrow, 285, 430. Mott V. Dunn, 595, 898. Mountfort, Ex parte, 110. TABLE OF CASES CITED. xlv [REFERENCES ABE TO PAGES.] Moyers v. Coiner, 130, 963. Mueller v. Stinesville & B. S. Co., 223. Mulcahcy v. Strauss, 153, 159, 161, 294, 297. Mullane v. Ahern, 620. Mullen V. Jennings, 16, 883. Mullcr V. Pondir, 924. Municipal Commissioners of Car- rickfergus v. Lockhart, 21, 26, 718, 723, 910. Munns v. Isle of Wight R. Co., 464. Murdock's Case, 880, 882. Murphy v. Fidelity M. F. Ins. Co., 53, 115, 132. Murphy v. Harker, 198. Murphy v. Penniman, 238, 450. Murray v. Chambers, 455. Murray v. Superior Court, 342, 348. Murray v. Vanderbilt, 368, 369. Murrey v. Chambers, 455. Murrough v. French, 619. Murtey v. Allen, 249, 261, 281, 395, 396. Musgrove v. Gray, 178. Musgrove v. Nash, 950. Mutual Life Insurance Co. v. Spicer, 830. Myer v. Carr Co., 520. Myers v. Estell, 7, 819. Myton V. Davenport, 846. N. N. J. & N. Y. R. Co., In re, 493. Naglee v. Minturn, 678, 710. Nason v. Blennerhassett, 777. Nathan v. Whitlock, 254. Nathans v. Steinmeyer, 792. National Bank v. Colby, 457, 458. National Bank of the Metropolis v. Sprague, 230. National Fire Ins. Co. v. Broad- bent, 824. National Mechanics Banking Asso- ciation V. Mariposa Co., 582, 583, 992. National State Bank v. Vigo Coun- ty National Bank, 386. National Trust Co. v. Miller, 279. National Trust Co. v. Murphy, 257. Naylor v. Sidener, 35. Nealis v. American T. & I. Co., 401. Neall V. Hill, 342, 343, 892. Neate v. Pink, 784. Neeves v. Boos, 53. Neitzel v. Lyons, 348. Nelson v. Connor, 71. Nelson v. Kalkhofif, 322, 325. Nelson v. Nugent, 265. Nesbitt V. Turrentine, 726. Neun V. Blackstone B. & L. Assn., 53, 214. Nevitt V. Woodburn, 3, 4, 297. New V. Wright, 656, 666, 676, 905. New Amsterdam Fire Insurance Co., In re, 424. Newbold v. P. & S. R. Co., 570. Newell V. Fisher, 261. Newell V. Schnull, 134. New England R. Co. v. Carnegie Steel Co., 513, 516. New Haven H. N. Co. v. Linden Springs Co., 395. Newman v. Hammond, 62, 143. Newman v. Mills, 215. Newman v. Newman, 801, 805. New Orleans Gas Light Co. v. Ben- nett, 389, 408. Newport v. Bury, 104, 855, 876, 917. Newport & Cincinnati Bridge Co. v. Douglass, 519. Newport Cotton Mill Co. v. Mims, 286, 398, 409, 411. New South B. & L. Assn. v. Wil- lingham, 114. Newton v. Eagle P. Mfg. Co., 378. Newton v. Ricketts, 854. xlvi TABLE OF CASES CITED. [references are to pages.] New York N. E. Bank v. Metropol- itan S. Bank, 394. New York, P. & O. R. Co. v. New York, L. E. & W. R. Co., 533. New York Security & T. Co. v. Illi- nois T. R. Co., 302. New York & W. U. T. Co. v. Jew- ett, 316, 994. Nichol V. Murphy, 55. Nichols V. Perry Patent Arm Co., 435, 892. Nichols V. Smith, 537. Nicoll V. Boyd, 652. Niemann v. Niemann, 664. Nimick & Co. v. Iron Works Co., 395. Nimocks v. Shingle Co., 34. Nisbet V. Great Northern C. Co., 378. Nisbet V. Tindall, 333. Nix V. Ellis, 287. Noad V. Backhouse, 46, 856. Noe V. Gibson, 191, 192. Noonan v. McNab, 710. Norris v. Lake, 13, 15. North American Gutta Percha Co., In re, 159, 160. North America Land & T. Co. v. Watkins, 129, 353. North Carolina R. Co. v. Drew, 523. North Carolina R. Co. v. Wilson, 852. Northern Alabama Ry. Co. v. Hop- kiris, 916, 942. Northern Pacific R. Co. v. Heflin, 541. Northern Pacific R. Co. v. Lament, 512, 515, 517. Northwestern Iron Co. v. L. & R. I. Co., 70, 71. Northwestern Mutual Life Ins. Co. V. Burr, 154. Northwestern Mutual Life Ins. Co. V. Kidder, 386. Northwestern Mutual Life Insur- ance Co. V. Park Hotel Co., 816. Norwood, Ex parte, 281. Nowell V. International Trust Co., 930. Noyes v. Rich, 479, 502. Nugent V. Nugent, 224, 226, 777. Nusbaum v. Stein, 129, 130, 591, 593, 897. Nutting V. Colt, 660, 902. O. Oakes v. Myers, 165. Oakford v. Robinson, 794, 795, 806. Oakley v. Paterson Bank, 23, 114, 344, 345, 347, 435, 886, 892. O'Brien v. Chicago, Rock Island & Pacific R. Co., 359. O'Callaghan v. O'Callaghan, 774. Ocean Steamship Co. v. Wilder, 270. O'Connor v. Malone, 213. O'Donnell v. First National Bank, 132. Oehme v. Rucklehaus, 739. Ogden V. Gregg, 703. Ogden City v. Irrigation Co., 932, 937, 963. Ohio & Mississippi R. Co. v. Ander- son, 550. Ohio & Mississippi R. Co. v. Davis, 537, 550. Ohio & Mississippi R. Co. v. Fitch, 86, 551, 552, 554. Ohio & Mississippi R. Co. v. Nick- less, 555. Ohio & Mississippi R. Co. v. Russell, 553. Ohio Turnpike Co. v. Howard, 212 O'Keeflfe v. Armstrong. 145. Olcott V. Heermans, 218. Oldham v. Bank, 818. Olds V. Tucker, 300. Oleson V. Bank, 601. Oliver v. Clark, 284. Oliver v. Decatur, 789. Oliver v. Victor, 591. TABLE OF CASES CITED. xlvii [eefbkences ake to pages.] Olmstead v. Distilling & C. F. Co., 102. Olney v. Tanner, 272, 630, 639. Olson V. Bank, 956, 961. Olyphant v. St. Louis O. & S. Co.. 377. Omaha & S. W. R. Co. v. Chicago, etc., Ry. Co., 44. O'Mahoney v. Belmont, 20, 48, 70, 112, 189, 958, 982. Ormsby, In re, 931. Orphan Asylum v. McCartee, 17, 18, 848, 853. Orton V. Madden, 591. Osborn v. Heyer, 3, 579, 580, 581, 899. Osborne v. Big Stone G. C. Co., 568. Osborne v. Harvey, 110, 125. Osgood V. Laytin, 389, 390, 404, 405, 894. Osgood V. Maguire, 292. Osgood V. Ogden, 291, 404, 419. Otis V. Gross, 328. Overholt v. Old D. Mfg. Co., 970. Overton v. M. & L. R. Co., 461. Owen V. Homan, 12, 14, 26, 27, 718, 722, 880, 910. Owen V. Smith, 365, 752. Pacific Lumber Co. v. Prescott, 215. Pacific R. Co. V. Wade, 542. Pacific Railroad v. Ketchum, 61. Pagett V. Brooks, 52, 975, 986. Paige V. Smith, 294, 332, 537, 541, 559. Paige V. Vankirk, 665. Paine v. Holliday, 638. Painter v. Painter, 304. Palen v. Bushnell, 262, 644, 649. Palen v. Johnson, 262. Palmer v. Bank, 392. Palmer v. Murray, 256. Palmer v. Pettingill, 166. i'almcr v. State, 70. Palmer v. Vaughan, 31, 886. Palmer v. Wright, 869. Palys V. Jewett, 301, 542. Pangburn v. American V., S. & L. Co., 224, 930. Panton v. Zebley, 201. Paradise v. Farmers & Merchants Bank, 279. Park V. New York, L. E. & W. R. Co., 533. Parker v. Browning, 179, 201. Parker v. Dunn, 213. Parker v. Lamb & Sons, 272, 276. Parker v. Moore, 584, 586. Parker v. Parker, 759. Parker v. Stoughton Mill Co., 413. Parkhurst v. Kinsman, 48. Parkhurst v. Muir, 671, 672. Parkin v. Seddons, 64, 65, 718. Parkinson v. Trousdale, 34, 980. Parks V. Sprinkle, 644, 645. Parks V. United States B. Corpora- tion, 356. Parmly v. Tenth Ward Bank, 16, 17, 363, 884. Parr v. Bell, 294, 304, 305, 889. Parr v. Spartanberg, etc. R. Co., 550. Parsons v. Charter Oak Life Ins. Co., 64, 372, 473. Parsons v. Monroe Manufacturing Co., 433. Partington v. Booth, 195. Patrick v. Eells, 308. Patterson v. Lynde, 67. Patterson v. Northern Trust Co., 93, 104. Patterson v. Patterson, 230. Patterson v. Ward, 225, 972. Payne v. Atterbury, 740. Payne v. Baxter, 127, 294. Payne v. Hook, 652. Payne v. Paddock, 885. Payson v. Jacobs, 297, 298. xlviii TABLE OF CASES CITED. [EEFEEENCES ABE TO PAGES.] Peabody v. New England W. Co., 403. Peacock v. Peacock, 676. Pearce v. Elwell, IS. Pearce v. Gamble, 703. Pearce v. Jennings, 595. Pearson v. Kendrick, 38. Pease v. Fletcher, 33. Peatman v. Centerville L., H. & P. Co., 354. Peek V. Trinsmaran Iron Co., 804. Peirce v. Van Dusen, 8, 430, 540. Pelzer v. Hughes, 591, 598. Pender v. Mallett, 636. Pendleton v. Lutz, 548. Pendleton v. Russell, 308, 437. Penn v. Whiteheads, 24, 614, 885. Pennsylvania Co. v. American Con- struction Co., 476. Pennsylvania Co. v. Jacksonville, T. & K. W. R. Co., 962. Pennsylvania Steel Co. v. New York C. Ry. Co., 527, 529. Pentz V. Hawley, 407, 412, 893. Penzel Grocer Co. v. Williams, 224. People V. Albany & Susquehanna R. Co., 124, 128, 352. People V. Bank of San Luis Obispo, 343. People V. Barnett, 468. People V. Barrett, 199. People V. Brooks, 334. People V. Central City Bank, 183, 205. People V. Columbia Car Spring Co., 949. People V. Commercial Alliance L. & I. Co., 439. People V. District Court, 118, 342. People V. Draper, 29, 886. People V. Hulburt, 629. People V. Jones, 334. People V. Knickerbocker Life Insur- ance Co., 308, 437, 956. People V. Mayor of New York, 739. People V. Mead, 581. People V. Merchants & Mechanics Bank, 329. People V. Norton, 135, 751. People V. Rogers, 200. People V. Security Life Insurance Co., 216, 427. People V. Security Life Insurance and Annuity Co., 956. People V. St. Nicholas Bank, 322. People V. Sturtevant, 195. People V. Universal Life Insurance Co., 322. People V. Van Buren, 195. People V. Washington Ice Co., 374, 893. People V. Weigley, 192, 199, 342. People V. Zimmer, 334. Peoples National Bank v. Virginia Textile Co., 51. People's State Bank v. Francis, 286, 447. Peoria & P. U. R. Co. v. Chicago, P. & S. W. R. Co., 506. Peoria Steam Marble Works v. Hickey, 321. Pepper v. Fidelity & C. Co., 455. Perrin v. Lepper, 858, 871. Perry v. Oriental Hotels Co., 93, 95, 813. Perry-Mason Shoe Co. v. Sykes, 954. Person v. Learj^ 277. Persse, In re, 294, 304, 305, 889. Petaluma Savings Bank v. Superior Court, 619. Petersburg Sav. & Ins. Co. v. Del- latorre, 575. Peterson v. Baker, 543, 545. Pfeltz V. Pfeltz, 717, 910. Phelan v. Ganebin, 181. Phelps V. Foster, 591, 897. Phenix Insurance Co. v. Schultz, 277. Philadelphia M. & T. Co. v. Goos, 791, 816. TABLE OF CASES CITED. xlix [eebtbrbnces are to pages.] Philadelphia M. & T. Co. v. Oyler, 794. Philadelphia & Reading R. Co. v. Commonwealth, 469. Philadelphia & R. R. Co. v. Little, 232. Phillips V. Atkinson, 696. Phillips V. Eiland, 764. Phillips V. Smoot, 158. Phipps V. Bishop of Bath, 836. Phoenix Iron Co. v. New York Wrought Iron Railroad Chair Co., 422. Phoenix Mutual Life Insurance Co. V. Grant, 125. Phoenix Warehousing Co. v. Badg- er, 409. Pickersgill v. Myers, 389. Pickett V. Fidelity & C. Co., 653. Picton V. Cullen, 31. Pignolet V. Bushe, 759, 760. Pinchback v. Mining Co., 430, 431. Pincke, Ex parte, 98, 878. Pine Lake Iron Co. v. LaFayette Car Works, 398, 399. Pini V. Roncoroni, 675. Pitcher v. Helliar, 874. Pitkin V. Cowen, 548. Pitt V. Snowden, 250, 775. Pittman v. Hopkins, 954. Pittsburg Carbon Co. v. McMillin, 387. Pittsfield National Bank v. Bayne, 935. Piatt V. Adriance, 455. Piatt V. Archer, 81, 82, 83. Piatt V. Beach, 455. Piatt V. Beebe, 450. Piatt V. Crawford, 269, 446, 450. Piatt V. New York & S. B. Ry. Co., 55. Piatt V. Philadelphia & R. R. Co., 473, 520, 522. Poage V. Bell, 16. 883. Podmore v. Gunning, 733. Poertner v. Russell, 197. Poland V. Railroad Co., 526, 531. Polk V. Garver C. & M. Co., 936. Polk V. Johnson, 94, 937, 939. Pollard V. Southern Fertilizer Co., 114, 129, 132. Pollock V. B. & L. Assn., 272. Ponca Mill Co. v. Mikesell, 356, 358. Pond V. Cooke, 189. Pond V. F. & L. R. Co., 343. Ponsonby v. Ponsonby, 992. Pontius, In re, 363. Pope V. Ames, 156. Pope V. Pope, 776. Popp V. Mining Co., 24, Zl . Popper V. Scheider, 660, 661, 903. Poppitz V. Rognes, 584. Portarlington v. Soulby, 887. Porter v. Kingman, 300. Porter v. Lopes, 33. Porter v. Sabin, 406. Porter v. Williams, 629, 636. Porter v. Williams & Clark, 250. Post V. Dorr, 52, 794, 840. Potter V. Bunnell, 315, 537. Potter V. IMerchants Bank, 270. Potter V. Spa Spring Brick Co., 162. Potts, In re, 129. Potts V. Leighton, 952, 953. Potts V. Warwick and Birmingham Canal Navigation Co., 609. Pouder v. Catterson, 775. Ponder v. Tate, 821. Pound, In re, 804. Fountain, In re, 877. Powell V. Allarton, 885. Powell V. Dayton, S. & G. R. R. Co., 554. Powell V. Follett, 197. Powell V. Quinn, 858. Powell V. Waldron, 647, 650. Powers V. Hamilton Paper Co., 433. Powers V. Loughridge, 330. Poythress v. Po>-thress, 848, 850. TABLE OF CASES CITED. [REFERENCES ARE TO PAGES.] Prather Engineering Co. v. Detroit, F. & S. Ry., 298. Pread v. Lewis, 111. Prebble v. Boghurst, 751. Premier Cycle Mfg. Co., In re, 978, 979. Premier Steel Co. v. McElwaine- Richards Co., 170. Prescott V. Pfeififer, 636, 638. Pressley v. Harrison, 24. Pressley v. Lamb, 53. Preston v. American Surety Co., 151. Preston v. Corporation of Great Yarmouth, 812. Preston v. Tunbridge, 840. Preston National Bank v. Smith M. P. Co., 915. Price V. Abbott, 455. Price V. White, 928. Price's Executrix v. Price's Execu- tors, 861. Pringle v. Woolworth, 399, 430. Pritchard v. Fleetwood, 746. Probasco v. Probasco, 123, 738. Provident Life & Trust Co. v. Ken- iston, 14. Prytherch, In re, 804. Pueblo T. & E. Co. v. Allison, 493. Pullan V. Cincinnati & Chicago R. Co., 6, 12, 477, 881. Pullis V. Pullis, 719. Pullman's Palace-Car Co. v. Amer- ican L. & T. Co., 521. Purcell V. Woodley, 970. Quin V. Holland, 779. Quincy v. Cheeseman, 818, 829. Quincy, M. & P. R. Co. v. Humph- reys, 322, 533. Quinn v. Brittain, 607, 833, 834. R. Rabb V. Albright, 60. Rachel Colvin, In re, 205, 877. Radebaugh v. Tacoma & P. R. Co., 53, 523. Radford v. Folsom, 935, 951, 962. Raht V. Attrill, 379. Railroad v. Keary, 539. Railway Co. v. Jewett, 130, 462. Raincock v. Simpson, 775. Rainey v. Freeport S. C. & C. Co., 10, 24. Ralph V. Wisner, 478. Ralston v. Washington & C. R. Ry. Co., 102. Randall v. Morrell, 686, 905. Randfield v. Randfield, 294, 295. Ranger v. Champion C. P. Co., 354. Rankin v. Minor, 633. Rankine v. Elliott, 407, 439, 894. Ranney v. Peyser, 840, 841, 846. Ratcliff V. Adler, 297, 560. Rathbone v. Gas Co., 348. Rath f on v. Locher, 265. Rawnsley v. Trenton Mutual Life & Fire Insurance Co., 23, 435, 886, 892. Ray V. Carlisle, 825. Ray V. Macomb, 259. Ray V. Pierce, 548. Ray V. Robert Price Coal Co., 13. Ray V. Trice, 303. Read v. Brayton, 162. Read v. Corcoran, 961. Real Estate Associates, In re, 45. Real Estate Associates v. Superior Court, 109. Receiver v. First National Bank, 244, 245. Receiver of Adams & Co. v. Roman, 710. Receivers v. Wortendyke, 531. Receivership of Dugdamonia S. & L. Co., In re, 224. TABLE OF CASES CITED li [RBFEBENCBS AUE TO PACKS.] Receivership of the N. I. C. Mill Co., In re, 153, 209. Reddall v. Bryan, 880. Redding v. Anderson, 691. Redmond v. Hoge, 369. Reed v. Axtell, 299. Rees V. Andrews, 26, 129. Reeves v. Hastings, 937. Regenstein v. Pearlstein, 156, 591. Reid V. Middleton, 772. Reid V. Reid, 34. Reinhart v. Sutton, 542. Rendall v. Rendall, 858, 866. Renick v. Bank of West Union, 254. Renton v. Chaplain, 685, 686, 904. Republic v. Swigert, 387. Reynolds v. Aetna Life Ins. Co., 629. Reynolds v. Quick, 829. Reynolds v. Stockton, 69. Reynolds' Executor v. Pettyjohn, 239. Reynolds & Hamby E. M. Co. v. Martin, 21. Rheinstein v. Bixby, 799. Rhode Island Locomotive Works v. Continental T. Co., 526, 530. Rhodes v. Cousins, 591. Rhodes v. Lee, 33, 671, 672, 902. Rhorer v. Middlesboro, 265. Rice V. Dodd, 115. Rice V. St. Paul & Pacific R. Co., 16, 479. Rich V. Levy, 591, 593, 898. Rich V. Loutrel, 159, 160. Richards, Ex parte, 198. Richards v. Allen, 641, 650. Richards v. Chave, 64. Richards v. Haliday, 637. Richards v. Morris Canal & Banking Co., 948. Richards v. People, 180, 181, 194, 195, 197. Richards v. West, 195. Richardson v. Clinton Wall Trunk Co., 343. Richardson v. Hickman, 204. Richardson v. Turner, 443. Riches v. Owen, 613. Richey v. Gleeson, 118. Richmond v. Irons, 449. Richter v. Schroeder, 956. Rickert v. Suddard, 388. Ricks V. Broyles, 952. Rider v. Bagley, 796. Rider v. Vrooman, 796. Ridge V. Manker, 294, 297, 309. Ridout V. Earl of Plymouth, 138. Ridpath v. S. P. & C. R. F. & T. Co., 354. Rigge V. Bowater, 797. Riggs V. Whitney, 162, 651. Righton V. Pruden, 639, 640. Roach V. Glos, 806, 810, 841. Robenson v. Ross, 35. Roberson v. Roberson, 37. Robert v. Tift, 854. Roberts v. Anderson, 34, 980. Roberts v. Eberhardt, 668, 681. Roberts v. Parker, 819. Roberts v. Pipkin, 662. Robertson v. Detroit Pattern Works, 182. Robertson v. Staed, 189. Robeson v. Ford, 175, 201. Robinson v. Arkansas L. & T. Co., 320. Robinson v. Atlantic & Great West- ern R. Co., 153, 167. 169. Robinson v. Dickey, 109. Robinson v. Hadley, 110. Robinson v. Huidekoper, 539. Robinson v. Mills, 544. Robinson v. Mutual R. L. I. Co., 74, 77. Robinson v. Taylor, 95. Robrecht v. Robrecht, 41. Roby V. Title G. & T. Co., 107. Rochat V. Gee, 50, 945. 972. Rockwell V. Merwin, 266. Hi TABLE OF CASES CITED. [REFERENCES ARE TO PAGES.] Rockwell V. Portland Savings Bank, 994. Rodger Ballast Car Co. v. Omaha, K. C. & E. R. Co., 525, 530. Rodgers v. Adriatic Fire Ins. Co., 308, 437. Rodman v. Harvey, 581. Rodman v. Henry, 642. Rogers v. Chippewa Circuit Judge, 543. Rogers v. Corning, 188, 647. Rogers v. Dougherty, 129, 131. Rogers v. Haines, 277, 888. Rogers v. Marshal], 740, 913. Rogers v. Newton, 813. Rogers v. Odom, 99, 150. Rogers v. Riley, 277, 280. Rogers v. Rogers Locomotive Co., 234. Rogers & Baldwin Hardware Co. v. Cleveland B. Co., 8, 74. Rogers Mfg. Co. v. Rogers, 195. Roller V. Paul, 209, 953. Rollins V. Henry, 719, 739. Roman v. Woolfolk, 358. Root V. Safford, 618. Rose V. Baker, 631. Rose V. Bevan, 608, 899. Rosenberg v. Moore, 591, 593, 594, 897. Rosenblatt v. Johnston, 445. Rosenthal v. McGraw, 952. Ross V. Bridge, 981. Ross V. Williams, 151. Rossman v. Mitchell, 267. Rouse V. Harry, 537. Rowan v. Ide, 44. Rowe V. Wood, 833, 834. Rowland v. Auto Car Co., 660. Roxbury v. Central Vermont R. Co., 297. Royal Trust Co. v. Washburn, B. & I. R. Co., 192. Ruffner v. Mairs, 41, 129. Ruggles V. Brock, 411. Ruggles V. Patton, 936, 937. Ruggles V. Southern Minnesota Railroad, 461, 476, 814, 818, 895. Rumney v. Detroit & Montana Cat- tle Co., 354. Rumney v. Donovan, 219. Runals v. Harding, 618. Runk V. St. John, 272, 277. Runyon v. Farmers & Mechanics Bank of New Brunswick, 4, 406. Ruprecht v. Muhlke, 842. Russell V. Baker, 774. Russell V. Bruce, 806, 818. Russell V. Chicago Trust & Savings Bank, 639. Russell V. East Anglian R. Co., 161, 171, 192, 195. Russell V. Millett, 182. Russell V. Pacific Ry. Co., 395. Russell V. Texas & P. R. Co., 167, 783. Rust V. United Waterworks Co., 272. Rutherford v. Jones, 618. Rutter V. Tallis, 156, 157, 183. Ryan v. Hays, 510, 563. Ryan v. Kingsbery, 200. Ryan v. Lefroy, 839. Ryan v. Morrill, 704. Ryckman v. Parkins, 259, 960. Ryder v. Bateman, 26, 719, 721. S. Sackhoff V. Vandegrift, 595. Sacramento & P. R. Co. v. Superior Court, 480. Safford v. People, 469. Sage V. Memphis & L. R. R. Co., 463, 473. Salisbury z: Wilcox, 188. Sallee v. Soules, 18. Salway v. Salway, 328. San Antonio & A. P. Ry. Co. v. Bowles, 556. Sanders v. Lord Lisle, 840, 841, 977. Sandford v. Ballard, 756, 758, 913. TABLE OF CASES CITED. liii [RBFERBNCKS AKE TO PAGES.] Sand ford v. Clarke, 330, 915. Sandford v. Sinclair, 128, 618. Sands v. Greeley & Co., 66, 67, 69, 277, 372,. Sands v. Hill, 418. Sands v. Roberts, 625. Sands v. Sanders, 412, 416, 418. Sands v. Sweet, 412, 417. Sanford v. Anderson, 787. Sanford v. United States F. & G. Co., 592. San Jose Safe Deposit Bank v. Bank of Madera, 739. Sankey v. O'Maley, 597. Sargant v. Read, 705. Saulsbury v. Lady Ensley C, I. & R. Co., 958, 971. Savage v. Medbury, 286, 398, 415. Savannah, F. & W. R. Co. v. J., T. & K. W. R. Co., 504, 506, 533. Sawyer, In re, 199. Saylor v. Mockbie, 655, 670, 904. Scaife V. Scammon, 373. Scannell v. Felton, 307. Scarborough v. Borman, 227. Schaberg v. McDonald, 228, 448. Schenck v. Ingraham, 971. Schenk v. Peay, 188. Schilcer v. Brock, 114. Schindelholz v. Cullum, 163. Schlecht's Appeal, 113, 718, 734, 910. Schmid v. N. Y., L. E. & W. R. Co., 563. Schmidt v. Gayner, 294. Schoeffler v. Schwarting, 980. Schofield V. Palmer, 455. Schoonover v. Hinckley, 410. Schreiber v. Carey, 126, 806, 807, 818, 825. Schtirr v. Omaha & St. L. Ry. Co., 550. Schuyler's S. T. B. Co., In re, 80, 141, 156. Schwartz v. Keystone Oil Co., 919, 920, 921, 951, 973, Schwartz v. Rosetta G. P. & I. Co., 943. Scott V. Armstrong, 287, 458, 459. Scott V. Duncombe, 268. Scott V. Elmore, 629. Scott V. Nevius, 649. Scott V. Rainier P. & R. Co., 321. Scott V. Scott, 731. Scott V. Searles, 61. Scott V. Ware, 793. •■ Screven v. Clark, 247. Seagram v. Tuck, 143. Sea Insurance Co. v. Stebbins, 813, 818, 819. Sealy v. Munns, 784. Seamans v. Millers' M. I. Co., 413. Searcy v. Stubbs, 256. Searle v. Choate, 294. Second National Bank v. Lappe T. Co., 68, Z7Z. Second Ward Bank v. Upmann, 62, 584. Secor V. T., P. & W. R. Co., 192, 499. Security Bank v. National Bank of the Commonwealth, 444, 457. Security Life Insurance & Annuity Co., In re, 915. Security S. & L. Assn. v. Moore, 68. Security Title & Trust Co. v. Schlender, 704. Security Trust Co. v. Goble Trust Co., 381. Sedgwick v. Menck, 74, 81, 82. Sedgwick v. Place, 85. Seeds Dry Plate Co. v. Heyn Photo- Supply Co., 41. Seibert v. Minneapolis & St. L. Ry, Co., 533. Seibert v. Seibert, 694. Seidenbach v. Denklespeil, 150. Seighortner v. Weissenborn, 885. Seignious v. Pate, 828. Sellers v. Stoffell, 806. liv TABLE OF CASES CITED. [REFERENCES ABE TO PAGES.] Seney v. Wabash Western R. Co., 322, 533. Sengfelder v. Hill, 719. Sercomb v. Catlin, 194. Seventh National Bank v. Shenan- doah Iron Co., 378. Severns v. English, 163. Seymour v. Aultman Co., 119. Seymour v. Wilson, 636. Shadewald v. White, 3. Shainwald v. Lewis, 260, 598, 599, 976. Shand v. Hanley, 599. Shannon v. Davis, 858. Shannon v. Hanks, 41, 94, 95. Shannon v. Wright, 667, 695. Sharp V. Carter, 155, 156. Shaughnessy v. The Rensselaer In- surance Co., 286, 389, 398, 412, 415. Shaw V. Rhodes, 952, 953. Shaw V. Shore, 63, 801. Shea, hi re, 234. Shearing v. Trumbull, 88. Shedd V. Seefeld, 297, 299, 301. Shee V. Harris, 125, 746. Sheeks v. Klotz, 807. Sheets Lumber Co., In re, 224, 919. Shehan v. Mahar, 28. Sheldon v. Ames, 255. Sheldon v. Parker, 125. Sheldon v. Weeks, 117. Shelly V. Pelham, 775. Shephard, In re, 620. Shepherd v. Pepper, 794, 818. Sheppard v. Oxenford, 62, 677, 887, 906. Sheridan Brick Works v. Marion Trust Co., 34, 351, 359. Sherman v. Clark, 16, 883. Sherwood v. New England K. Co., 305. Shewell V. Jones, 948. Shinney v. North American S., L. & B. Co., 69, 88. Shoemaker v. Smith, 668. Shotwell V. Smith, 792. Shreve v. Hankinson, 796. Shulte V. Hoflfman, 125, 141, 690. Sieghortner v. Weissenborn, 903. Sigua Iron Co. v. Brown, 8, 376. Sigwald V. City Bank, 297. Silliman v. Whitmer, 195. Silver V. Bishop of Norwich, 748, 836. Silverman v. Kuhn, 609. Silverman v. Northwestern Mutual Life Insurance Company, 797. Simmons v. Allison, 153, 154, 915. Simmons v. Henderson, 33, 34, 870. Simmons v. Shelton, 942. Simmons v. Taylor, 246. Simmons v. Wood, 124, 131, 230, 232. Simmons Hardware Co. v. Waibel, 46. Simon v. Schloss, 671. Simpson v. Roberts, 798. Sims V. Adams, 136. Siney v. New York Consolidated Stage Co., 976, 979. Singerly v. Fox, 253, 292. Sjoberg v. Security S. & L. Assn., 367. Skiddy v. A., M. & O. R. Co., 516, 519. Skinner v. Maxwell, 3, 15, 32, 153, 162, 167, 169, 875. Skinner v. Terhune, 630. Skinners Company v. Irish Society, 12, 21, 22, 718, 724, SS2. 885, 910. Skip V. Harwood, 184. 191, 197, 198, 709. Slade V. Van Vechten, 227. Slemmer's Appeal, 687. Sligh V. Shelton S. R. Co., 294. Sloan V. Central Iowa R. Co., 537, 562. Slover V. Coal Creek C. Co., 17, 594, Small V. Smith, 280. Smathers ?/. Bank, 394. TABLE OF CASES CITED. Iv [bbfeebnces aue to pages.] Smiley v. Sioux B. S. Co., 10, 378. Smith, Ex parte, 62. Smith V. Brown, 667. Smith V. Burton, 224. Smith V. Butcher, 41, 109, 608. Smith V. Cawell, 33. Smith V. Earl of Effingham, 310. Smith V. Ely & Walker Dry Goods Co., 55, 56, 182. Smith V. Harris, 652. Smith V. Hopkins, 53. Smith V. Jeyes, 667, 682, 683, 903. Smith V. Johnson, 387. Smith V. Kelley, 764. Smith V. Lowe, 671. Smith V. Lowery, 38. Smith V. Lusk, 7. Smith V. Lyster, 876, 987. Smith V. Manhattan Insurance Co., 438. Smith V. McNamara, 181. Smith V. Mosby, 288. Smith V. New York Consolidated Stage Co., 93, 216, 217, 259. Smith V. Nursery & S. Co., 158, 159. Smith V. Smith, 866. Smith V. St. Louis & S. F. Ry. Co., 294, 546. Smith V. Superior Court, 591. Smith V. Taggart, 371. Smith V. Thompson, 583, 588. Smith V. Tiffany, 806. Smith V. Trenton Delaware Falls Co., 308. Smith V. United States, 72. Smith V. United States Express Co., 317. Smith V. Vaughan, 990. Smith V. Wells, 19, 20, 352. Smith V. White, 739. Smith V. Woodruff, 644. Smith-Dimmick Lumber Co. v. Teague, 114, 342. Snow V. Winslow, 573. Sobernheimer v. Wheeler, 277, 279. Solis V. Blank, 67. Sollory V. Leaver, 16, 738, 884. Solomons v. American B. & L. Assn., 952. Somerset Coal Co. v. Diamond State S. Co., 189. Sorchan v. Mayo, 797. Sorley v. Brewer, 596, 898. South Baltimore B. & T. Co. v. Kirby, 222, 230, 231. South Carolina & G. R. Co. v. C, C. G. & C. Ry. Co., 537. South Carolina R. Co. v. People's Saving Institution, 74. Southern Bank of Kentucky v. Ohio Insurance Co., 364. Southern B. & L. Assn. v. Carey, 793. 818, 825. Southern Development Co. v. Same, 526. Southern Granite Co. v. Wadsworth, 8, 294, 295. Southern Mutual B. & L. Assn. v. Andrews, 306. Southern Pacific R. Co. v. Maddox, 543. Southern Railway Co., In re, 466. Southern Ry. Co. v. Adams, 509, 511, 512, 513. Southern Ry. Co. v. American Brake Co., 509, 511, 512, 513. Southern Ry. Co. v. Carnegie Steel Co., 509, 511, 512, 513. Southern Ry. Co. v. Dunlop Mills, 518. Southern Ry. Co. v. Tillett, 513. Spalding v. Commonwealth, 166. Special Bank Commissioners v. Franklin Institution, 917, 920, 954. Speights V. Peters, 6, 16, 657, 693. Speiser v. Merchants' Exchange Bank, 921, 930, 952, 960. Spencer v. Brooks, 533. Spencer v. Cuyler, 581, 588, 589. Spencer v. World's Columbian Ex- position. 322, 323, 325. Ivi TABLE OF CASES CITED. [references ABE TO PAGES.] Spinning v. Ohio Life Insurance & Trust Co, 74, 11, 80, 161, 192, 193. Spokane v. Amsterdanisch T. K, 719, 724. Spokane County v. Annis, 166. Spring V. Strauss, 643. Springer v. Ayer, 11. Stairley v. Rabe, 858, 861, 873. Standish v. Musgrove, 811, 943, 944. Standley v. Handrie & B. M. Co., 378. Stanger Leathes v. Stanger Leathes, 33, 853. Stanley v. National Union Bank, 53. Stannus v. French, 228. Stanton v. A. & C. R. Co., 567, 569, 574. Staples V. May, 814, 815. Stark V. Burke, 389, 407, 431, 432. Starr v. Rathbone, 584, 586. State V. A. & G. R. Co., 469. State V. Allen, 727. State V. Anheuser-Busch B. Assn., 61, 382. State V. Bank of New England, 13. State V. Bank of Rushville, 211, 217. State V. Bell, 219. State V. Butler, 961. State V. Circuit Court, 195. State V. City of New Orleans, 129, 212. State V. Claypool, 981. State V. Corning State S. Bank, 328. State V. Bearing, 129. State V. Denham, 202. State V. District Court, 26, 55, 129, 132, 201, 355, 356, 592, 739. State V. E. & K. R. Co., 490. State V. Exchange Bank, 61. State v. Fawcett, 232, 346. State V. Fichtenkamm, 255. State V. German Exchange Bank, 938. State V. Germania Bank, 330, 930, 942, 959. State V. Gibson, 146, 336. State V. Gooch, 328. State V. Hirzel, 219. State V. J., P. & M. R. Co., 117, 129, 429, 461. State V. Johnson, 45, 218. State V. Judge of Civil District Court, 53, 167. State V. M. & C. R. Co., 472. State V. Markuson, 195. State V. McM. & M. R. Co., 490. State V. Merchant, 468. State V. Milligan, 199. State V. Minneapolis & St. L. Ry. Co., 551. State V. Miller, 86. State V. Nebraska S. & E. Bank, 916, 917, 942. State V. Northern Central R. Co., 63. State V. Northern Pac. R. Co., 88. State V. People's U. S. Bank, 917, 932. State V. Phoenix Loan Assn., 367. State V. Pierce, 195. State V. Port Royal & A. R. Co., 544, 547. State V. Reynolds, 70, 153, 154, 188. 976. State V. Rivers, 155. State V. Ross, 2, 24, 55, 56. State V. Stull, 45. State V. Sullivan, 241, 242. State V. Superior Court, 199, 624, 979. State V. Theard, 199. State V. Union National Bank, 24. State V. Union Stock Yards State Bank, 393. State V. Wabash R. Co., 551. State V. Woodson, 367. State Bank, In re, 916. State Bank v. Domestic S. M. Co^ 4. TABLE OF CASES CITED. Ivii [bbfeeences aue to pages.] State Bank v. Gill, 582. State Bank v. Receivers of Bank of New Brunswick, 288. State Central Savings Bank v. Bali- Bearing Chain Co., 211, 942, 943, 958. State Investment & Insurance Co. v. Superior Court, 343. State of Maryland v. Northern Cen- tral R. Co., 484. State Trust Co. v. National L. I. & M. Co., 98. Stearns Paint Mfg. Co. v. Corn- stock, 921. Steel V. Holladay, 932. Steele v. Aspy, 20. Steele v. Cobham, 858, 864. Steele v. Sturgis, 141, 156, 157, 183. Steele v. Walker, 301. Steinke v. Loofbourow, 392, 395. Stelzer v. La Rose, 703, 781. Stenhouse v. Davis, 870. Stephens v. Augusta T. & E. Co., 299, 302. Stephens v. Meriden B. Co., 402. Stephens v. Perrine, 637. Sterling Electric Co. v. Augusta T. & E. Co., 247. Stern v. Austern, 598. Stern v. State Board, 31. Sternberg v. Wolff, 349, 351. Stevens v. Davison, 461, 464. Stevens v. Hadfield, 811. Stevens v. Myers, 980. Stevens v. South O. L. Co., 350. Steward v. Green, 613. Steward v. Stevens, 583, 588, 589. Stewart v. Beebe, 265, 267. Stewart v. Chesapeake & Ohio Canal Co., 375. Stewart v. Lay, 408, 410. St. George, Estate of. In re, 982. Stillman v. Dougherty, 408, 411. Stillwell V. Savannah Grocery Co., 16. Stihvell V. Wilkins, 729, 730. Stith V. Jones, 759. Stitwell V. Williams, 729, 730. St. John V. Denison, 264. St. Johns Table Co. v. Brown, 265. St. Joseph & Denver City R. Co. v. Smith, 294, 297, 298, 541. St. Joseph & St. L. R. Co. v. Humphreys, 322, 533. St. Louis, A. & S. R. Co. v. Hamil- ton, 153, 161, 162, 192, 294, 296. St. Louis, A. & S. R. Co. v. O'Hara, 515, 517. St. Louis, A. & T. R. Co. v. Whit- aker, 168. St. Louis Car Co. v. Stillwater Street R. Co., 347. St. Louis, C G. & F. S. Ry. Co. v. Holladay, 2, 307, 430. St. Louis, K. & S. R. Co. v. Wear, 102, 130, 200. St. Louis Merchants' B. T. Ry. Co. V. Continental Trust Co., 526. St. Louis National Bank v. Field, 793. St. Louis & S. C. & M. Co. v. San- doval C. & M. Co., 56. St. Louis & S. F. Ry. Co. v. Bricker, 550. St. Louis S. W. Ry. Co. v. Hol- brook, 537, 544. St. Louis Trust Co. v. Riley, 509, 515, 528. Stockbridge v. Beckwith, 67, 272, 275. Stockley v. Thomas, 38, 369. Stockton V. Central R. R. Co., 892. Stockton V. Harmon, 129. Stockton V. Mechanics, etc., Bank, 322. Stoepel V. Union Trust Co., 322, 326. Stokes V. Hoffman House, 50, 322. Stokes V. Knickerbocker Investment Co., 353, 433. Stokes V. New Jersey P. Co., 403. Stolze V. Manitowoc T. Co., 430. Stolze V. M. & L. W. R. Co., 544. Iviii TABLE OF CASES CITED. [references are to pages.] Stone V. Dodge, 288. Stone V. Omaha Fire Ins. Co., 955. Stone V. Taylor, 747. Stone V. Wetmore, 29, 30, 886. Stone V. Wishart, 98, 105, 875. Stoner v. Bitters, 167. Stoors V. Kelsey, 585. Storm V. Ermantrout, 831. Storm V. Waddell, 74, 71, 626. Story V. Furman, 393. St. Paul Title, I. & T. Co. v. Diago- nal Coal Co., 959. St. Paul Trust Co. v. Alintzer, 735. Strain v. Palmer, 162, 915. Strang v. M. & E. R. Co., 521. Stratton v. Davidson, 136. Strauss v. Inter-State B. & L. Assn., 367. Street v. Anderton, 756, 757, 758, 913. Streit V. Citizens Fire Insurance Co., 360. Stretch v. Gowdey, 915, 950. Strong V. Carlyle Press, 804. Strong V. Goldman, 599. Strong V. Southworth, 448. Stuart V. Boulware, 919, 955. Stuart V. Hayden, 448. Stubbs, In re, 804. Stuparich Mfg. Co. v. Superior Court, 175. Sturch V. Young, 788. Sturgeon v. Douglas, 775. Sturgis V. Knapp, 155. Stuyvesant Bank, In re, 105. Suflfern v. Butler, 980. Sullivan v. Colby, 172. Sullivan v. Gage, 955. Sullivan v. Judah, 195. Sullivan v. Miller, 800. Sullivan Electric L. & P. Co. v. Blue, 35, 129. Suit V. Hochsletter Oil Co., 7. Sunflower Oil Co. v. Wilson, 533. Sutherland v. Lake Superior Ship Canal R. & I. Co., 802. Sutro V. Wagner, 667, 669, 903. Sutton V. Jones, 104, 855. Suydam v. Dequindre, 600. Suydam v. Receivers of Bank of New Brunswick, 420. Swaby V. Dickon, 966. Swan V. Mitchell, 790. Swann v. Clark, 567, 572. Swann v. Wright's Executor, 572. Sweeny v. Mayhew, 33. Sweet V. Partridge, 605, 606. Sweet & Clark Co. v. Union Na- tional Bank, 818. Swing V. Townsend, 44. Swope V. Villard, 358, 546. Sykes v. Hastings, 98, 104, 855, 875. Sylvester v. Reed, 614, 868. Syme v. Bunting, 150. Tabor v. Bank of Leadville, 916. Tait V. Jenkins, 874. Talbot V. Hope Scott, 715, 716, 718, 719. Talladega Mercantile Co. v. Jenifer Iron Co., 159. Talmage v. Pell, 256, 385. Tampa Suburban R. Co., In re, 43. Tandrup v. Sampsell, 301. Tanfield v. Irvine, 835, 838, 844. Tapp V. Rankin, 884. Tappan v. Gray, 29, 8S5. Tapscott V. Lyon, 180. Tarvin v. Walker's Creek C. & C. Co., 886. < Taylor v. Allen, 250. Taylor v. Baldwin, 294, 295. Taylor v. Canaday, 238. Taylor v. Columbian Insurance Co., 66, 67, 275, 277. Taylor v. Cuban L. & S. Co., 350. Taylor v. Decatur M. & L. Co., 343. Taylor v. Dickinson, 980. Taylor v. Emerson, 597, 742. TABLE OF CASES CITED. lix [BEFBBBNCES ABU TO PAtiKB.] Taylor v. Fanning, 40i. 'I'aylor v. Giileau, iiiu, 181, Taylor v. Kirby, 36, Taylor v. Life Association of Amer- ica, 97, 143. Taylor v. Mitciieii, 402. Tayior V. iNeate, 665. Taylor z;. P. & R. R. Co., 471, 514, i)ZO, 56S, 567. Tayior v. Sweet, 209, Teller v. Randall, 643. Tempest v. Ord, 946. Temple v. Glasgow, 141, 157, 591. Temple v. Williams, 674. Tenorook v. Jessup, 732, Tennis liros, Co. v. Wetzel & T, Ry. Co., 322. Terrell v. Goddard, 666. Terrell v. Ingersoll, 320, ierry v. Bamberger, 2o3, 390, Terry v. iVlarlin, 4y, 217. Texas Consolidated C. & M, Assn. V. Storrow, 43, 353, 591. Texas & Pacific R. Co. v. Adams, 563, Texas & Pacific R, Co. v. Bloom, 555. Texas & Pacific R. Co. v. Brick, 555. Texas & Pacific R. Co, v. Collins, 553. Texas & Pacific R. Co, v. Comstock, 555, 563. Texas & Pacific R. Co. z/.Cox, 547. Texas & Pacific R. Co. v. Gay, 5, 55, 550, 556. Texas & Pacific R. Co. v. Geiger, 555, 558. Texas &. Pacific R, Co, v. Griffin, 556, Texas & Pacific R, Co. v. Huffman, 556, Texas & Pacific R. Co. v. Johnson, 555. Texas & Pacific R. Co. v. Miller, Texas & Pacific R. Co. v. Overheis- er, 555. Texas Trunk R. Co. v. State, 461. Tharpe v. Tharpe, 91, 92, 97. Thayer v. Swift, 583, 588. The Anvil v. Savery, 13. The Jonas H. French, 170. The Willamette Valley, 66, 190. Thom V. Pittard, 312. Thomas v. Brigstocke, 809, 991. Thomas v. Cincinnati, N. O. & T. P. R. Co., 194, 499. Thomas v. Davies, 126, 806, 807. Thomas v. Dawkin, 91, 92. Thomas v. Gartner, 628. Thomas v. Nantahala M, & T. Co., 759. Thomas v. Thomas, 776. Thomas v. Van Meter, 8, 22, 257. Thomas v. Western Car Co., 521, 531. Thomas v. Whallon, 241, 286, 399, 412, 413, 416, 417. Thompsen v. DifTenderfer, 33, 591, 594, 897. Thompson v. Adams, 10, 18, 591. Thompson v. Allen County, 587. Thompson v. Greeley, 240, 391. Thompson v. Holladay, 53, 225. Thompson v. McCleary, 167, 169. Thompson v. Northern Pac. R, Co., 561, 562. Thompson v. Orser, 861. Thompson v. Phenix Insurance Co., 256, 945. Thompson v. Schartzel, 456, Thompson v. Scott, 294, 295, Thompson v. Selby, 118. Thompson v. Sherrard, 739. Thompson v. Silverthome, 29. Thompson v. Tower M. Co., 128. Thompson v. Willamette S. M. L. & M. Co., 928. Thomson v. MacGregor, 148. Thornhill v. Thornhill, 213, Thornley v. Walsh Co., 373. Ix TABLE OF CASES CITED. [BBFERENCES AEB TO PAGES.] Thornton v. Highland A. & B. R. Co., 50. Thornton v. Washington Savings Bank, 173. Thornton-Thomas Mercantile Co. v. Bretherton, 57. Threadgill v. Colcord, 53, 107, 223, 234. Thum V. Pyke, 67. Thurman v. Cherokee R. Co., 539. Tillinghast v. Champlin, 699, 703. Tillotson V. Wolcott, 625, 626. Tiltow V. Cascade O. M. Co., 265. Timothy v. Day, 20. Tindall v. Nisbet, 333, 942. Tink V. Rundle, 163, 164, 294, 304, 305, 888, 889. Tinkham v. Borst, 260. Tippecanoe Township v. Manlove, 413, 414. Titherington's Adm'r v. Hodge, 224. Title Insurance & T. Co. v. Grider, 53, 55. Tobey v. Russell, 407. Tobias v. Tobias, 297. Tobin V. Central Vermont Ry. Co., 550, 561, 562. Tobin V. Portland Flouring Co., 933. Todd V. Crooke, 601. Todd V. Lee, 597, 899. Todd V. Rich, 667, 705, 932. Toledo, W. & W. R. Co. v. Beggs, 258. Tome V. King, 837, 923. Tomlinson v. Ward, 25, 139, 669. Tomlinson & Webster M. Co. v. Shatto, 601. Tompkins Co. v. Catawba Mills, 348, 591. Tompson v. Huron L. Co., 919, 921, 937. Torbert v. Jeffrey, 63. Tornanses v. Melsing, 219. Totten & Hogg I. & S. F. Co. v. Muncie Nail Co., 159, 222. Towle V. American B., L. & I. So- ciety, 367. Town of Vandalia v. St. L., V. & T. H. R. R. Co., 36, Z7, 53, 54, 55, 153, 199, 568. Towne v. Campbell, 601. Tozer v. O'Gorman, 221. Tracy v. First National Bank of Selma, 306. Traders Insurance Co. v. Mann, 4. Travelers Insurance Co. v. Brouse, 807. Tredennick v. Graydon, 605. Tregaskis v. Judge of Superior Court, 7. Trenton Banking Co. v. Woodruff, 833, 834. Triebert v. Burgess, 129, 130. Tripp V. Boardman, 216. Trissilian v. Caniflfe, 814. Truman v. Redgrave, 790. Trust & Deposit Co. v. Spartanburg W. Co., 26, 348. Try V. Try, 169. Trye v. Earl of Aldborough, 814. Tuckerman v. Brown, 400. Tufts V. Little, 764. Tumlin v. Vanhorn, 764. Turner v. Cross, 553. Turner v. Hannibal & St. Joseph R. Co., 550. Turner v. I., B. & W. R. Co., 509, 510, 511, 512, 523. Turner v. P. & S. R. Co., 567, 569. Turnipseed v. Kentucky Wagon Co., 16. Tuttle V. Blow, 35, 132. Tuttle V. National Bank, 395. Twin City Power Co. v. Barrett, 16, 17. Twitty V. Logan, 719. Tylee v. Tylee, 138. Tyler, In re, 165. Tyler v. Whitney, 588, 590, 650. Tyler v. Willis, 588, 590, 650. TABLE OF CASES CITED. Ixi [RKI'EEENCES ABB TO PAGES.] Tyrrell v. Painton, 586. Tysen v. Wabash R. Co., 478. Tyson v. Fairclough, 756, 760. U. Ueland v. Haugan, 238. Uhl V. Dillon, 897, 591, 592. Ulman v. Clark, 741. Underwood v. Sutcliffe, 638. Union Bank Case, 330, 915. Union Bank of Chicago v. Kansas City Bank, 9, 12. Union Boom Co. v. Samish Boom Co., 13, 113. Union M. L. I. Co. v. Union M. P. Co., 790. Union National Bank v. Mills, 915, 917, 919, 921, 938. Union Street Ry. Co. v. City of Saginaw, 470. Union Trust Co. v. Atchison, T. & S. F. R. Co., 69, 541. Union Trust Co. v. C. & L. H. R. Co., 569. Union Trust Co. v. Illinois Midland R. Co., 504, 509, 511, 514, 518. 566, 567, 574. Union Trust Co. v. Morrison, 528. Union Trust Co. v. Souther, 511, 519. Union Trust Co. v. St. L., I. M. & S. R. Co., 478. Union Trust Co. v. The Rockford, Rock Island & St. Louis R. Co., 74, 75, 84, 486, 488. Union Trust Co. v. Walker, 519. Union Trust Co. v. Weber, 160. United States v. Church, 122, 174, 239, 343, 915, 930. United States v. De Coursey, 501. United States v. Duluth, 880. United States v. Kane, 499. United States v. Masich. 834. United States Investment Corpora- tion V. Portland Hospital, 51, 378 United States Rubber Co. v. Ameri- can O. L. Co., 42. United States Shipbuilding Co. v. Conklin, 13, 433. United States Trust Co. v. Harris, 290. United States Trust Co. v. Mercan- tile Trust Co., 535. United States Trust Co. v. New York, W. S. & B. R. Co., 516, 525. United States Trust Co. v. Omaha & St. L. R. Co., 499. United States Trust Co. v. Wabash Western R. Co., 322, 533. United States Vinegar Co. v. Spam- er, 257. University of Illinois v. Globe Sav- ings Bank, 8. Utica Insurance Co. v. Lynch, 951, 957. Vail V. Hamilton, 402. Vail V. Knapp, 887. Valley National Bank v. Claflin Co., 13, 230. Van Allen, In re, 216, 419. Van Alstyne v. Cook, 623, 674. Van Antwerp v. Hulburd, 445. Van Bianchi v. Wayne Circuit Judge, 182. Van Brocklin v. Queen City P. Co., 922. Van Buren v. Chenango County Mu- tual Insurance Co., 930. Vanderbilt v. Central R. Co., 494. Van Dusen v. Worrell, 262. Van Dyck v. McQuade, 288. Van Epps v. Van Epps, 226. Vann v. Bamett, 121, 122, 123, 729. Van Rensselaer v. Emer>', 3, 4, 684, 702, 902, 908. Van Wagenen v. Clark, 407. Ixii TABLE OF CASES CITED. [bbferences are to pages.] Van Wagoner v. Paterson Gas Light Co., 286, 288, 289. Varnum v. Leek, 760. Vasele v. Grant Street E. R. Co., 30L Vaughan v. Vaughan, 140. Vaughan v. Vincent, 755. Vause V. Woods, 604, 718, 719. Veatch v. American L. & T. Co., 528, 529. Veith V. Ress, 115, 132, 181, 217, 659. Venner v. W. W. Co., 102, 430. Veret v. Duprez, 65. Vermont & Canada R. Co. v. Ver- mont Central R. Co., 161, 192, 240, 490, 491, 498, 887, 896. Verplanck v. Mercantile Insurance Co., 128, 132, 933. Very v. Watkins, 188. Vestel V. Tasker, 163. Vila V. Grand Island E. L., I. & C. S. Co., 10, 14, 24, 50, 342. Vilas V. Page, 508. Villere v. New Orleans P. M. Co., 51, 955. Vincent v. Parker, 176. Virginia & Alabama Coal Co. v. Central R. & B. Co., 504, 506, 509, 511, 513. Virginia-Carolina Chemical Co. v. Provident S. L. A. Society, 591. Virginia, T. & C. Steel & I. Co. v. Bristol Land Co., 164, 165, 888. Virginia, T. & C. Steel & Iron Co. V. Wilder, 61. Visage v. Schofield, 987. Visalia City Water Co. v. Superior Court, 995. Vizard v. Moody, 740. Von Roun v. Superior Court, 159. Von Schlemmer v. Keystone Life Ins. Co., 356. Voorhees v. Indianapolis C. & M. Co., 302, 387. Vose V. Reed, 14, 15, 18, 850. Voshell V. Hynson, 34, 129, 131, 980. W. Wabash R. Co. v. Dykeman, 129, 132, 461, 463. W^abash, St. L. & P. R. Co. v. Central Trust Co., 463. Wachtel v. Wilde, 591. Wagar v. Stone, 790. Wales V. Dennis, 692. Walker, Ex parte, 881, 867. Walker v. Denne, 604. Walker v. Drew, 870. Walker v. Fitzgerald, 719. Walker v. George Taylor C. Co., 181. Walker v. Green, 294. Walker v. House, 696, 697, 906. Walker v. Morris, 783. Wall V. Piatt, 554. Wallace v. Loomis, 565, 566, 569. Wallace v. Milligan, 704. Wallace v. Pierce-Wallace Publish- ing Co., 342, 350. Wallace v. Yeager, 703. Walla Walla v. Walla Walla Water Co., 17. Waller v. Hamer, 392, 395. Walling V. Miller, 167, 168. Wall Street Fire Ins. Co. v. Loud, 825. Walsh V. Byrnes, 636. Walsh V. Raymond, 321. Walsh V. Walsh, 779. Walters v. Anglo-American M. & T. Co., 343. Walton V. Develing, 199. Ward V. Hotel Randolph Co., 10, 358. Ward V. Pacific M. L. I. Co., 67, 272. Ward V. Petrie, 241. Ward V. Swift, 184, 205. Wardell v. Leavenworth, 615. TABLE OF CASES CITED. Ixiii [nBt'EBKNCES AUE TO PAGES.] Wardle v. Hudson, 241, 242. Wardle v. Townsend, 414. Ware v. Supreme Sitting, 371. Ware v. Ware, 871. Waring v. Robinson, 673. Warner v. Gouverneur's Ex'rs, 819, 820. Warner v. Imbeau, 431. Warner v. Rising Fawn Iron Co., 790. Warren v. Bunch, 189. Warren v. Monnish, 111. Warren v. Pitts, 13, 818. Warren v. Sprague, 259. Warren v. Union National Bank, 272, 275. Warwick v. Hammell, 845. Warwick v. Stockton, 666. Washer v. Brown, 34, 980. Washington City & P. L. R. Co. v. S. M. R. Co., 988. Washington I. W. Co. v. Jensen, 800. Washington Life Insurance Co. v. Fleischauer, 840. Washington Mill Co. v. Sprague Lumber Co., 400. Waterbury v. Merchants Union Ex- press Co., 342, 343. 892. Waterhouse v. Comer, 499, 500. Waters v. Carroll, 2, 99, 100. Waters v. Melson, 150. Waters v. Taylor, 49. Watkins v. Brent, 64. Watkins V. Minnesota T. M. Co., 234. Watkins v. National Bank of Lau- rence, 454. Watkins v. Pinkney, 74, 11, 78. Watson V. Arundel, 98. Watson V. McKinnon, 690. Watson V. Sutherland, 17. Watterson v. IMasterson, 394. Wayne Pike Co. v. Hammons, 358. Wayne Pike Co. v. State, 294. Webb V. Overmann, 617. Webb V. Van Zandt, 747. Weber v. Weber, 704, 705. Webster v. Couch, 16, 883. Weed V. Central of Georgia Ry. Co., 961. Weed V. Smull, 631. Weeks v. Weeks, 772. Weems v. Lathrop, 15, 148. Wehrs v. Sullivan, 153, 975. Weigand v. Alliance S. Co., 929. Weigen v. Council Bluffs Ins. Co., 431. Weill V. First National Bank, 246. Weise v. Welsh, 759. Welch V. Henry, 800. Welles V. Stout, 459. Wellman v. Harker, 675. Wells, In re, 863. Wells V. Hartford Manilla Co., 321. Wells V. Higgins, 779. Welton V. Dickson, 17. Wenar v. Schwartz, 35. Wenzel v. Palmetto B. Co., 358. Werborn's Adm'r v. Kahn, 129. Werner v. Murphy, 406. Weslosky v Quarterman, 357, West V. Chasten, 120, 673. West V. Conant, 827. West V. Mercer, 858. West V. Swan, 123, 124. West V. Weaver, 60. Western Electric Co. v. Williams- Abbott Electric Co., 44. Western Union Telegraph Co. v. Atlantic & Pacific Telegraph Co., 467. Westinghouse Co. v. Christensen Co., 44. Wetter v. Schleiper, 976. Wheatley v. Glover, 394. Wheeler v. Clinton Canal Bank, 347. Wheeler v. Dime Savings Bank, 371. Wheeler v. Smith, 544. Whelan v. Enterprise T. Co., 642. Ixiv TABLE OF CASES CITED. [befeeences are to pages.] Whelpley v. Erie Railway Co., 13, 14, 466, 881. Whightsel v. Felton, 496. Whilden v. Chapman, 584, 591. Whipple V. Lee, 691. White, In re, 195. White V. Baugh, 328. White V. Bishop of Peterborough, 748. White V. Britton, 100, 109. White V. Colfax, 667, 670. White V. Ewing, 87. White V. Griggs, 827. White V. Haight, 389, 390. White V. Lord Westmeath, 120, 968, 989. White V. Low, 265, 266. White Water Valley Canal Co. v. Vallette, 830. Whitehead v. Hale, 13, 787. Whitehead v. Wooten, 6, 123, 124, 129, 133, 824. Whitehouse v. P. D., T. & E. Ry. Co., 111. Whitelaw v. Sandys, 743. Whitely v. Central Trust Co., 527. Whitely v. Lowe, 215. Whiteside v. Prendergast, 140, 986. Whitesides v. Lafferty, 706. Whitfield, Ex parte, 874. Whitley v. Berry, 111. Whitley v. Challis, 804, 826. Whitman v. Robinson, 667, 904. Whitney v. Buckman, 119, 741, 753, 886. Whitney v. Hanover National Bank, 55, 56. Whitney v. N. Y. & A. R. Co., 476. Whittlesey v. Delaney, 403. Whittlesey v. Frantz, 650. Whitworth v. Whyddon, 15, 64. Whitworth v. Wofford, 739. Whyte V. Spransy, 721. Wickens v. Townshend, 140. Wiggins V. Armstrong, 897, 591, 593. Wigton V. Bosler, 271, 396. Wilber v. Wooley, 195. Wilder v. Reed, 972. Wildridge v. McKane, 971. Wildy V. Mid-Hants R. Co., 804. Wiles V. Cooper, 749. Wilkins V. Williams, 91. Wilkinson v. Culver, 283. Wilkinson v. Dibbie, 14. Wilkinson v. Lehman-Durr Co., 2, 3, 154, 155. Wilkinson v. Washington Trust Co., 916, 958. Willamette Valley, 66, 190. Williams v. Babcock, 240, 241, 286, 398, 399, 412, 415. Williams v. Des Moines L. & T. Co., 993. Williams v. Green, 749, 913. Williams v. Hintermeister, 64, 372, 473. Williams v. Hogeboom, 588, 589, 590. Williams v. Hubbard, 588. Williams v. Jenkins, 122, 135, 756, 913. Williams v. Robinson, 792. Williams v. Traphagen, 290. Williams v. Turner, 401. Williams v. Wilson, 709, 908. Williams Co. v. U. S. Banking Co., 38. Williamson v. Gerlach, 842. Williamson v. Monroe, 671, 672. Williamson v. New Albany R. Co., 478. Williamson v. Pender, 172, 200. Williamson v. Wilson, 3, 4, 93, 95, 667, 668, 678, 903, 906, 976. Williamson's Adm'r v. W. C. V. M. & G. S. R. Co., 13, 509. Willink V. Morris Canal & Banking Co., 308, 438. Willis V. Corlies, 718, 726, 910. Willitts V. Waite, 66, 67, 275. Wills V. Luff, 808. TABLE OF CASES CITED. Ixv [RBFEBBNCHS ABB TO PAOBB.] Wills Valley Mining & Mfg. Co. v. Galloway, 964. Wilmer v. Atlanta & R. A. L. R. Co., 75. 480, 488. Wilmington Star Mining Co. v. Al- len, 434. Wilson V. Allen, 251, 626, 627. Wilson V. Barney, 975. Wilson V. Book, 394. Wilson V. Davis, 35. Wilson V. Fitchter, 685. Wilson V. Greenwood, 691, 692, 694. Wilson V. Keels, 68. Wilson V. Maddox, 34, 110. Wilson V. Poe, 96. Wilson V. Rankin, 297. Wilson V. Welch, 139, 248. Wilson V. Wilson, 307, 626, 745. Winans v. Gibbs & S. M. Co., 388. Winchester v. Davis Pyrites Co., 299. Winchester E. L. Co. v. Gordon, 130. Wincock v. Turpin, 393. Winfield v. Bacon, 311, 890, 968. Wing V. Disse, 629. Winkler v. Magdeburg, 818, 825. Winkler v. Winkler, 16, 883. Winslow V. Wallace, 703. Winthrop Iron Co. v. Meeker, 42. Wisconsin Trust Co. v. Jenkins, 248. Wise V. Ashe, 142, 744. Wise V. Wise Co., 166. Wiswall V. Kunz, 3, 967. Wiswall V. Sampson, 167, 169, 610. Witz V. Gray, 12. Woerishoffer v. North River C. Co., 163. Wolbert v. Harris, 663, 664, 687, 691. Wolf V. National Bank of Illinois, 326, 327, 446. Wolfe V. Claflin, 591. Wood V. Brewer, 35. Wood V. Gaynon, 780. Wood V. Grayson, 13. Wood V. Hitchings, 866, 867. Wood V. McCardle W. & F. C. Co., 324. Wood V. N. Y. & N. E. R. Co., 512, 515, 517. Wood V. Oregon Development Co., 977. Wood V. Sutcliffe, 885. Wood V. Wood, 335, 660. Woodburn v. Smith, 163, 888. Wooden v. Wooden, 16, 883, 884. Woodhull V. Farmers' Trust Co., 189. Woodruff V. Erie R. Co., 506, 549. Woodruff V. Jewett, 316, 994. Woods V. Ellis, 139, 141. Woodward v. Earl of Lincoln, 195. Woodward v. Ellsworth, 458. Woodyatt v. Gresley, 121, 752. Wooley V. Holt, 787. Wormser v. Merchants National Bank, 814, 815. Worrill v. Coker, 764. Worth V. Piedmont Bank, 70, 183. Worth Manufacturing Co. v. Bing- ham, 353, 358. Woven Tape Skirt Co., In re, 206, 928. Wray v. Hazlett, 294. Wray v. Jamison, 248, 252. Wren v. Kirton, 327. Wreyham, M. & C. Q. Ry. Co., In re, 505. Wright V. Merchants National Bank, 451, 453. Wright V. Nostrand, 637, 644. Wright V. Vernon, 126. Wrixon v. Vize, 213, 215. Wyatt V. O. & M. R. Co., 550. Wyckoff V. Scofield, 780. Wyman v. Eaton, 272, 409. Wyman v. Kimberly-Clark Co., 413. Wyman v. Williams, 408, 409. Wynne v. Lord Newborough, 91, 93, 96, 98, 245, 752, 913. Ixvi TABLE OF CASES CITED. [befeebnces are to pages.] Yeager v. Wallace, 248, 249. Yetzer v. Applegate, 228. Yoakum v. Selph, 553. Young, In re, 305, 309. Young V. Clapp, 639. Young V. Frier, 591, 897. Young V. Hughes, 48. Young V. Irish, 922, 979. Young v. M. & E. R. Co., 70. Young V. Rollins, 70, 360, 377. Young V. Stevenson, 388. Young V. Wempe, 448. Youngblood v. Comer, 539. Z. Zacher v. Fidelity T. & S. Co., 67, 68, 276. Zieverink v. Kemper, 52, 397. THE LAW OF RECEIVERS. CHAPTER I. OF THE GENERAL FEATURES OF THE JURISDICTION. i 1. A receiver defined; distinguished from trustee. 2. An executive officer; compared with sheriff; not a public officer, when agent of plaintiff. 3. The jurisdiction a preventive one; cautiously exercised. 4. Beneficial nature of the relief; possession of the receiver that of the court. 5. The remedy a sequestration; title net changed. 6. Remedy a provisional one; not decisive of ultimate right, nor conclusive of merits; not granted on final hearing; present necessity must exist. 7. Discretionary character of the jurisdiction; discretion defined. 8. Probability as to final decree; plaintiff must present a prima facie case; proof on interlocutory application. 9. When power may be invoked; not when property is of little value; bond in lieu of receiver. 10. Relief similar to that by injunction; not granted when there is a remedy at law; remedy at law defined. 11. Plaintifif must show his own right, and danger to the property. 12. Plaintiff must have existing interest; relief not granted to stranger; no receiver of gratuity. 13. Receiver not allowed for benefit of stranger to the cause. 14. Diligence necessary; laches and acquiescence a bar to relief. 15. The remedy compared with that by injunction. 16. Receiver not necessarily appointed because injunction granted. 17. Suit must be actually pending; allegations must be specific. 18. Insolvency as a ground for relief. 19. Courts averse to interfering with defendant in possession; con- siderations governing court in exercise of discretion. 20. Averse to interference with tenants in common of personalty. 21. The jurisdiction not extended to conflict as to public offices. 22. Receiver may be appointed over fees and emoluments of an of- fice; salary of school-teacher; of clerk of court. Receivers — 1. 2 RECEIVERS. [chap. I. § 23. The jurisdiction as affected by codes of procedure; Supreme Court of Judicature Act in England. 24. Receiver not granted when equities of bill are denied by answer. 25. Conflict of authority as to whether appeal will lie. 26. Appeal not allowed in certain states. 27. The question dependent upon whether the order affects a sub- stantial right. 27a. Decree appealable if right finally determined. 276. Appeals under Court of Appeals Act. 28. Reversal by certiorari. 29. Effect of appeal on functions of receiver; supersedeas not a matter of right. 30. Same relief sought in different suits. 31. Test as to defendant's interest; receiver over a pension; secret code. 32. Not granted when court can not control property; license; rates and taxes. 33. Relief refused as against innocent purchasers. 34. Peril to the fund; infringement of patent. 35. Receiver not granted to compel payment of money; subscrip- tions to a fund. 36. Management of business by a receiver; preferring debts in- curred. 37. Effect of acquiescence in appointment. 38. Receiver held to strict accountability. 39. Statute authorizing appointment by governor, 39a. Appointment can not be questioned collaterally. 396. The same; illustrations. 39c. Otherwise where court is without jurisdiction; not a proceeding in rem. 39d. Damages for wrongful appointment; measure of damages. 39(?. Death of receiver; when successor not appointed at instance of defendant. § 1. A receiver defined; distinguished from trustee. A receiver is an indifferent person between the parties to a cause, appointed by the court to receive and preserve the property or fund in litigation pendente lite, when it does not seem reason- able to the court that either party should hold it.l He is not 1 Booth V. Clark, 17 How., 322; Lehman-Durr Co., 136 Ala., 463, 34 Waters v. Carroll, 9 Yerg., 102; So., 216; State v. Ross, 122 Mo., Baker v. Administrator of Backus, 435, 25 S. W., 947, 23 L. R. A., 534; 32 111., 79 ; Devendorf v. Dickinson, St. Louis, C. G. & F. S. Ry. Co. v. 21 How. Pr., 275; Wilkinson v. Holladay, 131 Mo., 440, 33 S. W., CHAP. I.] GENERAL FEATURES. the agent or representative of either party to the action, but is uniformly regarded as an officer of the court, exercising his functions in the interest of neither plaintiff nor defendant, but for the common benefit of all parties in interest.^ He should be a person wholly impartial and indifferent to all parties in in- terest.2 Being an officer of the court, the fund or property in- trusted to his care is regarded as being in ciistodia legis for the benefit of whoever may finally establish title thereto, the court itself having the care of the property by its receiver, who is merely its creature or officer, having no powers other than those conferred upon him by the order of his appointment, or such as are derived from the established practice of courts of equity.^ A trustee differs in many respects from a receiver. He may be appointed by deed or will or in other ways without any order of a court and his powers and duties are prescribed 49; Gardner v. Caldwell, 16 Mont., 221, 40 Pac, 590; Wiswall v. Kunz, 173 111., 110, 50 N. E., 184; Nevitt V. Woodburn, 190 111., 283, 60 N. E., 500; Harman v. McMullin, 85 Va., 187, 7 S. E., 349. 2 Davis V. Duke of Marlborough, 2 Swans., 108; Booth v. Clark, 17 How., 322; Hooper v. Winston, 24 111., 353; Baker v. Administrator of Backus, 32 111., 79; Kaiser v. Kellar, 21 Iowa, 95 ; King v. Cutts, 24 Wis., 627; Osborn v. Heyer, 2 Paige, 342; Curtis V. Leavitt, 1 Ab. Pr., 274; Brown v. Northrup, 15 Ab. Pr., N. S., 2)ZZ ; Corey v. Long, 43 How. Pr., 497; S. C, 12 Ab. Pr., N. S., 427; Williamson v. Wilson, 1 Bland, 418; Ellicott v. Warford, 4 Md., 80; Wilkinson v. Lehman-Durr Co., 136 Ala., 463, 34 So., 216; McGar- rah V. Bank, 117 Ga., 556, 43 S. E., 987; Van Rensselaer v. Emery, 9 How. Pr., 135; Meier v. Kansas Pacific R. Co., 5 Dill., 476. But in Louisiana it is held that a receiver of partnership funds, appointed by consent of both partners, pending a suit for the dissolution of the firm, is not an officer of the court, but merely an agent of the parties, and that the principles governing receivers generally are inapplicable to such a case. Kellar v. Williams, 3 Rob. (La.), 321. Since a receiver is the representative of all parties in interest, he is bound to exercise his powers for the equal benefit of all and consequently an agreement to place the property and business in his hands under the control and management of a single party to the suit is void. Shadewald v. White, 74 Minn., 208, 77 N. W., 42. 3 Coy V. Title G. & T. Co., 157 Fed., 794. 4 Booth V. Clark, 17 How., 322 ; Hunt V. Wolfe, 2 Daly, 303; Deven- dorf V. Dickinson, 21 How. Pr., 275; Corey v. Long, 43 How. Pr., 497; S. C, 12 Ab. Pr., N. S., 427; Skinner v. Maxwell, 66 N. C, 45, and see S. C, 68 N. C, 400; Battle V. Davis, 66 N. C, 252; Hooper v. RECEIVERS. [chap. I. by the instrument creating the trust and not by the court ; nor is property in his possession regarded as being in custodia Icgis, as in the case of a receiver, and he may be called to account not merely by the court which may have appointed him but by any court which may acquire the proper jurisdiction.^ § 2. An executive officer ; compared with sheriff ; not a public officer ; v^^hen agent of plaintiff. A receiver is fre- quently spoken of as the "hand of the court," and the expres- sion very aptly designates his functions, as well as the relation which he sustains to the court.^ He is regarded as the execu- tive officer of a court of chancery in much the same sense that a sheriff is the executive officer of a court- of law, and the assets and property in his hands are as much in the custody of the law as if levied upon under an execution or attachment. Indeed, the purpose for which a receiver takes possession is Winston, 24 111., 353; Nevitt v. Woodburn, 190 111., 283, 60 N. E., 500; Kaiser v. Kellar, 21 Iowa, 95; Ellicott V. Warford, 4 Md., 80; Co- burn V. Ames, 57 Cal., 201 ; Howell V. Hough, 46 Kan., 152, 26 Pac, 436; Carswell v. F. L. & T. Co., 20 C. C. A., 282, 74 Fed., 88, 43 U. S. App., 300. And see Gayle v. Johnson, 80 Ala., 388; Ashurst v. Lehman, 86 Ala., 370, 5 So., 731. 5 Nevitt V. Woodburn, 190 111., 283, 60 N. E., 500. As to the dis- tinction between a receiver and a trustee in bankruptcy, see Traders Insurance Co. v. Mann, 118 Ga., 381, 45 S. E., 426. And see State Bank v. Domestic S. M. Co., 99 Va., 411, 39 S. E., 141, 86 Am. St. Rep., 891, for the distinction between a passive receiver who merely holds the possession of the res and an ac- tive receiver to whom is confided the management of a going business concern. 6 See Runyon v. Farmers & Me- chanics Bank of New Brunswick, 3 Green Ch., 480; Van Rensselaer v. Emery, 9 How. Pr., 135; William- son V. Wilson, 1 Bland, 418; Ellicott V. Warford, 4 Md., 80. "The ap- pointment of a receiver," observes Mr. Justice Eccleston, in Ellicott V. Warford, 4 Md., 85, "does not determine any right, or affect the title of either party, in any manner whatever. He is the officer of the court, and truly the hand of the court. His holding is the holding of the court from him from whom the possession was taken. He is appointed on behalf of all parties, and not of the plaintiff or of one defendant only. His appointment is not to oust any party of his right to the possession of the property, but merely to retain it for the ben- efit of the party who may ultimately appear to be entitled to it." And see Williamson v. Wilson, 1 Bland, 418, for a learned and exhaustive discussion of the general principles governing the jurisdiction of equity by the appointment of receivers. CHAP. I.] GENERAL FEATURES. 5 closely allied to that of a sheriff in levying under execution, except that the scope of the receiver's authority is more com- prehensive, since he is usually required to pay all demands upon the fund in his hands to the extent of that fund; while a sheriff is only obliged to make payment of the debt mentioned in the execution out of the property levied upon.*^ And a receiver is not a public officer within the meaning of a statute which exempts public officers from garnishment as to funds in their hands as such officers. ^ And it has been held that the appointment of a receiver is, in effect, an equitable execution.^ But where a receiver is appointed at the instance or in the interest of the person whose property is to be taken into his custody, he is not to be regarded as the hand of the court but merely as the agent or representative of the person who has thus procured his appointment.^^ § 3. The jurisdiction a preventive one ; cautiously exer- cised. The jurisdiction exercised by courts of equity in ad- ministering relief by the extraordinary remedy of a receiv- er pendente lite is a branch of their general preventive ju- risdiction, being intended to prevent injury to the thing in con- troversy, and to preserve it for the security of all parties in interest, to be disposed of as the court may finally direct.^! The power is justly regarded as one of a very high nature, and "^ In re Merchants Insurance Co., ing him, and not the agent of the 3 Biss., 162. owner, whose property is placed in 8 Cohnen v. Sweenie, 105 Mich., his possession, is that the property 643, 63 N. W., 641 ; Citizens' Com- to be controlled is taken from the mercial & Savings Bank v. Bay Cir- custody and management of its own- cuit Judge, 110 Mich., 633, 68 N. W., er and made subject to the control 649. of the court without his consent; 9 Hunt V. Wolfe, 2 Daly, 303. but when the defendant owner asks 10 Texas & Pacific R. Co. v. Gay, the court to do this, he, in effect, 86 Tex., 571, 605, 26 S. W., 599, asks the court to make an appoint- 613; Harrigan v. Gilchrist, 121 Wis., ment for him, and it is but just that 127, 292, 99 N. W., 909, 956. In a receiver so appointed should be Texas & Pacific R. Co. v. Gay, held to be his agent." supra, Stayton, C. J., says: "The H Mays i;. Rose, Freem. (Miss.), theory on which a receiver is held 703. to be an officer of the court appoint- 6 RECEIVERS. [chap. I. not to be exercised when it would be productive of serious in- justice or injury to private rights. 12 The exercise of the extra- ordinary power of a chancellor in appointing receivers, as in granting writs of injunction or ne exeat, is an exceedingly deli- cate and responsible duty, to be discharged by the court with the utmost caution, and only under such special or peculiar circumstances as demand summary relief. ^^ Indeed, the ap- pointment of a receiver is regarded as one of the most difficult and embarrassing duties which a court of equity is called upon to perform.i^ j^ jg ^ peremptory measure, whose effect, tem- porarily at least, is to deprive of his property a defendant in possession, before a final judgment or decree is reached by the court determining the rights of the parties.l^ It is therefore not to be exercised doubtingly, but the court must be convinced that the relief is needful, and that it is the appropriate means of securing an appropriate end.^^ And since it is a serious inter- ference with the rights of the citizen, without the verdict of a jury and before a regular hearing, it should be granted only for the prevention of manifest wrong and injury.^^ And be- cause it divests the owner of property of its possession before a final hearing, it is regarded as a severe remedy, not to be adopted save in a clear case, and never unless plaintiff would otherwise be in danger of suffering irreparable loss.^^ And since a receivership is a harsh and costly remedy, interfering seriously with the rights of persons in possession, courts of 12 Opinion of Frick, J., in Mining Co. v. United States Petro- Speights V. Peters, 9 Gill, 476; As- leum Co., 57 Pa. St., 83; S. C, 6 hurst V. Lehman, 86 Ala., 370, 5 So., Philad., 521. 731 17 Crawford v. Ross, 39 Ga., 44. 13 Crawford v. Ross. 39 Ga., 44; The court say: "The high preroga- Furlong v. Edwards, 3 Md., 112; tive act of taking property out of the Latham v. Chafee, 7 Fed., 525. hands of one, and putting it in See, also, Beverley v. Brooke, 4 pound, under the order of a judge, Grat., 187. ought not to be taken, except to 14 Drummond, J., in Bill v. New prevent manifest wrong, imminently Albany, etc., R. Co., 2 Biss., 390. impending." 15 Whitehead v. Wooten, 43 Miss., 18 Pullan v. Cincinnati & Chicago 523. R. Co., 4 Biss., 47; Hayes v. Jasper 16 Chicago ^ Allegheny Oil & Land Co., 147 Ala., 340, 41 So., 909. CHAP. I.] GENERAL FEATURES. 7 equity exercise extreme caution in the appointment of receivers and withhold the remedy until a proper case has been made therefore. ^^ § 4. Beneficial nature of the relief ; possession of the re- ceiver that of the court. The power exercised by courts of equity in the appointment of receivers is invoked upon many occasions with great advantage to the parties. It is especially beneficial when there is danger that the subject-matter in con- troversy may be wasted, destroyed, injured or removed during the progress of the litigation, the object of the relief being to secure the fund for the person who may ultimately be found entitled thereto, with as little prejudice as possible to any of those concerned. 20 And a receivership is one of those remedial agencies originally devised to preserve the fund or thing in controversy from removal beyond the jurisdiction, or from spoliation, waste or deterioration pendente lite, to the end that it may be appropriated as the final decree shall direct. 21 A court of equity, by its order appointing a receiver, takes the entire subject-matter of the litigation out of the control of the parties and into its own hands, and ultimately disposes of all questions, leg"al or equitable, growing out of the proceeding. 19 Suit V. Hochsletter Oil Co., 63 hearing, to be entitled, and to pro- West Va., 317, 61 S. E., 307. duce as little prejudice as possible to 20 Lenox v. Notrebe, Hemp., 225 ; any of those concerned. When one Smith V. Lusk, 119 Ala., 394, 24 So., party has a clear right to the pos- 256. "The application for a re- session of property, and when the ceiver," says Mr. Justice Clayton in dispute is as to the title only, the Lenox v. Notrebe, supra, "is ad- court would very reluctantly dis- dressed to the sound discretion of turb that possession. But when the the court, regulated by legal princi- property is exposed to danger and pies, and is exercised by the courts to loss, and the party in possession upon many occasions with great has not a clear legal right to the benefit to the parties. It is par- possession, it is the duty of the ticularly serviceable when there is court to interpose and to have it danger that the subject-matter of secured." See, also, Tregaskis v. controversy may be wasted or de- Judge of Superior Court, 47 Mich., stroyed, impaired, injured or re- 509, 11 N. W., 293; McElwaine v. moved during the progress of the Hosey, 135 Ind., 481,. 35 N. E., 272. suit. The object is to secure the 21 Myers v. Estell, 48 Miss., 401. fund for the party found, upon final 8 RECEIVERS. [chap. I. And the receiver's possession being the possession of the court appointing him, any attempt to disturb such possession without leave of the court may be treated as a contempt of court, and punished accordingly.22 § 5. The remedy a sequestration; title not changed A receiver being appointed for the preservation of the fund or property pendente lite, and for its uhimate disposal accord- ing to the rights and priorities of the parties entitled, the rem- edy is regarded as in the nature of a sequestration rather than as an attachment of the property, and it ordinarily gives no ad- vantage or priority to the person at whose instance the appoint- ment is made, over other parties in interest. 23 Nor does the ap- pointment of a receiver, in the absence of statute, vest him with any title to the property in controversy, the effect of the ap- pointment being merely to give him the right to the possession of the property without changing the title or creating any lien upon it.24 Its purpose in this respect is rather like that of an injunction pendente lite, to preserve the subject-matter until the rights of all parties may be judicially determined. ^^ And 22 Beverley v. Brooke, 4 Grat., liams, 22 R. I., 547, 48 Atl., 798; 211. Krohn v. Weinberger, 47 West Va., 23 Beverley v. Brooke, 4 Grat., 127, 34 S. E., 746; Peirce v. Van 187; Ellis v. Boston, Hartford & Dusen. 24 C. C. A., 280, 78 Fed., Erie R. Co., 107 Mass., 1 ; Southern 693, 47 U. S. App., 339 ; Central Ap- Granite Co. v. Wadsworth, 115 Ala., palachian Co. v. Buchanan, 33 C. C. 570, 22 So., 157. A., 598, 90 Fed., 454, 62 U. S. App., 24 Southern Granite Co. v. Wads- 195 ; ZZ C. C. A., 682, 91 Fed., 1001. worth, 115 Ala., 570, 22 So., 157; And where a receiver of an insol HefTron v. Gage, 149 III, 182, 36 N. vent bank was ordered to take pos- E., 569; Thomas v. VanMeter, 164 session of certain securities which 111., 304, 45 N. E., 405; Bartlett v. appeared to belong to the bank, it Cicero L., H. & P. Co., 177 III, 68, was held that his possession vested 52 N. E., 339; Manufacturers Paper no title in him nor created any lien Co. V. Lindblom, 80 III App., 267 ; but that he merely held the property Harrison v. Warren Co., 183 Mass., pending the final determination of 123, 66 N. E., 589; Rogers & Bald- the title thereto. University of Ill- win Hardware Co. v. Cleveland B. inois v. Globe Savings Bank, 185 Co., 132 Mo., 442, 34 S. W., 57, 31 III, 514, 57 N. E., 417. L. R. A., 335, 53 Am. St. Rep., 494 ; 25 Ellis v. Boston, Hartford & Sigua Iron Co. v. Brown, 171 N. Y., Erie R. Co., 107 Mass., 1 ; Southern 488, 64 N. E., 194; Greene v. Wil- Granite Co. v. Wadsworth, 115 Ala., CHAP. I.] GENERAL FEATURES. 9 in the exercise of this branch of its extraordinary jurisdiction, equity reverses the ordinary course of administering justice, and levies upon the property a kind of equitable execution, by means of which it makes a general appropriation thereof, leav- ing the question of who may finally be entitled to be determined thereafter. It follows, therefore, from the peculiar nature of the remedy as thus shown, as well as from the fact that the court must often act before the merits of the controversy have been fully developed, and when the parties in interest are not all before the court, that it proceeds with extreme caution, in order to avoid any unnecessary disturbance of legal rights or equitable priorities.^^ § 6. Remedy a provisional one ; not decisive of ultimate right, nor conclusive of merits ; not granted on final hear- ing ; present necessity must exist. It necessarily follows from the nature of the jurisdiction as thus far disclosed, as well as from the purpose and object usually had in view in the appointment of a receiver pendente lite, that the remedy is a provisional or auxiliary one, invoked as an adjunct or aid of 570, 22 So., 157. See, also, Ex court in a seasonable time, and due parte Dunn, 8 S. C, 207; Union course of proceeding, to assert and Bank of Chicago v. Kansas City establish their pretensions. The re- Bank, 136 U. S., 223, 10 Sup. Ct. ceiver appointed is the officer and Rep., 1013. representative of the court, subject 26 Beverley v. Brooke, 4 Grat., to its orders, accountable in such 187. The nature and functions of manner and to such persons as the this extraordinary jurisdiction of court may direct, and having m his courts of equity are very clearly character of receiver no personal in- stated in the opinion of the court in terest but that arising out of his this case, by Baldwin, J., as follows, responsibility for the correct and p. 208 : "By means of the appoint- faithful discharge of his duties. It ment of a receiver, a court of equity is of no consequence to him how or takes possession of the property when, or to whom, the court may which is the subject of the suit, pre- dispose of the funds in his hands, serves it from waste or destruction, provided the order or decree of the secures and collects the proceeds or court furnishes to him a sufficient profits, and ultimately disposes of protection. The order of appoint- them according to the rights and ment is in the nature, not of an priorities of those entitled, whether attachment, but a sequestration; it regular parties in the cause, or only gives in itself no advantage to the parties in interest coming before the party applying for it over other 10 RECEIVERS. [chap. I. the principal relief sought by the action and never as the ulti- mate object of that action. The court must have jurisdiction independent of the receivership and a receiver is never ap- pointed except as a measure in aid of the enforcement of some recognized equitable right. The appHcation for a receiver may succeed or fail, and yet in no manner affect the principal controversy or determine the final result. 27 And in this respect the appointment of a receiver in limine bears no closer relation to the action in which this extraordinary relief is sought than an attachment in aid of an action upon a promissory note bears to such action.28 The appointment of a receiver in limine, therefore, like the granting of a preliminary or interlocutory injunction, is not an ultimate determination of the right or claimants; and operates prospect- ively upon rents and profits, which may come to the hands of the re- ceiver, as a lien in favor of those interested, according to their rights and priorities in or to the principal subject out of which those rents and profits issue. In the exercise of this summary jurisdiction, a court of equity reverses, in a great measure, its ordinary course of ad- ministering justice; beginning at the end, and levying upon the prop- erty a kind of equitable execution, by which it makes a general instead of a specific appropriation of the issues and profits, and afterwards determining who is entitled to the benefit of its quasi process. But acting, as it often must of necessity, before the merits of the cause have been fully developed, and not un- frequently when the proper parties in interest are not all before the court, it proceeds with much cau- tion and circumspection, in order to avoid disturbing unnecessarily or injuriously legal rights and equi- table priorities." 27 Barber v. International Co., 73 Conn., 587, 48 Atl., 758 ; Hottenstein V. Conrad, 9 Kan., 435; Cooke v. Gwyn, 3 Atk., 689; Vila v. Grand Island E. L., I. & C. S. Co., 68 Neb., 222, 94 N. W., 136, 97 N. W., 613; Mann v. German-American I. Co., 70 Neb., 454, 97 N. W., 600; Smiley V. Sioux B. S. Co., 71 Neb., 581, 101 N. W., 253, 99 N. W., 263; Balti- more Bargain House v. St. Clair, 58 West Va., 565, 52 S. E., 660; Thompson v. Adams, 60 West Va., 463, 55 S. E., 668; Ward v. Hotel Randolph Co., 65 West Va., 721, — S. E., — . See, also, Rainey v. Freeport S. C. & C. Co., 58 West Va., 424, 52 S. E., 528; Mays v. Rose, Freem. (Miss.) 703; Chicago and Allegheny Oil and Mining Co. V. United States Petroleum Co., 57 Pa. St., 83, 6 Philad., 521; Fellows V. Heermans, 13 Ab. Pr., N. S., 1; McCarthy v. Peakc, 18 How. Pr., 138, 9 Ab. Pr., 164. 28 Hottenstein v. Conrad, 9 Kan., 435. CHAP. I.] GENERAL FEATURES. 11 titlt, and the court, in passing upon the application, in no manner decides the questions of right involved, nor antici- pates its final decision upon the merits of the controversy ; the leading idea upon the preliminary application being merely to husband the property or fund in litigation for the benefit of whoever may be determined in the end to be entitled thereto.29 The decision upon the application for a receiver pendente lite is, therefore, without prejudice to the final decree which the court may be called upon to make, and the court expresses no opinion as to the ultimate questions of right involved. And if the plaintiff presents a prima facie case, showing an apparent right or title to the thing in controversy, and that there is imminent danger of loss without the intervention of the court, the relief may be granted without going further into the merits upon the preliminary application.30 Indeed, upon an interlocutory application for a receiver, a court of equity usually confines itself strictly to the point which it is called upon to decide, and will not go into the merits of the case at large, since the court is bound to express its opinion only to the extent necessary 29Huguenin v. Baseley, 13 Ves., brought to a hearing for a final 106; Cooke v. Gvvyn, 3 Atk, 689; decree; but it does not follow that Ellicott V. Warford, 4 Md., 80; a decisive opinion is to be ex- Blakeney v. Dufaur, 15 Beav., 40; pressed in this stage of the cause Leavitt v. Yates, 4 Edw. Ch., 162; upon the rights of all the parties; Brown v. Northrup, 15 Ab. Pr., N. for, whatever may be the result of S., 333; Ex parte Walker, 25 Ala., a motion of this kind, the general 104; Bitting v. Ten Eyck, 85 Ind., understanding is that it is without 357 prejudice to the ultimate decision 30 Leavitt v. Yates, 4 Edw. Ch., which the court may be called upon 162; Brown v. Northrup, 15 Ab. to make. Insolvency and danger to Pr., N. S., 333. Leavitt v. Yates the fund pending the litigation, with was a bill to set aside a deed of a prima facie case and probable trust transferring certain securities, cause for sustaining the bill, are or and a motion upon bill and an- ought to be sufficient in the first in- swers for an injunction and for a stance to found an injunction and receiver to take charge of the secu- a receivership upon, without going rities pendente lite. McCoun, Vice- minutely into the merits. My own Chancellor, observes: "The argu- observation has taught me that, in ment has embraced all the points general, it is most prudent and best which the pleadings are calculated promotes the ends of justice to go to present when the cause shall be no further upon the motion." 12 RECEIVERS. [chap. I. to show the gfrounds upon which it disposes of the appHca- tion.^^ And since a receiver derives his title from the court, rather than from the act of the parties upon whose appHcation or by whose consent he is appointed, it necessarily follows that ' the effect of his appointment is to place the property in his custody as an officer of the court, for the benefit of whoever may ultimately prove to be entitled thereto, but without effect- ing any change of title to the property.^2 \nd since the appointment of a receiver is a provisional remedy, it should not be made by final decree except where necessary to carry such decree into effect. ^^ And for the same reason, if it ap- pears upon an application for such appointment that the plaintiff will in no event be entitled to the principal relief sought, the receiver should be denied. 2"* And a receiver should not be appointed simply because an occasion for such appointment is anticipated or may arise in the future, but the occasion must exist when the appointment is made.^^ § 7. Discretionary character of the jurisdiction; discre- tion defined. The appointment of a receiver pendente lite, like the granting of an interlocutory injunction, is to a con- siderable extent a matter resting in the discretion of the court to which the application is made, to be governed by a considera- tion of the entire circumstances of the case.^^ And since the 31 Skinners Company v. Irish 34 Witz v. Gray, 116 N. C, 48, 20 Society, 1 Myl. & Cr., 162. See, S. E., 1019. also, Conro v. Gray, 4 How. Pr., 35 Chadron Banking Co. v. Ma- 166. honey, 43 Neb., 214, 61 N. W., 594. 32 Union Bank of Chicago v. , 30 Owen v. Homan, 3 Mac. & G., Kansas City Bank, 136 U. S., 223, 378, affirmed on appeal to the House 10 Sup. Ct. Rep., 1013; Central Ap- of Lords, 4 H. L. Rep., 997; Ham- palachian Co. v. Buchanan, 33 C. C. burgh Manufacturing Co. v. Edsall, A., 598, 90 Fed., 454, 62 U. S. App., 4 Halst. Ch., 141 ; Chicago and Alle- 195 ; 33 C. C. A., 682, 91 Fed., 1001 ; gheny Oil and Mining Co. v. United Central Trust Co. v. Worcester Cy- States Petroleum Co., 57 Pa. St., 83 ; cle Co., 86 Fed., 35. Beaumont v. Beaumont, 166 Pa. St., 33Chadm Banking Co. v. Ma- 615, 31 Atl., 336; S. C, 6 Philad., honey, 43 Neb., 214, 61 N. W., 594, 521; Pullan v. Cincinnati & Chicago distinguished in Buck v. Stuben, 63 R. Co.. 4 Biss., 47 ; Crane v. McCoy, Neb., 273, 88 N. W., 483. 1 Bond, 422; Mays v. Rose, Freem. CHAP. I.] GENERAL FEATURES. 13 appointment of a receiver is thus a discretionary measure, the action of the lower court in appointing or denying a receiver pendente lite will not be disturbed upon appeal unless there has been a clear abuse. 3? But the discretion thus vested in the chancellor in the matter of appointing receivers pendente lite is not an absolute or arbitrary one but it is a sound judicial discretion in view of all the circumstances of the case, to be exercised for the promotion of justice where no other adequate remedy exists.38 And where the court is unable to see that any benefit will result from appointing a receiver in the cause, or that any injury will follow from refusing the relief, it will not interfere, especially if it is apparent that great confusion and difficulty in the management of the property may result to both parties from a receivership.39 So, if upon a consideration of all the circumstances of the case, it is apparent that greater injury will ensue from appointing a receiver than from leaving the property in its present possession, or if other considerations of propriety or of convenience render the appointment im- (Miss.), 703; Greville v. Fleming, 2 v. Neal, 56 C. C. A., 572, 120 Fed., Jo. & Lat., 335; Morrison v. Buck- 224, affirming S. C, 110 Fed., 477; ner. Hemp., 442; Whelpley v. Erie United States Shipbuilding Co. v. Railway Co., 6 Blatchf., 271 ; Hanna Conklin, 60 C. C. A., 680, 126 Fed., V. Hanna, 89 N. C, 68; Whitehead 132; Heinze v. Butte & B. C. M. Co.] V. Hale, 118 N. C, 601, 24 S. E., 61 C. C. A., 63, 126 Fed., 1; Moore 360; Williamson's Adm'r v. W. C. v. Bank, 106 Fed., 574; Ford v. Tay- V. M. & G. S. R. Co., 33 Grat., 624; lor, 137 Fed., 149. And see State Norris V. Lake, 89 Va., 513, 16 S. E., v. Bank of New England, 55 Minn., 663; Lyle v. Commercial National 139, 56 N. W., 575. Bank, 93 Va., 487, 25 S. E., 547; 37 Clark v. Bradley Co., 6 App. Warren z;. Pitts, 114 Ala., 65, 21 So., D. C, 437; Wood v. Grayson, 16 494; Ray v. Robert Price Coal Co., App. D. C, 174; Coming v. Siesel, 80 Conn., 558, 69 Atl., 355 ; Clark v. 101 Ga., 389, 28 S. E., 861 ; Heinze Bradley Co., 6 App. D. C, 437; v. Butte & B. C. M. Co., 61 C. C. Wood V. Grayson, 16 App. D. C, A., 63, 126 Fed., 1. 174; The Anvil v. Savery, 116 Ga., 38 Union Boom Co. v. Samish 321, 42 S. E., 495; McGarragh v. Boom Co., ZZ Wash., 144, 74 Pac, Bank, 117 Ga., 556, 43 S. E., 987; 53; Baltimore Bargain House v. St. Valley National Bank v. Claflin Co., Clair, 58 West Va., 565, 52 S. E , 108 Iowa, 504, 79 N. W., 279 ; Balti- 660. more Bargain House v. St. Clair, 58 39 Hamburgh Manufacturing Co. West Va, 565, 52 S. E., 660; Briggs v. Edsall, 4 Halst. Ch., 141. 14 RECEIVERS. [chap. I. proper or inexpedient, the court will refuse to interf ere.^^ ]^or will a receiver be appointed in an improper case, even by con- sent of the parties, especially when the rights of third persons are concerned and may be jeopardized by the appointment.^^ And he who seeks the appointment of a receiver must himself come into court with clean hands.'*^ § 8. Probability as to final decree ; plaintiff must present a prima facie case; proof on interlocutory application. While it has already been shown that the court, in passing upon the application for a receiver, in no manner forestalls or antici- pates the final decision upon the merits, the probability that plaintiff will ultimately be entitled to a decree in his action is still a material element to be considered by the court. And when upon the entire record this is a matter of much doubt, the court is justified, in its discretion, in refusing a receiver.^s To warrant the relief, therefore, plaintiff should present at least 40Vose V. Reed, 1 Woods, 647; Provident Life & Trust Co. v. Ken- iston, 53 Neb., 86, 73 N. W., 216; Equitable Life Assurance Society v. Brown, 213 U. S., 25, 29 Sup. Ct. Rep., 404, reversing S. C, 81 C. C. A., 1, 151 Fed., 1. 41 Whelpley v. Erie Railway Co., 6 Blatchf., 271. To the same effect, see Hutchinson v. American P.-C. Co., 104 Fed., 182. 42 Hyde Park Gas Co. v. Kerber, 5 Bradw., 132. 43 Owen V. Homan, 3 Mac. & G., 378, affirmed on appeal to the House of Lords, 4 H. L. Rep., 997; Wilkin- son V. Dibbie, 12 Blatchf., 298; Bank of Florence v. United States S. &. L. Co., 104 Ala., 297, 16 So., 110; Builders' & Painters' Supply Co. v. Lucas, 119 Ala., 202, 24 So., 416; Hayes v. Jasper Land Co., 147 Ala., 340, 41 So., 909; Vila v. Grand Is- land E. L., I. & C. S. Co., 68 Neb., 222, 94 N. W., 136, 97 N. W., 613; Lancaster v. Asheville St. Ry. Co., 90 Fed., 129; Kelley v. Boettcher, 89 Fed., 125. In Owen v. Homan, 3 Mac. & G., 378, Lord Truro ob- serves, p. 411, as follows: "I am of opinion that the case upon the whole record presents too much doubt as to the plaintiffs' right to a decree to warrant the possession of the prop- erty being disturbed. It is unneces- sary to do more than to state that the granting a receiver is a matter of discretion, to be governed by a view of the whole circumstances of the case ; one most material of which circumstances is the probabil- ity of the plaintiff being ultimately entitled to a decree. In this case many of the important points arise upon the construction of the deeds, and not upon disputed facts ; and I repeat that in my opinion that con- struction is attended with too much doubt and difficulty to entitle the plaintiff to a receiver." CHAP. I.J GENERAL FEATURES. 15 a prima facie case, and the court should be satisfied that there is imminent danger of loss unless a receiver is appointed.'** But it is not necessary in an application for ancillary relief by the appointment of a receiver that the proof should be as full and complete as would be required upon a final hearing upon the merits. *5 § 9. When power may be invoked; not when property is of little value ; bond in lieu of receiver. The power of ap- pointing receivers is necessarily inherent in courts possessed of equitable jurisdiction, and may be invoked whenever there is an estate or fund in existence and no competent person en- titled to hold it, or when the person entitled occupies the rela- tion of a trustee and is misusing or misapplying the property. And when property constituting the subject-matter of the liti- gation is subject to clear equities in favor of a party to the action who is out of possession, the court may appoint a receiv- er when the relief seems to be just and necessary to preserve the thing in dispute from the control of either party until the controversy is determined.*^ So a receiver will be appointed for the protection of the fund when plaintiff has an equitable interest, and defendant having possession of the property is wasting it, or removing it beyond the jurisdiction of the court.^'^ And if the order does not in terms fix or limit the duration of the receivership, it will be construed as continuing during the pendency of the suit, unless the receiver is sooner discharged.*^ But to warrant a court of equity in incurring the expense of a receivership, it must clearly appear that there is actual property in existence which ought to be protected, and the courts are averse to interfering when the property is of trifling value.^^ And where the property involved is such that 44 Norris v. Lake, 89 Va., 513, 16 518. And see Clark v. Brown, 57 S. E., 663. C. C. A., 76, 119 Fed., 130. 45Pearce v. Elwell, 116 N. C, ^I ^°'^ ^- ^''^' ^ ^^°°d^' ^7- 595 21 S E 305 Weems v. Lathrop, 42 Tex., 207. 46 Skinner v. Maxwell, 66 N. C, 49 Whitworth v. Whyddon, 2 Mac. 45 ; Flagler v. Blunt, 32 N. J. Eq., & G., 52. 16 RECEIVERS. [chap. I. it is not likely to sufifer injury by remaining in the hands of the defendant and it appears that the latter is perfectly solvent, it has been held error to appoint a receiver pendente lite without affording the defendant the alternative of giving bond for the protection of the plaintiff.^^ And it may be stated generally that a court of equity has inherent power to impose conditions upon the appointment and discharge of receivers, and it may properly discharge a receiver previously appointed upon the giving by defendant of a bond properly conditioned to save the plaintiff harmless from the injuries complained of.^^ § 10. Relief similar to that by injunction; not granted when there is a remedy at law; remedy at law defined. A receiver being appointed by a court of equity in the exercise of its extraordinary jurisdiction, applications for the relief are governed by many of the principles which control the courts in administering the extraordinary remedy of an in- junction. And as it is always a sufficient objection to the granting of an injunction that the person aggrieved has a full and adequate remedy at law,^^ so courts of equity will not lend their aid by the appointment of receivers when the persons seeking the relief have ample redress by the usual course of pro- ceedings at law, or when the law affords any other safe or ex- pedient remedy.^^ Thus, when proceedings are instituted by a creditor of a banking corporation for the appointment of a 50 Stillwell V. Savannah Grocery v. Jennings, 1 Stockt., 192 ; Wooden Co, 88 Ga, 100, 13 S. E., 963; Biv- v. Wooden, 2 Green Ch, 429; Sher- ins V. Marvin, 96 Ga, 268, 22 S. E, man v. Clark, 4 Nev, 138. 923; Conquest v. Bank, 97 Ga, 500, 53 Sollory v. Leaver, L. R, 9 Eq., 25 S. E., 343; Turnipseed v. Ken- 22; Cremen v. Hawkes, 2 Jo. & tucky Wagon Co, 97 Ga, 258, 23 Lat., 674; Parmly v. Tenth Ward S. E., 84 ; Cordele Ice Co. v. Sims, Bank, 3 Edw. Ch, 395 ; Corey v. 120 Ga, 428, 48 S. E, 12. And see Long, 43 How. Pr., 497 ; S. C, 12 §§ 124, 308 and 478, /'o.r^. Ab. Pr, N. S., 427; Opinion of 51 Twin City Power Co. v. Bar- Frick, J., in Speights v. Peters, 9 rett, 61 C. C. A., 288, 126 Fed., 302. Gill, 476; Morrison v. Buckner, 52Coughron v. Swift, 18 111., 414; Hemp, 442; Rice v. St. Paul & Pa- Winkler v. Winkler, 40 111., 179; cific R. Co, 24 Minn., 464; Bush v. Poage V. Bell, 3 Rand, 586; Web- Mattox, 110 Ga., 472, 35 S. E., 640; ster V. Couch, 6 Rand., 519; Mullen Griffin v. Henderson, 116 Ga., 310, CHAP. I.] GENERAL FEATURES. 17 receiver to wind up its affairs, but it is apparent from his bill that whatever rights he may have are cognizable at law and may be remedied by following the course prescribed by law for that purpose, the application will be denied and the plaintiff will be left to pursue his legal remedy. ^^ So where plaintiff has an adequate remedy at law by attachment or garnishment, a re- ceiver is properly refused. ^^ Nor does it necessarily follow, because the remedy at law is attended with difficulty, that plaintiff may have relief in equity by a receiver.^^ So when the person aggrieved, having a remedy at law, loses that remedy by his own laches, he can not come into equity and have a receiver.^'? And there is no case in which a court of equity appoints a receiver simply because it will be productive of no harm. 5^ But in order that the existence of a remedy at law may constitute a bar to the intervention of equity by the ap- pointment of a receiver, it must appear that the legal remedy is equally as complete, efficient and effective as that in equity, and unless this appears, a court of equity may properly inter- vene.^^ And where it appears that the remedy at law is inade- 42 S. E., 482; Carstarphen Ware- rett, 61 C. C. A., 288, 126 Fed., 302; house Co. V. Fried, 124 Ga., 544, Columbia National Sand Dredging 52 S. E., 598; Slover v. Coal Creek Co. v. Washed B. S. D. Co., 136 C. Co., 113 Tenn., 421, 82 S. W., Fed., 710. For the application of the 1131. And see McClure v. McGee, same principle in the case of injunc- 128 Ky., 464, — S. W., — . tions, see Watson v. Sutherland, 5 54Parmly v. Tenth Ward Bank, Wal., 74; Walla Walla v. Walla 3 Edw. Ch., 395. Walla Water Co., 172 U. S., 1, 55 Bush V. Mattox, 110 Ga., 472, 19 Sup. Ct. Rep., 77; Irwin v. 35 S. E., 640; Carstarphen Ware- Lewis, 50 Miss., 363; Beaser v. house Co. V. Fried, 124 Ga., 544. 52 City of Ashland, 89 Wis., 28, S. E., 598; Slover v. Coal Creek C. 61 N. W., 77; Welton v. Dick- Co., 113 Tenn., 421, 82 S. W., 1131. son, 38 Neb., 767, 57 N. W., 559, 56Cremen v. Hawkes, 2 Jo. & 22 L. R. A., 496, 41 Am. St. Lat., 674. Rep., 771 ; Kellogg v. King, 114 Cal., 57 Drewry v. Barnes, 3 Russ., 94. 378, 46 Pac, 166, 55 Am. St. Rep., 58 Orphan Asylum v. McCartee, 74; Coler v. Board of Commission- Hopk. Ch., 429; Corey v. Long, 43 ers, 89 Fed., 257; Bank of Kentucky How. Pr., 498; S. C, 12 Ab. Pr., v. Stone, 88 Fed., 383; Drew v. N. S., 427. Town of Geneva, 150 Ind., 662, SO 59 Twin City Power Co. v. Bar- N. E., 871, 48 L. R. A., 814. Receivers — 2. 18 RECEIVERS. [chap. I. quate and ineffectual, it is not necessary that the plaintiff should exhaust that remedy before appealing to a court of equity.^^ § 11. Plaintiff must show his own right, and danger to the property. The principal grounds upon which courts of equity grant their extraordinary aid by the appointment of receivers pendente lite are that the person seeking the relief has shown at least a probable interest in the property, and that there is danger of its being lost unless a receiver is allowed, the element of danger being an important consideration in the case.61 And where there is no danger to the property and nothing else to show the necessity for a receiver, one should not be appointed. ^2 And a remote or past danger will not suffice as a ground for the relief, but there must be a well- grounded apprehension of immediate injury. ^^ The power of appointment is usually invoked either for the prevention of fraud, to save the subject of litigation from material injury, or to rescue it from threatened destruction. 6"* And to warrant the interposition of a court of equity by the aid of a receiver, it is essential that plaintiff should show, first, either a clear legal right in himself to the property in controversy, or that he has some lien upon it, or that it constitutes a special fund out of which he is entitled to satisfaction of his demand. And, secondly, it must appear that possession of the property was obtained by defendant through fraud; or that the property itself, or the income from it, is in danger of loss from the neglect, waste, misconduct or insolvency of the defendant.^^ 60 Chicago & Southeastern Ry. 62 Beaumont v. Beaumont, 166 Pa. Co. V. Kenney, 159 Ind., 72, 62 N. St., 615, 31 Atl., 336. E., 26; Sallee v. Soules, 168 Ind., 63 Kean v. Colt, 1 Halst. Ch., 365. 624, 81 N. E., 587. 64 Baker v. Administrator of 61 Goodyear v. Betts, 7 How. Pr., Backus, 32 111., 70. 187; Flagler v. Blunt, 32 N. J. Eq., 65 Mays v. Rose, Freem. (Miss.), 518; Mead v. Burk, 156 Ind., 577, 703; Kanawha Coal Co. v. Ballard 60 N. E., 338; Attorney-General v. & W. C. Co., 43 West Va., 721, 29 Clavin, (also sub. nom. McCarter v. S. E., 514; Thompson v. Adams, 60 Clavin), 72 N. J. Eq., 642, — Atl, West Va., 463, 55 S. E., 668; Inter^ — . See, also. Orphan Asylum v. national Trust Co. v. Decker Bros., McCartee, Hopk. Ch., 429; Vose v. 81 C. C. A., 302, 152 Fed., 78. See Reed, 1 Woods. 647. also, Leavitt v. Yates, 4 Edw. Ch., CHAP. I.] GENERAL FEATURES. 19 Not only must the plaintiff show a case of adverse and conflict- ing claims to the property, but he must also show some emer- gency or danger of loss demanding immediate action, and that his own right is reasonably clear and free from doubt. ^^ If the dispute is as to title only, the court very reluctantly disturbs possession by a receiver, but if the property is exposed to dan- ger and to loss, and the person in possession has not a clear legal right thereto, the court will interpose by a receiver for the security of the property.^"^ § 12. Plaintiff must have existing interest; relief not granted to stranger; no receiver of gratuity. It is in all cases essential to the exercise of the jurisdiction that the plain- tiff should have a present existing interest in the property over which he seeks to have a receiver appointed.^^ And when it is 162 ; Beecher v. Bininger, 7 Blatchf., 170. "An application for the ap- pointment of a receiver," say the court in Mays v. Rose, Freem. (Miss.), p. 718, "is one which is ad- dressed to the sound discretion of the court, to be exercised as an auxiliary to the attainment of the ends of justice. It is one of the modes in which the preventive jus- tice of a court of equity is admin- istered. The great object is to se- cure the property or thing in con- troverisy, so that it may be subjected to such order or decree as the court may make in the particular case. It is intended equally for the security of both plaintiff and defendant. The possession of the receiver is not ad- verse to or in hostility to the rights of the defendant ; that possession is the possession of the court, held equally for the greater safety of all the parties concerned. A reference to the various decisions upon mo- tions for the appointment of re- ceivers shows that each case has been made to depend upon its own peculiar features, and throws but little light upon any new case, ex- cept so far as they establish the general principles which should gov- ern the court in the exercise of its discretion upon these motions. These principles are: that the plaintiff must show, first, either that he has a clear right to the property itself, or that he has some lien upon it; or that the property constitutes a special fund to which he has a right to resort for the satisfaction of his claim. And secondly, that the pos- session of the property by the de- fendant was obtained by fraud ; or that the property itself, or the in- come arising from it, is in danger of loss from the neglect, waste, mis- conduct or insolvency of the defend- ant. These are believed to be the general rules governing all applica- tions of this kind." 66 Beecher v. Bininger, 7 Blatchf., 170. 67 Opinion of Clayton, J., in Lenox v. Notrebe, Hemp., 225. 68 Smith V. Wells, 20 How. Pr., 20 RECEIVERS. [chap. I. apparent that he has parted with his entire interest in and title to the property, the court will not interfere, even though suffi- cient grounds may be shown to have warranted the relief, when the offense complained of was committed, and when plaintiff still had an interest in the subject-matter. ^9 And a receiver will not be appointed over a gratuity which amounts to nothing more than a mere allowance in which the defendant has no property right or interest and which has been appropriat- ed for his own personal benefit.'^^^ And a receiver will be ap- pointed only in behalf of a party in interest in the litigation; and a stranger to the suit, who represents no interest at stake, is not entitled to participate in the proceedings, or to thrust himself forward and obtain a receiver, especially when the parties to the action are not desirous of having one appointed.'^^ So the right to propose a suitable and proper person for re- ceiver, after the order for his appointment has been granted, rests in the first instance with the parties in interest in the cause, and the court will not permit a stranger to the action to come in and propose a person for the officeJ^ § 13. Receiver not allowed for benefit of stranger to the cause. A receiver pendente lite is appointed only for the benefit of such of the parties to the cause as appear to be en- titled to the fund in controversy, and not for the benefit of strangers to the suit. And if the receivership interferes with the rights of a stranger, he may apply to the court to be heard pro interesse suo, and his rights will be protected against any inequitable interference therewith by the officer of the court. But the appointment of the receiver does not give a mere 158; Steele v. Aspy, 128 Ind., 367, 70 Timothy v. Day, (1908) 2 L. 27 N. E., 739. R. Ir., 26. 69 Smith V. Wells, 20 How. Pr.. 71 O'Mahoney v. Belmont, 62 N. 158. And this principle would seem Y., 133, affirming S. C, 37 N. Y. to hold good, even though plaintiff Sup'r Ct. R., 223. still has a right of action against 72 Attorney - General v. Day, defendants for the injury done to Madd., 246, 1st American edition, the property while he yet had an 470. interest therein. Id. CHAP. 1.] GENERAL FEATURES. 21 Stranger to the suit the benefit of the proceedings, so that he may claim what he would not otherwise have been entitled to.'^^ § 14. DiHgence necessary; laches and acquiescence a bar to relief. It is important to observe, at the outset, that courts of equity lend their extraordinary aid by the appoint- ment of receivers, as in the granting of injunctions, only in behalf of those who have used due diligence in the assertion of their rights and in invoking the aid of the court. And a plaintiff, whose right is otherwise clear, and sufficient to en- title him to the relief, may be entirely debarred from the aid of the court by his own laches, which will be construed as a waiver of the right if he delays an unreasonable time in its assertion."^^ So an application for a receiver is not entitled to favorable consideration, when the plaintiff has lain by for a long period of years, and quietly acquiesced in a condition of affairs which he seeks to change by obtaining a receiver. "^^ Yot example, where plaintiffs seek the aid of a receiver over property in which they claim some interest, but which has been in posses- sion of defendants for a long period of years, during all which time plaintiffs and those under whom they claim have ac- 73 Howell V. Ripley, 10 Paige, 43. too late with this motion. They 74 Brown z;. Chase, Walk. (Mich.), filed their bill August 13, 1839, near- 43; Reynolds & Hamby E. M. Co. ly three years ago, and, for aught V. Martin, 116 Ga., 495, 42 S. E., that appears from their petition, 796. And see Gould v. Tryon, id., might with due diligence have ob- 353; Gray v. Chaplin, 2 Russ., 126; tained a decree long before this Fogarty v. Bourke, 2 Dr. & War., time, and had the mortgaged prem- 580; Skinners Company v. Irish So- ises sold. If they were entitled to ciety, 1 Myl. & Cr., 162. Brown v. a receiver, their neglect to apply for Chase, Walk. (Mich.), 43, was a bill his appointment at an earlier day in equity for the foreclosure of a should be construed as a waiver of mortgage, on which an application their right. Motion denied." was made for a receiver of the rents 75 Fogarty v. Bourke, 2 Dr. & and profits of the mortgaged prem- War., 580; Gray v. Chaplin, 2 Russ., ises, on the ground of insufficiency 126; Skinners Company v. Irish So- of the security and insolvency of the ciety, 1 Myl. & Cr., 162. And see mortgagor. The application for a Municipal Commissioners of Car- receiver was made nearly three rickfergus v. Lockhart, Ir. Rep., 3 years after filing the bill. The court Eq., 515; Hood v. First National say: "The complainants have come Bank, 29 Fed., 55. 22 RECEIVERS. [chap. I. quiesced in such possession, equity will not interfere by a re- ceiver in limine.'^^ So when the application is based upon the alleged misconduct of defendant as a trustee, and his misap- propriation of funds, but it is shown that the state of affairs complained of has existed for very many years, with plaintiffs' knowledge and without objection on their part, the court will not take the property from defendant's hands and place it in the custody of a receiver. '^'^ And when the wrong complained of occurred, if at all, several years before the application for relief, and so long since as to afford no ground for apprehen- sion of impending danger, and no act is alleged as being now threatened, a receiver will not be allowed. '^^ And where the receiver of a plaintiff in a foreclosure suit has allowed many years to elapse after the entry of a decree in the action, such laches and delay constitute a bar to the right of the receiver to have the proceeds of the sale paid to him where the rights of third persons have intervened.''^ § 15. The remedy compared with that by injunction. The relief granted by courts of equity in the appointment of receivers pendente lite bears in many respects a close analogy to that by preliminary injunction. Some points of resemblance jin the two forms of remedy have been already indicated, while others will frequently appear throughout the following pages. Both are extraordinary equitable remedies, as distin- guished from the usual and ordinary modes of administering relief either in courts of law or of equity. Both are essen- tially preventive in their nature, being properly used only for the prevention of future injury, rather than for the redress of past grievances. Both, too, have one common object in so far as they seek to preserve the res or subject-matter of the litiga- tion unimpaired, to be disposed of in accordance with the future decree or order of the court. Perhaps the principal ele- ment of difference between these two important remedies lies 76 Gray v. Chaplin, 2 Russ.. 126. 78 Kean v. Colt, 1 Halst. Ch., 365. 77 Skinners Company v. Irish So- 79 Thomas v. VanRIeter, 164 III., ciety, 1 Myl. & Cr., 162. 304, 45 N. E., 405. CHAP. I.] GENERAL FEATURES. 23 in this: that an injunction is strictly a conservative remedy, merely restraining action and preserving matters in statu quo, without affecting the possession of the property or fund in con- troversy ; while the appointment of a receiver is usually a more active remedy, since it changes the possession as well as the subsequent control and management of the property. A court of equity by an injunction ties up the hands of defendants, and preserves unchanged, not only the property itself, but the rela- tions of all parties thereto. But in appointing a receiver the court goes still farther, since it wrests the possession from defendant, and assumes and maintains the entire management and control of the property or fund, frequently changing its form, and retaining possession through its officer, the re- ceiver, until the rights of all parties in interest are satisfactorily determined. § 16. Receiver not necessarily appointed because injunc- ,tion granted. From the points of resemblance already indicated between these two extraordinary equitable remedies, it is not to be inferred that the appointment of a receiver nec- essarily follows from the granting of an injunction, or that the two remedies are necessarily inseparable. And while it frequently happens that the courts are called upon to adminis- ter both species of relief in the same action, and at one and the same time, yet it by no means follows that because an injunc- tion is granted a receiver must be appointed, and the two are to be treated as distinct and independent matters. A court of equity may therefore refuse a receiver, although the case pre- sented is a fitting one for an injunction, and although an in- junction has already been granted.^O It has been held, how- ever, that the power of appointing a receiver, when the relief is necessary for the collection and preservation of property 80 Rawnsley v. Trenton Mutual "the rights to those different reme- Life & Fire Insurance Co., 1 Stockt., dies are essentially distinct, and de- 347; Oakley v. Paterson Bank, 1 pend upon totally different grounds Green Ch., 173. And see Hall v. and circumstances." And see, post, Hall. 3 Mac. & G., 85, where it was § 743. said by the Lord Chancellor that 24 RECEIVERS. [chap. I. pending an injunction suit, is a necessary incident to the power of granting an injunction ; ^^ and if the latter power be express- ly conferred by law upon a judge in vacation, the former may be regarded as conferred by implication.^^ § 17. Suit must be actually pending ; allegations must be specific. Ordinarily, unless perhaps in the case of infants or lunatics, a suit must be actually pending to justify a court of equity in appointing a receiver ;83 and it follows, necessarily, that the person whose property it is sought to place in the re- ceiver's hands must be made a party to the suit, in order that he may have an opportunity of resisting the application, the grant- ing of which might result in irreparable injury to his inter- ests.8^ And since the court is without jurisdiction to appoint a receiver before the bill is filed, the fact that the bill is subse- quently filed and that the receiver gives bond does not impart any validity to the order.85 And the suit which must be ac- tually pending must be one in which the main relief sought is independent of the receivership.^e But where an order ap- pointing a receiver may be void because made before the actual pendency of an action, a subsequent order made after the court has acquired jurisdiction and confirming the original appoint- 81 Elk Fork Oil & Gas Co. v. Va., 565, 52 S. E., 660; Popp v. Foster, 39 C. C. A., 615, 99 Fed., 495. Mining Co., 27 Utah, 83, 74 Pac, 82 Penn v. Whiteheads, 12 Grat., 426 ; In re Brant, 96 Fed., 257. And 74_ see In re Hancock, 27 Hun, 575; 83 Baker v. Administrator of Back- Plarwell v. Potts, 80 Ala., 70; Jones us, 32 111., 79; Merchants & Manu- v. Bank of Leadville, 10 Colo., 464, facturers National Bank v. Kent 17 Pac, 272; Pressley v. Harrison, Circuit Judge. 43 Mich., 292, 5 N. 102 Ind., 14, 1 N. E., 188; Greene W., 627; Jones v. Schall, 45 Mich., v. Star C. & P. Car Co., 99 Fed., 379, 8 N. W., 68 ; Hardy v. McClel- 656. Ian, 53 Miss., 507 ; Barber v. Manier, 84 Baker v. Administrator of 71 Miss., 725, 15 So., 890; State v. Backus, 32 111., 79. See, also, Dale Union National Bank, 145 Ind., 537, v. Kent, 58 Ind., 584. 44 N. E., 585, 57 Am. St. Rep., 209; 85 Harwell v. Potts, 80 Ala., 70. State V. Ross, 122 Mo., 435, 25 S. 86 Vila v. Grand Island E. L., I. W., 947, 23 L. R. A., 534; Rainey & C. S. Co., 68 Neb., 222, 94 N. W., V. Freeport S. C. & C. Co., 58 West 136, 97 N. W., 613 ; Mann v. Ger- Va., 424, 52 S. E., 528; Baltimore man- American I. Co., 70 Neb.. 454, Bargain House v. St. Clair, 58 West 97 N. W., 600. CHAP. I.] GENERAL FEATURES. 25 ment will operate as an appointment as of that date and will be binding upon the parties and their privies. Such confirmatory order, therefore, constitutes a good defense to an action against the receiver to recover funds received by him brought by a person who is in privity with a party to the suit in which such order was entered.^'' The facts relied upon as the ground for the relief should be distinctly and specifically set forth, in order that defendant may be fully apprised thereof and have an oppor- tunity to resist the application.^^ It will not therefore suffice to allege in general terms that plaintiff is entitled on principles of equity to the interposition of the court, but the facts relied upon should specifically appear.^^ And while fraudulent con- duct on the part of defendant, or danger to the property or fund in controversy, is frequently made the foundation for a receivership, it will not suffice merely to allege such fraud or danger upon information generally, without specifying the sources of the information. And a bill whose only allegations upon these points are thus vague and general does not present such a case as to justify the court in interfering by a receiver.^^ Nor will mere general averments of plaintiff's belief that the property in controversy will be wasted or destroyed, unless a receiver is appointed, warrant the court in interfering, but the grounds upon which such belief is founded should be set forth.9i § 18. Insolvency as a ground for relief. While insolven- cy of a defendant in possession, and against whom a receiver is sought, is frequently relied upon by the courts as a ground for granting the relief,^^ j^ [^ to be observed that insolvency will not of itself warrant a court in appointing a receiver. It must also appear that plaintiff has a probable cause of action against 87 Anderson v. Riddle, 10 Wyo., 90 Blondheim v. Moore, 11 Md., 277, 68 Pac, 829. 365. 88 Tomlinson v. Ward, 2 Conn., 91 Hanna v. Hanna, 89 N. C, 68. 396; Blondheim v. Moore, 11 Md., 92 See Leavitt v. Yates, 4 Edw. 365. Ch., 162. 89 Tomlinson v. Ward, 2 Conn., 396. 26 RECEIVERS. [chap. L the defendant, and that the benefit to result from his recovery will either be wholly lost or substantially impaired by reason of such insolvency, unless a receiver is appointed.^^ Upon the other hand, if the case is in other respects a proper one for the appointment of a receiver, the relief may be granted although it appears that the defendant is entirely solvent.^^ § 19. Courts averse to interfering with defendant in possession; considerations governing court in exercise of discretion. As against a defendant in the possession and enjoyment of property which is the subject-matter of the liti- gation, equity always proceeds with extreme caution in ap- pointing a receiver.9^ Where the property has been held and enjoyed by defendants in possession for a long series of years, and plaintiff shows no real danger, a receiver will not ordi- narily be appointed in limine. ^^ And where plaintiff's object is to assert a right to property possessed by defendant, a re- ceiver, if appointed at all, is appointed only upon the principle of preserving the subject-matter pending a litigation which is to determine the rights of the parties. In all such cases, a court of equity necessarily exercises a large discretion as to whether it will or will not take possession of the property by its receiver, and this discretion is governed by a consideration of all the circumstances of the case. It is therefore difficult to establish any fixed rule in such cases, although it may be said generally, that if the case as presented upon the application for 93 Gregory v. Gregory, 33 N. Y. Carrickfergus v. Lockhart, Ir. Rep., Supr. Ct. R., opinion of Jones, J., 3 Eq., 515; Rees v. Andrews, 169 p. 39; Lawrence Iron-Works v. Mo., 177, 69 S. W., 4; State v. Dis- Rockbridge Co.. 47 Fed., 755; Trust trict Court, 13 Mont., 416, 34 Pac, & Deposit Co. V. Spartanburg W. 609; dictum in Hall v. Wayne Cir- Co., 91 Fed., 324; Ryder v. Bate- cuit Judge, 111 Mich., 395, 69 N. man, 93 Fed., 16. W., 643. 94 Mead v. Burk, 156 Ind., 577, 60 96 Municipal Commissioners of N. E., 338; Fink v. Montgomery, Carrickfergus v. Lockhart, Ir. Rep., 162 Ind., 424, 68 N. E., 1010. 3 Eq., 515; Kelley v. Boettcher, 89 95 Owen v. Homan, 4 H. L. Rep., Fed., 125 ; Ryder v. Bateman, 93 997, affirming S. C, 3 Mac. & G., Fed., 16. 378; Municipal Commissioners of CHAP. I.] GENERAL FEATURES. 27 a receiver is clearly in favor of plaintiff, indicating that he will probably be entitled to a final recovery, the risk of injury to defendant is very small, and the court does not hesitate to in- terfere. If there be more doubt as to plaintiff's right, there is of course more difficulty in passing upon the application, the question being one of degree, as to which it is impossible to lay down any precise rule.^"^ 97 Owen v. Homan, 4 H. L. Rep., 997, affirming S. C, 3 Mac. & G., 378. The doctrine of the text is well stated in this case in the opin- ion of the Lord Chancellor, as fol- lows, page 1032 : "The receiver, if appointed in this case, must be ap- pointed on the principle on which the court of chancery acts, of pre- serving property pending the liti- gation which is to decide the right of the litigant parties. In such eases the court must of necessity exercise a discretion as to whether it will or will not take possession of the property by its officer. No pos- itive, unvarying rule can be laid down as to whether the court will or will not interfere by this kind of interim protection of the property. Where indeed the property is as it were in medio, in the enjoyment of no one, the court can hardly do wrong in taking possession. It is the common interest of all parties that the court should prevent a scramble. Such is the case when a receiver of a property of a de- ceased person is appointed, pend- ing a litigation in the ecclesiastical court as to the right of probate or administration. No one is in the actual, lawful enjoyment of property so circumstanced, and no wrong can be done to any one by taking and preserving it for the benefit of the successful litigant. But where the object of the plaintiff is to assert a right to property of which the de- fendant is in the enjoyment, the case is necessarily involved in further questions. The court, by taking pos- session at the instance of the plain- tiff, may be doing a wrong to the defendant; in some cases an irrepar- able wrong. If the plaintiff should eventually fail in establishing his right against the defendant, the court may, by its interim interfer- ence, have caused mischief to the defendant for which the subsequent restoration of the property may af- ford no adequate compensation. In all cases, therefore, where the court interferes by the appointment of a receiver of property in the posses- sion of the defendant before the title of the defendant is established by decree, it exercises a discretion to be governed by all the circum- stances of the case. When the evi- dence on which the court is to act (here the only evidence is the an- swer of Mrs. Homan) is very clear- ly in favor of the plaintiff, then the risk of eventual injury to the de- fendant is very small, and the court does not hesitate to interfere. Where there is more of doubt there is of course more of difficulty; the ques- tion is one of degree, as to which, therefore, it is impossible to lay down any precise and unvarying rule. In this case Lord Truro did 28 RECEIVERS. [chap. I. § 20. Averse to interference with tenants in common of personalty. As between tenants in common of personal property, the courts are usually averse to appointing a receiver over the joint property upon the application of one co-tenant against the other.^^ And one co-tenant can not, on the ground of a refusal of the other to divide the property, maintain a bill in equity for a receiver and for a sale and division, when it is not shown that the chattels were agreed to be or were used in carrying on any business for the joint benefit of the parties, as partners or otherwise ; or that the tenancy in common was of such a nature as to require a sale of the chattels or a termina- tion of the tenancy; and when it does not appear that there is any necessity for a division of the property, on account of the death or insolvency of one of the co-tenants. And this is true, even though the bill charges the defendant with having the sole and exclusive use of the property, and that he is diminish- ing its value and refuses to make a division thereof, since the remedy for such grievances, if they amount to a conversion of the property, must be sought by an action at law.^^ So in the case of joint owners of the machinery and material of a print- ing office, upon a bill by one joint owner or tenant in common against the other for a partition of the property, which is in defendant's possession, the court will refuse a receiver if the defendant in possession will give adequate security for the rents and profits pendente lite.^ And if, pending proceed- ings for the partition of personalty, one of the co-owners not think the title of the plaintiff personal property in an action for was so clearly made out as to justify its sale and for a distribution of the the court in turning the defendant proceeds among tenants in common, out of possession before the plain- see Andrews v. Betts, 8 Hun, 322; tiffs had finally established their Shehan v. Mahar, 17 Hun, 129. See right, and I am not prepared to say Laing v. Williams, 135 Wis., 253, that the conclusion at which he ar- 115 N. W., 821, as to the appoint- rived was wrong; on the contrary, ment of a receiver in an action for I think it was right." the partition of personal property. 98 Low V. Holmes, 2 C. E. Green, 99 Blood v. Blood, 110 Mass., 545. 148; Blood v. Blood, 110 Mass., 545. 1 Low v. Holmes, 2 C. E. Green, As to the right to a receiver over 148. CHAP. I.] GENERAL FEATURES. 29 threatens the destruction or removal of the property, the court may properly appoint a receiver.2 § 21. The jurisdiction not extended to conflict as to public offices. The subject-matter of the jurisdiction of equity being property rights, a court of equity is not the proper forum for determining controversies concerning the right to hold public offices, all such questions being of a purely legal nature and cognizable only in courts of law. Equity will not therefore extend its extraordinary jurisdiction by the grant- ing of injunctions and the appointment of receivers, to the ex- tent of determining the rights of conflicting claimants to a pub- lic office, but will leave all such questions to be determined in the manner provided by law.^ And where there are rival claim- ants to an office of a public nature, held by appointment from the executive of the state, a court of equity will not, in behalf of one of such claimants, enjoin the other from receiving the fees and emoluments of the office, and will not appoint a re- ceiver of such fees, although it is alleged that defendant, who has intruded into the office, is insolvent. The appointment of a receiver in such a case would be, in effect, the assumption by the court of a right to make a temporary appointment to the office, which is by law required to be filled by the executive de- partment of the government, and would be utterly foreign to the jurisdiction of a court of equity.-* So when a controversy 2 Thompson v. Silverthorne, 142 fore the right to the office could be N. C, 12, 54 S. E., 782. determined by legal proceedings; STappan v. Gray, 9 Paige, 507. and prayed an injunction and a re- See, also, People v. Draper, 24 ceiver. The Vice-Chancellor decided Barb., 265; Stone v. Wetmore, 42 that the bill showed a prima facie Q^ 501 case of intrusion by defendant into 4'Tappan V. Gray, 9 Paige, 507. complainant's office; and that de- Complainant, claiming to be entitled fendant's insolvency was sufficient to to the office of flour inspector of the sustain the bill until the right could city of New York, filed his bill al- be determined upon an information leging that defendant had usurped in the nature of a quo warranto. the office and was receiving its fees Upon appeal, Walworth, Chancellor, and emoluments ; that he was wholly held as follows : "If the Vice-Chan- insolvent and unable to respond for cellor was right in the conclusion the fees which he might receive be- that the complainant was entitled to 30 RECEIVERS. [chap. 1. is pending in quo warranto to test the right to a public office, equity will not assume jurisdiction over the matter, or appoint a receiver to take charge of the fees and emoluments of the of- fice, A receiver is appointed by a court of equity only when a controversy is actually pending in that court, and a proceeding in quo warranto being a legal proceeding, and depending upon legal and not equitable rights, equity will not interfere, the ex- ercise of its jurisdiction in such a case being contrary to pub- lic policy as well as unsustained by authority.^ § 22. Receiver may be appointed over fees and emolu- ments of an office; salary of school-teacher; of clerk of court. When, however, the question is not one which affects the right or title to the office in controversy, but merely discharge the duties of the office of flour inspector, after the appoint- ment by the governor during the recess of the senate, and that such appointment of the defendant to the office was illegal and unauthorized, I think he erred in supposing that this court had jurisdiction to afford the complainant any relief at this time. This court certainly ought not to assume the jurisdiction to oust an officer in no way connected with the administration of justice here, and over whose appointment it has no control, from an office, the duties of which he is discharging under color of an appointment from the executive of the state, until his right to such office has been settled in the mode prescribed by the Re- vised Statutes for the determination of his claim. That, however, would be the necessary effect of an injunc- tion such as is prayed for in this case. For the receiving and inter- meddling with and enjoying the fees, profits and advantages of the office are so connected with the proper discharge of the duties of the office itself, that they could not be sepa- rated without rendering the office of no benefit whatever to the de- fendant, should he finally succeed in establishing his right to it on the quo warranto. Such relief, there- fore, could not be granted without depriving the public of the benefit which the inspection law contem- plates, until the termination of this litigation. And it would be equally inconsistent with public policy and the rights of those who are inter- ested in having the duties of the of- fice properly discharged, to appoint a receiver of the fees and emolu- ments of such an office. The ap- pointment of a receiver to discharge the duties of the office, in connection with the receipt of the fees and emoluments, would be still more ob- jectionable in principle, as it would, in effect, be the assumption of a right by this court to make a tem- porary appointment of a public of- ficer, whose appointment is by law required to be made by the execu- tive department of the government." 5 Stone V. Wetmore, 42 Ga., 601. CHAP. I.] GENERAL FEATURES. 31 the right to its fees or profits as property, in which plaintiff claims a right or interest by virtue of contract relations with the officer, there would seem to be no objection upon principle to interfering by a receiver in a case otherwise appropriate for the relief.^ And when a public officer has assigned the profits and emoluments of his office to trustees to secure payment of his debts, a receiver was appointed pendente lite, upon j. bill to compel the execution of the trust, but without prejudice to the question of whether the profits were assignable^ So when a deputy clerk was employed by a clerk of the court upon a contract providing that he should receive as compensation for his services one-half the fees of the office, in an action by the deputy against the principal to recover the amount due under the contract, an injunction was granted and a receiver appoint- ed to collect the fees pending the litigation, plaintiff alleging the insolvency of defendant and his inability to satisfy any judgment which might be had against him. And the relief was based upon the ground that the collection of the fees was not an official duty, but a right pertaining to the officer indi- vidually, and that plaintiff, under his contract, was entitled to the same right, since a portion of the fees belonged to him, and they might be collected by a receiver without in any manner interfering with the defendant's official duties.^ And a receiver has been appointed upon behalf of a judgment creditor over an installment of the salary of a school-teacher which had become due him.9 But it is held, upon principles of public policy, that a judgment creditor is not entitled to a receiver by way of 6 Palmer v. Vaughan, 3 Swans., 9 Picton v. Cullen, (i900) 2 L. R. 173; Cheek v. Tilley, 31 Ind., 121. Ir., 612. But in Ireland it is held And see Stern v. State Board, 50 that a receiver should not be ap- Wash., 100, 96 Pac, 693. pointed by way of equitable execu- 7 Palmer v. Vaughan, 3 Swans., tion over future installments of a 173. But the court directed that if superannuation allowance granted the parties should consent to such under the Superannuation Act of an arrangement, the fees and profits 1859. MacDonald z;. O'Toole, (1908) of the office might be paid into court, 2 L. R. Ir., 386. in lieu of appointing a receiver. S Cheek v. Tilley, 31 Ind., 121. 32 RECEIVERS. [chap. I. equitable execution over the future salary of the clerk of a court.i^' And equity will not appoint a receiver of the salary of a public officer when there is no permanent fund out of which it is payable, it being paid out of an allowance voted by parlia- ment from year to year, and when no action can be maintained to recover the allowance or to enforce its payment.^i § 23. The jurisdiction as affected by codes of procedure ; Supreme Court of Judicature Act in England. In many of the states of this country the jurisdiction of the courts over the subject of receivers has been, to a considerable degree, fixed or controlled by legislation, enlarging or abridging the jurisdic- tion as exercised by courts of equity independent of statute. This is especially true of those states which have adopted codes of procedure similar to that of New York. And in New York it is held that the appointment of a receiver, like other provi- sional remedies prescribed in the code of procedure, is a mere incident of the general jurisdiction of the courts, and not an essential part of such jurisdiction. And the legislature, having prescribed the cases in which a receiver may be appointed pendente lite, and as a proceeding in the action, have as care- fully excluded all other cases, thus prohibiting the appointment except as authorized by the code.12 g^t in North Carolina, while the code of procedure has specified certain cases in which a receiver may be appointed, it is held that the code has not ma- terially altered the general equity jurisdiction of the courts over the subject, which remains as before. ^^ In England, under the Supreme Court of Judicature Act of 1873, the power of ap- pointing receivers has been extended to all cases where it shall appear to the court to be just or convenient, and the relief may be granted either unconditionally, or upon such terms as the court may deem just.^* lOM'Creery v. Bennett, (1904) 2 13 Skinner v. Maxwell, 66 N. C, L. R. Ir., 69. 45. See, also, Battle v. Davis, id., 11 Cooper V. Reilly, 1 Russ. & M., 252. 560, aflfirming S. C, 2 Sim., 560. l'* Supreme Court of Judicature 12 Fellows V. Heermans, 13 Ab. Act, August 5, 1873. Paragraph 8 Pr. N. S., 1. of section 25 provides as follows: CHAP. I.] GENERAL FEATURES. 33 § 24. Receiver not granted when equities of bill are denied by answer. An important principle of general ap- plication in the exercise of this branch of the extraordinary jurisdiction of equity is that plaintiff is never entitled to a re- ceiver when the equities of his case are fully and fairly denied by the sworn answer of defendant. When, therefore, the ap- plication for a receiver is made after the coming in of the answer, and the equities of the bill upon which the receiver is sought are fully denied by defendant's answer under oath, and the evidence adduced in support of the bill does not overcome the denials of the answer, the court will refuse to appoint a re- ceiver.15 In such cases, the plaintiff, having addressed himself to the conscience of the defendant, has made him a witness and must take his answer as true, unless he can overcome it by other testimony.l^ And the question is no longer regarded as one addressed to the discretion of the court, but it is judicial error to appoint a receiver when the charges of the bill are thus "A mandamus or an injunction may be granted or a receiver appointed by an interlocutory order of the court in all cases in which it shall appear to the court to be just or convenient that such order should be made ; and any such order may be made either unconditionally or upon such terms and conditions as the court shall think just," etc. See this act construed in Pease v. Fletcher, 1 Ch. D., 273; Porter v. Lopes, 7 Ch. D., 358; Anglo-Italian Bank v. Davies, 9 Ch. D., 275; Bryant v. Bull, 10 Ch. D., 153; Smith V. Cowell, 6 Q. B. D., 75; Fuggle V. Bland, 11 Q. B. D., 711; Howell V. Dawson, 13 Q. B. D., 67 ; In re Coney, 29 Ch. D., 993 ; Stanger Leathes v. Stanger Leathes, Weekly Notes, 1882, p. 71 ; Mason v. West- oby, 32 Ch. D., 206; Manchester & L. D. B. Co. V. Parkinson, 22 Q. B. Receivers — 3. D., 173; Holmes v. Millage, (1893), 1 Q. B., 551 ; Harris v. Beauchamp Brothers, (1894), 1 Q. B., 801. These decisions indicate the marked tendency of the English courts to limit the relief, notwithstanding the language above quoted, to cases in which the High Court of Chancery would have interposed prior to the passage of the Judicature Act. 15 Thompsen v. Diffenderfer, 1 Md. Ch., 489; Simmons v. Hender- son, Freem. (Miss.), 493; Henn v. Walsh, 2 Edw. Ch., 129; Buchanan V. Comstock, 57 Barb., 581 ; Fair- bairn V. Fisher, 4 Jones Eq., 390; Sweeny v. Mayhew, 6 Idaho, 455, 56 Pac, 85 ; Callanan v. Shaw, 19 Iowa, 183 ; Rhodes v. Lee, 32 Ga., 470; Crombie v. Order of Solon, 157 Pa. St. 588, 27 Atl., 710. 16 Thompsen v. Diffenderfer, 1 Md. Ch., 489. 34 RECEIVERS [chap. I, denied.l'^ So if a receiver has already been appointed, he will be discharged upon the coming in of defendant's answer fully denying the equities of the bill.^^ Indeed, the rule as here stated is analogous to the well-established rule which governs applications for the dissolution of interlocutory injunctions, which is, that defendant is entitled to a dissolution of the in- junction upon filing his answer fully denying the equities of the bill.lS § 25. Conflict of authority as to whether appeal will lie. The question whether an appeal will lie from an order granting or refusing a receiver in limine is one of considerable impor- tance, upon which the authorities are far from reconcilable. The conflict of authority upon this point is attributable in part to the difference in practice in the different states with regard to appeals, and in part to the different views of the courts as to whether such orders are final in their nature and affect the substantial rights of the parties. It may be safely said that, since the appointing or refusing a receiver is largely a matter of sound judicial discretion, even in those states where an ap- peal is allowed from such interlocutory order, if the testimony addressed to the court below is conflicting, and if that court, after duly weighing and considering the testimony, either ap- points or refuses to appoint a receiver, an appellate court will not interfere with the exercise of this discretion, in the absence of any facts showing that it has been abused.20 And when the 17 Fairbairn v. Fisher, 4 Jones 20 Njmocks t;. Shingle Co., 110 N. Eq., 390. And see Wilson v. Mad- C, 230, 14 S. E., 6S4; Reid v. Reid, dox, 46 West Va., 641, 33 S. E., 775. 38 Ga., 24; Gunby v. Thompson, 56 18 Drury z'. Roberts, 2 Md. Ch., Ga., 316; Crawford v. Spurling, 56 157 ; Voshell t;. Hynson, 26 Md., 83. Ga., 611; Gardner v. Howell, 60 19 Simmons t'. Henderson, Freem. Ga., 11; Sheridan Brick Works zl (Miss.), 493. And see for applica- Marion Trust Co., 157 Ind., 292, 61 tion of the rule to cases of injunc- N. E., 666, 87 Am. St. Rep., 207; tions, Parkinson v. Trousdale, 3 Chicago & Southeastern Ry. Co. v. Scam., 367; Roberts v. Anderson, Kenney, 159 Ind., 72, 62 N. E., 26; 2 Johns. Ch., 202 ; Hollister v. Bark- Cameron v. Groveland Imp. Co., 20 ley, 9 N. H., 230; Hatch v. Daniels, Wash., 169, 54 Pac, 1128, 72 Am. St. 1 Halst. Ch., 14; Washer v. Brown, Rep., 26 and note. As to the ap- id., 81. pealability of an order directing the CHAP. I.] GENERAL FEATURES. 35 testimony is conflicting and the court below has, after hearing, refused to revoke its appointment of a receiver, an appellate court will refuse to control the discretion of the inferior tribu- nal.2i § 26. Appeal not allowed in certain states. It has been said in general terms, upon the question under consideration, that since the appointment of a receiver to take charge of prop- erty pendente lite is an interlocutory order, no appeal will lie therefrom.22 And it was formerly held in Indiana that an ap- peal would not lie from the refusal of a court below to set aside the appointment of a receiver, all orders touching the appoint- ing or removing of receivers being regarded as interlocutory orders, and the statute authorizing appeals from interlocutory orders not embracing such cases.23 But by a later statute an appeal is authorized from an order appointing or refusing a receiver. 24 And upon such an appeal, the evidence upon which the court below acted in making the appointment being con- flicting, the appellate court will not ordinarily interfere with such action. 25 And upon an appeal from an interlocutory order appointing a receiver pendente lite, the appellate tribunal will not consider the case upon its merits except in so far as it may incidentally become necessary to do so in determining the correctness of the action of the lower court in making the appointment.26 And it is held in Nevada, under the practice sale in bulk of all the property of 24 Dale v. Kent, 58 Ind., 584. And a corporation over which a receiver see Buchanan v. Berkshire Life Ins. has been appointed, see Wenar v. Co., 96 Ind., 510. Schwartz, 116 La., 151, 40 So., 599. 25 Naylor z;. Sidener, 106 Ind., 179, 21 Robenson v. Ross, 40 Ga., 375; 6 N. E., 345. Cohen V. Meyers, 42 Ga., 46. 26 Sullivan Electric L. & P. Co. v. 22 Wilson V. Davis, 1 Mont., 98; Blue, 142 Ind., 407, 41 N. E., 805; Emmons v. Garnett, 18 District of Gray v. Oughton, 146 Ind., 285, 45 Columbia, 52. As to the amount of N. E., 191; Levin v. Florsheim, 161 the penalty in an appeal bond upon Ind., 457, 68 N. E., 1025 ; Tuttle v. an appeal from an order appointing Blow, 163 Mo., 625, 63 S. W., 839. a receiver, see Home Savings & In such case it is enough if upon Trust Co. V. Polk District Court, the verified pleadings and affidavits 121 Iowa, 1, 95 N. W., 522. there was a sufficient showing for 23 Wood V. Brewer, 9 Ind., 86, the appointment of a receiver. 36 RECEIVERS. [chap. I. and procedure in that state, that an appeal will not lie from an interlocutory order appointing a receiver, and that the action of the inferior court in such matters can only be revised upon an appeal from the final judgment in the cause. ^"^ So in Penn- sylvania, where an appeal lies only from a final order or decree, an order granting an injunction and appointing a receiver, up- on the filing of a bill for the settlement of partnership affairs, is not such a final order within the intent of the statute, and no appeal will lie therefrom, it being purely an interlocutory mat- ter.28 And it is held in Ohio, that an order appointing a re- ceiver to take the revenues of a railway and bring them into court, subject to its order and without making any application of the funds, except as to certain accrued costs, is not a final order from which an appeal will lie.29 So in Illinois, in the ab- sence of legislation, a writ of error will not lie to a purely inter- locutory order appointing a receiver, no final decree having been rendered determining the rights of the parties. ^^ So in Goshen Woolen Mills Co. v. City National Bank, 150 Ind., 279, 49 N. E., 154. 27 Meadow Valley Mining Co. v. Dodds, 6 Nev., 261. 28 Holden's Administrators v. Mc- Makin. Par. Eq. Cas., 270. 29 Eaton & Hamilton R. Co. v. Varnum, 10 Ohio St., 622. But see C. S. & C. R. Co. V. Sloan, 31 Ohio St., 1, for a full discussion of the right of appeal in such cases as af- fected by the code of procedure, as well as the power to appoint or dis- charge a receiver by a judge at chambers. Under the statute of Washington, it is held that an ap- peal will lie from an order denying a motion to vacate the appointment of a receiver. Davis v. Edwards, 41 Wash., 480, 84 Pac, 22. 30 Coates v. Cunningham, 80 111., 467; Farsow v. Gorham, 117 111., 137, 7 N. E., 104; Town of Vandalia v. St. L., V. & T. H. R. R. Co., 209 111., 73, 70 N. E., 662. But in Illi- nois, by an act approved June 14, 1887, an appeal is now allowed from an interlocutory order or decree ap- pointing a receiver or giving other or further powers or property to a receiver already appointed. Chica- go Steel Works v. Illinois Steel Co., 153 111., 9, 38 N. E., 1033. As to the constitutionality of certain provi- sions of this statute as not embraced in its title, see Taylor v. Kirby, 31 111. App., 658; City of Chicago v. Beck, 44 111. App., 47. See Eau Claire Canning Co. z/. Western Brok- erage Co., 213 111., 561, n N. E., 430, as to the right of the receiver of a foreign corporation appointed in a proceeding in a foreign state to dissolve the corporation, to main- tain a writ of error in this state in the name of the corporation. CHAP. I.] GENERAL FEATURES. Z7 the absence of statutory provision an appeal will not lie from an interlocutory order appointing a receiver.3l And in Tennes- see, even under a statute authorizing the supreme court to grant writs of supersedeas to interlocutory orders, as in case of a final decree, an order appointing a receiver, being within the discretion of the court for the purpose of preserving property pendente lite, can not be superseded by the supreme court.32 Nor will a bill of review lie to revise or correct the action of the court in appointing a receiver, since, the order being interlocu- tory, it may be revised or corrected by the same court ; or, if improvidently made, it may be corrected upon the final hear- ing.33 So under the statute of California regulating appeals, no appeal lies from an order appointing a receiver.^'* So in Utah it is held that an order appointing a receiver pendente lite, being interlocutory, is not appealable and that an appeal from such an order should be dismissed.^s So, under the statute of Missouri governing appeals, an appeal will not lie from an order appointing a receiver and directing certain prop- erty to be turned over to him.36 And in Kansas, an order of 31 Town of Vandalia v. St. L., V. 33 Johnston v. Hanner, 2 Lea, 8. & T. H. R. R. Co., 209 111., 7Z, 70 34 French Bank Case, S3 Cal.. 495; N. E., 662. In this case it was held Emeric v. Alvarado, 64 Cal., 529, 2 that where the statute authorized Pac, 418. appeals to the Appellate Court from 35 Popp v. Mining Co., 22 Utah, interlocutory orders appointing re- 457, 63 Pac, 185. ceivers but further provided that 36 Greeley v. Missouri Pac. Ry. "no appeal shall lie or writ of error Co., 123 Mo., 157, 27 S. W., 613. be prosecuted from the order en- But by the statute of 1895 an appeal tered by said Appellate Court in any will lie from an order "refusing to such appeal," the judgment of the revoke, modify or change an inter- Appellate Court affirming such in- locutory order appointing a receiver terlocutory order did not change the or receivers." Laws of 1895, p. 91 ; character of such order and that the 1 Mo. Annotated Stat., 1906, § 806. propriety of granting such interlocu- This statute is remedial in its char- tory order could therefore be re- acter and should therefore be liber- viewed in the Supreme Court only ally construed. Merriam v. St. upon an appeal from a final order Louis, C. G. & F. S. Ry, Co., 136 or decree in the cause. Mo., 145, 36 S. W., 630. 32 Baird v. Turnpike Co., 1 Lea, 394; Bramley v. Tyree, 1 Lea, 531; Roberson v. Roberson, 3 Lea, 50. 38 RECEIVERS. [chap. I. a judge at chambers appointing a receiver is not a final order involving the merits of the action, but a mere provisional or interlocutory order from which no appeal will lie-^"^ So in Texas, the appointment of a receiver upon an interlocutory order in a suit brought by attaching creditors to set aside prior attachments upon the ground of fraud, no adjudication bemg made upon the merits of the controversy, which yet remain to be determined, is not a final judgment from which an appeal will lie.38 And in Mississippi, an appeal formerly would not lie from an order vacating the appointment of a receiver and directing the return of th^ property to the persons from whom it was taken.39 But under the later code the rule in Mississippi has been changed and it is now held that an order discharging a receiver is appealable.^^ But in Montana an order refusing to appoint a receiver is not appealable^^ So in Maryland an appeal will not lie from an order refusing to rescind a previous order appointing a receiver.42 Nor may an appeal be main- tained from an order appointing a receiver by consent.43 And where, pending an appeal from an order appointing a tempo- rary receiver, the temporary receivership has ceased and a per- manent receiver has been appointed, the appeal should be dis- missed.44 g^t under the code of Wyoming it is held that an order appointing a receiver at the instance of a second mort- ■^agee and denying a motion of the defendant, the first mort- gagee, for the vacation of such appointment is appealable.^^ And questions as to the propriety of the appointment of a re- 37 Hottenstein v. Conrad, 5 Kan., 42 Hull v. Caughy, 66 Md., 104, 6 249; Kansas Rolling Mill Co. t;. A., Atl., 591; Williams Co. v. U. S. T. & S. F. R. Co., 31 Kan., 90, 1 Banking Co., 86 Md., 475, 38 Atl., Pac, 274; Boyd v. Cook, 40 Kan., 990; Stockley v. Thomas, 89 Md., 675, 20 Pac, 477. 663, 43 Atl., 766. 38 East & West T. Lumber Co. v. 43 Smith v. Lowery, 56 S. C, 493, Williams, 71 Tex., 444, 9 S. W., 436. 35 S. E., 129. 39 Planon v. Weil, 69 Miss., 476, 44 Kelso v. American I. & I. Co., 13 So., 878. 48 Wash., 5, 92 Pac, 673. 40 Pearson v. Kendrick, 74 Miss., 45 Anderson v. Matthews, 8 Wye, 235, 21 So., 37. 307, 57 Pac, 156. 41 Cotter V. Cotter, 16 Mont., 63, 40 Pac, 63. CHAP, I.] GENERAL FEATURES. 39 ceiver can be raised only by appeal from the order itself, and they will not be reviewed upon an appeal from an order direct- ing a distribution of the estate in the hands of the receiver.^^ § 27. The question dependent upon whether the order affects a substantial right. In Michigan, where the laws of the state restrict the right of appeal to decrees and final orders, the question under discussion has been made to turn upon whether the appointment of a receiver is a substantial decision of the merits involved, and the principal relief sought, or whether it is merely ancillary, or incidental to the principal relief. Thus, where the object of the action is to remove the administrators of an estate, and to procure a receiver to take charge of the assets until the question of removal is deter- mined, the order appointing a receiver, although nominally interlocutory, is regarded as in effect a final order or decree, from which an appeal will lie, since it gives the relief prayed for as the end and object of the bill upon that branch of the case.^'^ And it is held in Michigan, that an order appointing a receiver is appealable when it deprives a defendant of prop- erty to which he is of right entitled.'*^ So an appeal will lie from an order whereby the possession of property is divested.*^ And an order for the sale by a receiver of the entire assets of the receivership is an order from which an appeal will lie in behalf of intervening petitioners.^^ So upon a bill by the executor of a deceased partner for an account of the partner- ship transactions, an order for a receiver to take charge of the property held by defendant as surviving partner, although in- terlocutory in point of time, is in substance and effect a decree of the court to the extent that an appeal will lie therefrom. The order is therefore to be considered as regards its effect 46 Jones z;. North P. F. & O. Co., Ill Mich., 395, 69 N. W., 643; 42 Wash., 332, 84 Pac, 1122, 114 Mardian v. Wayne Circuit Judge, Am. St. Rep., 131. 118 Mich., 353, 76 N. W., 497. 47 Lewis V. Campau, 14 Mich., 458. 50 First National Bank v. Barnum 48 Brown v. Ring, 77 Mich., 159, Wire & Iron Works, 58 Mich., 315, 43 N. W., 770, 1152. 24 N. W., 543, 25 N. W., 202. 49 Hall V. Wayne Circuit Judge, 40 RECEIVERS. [chap. I. upon the rights of the parties, rather than as to the stage of the cause when made. And since the defendant, who would otherwise be entitled to possession of all the assets and to close up the firm business, is by the order divested of all control over the matter, and the entire management of the business is placed in the receiver's hands, the order partakes of the nature of a decree, to the extent, at least, of being appealable.^^ Where, however, the receivership is merely ancillary or incidental to the principal relief sought, no appeal will lie from an order appointing a receiver.^2 So an order appointing a receiver to take possession of certain securities claimed by a trustee, the title to which is in dispute, is treated as an interlocutory order resting in the discretion of the court, and hence not ap- 51 Barry v. Briggs, 22 Mich., 201. Campbell, C. J., observes, p. 206 : "The effect of this order (appoint- ing the receiver) is to divest the entire legal estate of defendant in property over which he had this ex- clusive control, as well as exclusive title, and in which he was equitably as well as legally interested, and in which no one else had any rights, except to receive the amount which might belong to the deceased part- ntT's estate after the accounts should be closed and the funds converted. The specific property and its dis- posal belonged to defendant. A cer- tain share of the net proceeds would belong to the executor. The order divests the whole body of the prop- erty, and puts its management as well as ownership into other hands. It does very nearly all that could be done under the bill by a decree upon the hearing. The striking of bal- ances and the final distribution, al- though not universally are quite fre- quently subsequent steps to the prin- cipal decree; and in the present case, the principal object of the bill is to transfer the trust into new hands, for execution. All the other objects are subordinate to this main pur- pose. An adjudication which pro- duces such important effects, and which actually transfers the entire estate from the defendant, is to all intents and purposes a decree as far as it goes. ... It would be a very singular thing if a court could, by anticipating the proper date of a decree which would be appealable, produce all the consequences of a decree, and yet deprive a party of his right to a review. The statutes regulating appeals have regard to the rights of parties, and not to senseless formalities. And the prac- tice in this state, as well as else- where, has always been to apply them to that end. . . . We think the order in the case before us is appealable, because it divests de- fendant's estate." Motion to dis- miss appeal denied. 52 Duncan v. Campau, 15 Mich., 415. CHAP. I.] GENERAL FEATURES. 41 pealable.^^ And an order refusing a receiver in an action for the foreclosure of a mortgage is merely interlocutory and not appealable.^* But it is held under the code of procedure in New York, that an appeal will lie from an order denying a mo- tion for a receiver, since the appellate court may review all orders which affect a substantial right, even though they rest in the discretion of the court.^^ So under the statutes of Min- nesota, an order refusing a receiver in accordance with the report of a referee is an order refusing a provisional remedy, from which an appeal will lie.^^ And in the same state an or- der appointing a receiver is an order affecting a substantial right of the defendant and is appealable. ^'^ So in Nebraska, under a statute authorizing appeals from orders which affect a substantial right, an interlocutory order appointing a re- ceiver in a judgment creditor's suit is an appealable order.^^ And in Virginia, an appeal being allowed by statute in any case in chancery wherein there is a decree or order requiring the possession of property to be changed, an appeal lies from an interlocutory order appointing a receiver to take possession of real property, since such order changes the possession and control of the property. ^^ And under a similar statute in West Virginia, an appeal is allowed from an interlocutory or- der appointing a receiver over personal property.^^ 53 Brown v. Vandermeulen, 41 57 Knight v. Nash, 22 Minn., 452. Mich., 418, 49 N. W., 920. 58 McCord v. Weil, 33 Neb., 868, 54 Beecher v. M. & P. R. M. Co., 51 N. W., 300, overruling S. C, 29 40 Mich., 307. Neb., 682, 46 N. W., 152; Seeds Dry 55Dollard V. Taylor, ZZ N. Y. Plate Co. v. Heyn Photo-Supply Supr. Ct. R., 496. And see as to the Co., 57 Neb., 214, 77 N. W., 660. power of the courts of New York 59 Shannon v. Hanks, 88 Va., 338, under the code, pending an appeal 13 S. E., 437. And see Smith v. from a judgment, to appoint a re- Butcher, 28 Grat, 144. ceiver in behalf of appellant, over 60 Ruflfner v. Mairs, 33 West Va., property of which the other party 655, 11 S. E., 5; Baltimore Bargain would otherwise be entitled to pos- House v. St. Clair, 58 West Va., session under the judgment of the 565, 52 S. E., 660. And see Rob- court, Fellows V. Heermans, 13 Ab. recht v. Robrecht, 46 West Va., 738, Pr., N. S., 1. 34 S. E., 801. 56 Grant v. Webb., 21 Minn., 39. 42 RECEIVERS. [chap, I. § 27a. Decree appealable if right finally determined. If the decree appointing a receiver determines the right to the property in controversy, so that the party in whose favor it is rendered is entitled to its immediate execution, an appeal will lie, even though something still remains to be done to carry the decree fully into execution. Thus, when a bill is filed by stockholders to set aside a lease of the property of a corpora- tion upon the ground of fraud, and for the appointment of a receiver, and upon a hearing on the merits a decree is ren- dered setting aside the lease, appointing a receiver, and direct- ing that the company and its directors deliver to him all cor- porate property, records and papers, and that he continue the business of the company, the decree is so far final that an ap- peal will lie, even though an accounting is still necessary to ad- just the rights of the parties.^^ § 21b. Appeals under Court of Appeals Act. Section seven of the act of congress of March 3, 1891 creating the United States Circuit Courts of Appeals is limited to interlocu- tory orders or decrees granting or continuing injunctions and it makes no mention of interlocutory orders appointing re- ceivers. ^2 Under this section it is held that upon an appeal from an interlocutory order granting an injunction and ap- pointing a receiver, the propriety of only so much of the order as relates to the injunction is open to review.^^ This section was afterwards amended so as to authorize appeals from interlocutory orders or decrees refusing, dissolving or refusing to dissolve injunctions.^^ This amended section makes no provision for appeals from interlocutory orders ap- 61 Winthrop Iron Co. v. Meeker, 63 Florida Coast Co. v. Young, 8 109 U. S., 180, 3 Sup. Ct. Rep., 111. C. C. A., 231, 59 Fed., 721. But see See Grand De Tour Plow Co. v. United States Rubber Co. v. Ameri- Rude Bros. Mfg. Co., 60 Kan., 145, can O. L. Co., 27 C. C. A., 118, 82 55 Pac, 848, as to the necessity for Fed., 248, 53 U. S. App., 444, dis- a receiver being a party to an appeal missing appeal from S. C, 77 Fed., from a final order taken by one of 671. the parties to a suit. 64 Act of February 18, 1895. c. 96, 62 Act of March 3, 1891, c. 517, 28 Stat, 666. § 7, 26 Stat., 828. CHAP. I.] GENERAL FEATURES. 43 pointing receivers and it is held that such an order is not ren- dered appealable by the incorporation into it of a direction to the defendants to turn over and deliver to a receiver the prop- erty in their possession.^^ But where an interlocutory order has been entered appointing a receiver and granting an injunc- tion, an appeal will lie from such order under section seven as thus amended, although the injunction is a mere incident to the receivership, where it constitutes a substantial part of the de- cree of the court.^^ Both of these sections are now superseded by the act of June 6, 1900, which, among other changes in the prior law, permits appeals from interlocutory orders appoint- ing receivers.^'' This statute is amendatory of the original act 65 Highland Avenue & B. Ry. Co. V. C. E. Co., 168 U. S., 627, 18 Sup. Ct. Rep., 240, 42 L. Ed., 605, an- swering question certified by the Court of Appeals of the 5th Circuit in S. C, 28 C. C. A., 683, 84 Fed., 1018, which was an appeal from S. C, 74 Fed., 920. This last appeal was finally dismissed, pursuant to the above decision of the Supreme Court, in 33 C. C. A., 684, 92 Fed., 1019, 52 U. S. App., 762. And see In re Tampa Suburban R. Co., 168 U. S., 583, 18 Sup. Ct. Rep., 177; Texas Consolidated C. & M. Assn. V. Storrow, 34 C. C. A., 182, 92 Fed., 5. 66 Lake National Bank v. Wolfe- borough S. Bank, 24 C. C. A., 195, 78 Fed., 517, 33 U. S. App., 734. 67 Section seven of the law as it now exists is as follows : "That where, upon a hearing in equity in a district court or in a circuit court, or by a judge thereof in vacation, an injunction shall be granted or continued or a receiver appointed, by an interlocutory order or decree, in a cause in which an appeal from a final decree may be taken under the provisions of this Act to the circuit court of appeals, an appeal may be taken from such interlocu- tory order or decree granting or continuing such injunction or ap- pointing such receiver to the circuit court of appeals : Provided, That the appeal must be taken within thirty days from the entry of such order or decree, and it shall take precedence in the appellate court : And the proceedings in other re- spects in the court below shall not be stayed, unless otherwise ordered by that court, or by the appellate court or a judge thereof, during the pendency of such appeal : Provided further, That the court below may in its discretion require as a con- dition of the appeal an additional bond." Act of June 6, 1900, c. 803, 31 Stat., 660; 1 U. S. Comp. Stat. 1901, p. 550; 4 Fed. Stat. Ann., p. 422. Prior to this statute an ap- peal would not lie from an order appointing a co-receiver to act with one already appointed. Coltrane v. Templeton, 45 C C. A., 328, 106 Fed., 370. 44 RECEIVERS. [chap. I. and by necessary implication it repeals the statute of 1895 and now contains the entire law as administered in the United States courts upon the subject of such appeals. ^^ § 28. Reversal by certiorari. Under the practice pre- vailing in New Jersey, it is held that, if the court below upon the case presented had authority and jurisdiction to order the appointment of a receiver, if in making such order no manifest error was committed, it will not be reversed on certiorari; and that to reverse the action of the lower court by certiorari, it must appear to the appellate tribunal that the order was an illegal one. And in such case the appellate court will not weigh the evidence on which the court below acted, and if there was enough in the case to give the court below jurisdiction and power to act, that will be deemed sufficient.^^ § 29. Effect of appeal on functions of receiver; super- sedeas not a matter of right. As regards the effect of an appeal upon the functions of a receiver appointed by the court below, it has been held in Ohio, that where receivers are ap- pointed in an action to obtain the direction and judgment of the court as to the construction of a will, and as to the duties of executors in carrying it into effect, and praying lOr an order of sale of real estate for the payment of legacies, and for distribution, the receivers still remain in office pending an ap- peal from the judgment of the court below7^ But in Florida, where the laws of the state authorize appeals from interlocu- tory orders, and authorize the appellate court to issue a su- persedeas pending such an appeal, if a supersedeas is granted on an appeal from an order allowing a preliminary injunction and a receiver, it has the effect of suspending the power of the 68 Columbia Wire Co. v. Boyce, 219, 107 Fed., 165 ; Western Electric 44 C. C. A, 588, 104 Fed., 172 ; Co. v. Williams-Abbott Electric Co., Westinghouse Co. v. Christensen 48 C. C. A., 159, 108 Fed., 951. Co., 44 C. C. A., 92, 104 Fed., 622; 69Journeay v. Brown, 2 Dutch., Omaha & S. W. R. Co. v. Chicago, 111. etc., Ry. Co., 45 C. C. A., 474, 106 70 Swing v. Townsend, 24 Ohio Fed.. 586; Rowan v. Ide, 46 C. C. St., 1. But see Allen v. Chadburn, A., 214, 107 Fed., 161 ; Heinze v. 3 Baxter, 225. And see, post, § 190. Butte & B. C M. Co., 46 C. C. A., CHAP. I.] GENERAL FEATURES. 45 court below, and hence the power of its officer, the receiver, whose authority thus becomes nugatory by operation of law. And while it does not render unlawful any act done by the receiver before the appeal was taken, it forbids him further to act ; and it then becomes his duty to restore the property to the person from whom it was taken, since his authority to take be- ing inoperative, his authority to hold is equally so, both being derived from the same order. "^^ In California, it is held that upon an appeal from an order adjudging a defendant to be insolvent, the functions of a receiver appointed in the cause are not suspended ; and the court will not, therefore, stay pro- ceedings in an action brought by the receiver.'^^ And it has been held by the Court of Appeals of the District of Colum- bia that the lower court is not, in consequence of an appeal and supersedeas, deprived of the power of substituting one re- ceiver in place of another, since a court which appoints a re- ceiver and causes a fund to accumulate in his hands may con- tinue to make all proper orders for the conservation of the fund notwithstanding the appeal. "^^ But it is held generally that upon an appeal from an order appointing a receiver, a supersedeas will not be granted by the reviewing court as a matter of right but that the granting of such application rests in the discretion of the court.*^^ § 30. Same relief sought in different suits. When two different persons whose interests are conflicting are proceeding for the appointment of a receiver in separate actions, the ques- tion whether the receiver shall be appointed upon motion of one plaintiff or the other is regarded as of minor importance when the object of each proceeding is the preservation of the fund in controversy, and its ultimate distribution among credit- ors. And when, in such case, the appointment in one suit is not completed by reason of an appeal from the order, the court 71 State V. Johnson, 13 Fla., 33. 74 Home Fire Ins. Co. v. Dutcher, 72 /„ re Real Estate Associates, 48 Neb., 755, 67 N. W., 766 ; State v. 58 Cal., 356. Stull, 49 Neb., 739, 69 N. W., 101 ; 73 Hitz V. Jenks, 16 App. D. C, Lowe v. Riley, 57 Neb., 252, 77 N. 530, 546. W., 758 46 RECEIVERS. [chap. 1. may permit the plaintiff in the other suit to proceed and obtain a receiver of the fund for the benefit of all concerned, and such appointment will not be vacated."^^ § 31. Test as to defendant's interest; receiver over a pension; secret code. As regards the nature of defend- ant's interest in the property which it is sought to subject to a receivership, it has been held that if the property is such as to be subject to execution by creditors of defendant, it is competent for a court of equity to appoint a receiver ; otherwise not. And relying upon this distinction, the court refused to appoint a receiver over a pension granted by government to the defend- ant, who had conveyed his interest therein, with other property, to secure an annuitant."^^ But when a merchant, transacting a large business throughout the country, invents and prepares for the exclusive use of himself and of his traveling salesmen a secret code or system of characters to denote the cost and selling price of his goods, he has such a property interest therein as may be protected by the appointment of a receiver to take pos- session of a copy of such code, of which defendant has wrong- fully obtained possession and which he threatens to use to the injury of plaintiff."^"^ § 32. Not granted when court can not control property ; license; rates and taxes. A receiver will not be appointed over property when it is of such a nature that it is impossible for tJie court to put him in possession, and when the court has no control over the officers or persons intrusted with the man- agement of the property, as in the case of a permit or license to occupy a stall in a city market, the control of which is wholly vested in certain municipal officers, whose discretion in grant- 75 Lottimer v. Lord, 4 E. D. civil service pension, due to the Smith, 183. debtor and payable in monthly in- 76 Davis V. Duke of Marlborough, stalments. See also Noad v. Back- 1 Swans., 74; S. C, 2 Wils. Ch., 130. house, 2 Y. & C. C. C, 529, where a See S. C, 2 Swans., 108. But see receiver was granted over a pen- Molony v. Cruise, 30 L. R. Ir., 99, sion. where a receiver was allowed in be- 77 Simmons Hardware Co. v. half of a judgment creditor over a Waibel, 1 S. D., 488. CHAP. I.] GENERAL FEATURES. 47 ing or withholding the permit is beyond control by the courts.*^^ Nor will a court of equity grant a receiver over certain rates or taxes, which are to be fixed by a future assessment and are to be collected at a future period by public officers designated for that purpose, upon the application of a creditor who has loaned money for a work of public improvement, to be repaid out of such rates. And it is a sufficient objection to the relief in such a case that the remedy at law, by mandamus or otherwise, to compel the officers to act, affords an adequate protection to the creditor.'^^ § 33. Relief refused as against innocent purchasers. While it is competent for a court of equity, by an interlocutory order, to take possession of property by its receiver, pending litigation concerning the rights of the parties, yet where the rights of third persons have intervened, who are not parties to the record, as in the case of innocent purchasers of the prop- erty in contest, the court will not exercise its extraordinary ju- risdiction by ordering the property into the possession of its re- ceiver. The relief will be refused in such case upon the ground that the rights of purchasers in good faith are not to be ad- judicated or determined in the summary and collateral method of an order to surrender possession to a receiver. ^^ § 34. Peril to the fund ; infringement of patent. Peril to the fund in litigation is a frequent ground for the interference of equity by a receiver, when the danger is such as to demand the summary interference of the court in order to preserve the fund, which would otherwise be lost. Thus, upon a bill to re- strain the infringement of a patent right, when an injunction has been granted pendente lite, and it is apparent that if plain- tiff's rights are ultimately established he will be entitled to a large share of the money received by defendants from sales of the patented machines, and defendants are shown to be in in- solvent circumstances, and to have debts due them to a large amount for machines sold since the granting of the injunction, 78 Barry v. Kennedy, 11 Ab. Pr., 79 Drewry v. Barnes, 3 Russ., 94. N. S., 421. 80 Levi v. Karrick, 13 Iowa, 344. 48 RECEIVERS. [chap. 1. sufficient danger to the fund is shown to warrant the court in appointing a receiver.^i § 35. Receiver not granted to compel payment of mon- ey; subscriptions to a fund. As a general rule, where the object of the action is only to compel payment of a sum of money, the courts will not appoint a receiver upon the filing of the bill.^2 And where no active duty is required of any one to execute the decree of the court except the payment of money to the persons entitled therto, no case is presented for the ap- pointment of a receiver.83 And in an ordinary action for money had and received by defendant to the use of plaintiff, it is not proper to allow a receiver when there is no allegation or pretense that the money is in danger of being lost, or that it will be in jeopardy during the pendency of the action unless a receiver is appointed.^^ But when one has received sub- scriptions to a given project, depositing the funds with third parties, and the project is abandoned, a subscriber electing to withdraw his subscription is entitled, in an action against the different parties, to have a receiver of the fund in controversy. And it is not a sufficient objection to the relief, in such case, that a receiver of the fund has been appointed in a previous ac- tion of the same nature ; but the powers and functions of the second receiver will be made subordinate to those of the first, and when the first becomes functus oificio, the second will be- come entitled to the custody of the fund, or of so much thereof as remains.85 But this doctrine is to be accepted with the limitation that the subsequent receiver takes only what is un- disposed of by the court in the former litigation.^S § 36. Management of business by a receiver; prefer- ring debts incurred. While it is sometimes necessary for 81 Parkhurst v. Kinsman, 2 Y., 133, affirming S. C, 37 N. Y. Blatchf., 78. Supr. Ct. R., 223. 82 Hager v. Stevens, 2 Halst. Ch., 85 Bailey v. O'Mahony, 33 N. Y. 374. Supr. Ct. R., 239. 83 Young V. Hughes, 39 Ore., 86 Q'Mahoney v. Belmont, 62 N. 586, 65 Pac, 987, 66 Pac. 272. ¥., 133, affirming S. C, 37 N. Y. 84 O'Mahoney v. Belmont, 62 N. Supr. Ct. R., 223. CHAP. I.] GENERAL FEATURES. 49 the court, by its receiver, to continue the management of the business over which the receiver is appointed, for the purpose of effecting a more satisfactory adjustment and for better protecting the interests of all parties, yet the courts are gen- erally averse to assuming the management of a business except as incidental to the object of the suit, and for the purpose of closing it up and dividing the proceeds. And a receiver will not be appointed to continue the management of a business which, from its nature, can not be conducted under the direction of the court, as in the case of a theater.^'' Nor will a receiver be au- thorized to begin a business which has not yet been undertaken by the parties, such as the manufacture and sale of medicines under letters patent; nor will the court require the parties, in such case, to disclose to the receiver secrets concerning the man- ufacture of such medicines.^^ Nevertheless it may be regarded as a matter resting within the sound discretion of the court whether its receiver shall be permitted to carry on the business which has come under his control. And where it is clear that the conduct of a business by a receiver under the supervision of the court will be for the benefit of all parties in interest and will result in preserving or enhancing the estate in his posses- sion, courts of equity frequently authorize their receivers for a limited period and under the strict supervision of the court to continue and carry on the business which has thus come into their custody and control. And the power of the court thus to authorize its receiver to continue a business carries with it as a necessary incident the authority to authorize him to borrow money for the purchase of all such supplies and materials as may be necessary for the proper maintenance of the business and to secure to the payment of such obligations a preference over the x:laims of other creditors, making them payable either 87 Waters v. Taylor, IS Ves., 10. run the business without the au- And see Terry v. Martin, 7 New thority of the court. Mex., 54, 32 Pac, 157, where a re- 88 Merreli v. Pemberton, 62 Ga., ceiver appointed to take possession 29. of a drug store had proceeded to Receivers — 4. 50 RECEIVERS. [chap. 1. out of the net income in the hands of the receiver or out of the corpus of the estate if the income proves insufficient.^^ And where, by agreement between the creditors and others in- terested in a receivership, the receiver has been authorized to carry on the business of an insolvent concern, obHgations in- curred by the receiver during the management of the business in the purchase of necessary materials are entitled to preference over the claims of the creditors. ^^ And upon the same prin- ciples as those governing in the case of receivers' certificates and of preferred debts of railway companies, it is held that where a receiver is appointed to take possession of a hotel and is directed by the order of appointment to run it as a going business, he is entitled, in so doing, to purchase all necessary supplies, and the indebtedness thereby incurred becomes a prior charge upon the property in his possession, to be paid out of the income, or in case that is not sufficient, out of the pro- 89 Cake V. Mohun, 164 U. S., 311, 17 Sup. Ct. Rep., 100, affirming Cake V. Woodbury, 3 App. D. C, 60, and distinguished in International Trust Co. V. United Coal Co., 27 Colo., 246, 60 Pac, 621; Heffron v. Rice, 149 111., 216, 36 N. E., 562, 41 Am. St. Rep., 271 ; Knickerbocker v. Mc- Kindley C. & M. Co., 172 111., 535, 50 N. K, 330, 64 Am. St. Rep., 54; Thornton v. Highland A. & B. R. Co., 94 Ala., 353, 10 So., 442; Highland Avenue & B. R. Co. V. Thornton, 105 Ala., 225, 16 So., 699; Rochat v. Gee, 137 Cal., 497, 70 Pac, 478; Blythe v. Gibbons, 141 Ind., 332, 35 N. E., 557. In Makeel v. Hotchkiss, 190 111., 311, 60 N. E., 524, 83 Am. St. Rep., 131, the court recognize the rule that a court of equity may in some instances but with great cau- tion permit a business to be carried on by its receiver and make the ex- penses thereof a prior charge upon the property. As to the right of a receiver to be indemnified for money borrowed by him in excess of the amount authorized by the court in carrying on a business, see In re British Power T. & L. Co., (1906) 1 Ch., 497. As to the right of the owner of the premises in which a business is carried on by a receiver to recover rent therefor, see Lane v. Washington Hotel Co., 190 Pa. St., 230, 42 Atl. 697 ; Stokes V. Hoffman House, 167 N. Y., 554, 60 N. E., 667, 53 L. R. A., 870. And see Davis v. Foster, 29 Wash., 363, 69 Pac, 1102; Vila v. Grand Island E. L., I. & C. S. Co., 68 Neb., 222, 94 N. W., 136, 97 N. W., 613. As to the right of a receiver to hire employees in the management of a business, see, post, § 175. 90 Diamond Match Co. v. Taylor, 83 Md., 394, 34 Atl., 1015. CHAP. I.] GENERAL FEATURES. 51 ceeds of the sale.^^ But where a receiver has carried on a business without any authority from the court and his manage- ment has resulted in a loss, such loss must be borne by the re- ceiver.92 ^j^^j where a receiver is appointed at the instance and for the benefit of lien-holders who ask that he be author- ized to continue a business, all charges and expenses properly incurred by the receiver in so conducting the business are en- titled to priority over the liens of the plaintiffs and are held to be a first charge upon the net earnings or upon the corpus of the estate in the hands of the receiver.93 But in no event should obligations incurred by a receiver in carrying on a business be given a preference over prior mortgage liens where the court never authorized the receiver to contract debts or incur liabilities to which a preference should be given ; nor should the court itself, in the case of a purely private business and against the objections of the holders of prior mortgage liens, authorize the creation of debts and the incurring of obli- gations payable out of the corpus of the estate in preference to such prior liens.^^ § 37. Effect of acquiescence in appointment. Where parties to the action are before the court upon the appointment of a receiver, and have a right to object to the order of the court, or to appeal therefrom, but submit to the order without objection and without subsequently appealing, their submis- sion will be deemed an acquiescence in the order, so far as to render it the law of the case with respect to the right to a receiver. Such persons can not, therefore, call in question the 91 Knickerbocker v. McKindley poration v. Portland Hospital, 40 C & M. Co., 172 111., 535, 50 N. E., Ore., 523, 64 Pac, 644, 67 Pac, 194, 330, 64 Am. St. Rep., 54. 56 L. R. A., 627. In this case it 92 Villere v. New Orleans P. M. was held that the mere fact that a Co., 122 La., 717, 48 So., 162. receiver was authorized by the 93 Peoples National Bank v. Vir- court to operate and conduct a hos- ginia Textile Co., 104 Va., 34, 51 S. pital did not, ipso facto, give a pref- E., 155. And see Hulings v. Jones, erence over prior mortgage liens to 63 West Va., 696, 60 S. E., 874. obligations which he might incur. 94 United States Investment Cor- And see, post, § 312&. 52 RECEIVERS. [chap. I. propriety of the appointment upon a final application for a disposal of the funds in the receiver's hands. ^^ § 38. Receiver held to strict accountability. From the nature of a receiver's duties, and his attitude and relation toward the court as its representative or officer, he is held to a strict accountability for the faithful performance of the trust reposed in him. Especially is this the case when his position and duties with reference to the property or trust confided to him as receiver are in any degree inconsistent with other in- terests which he has in the same property; and in such case the court will scrutinize his conduct with extreme care, and will hold him to a strict performance of his duties.^^ § 39. Statute authorizing appointment by governor. It has been held that the appointment of a receiver is not necessarily a judicial act in all cases, in the sense that it must be made only by the courts. And the right of the legislature of a state to enact a law, authorizing the governor of the state to appoint a receiver of an insolvent banking corporation, is not a violation of the constitutional provision limiting each de- partment of the government to its own particular sphere; the appointment of a receiver under such law being in no manner a decree or judgment affecting title to property, and not being a final determination of any rights, either legal or equitable.^'^ § 39a. Appointment can not be questioned collaterally. The general principle applicable to all judicial proceedings, that the propriety of an order or decree made in a cause in which the court has jurisdiction can not be challenged collater- ally, applies with equal force to an order appointing a receiver made by a court of competent jurisdiction. And when a court having jurisdiction of the parties and of the subject-matter appoints a receiver over the property or fund in controversy, the validity of such appointment and the propriety of the order 95 Post V. Dorr, 4 Edw. Ch., 412; 96 Bolles v. Duff, 54 Barb., 215; Pagett V. Brooks, 140 Ala., 257, 37 S. C, 27 How. Pr., 162. So., 263 ; Zieverink v. Kemper, 50 97 Carey v. Giles, 9 Ga., 253. Ohio St., 208, 34 N. E., 250. CHAP. I.] GENERAL FEATURES. 53 can not be successfully challenged in a collateral suit or proceed- ing.98 Thus, in an action brought by a receiver for the re- covery of property claimed by him by virtue of his receiver- ship, the defendant will not be permitted to question the pro- priety of his appointment.99 So when a receiver is appointed over a corporation, a creditor, not a party to the suit, who in- tervenes, claiming an equitable lien upon funds in the receiver's hands and seeking payment in full of his demand, can not, upon appeal from an order dismissing his petition, call in question the appointment of the receiver.^ § 39b. The same; illustrations. As further illustrating the rule under discussion it has been held that, where a receiver 98 Florence Gas, E. L. & P. Co. v. Hanby. 101 Ala., 15, 13 So., 343; Lowenstein v. Finney, 54 Ark, 124, 15 S. \V., 153; Illinois Trust & Sav- ings Bank v. Pacific Ry. Co., 115 Cal., 285, 47 Pac, 60; Title Insur- ance & T. Co. v. Grider, 152 Cal., 746, 94 Pac, 601; Commercial Na- tional Bank v. Burch, 141 111., 519, 31 N. E., 420; Equitable Trust Co. V. Wilson, 200 111., 23, 65 N. K, 430; Town of Vandalia v. St. L., V. & T. H. R. R. Co., 209 111., 73, 70 N. E., 662; Bodkin v. Merit, 102 Ind., 293, 1 N. E., 625 ; Pressley v. Lamb, 105 Ind., 171,4 N. E., 682; First Nation- al Bank v. United States E. T. Co., 105 Ind., 227, 4 N. E., 846; Hatfield V. Cummings, 152 Ind., 280, 50 N. E., 817, 53 N. E., 231 ; Metropolitan National Bank v. Commercial State Bank, 104 Iowa, 682, 74 N. W., 26 ; Greenawalt v. Wilson, 52 Kan., 109, 34 Pac. 403 ; State v. Judge of Civil District Court, 45 La. An., 1418, 14 So., 308; Converse v. Ayer, 197 Mass., 443, 84 N. E., 98; Basting v. Aukeny, 64 Minn., 133, 66 N. W., 266; Neun v. Blackstone B. & L. Assn.. 149 Mo., 74, 50 S. W. 436; Andrews v. Steele City Bank, 57 Neb., 173, 77 N. W., 342; Murphy V. Fidelity M. F. Ins. Co., 69 Neb., 489, 95 N. W., 1022 ; Stanley v. Na- tional Union Bank, 115 N. Y., 122, 22 N. E., 29; Jones v. Blun, 145 N. Y., 333, 39 N. E., 954; Brynjolfson V. Osthus, 12 N. Dak., 42, 96 N. W., 261 ; Threadgill v. Colcord, 16 Olka., 447, 85 Pac, 703 ; Thompson v. Hol- laday, 15 Ore., 34, 14 Pac, 725; First National Bank v. Mack, 35 Ore., 122, 57 Pac, 326; Eichman v. Her- sker, 170 Pa. St., 402, 33 Atl., 229; Radebaugh v. Tacoma & P. R. Co., 8 Wash., 570, 36 Pac, 460; Elder- kin V. Peterson, 8 Wash., 674, 36 Pac, 1089; Smith v. Hopkins, 10 Wash., 77, 38 Pac, 854; Carroll v. Pacific National Bank, 19 Wash., 639, 54 Pac, 32; Neeves v. Boos, 86 Wis., 313, 56 N. W., 909; Davis v. Shearer, 90 Wis., 250, 62 N. W., 1050 ; Gunby v. Armstrong, 66 C. C. A.. 627, 133 Fed., 417. 90 Greenawalt v. Wilson, 52 Kan., 109, 34 Pac, 403. 1 Commercial National Bank v. Burch, 141 111., 519, 31 N. E. 420. 54 RECEIVERS. [chap. I. has been appointed over a mutual insurance company in a pro- ceeding in which the company admitted its insolvency and con- sented to the appointment, it constitutes no defense to an action brought against a policy-holder to collect an assessment made against him that the company was not in fact insolvent and that the appointment was for this reason improper.^ So in an action brought by a receiver to recover upon a promissory note, it is no defense that the receiver is also the clerk of the court in which the receivership proceedings were pending or that as such clerk he had approved his bond as receiver, since these objections affect merely his eligibility and constitute a collateral attack upon the validity of his appointment.^ So the propriety or validity of the appointment of a receiver can not be questioned in an action brought by him to collect an assessment upon premium notes given by members of a mu- tual fire insurance company."* And upon a writ of error to review an order authorizing the issuing of receiver's certifi- cates, the propriety of the original order of appointment is not subject to collateral attack where the court had jurisdiction of the subject-matter and of the parties.^ And where a re- ceiver has been appointed by one court, the regularity of his appointment, as being without the proper notice, can not be questioned in another action brought by a later receiver over the same estate in a collateral suit instituted in another court of concurrent jurisdiction for the purpose of determining the sta'c-us of the two receivers.^ So where a receiver had been ap- pointed in a foreclosure suit to which the owner of the equity of redemption was properly made a party, and had collected the rents and profits and had paid them out under orders of the court, one who, pending the foreclosure proceeding, takes an 2Eichman v. Hersker, 170 Pa. 5 Town of Vandalia v. St. L., St., 402, 33 Atl., 229. V. & T. H. R. R. Co., 209 111., 7Z, 3 Metropolitan National Bank v. 70 N. E., 662. Commercial State Bank, 104 Iowa, 6 McKay v. Van Kleeck, 133 682, 74 N. W., 26. Mich., 27, 94 N. W., 367. 4 Davis V. Shearer, 90 Wis., 250, 62 N. W., 1050. CHAP. I.] GENERAL FEATURES. 55 assignment of the equity of redemption, can not afterward maintain an independent bill in equity against the former re- ceiver upon the ground that he had made an improper appli- cation of the rents and profits of the mortgaged premises."^ So in an action brought by a receiver who had been appointed in a proceeding pending between partners, the action by the receiver being for the recovery of money due the partnership from third persons, it is no objection that the declaration fails to allege that the particular persons were partners, since such an objection is a collateral attack upon the appointment of the receiver and can therefore not be maintained.^ So in an ac- tion brought by the receiver of a mutual fire insurance com- pany to recover an assessment, it constitutes no defense that a prior receiver had been removed and the plaintiff appointed as his successor without notice to the defendant.^ And an order directing a receiver to make payment and distribution of the funds in his possession, although erroneous, can not be questioned in a collateral suit, the remedy of the aggrieved par- ty in such case being by appeal from the order.^^ § 39c. Otherwise where court is without jurisdiction; not a proceeding in rem. Where, however, the court making the order was without jurisdiction, a different doctrine pre- vails, and in such case its order may be held void, even when questioned in a collateral suit or proceedings^ So when the appoir. nent of a receiver over a corporation is absolutely void for want of jurisdiction over the defendant, there being no proper service of process, a conveyance of property made by 7 Equitable Trust Co. v. Wilson, Miss., 1009, IS So., 33, 23 L. R. A., 200 111., 23, 65 N. E., 430. 531 ; Smith v. Ely & Walker Dry 8 Title Insurance & T. Co. v. Goods Co., 79 Miss., 266, 30 So., Grider, 152 Cal., 746, 94 Pac, 601. 653 ; State v. Ross, 122 Mo., 435, 25 9Nichol V. Murphy, 145 Mich., S. W., 947, 23 L. R. A., 534; State 424, 108 N. W., 704. v. District Court, 21 Mont., 155, 53 10 Piatt V. New York & S. B. Ry. Pac, 272, 69 Am. St. Rep., 645 ; Co., 170 N. Y., 451, 63 N. E., 532. dictum in Town of Vandalia v. St. 11 Texas & Pacific R. Co. v. Gay, L., V. & T. H. R. R. Co., 209 III., 86 Tex., 571, 26 S. W.. 599; Whit- 72, 70 N. E., 662. ney v. Hanover National Bank, 71 56 RECEIVERS. [chap. 1. such receiver will be ineffectual to pass the title to real property. And in such case the validity of the order appointing the re- ceiver may properly be called in question in a collateral pro- ceeding, as in an action of ejectment for the recovery of the property so conveyed.12 So where a receiver is appointed over an insolvent corporation upon an ex parte application made by its officers without notice to any of the parties in interest, such appointment is void and subject to attack in a collateral pro- ceeding.12 And where the stockholders of an insolvent corpo- ration had procured ex parte the appointment of a receiver of the corporation without notice to any of the parties in in- terest and without the filing of a bill, it was held that the ap- pointment was void and subject to collateral attack.^^ So where a receiver had been appointed over a railway company at the instance of the company itself but without the filing of any bill and upon an ex parte application without notice to any of the parties in interest, it was held that the appointment was void and subject to attack in a collateral proceeding.i^ And under a statute which makes the notice of an application for the appointment of a receiver jurisdictional and provides that the 12 St. Louis & S. C. & M. Co. V. the relief was the alleged insolvency Sandoval C. & M. Co., Ill 111., 32. of the institution, since the appoint- 13 Whitney v. Hanover National ment in such case was erroneous at Bank, 71 Miss., 1009, 15 So.. 33, 23 most but not void. It is a matter L. R. A. 531. of some difficulty to reconcile this 14 Smith V. Ely & Walker Dry case with those above cited. The Goods Co., 79 Miss., 266, 30 So., court point out the distinction that 653. in State v. Ross, supra, Mr. Justice 15 State V. Ross, 122 Mo., 435, 25 Brace seems to treat the writ of S. W., 947, 23 L. R. A., 534. But prohibition, upon which the question in First National Bank v. Mack, 35 arose, as equivalent, under the prac- Ore., 122, 57 Pac, 326, it was held, tice of Missouri, to an appeal or in an action brought by the receiver writ of error and therefore as a di- of an insolvent bank to have a judg- rect and not a collateral proceeding, ment against the bank declared not There is the further distinction that to be a lien upon the assets of the in this case the action was instituted bank, that it was no defense that the by the stockholders of the corpora- receiver was appointed in an action tion, while in State v. Ross, supra, instituted by a stockholder of the it was begun by the corporation it- bank in which the only ground for self. And see, post, § 344a. CHAP. I.] GENERAL FEATURES. 57 appointment without notice is void, it is held that an appoint- ment made prior to the time named in such notice is void and therefore subject to collateral attack.^^ And an order appoint- ing a receiver over property which is in no way involved in the litigation is absolutely void and subject to collateral at- tack.i'^ The appointment of a receiver is not, however, a pro- ceeding in rem in the sense that it is binding upon all the world, and persons who are not parties to the action are not concluded thereby.^^ § 39d. Damages for wrongful appointment ; measure of damages. The plaintiff in a proceeding who procures the appointment of a receiver over a going, solvent concern be- comes liable to the defendant for damages resulting from such appointment where it appears that the appointment was un- warranted and the order of the court is afterward reversed upon appeal. And the action is one which survives and after the death of the plaintiff in the receivership proceeding, the action may be maintained against the personal representative of the deceasedA^ And in an action upon a bond to recover damages for the wrongful appointment of a receiver, the ap- proval of the receiver's accounts and an order for the disburse- ment of the funds in his hands do not amount to an adjudica- tion of the right of the plaintiff to recover upon the bond. And in such case the rental value of the premises sequestered during the receivership and the value of the services of coun- sel in procuring the removal of the receiver are to be con- sidered as proper elements of damage.20 16 Gibson v. Sexson, 82 Neb., 475, 20 josHn v. Williams, 76 Neb., _ N. W., — . 594, 107 N. W., 837, 112 N. W., 343. 17 Bowman v. Hazen, 69 Kan., See, further, as to the measure of 682, 77 Pac, 589. damages in an action against the iSDann Manufacturing Co. v. plaintiff and the sureties upon his Parkhurst, 125 Ind., 317, 25 N. E., bond for wrongfully procuring the 347. appointment of a receiver, Haverly 19 Thornton-Thomas Mercantile v. Elliott, 39 Neb., 201, 57 N. W., Co., V. Bretherton, 32 Mont., 80, 80 1010. Pac. 10. 58 RECEIVERS. [chap. I. § 39^. Death of receiver ; where successor not appointed at instance of defendant. A defendant has no right, merely because of the death of a receiver appointed upon the appHca- tion of the plaintiff, to procure the appointment of a successor to the deceased receiver; and it is accordingly held erroneous to appoint such a successor upon motion of the defendant and over the objection of the plaintiff w^ithout some showing of right other than the mere fact of the death of the former re- ceiver 21 21 De Leonis v. Walsh, 148 Cal., 254, 82 Pac, 1047. CHAPTER II. OF THE COURTS EXERCISING THE JURISDICTION. I. What Courts May Appoint Receivers § 40 II. Relative Powers of State and Federal Courts 50 I. What Courts May Appoint Receivers. § 40. English and Irish Courts of Chancery. 41. Courts granting the relief in this country; original jurisdiction; courts of last resort. 42. Jurisdiction not exercised by probate courts. 43. Power limited to particular court must be followed strictly. 44. Receivers over property in foreign state or country. 45. Receiver in aid of decree of foreign court. 46. Receivers pending litigation concerning probate or administra- tion. 47. Authority of receiver co-extensive only with that of court; no extraterritorial powers, except by state comity. 47o. Prior receivership in one state excludes control over receiver by courts of another state. 48. Court first appointing acquires control; receiver not subject to order of other court; test as to priority. 49. New York code of procedure; court first moving has exclusive control; rule not applicable where parties are not the same. 49a. Receivers in United States courts in suits concerning allotments among Indians on reservations. § 40. English and Irish Courts of Chancery. The juris- diction exercised in the appointment of receivers has always been treated as a purely equitable one, and the remedy has been generally regarded, next to that by injunction, as the most efficient and salutary of the extraordinary remedies known to courts of equity. Finding its origin in the English Court of Chancery, it was, until the recent abolition of that court as a distinct tribunal, always regarded as one of its most efficient remedies, although granted with caution and only upon a satis- factory showing of the necessity for the immediate interposi- 59 60 RECEIVERS. [CHAP. II. tion of the court. It has also been a favorite remedy of the Irish Court of Chancery, whose decisions afford an exceeding- ly instructive presentation of the principles underlying the jurisdiction, and of the conditions necessary to justify its ex- ercise. § 41. Courts granting the relief in this country; original jurisdictional; courts of last resort. In those states of this country which have preserved a distinct chancery system, the relief has always been granted by the chancery courts, which have adopted and followed the general principles governing the remedy under the English system, enlarging and shaping the jurisdiction to adapt it to the different conditions in -this country.! In the states which have blended the systems of equity and law, or which have adopted codes of procedure, re- lief by receivers is usually granted by the various courts of gen- eral jurisdiction throughout the states. By whatever name these courts are known, the jurisdiction has preserved its dis- tinctive equitable character, and it is still exercised upon the same general principles of equity by which it was governed before the adoption of the various codes of procedure. It is also strictly an original in distinction from an appellate power, and it is generally exercised by courts of original jurisdiction only. In Tennessee, however, it would seem that the supreme court of the state may, pending an appeal thereto from an in- ferior court, appoint a receiver to take charge of the subject- matter of litigation, in a case otherwise appropriate for the relief.2 But while that court has power to appoint a receiver when necessary to the proper administration of its appellate ju- risdiction, yet to warrant the exercise of the power the proper- ty in controversy must be first brought under the jurisdiction 1 See Miller Brothers v. Perkins, 2 West v. Weaver, 3 Heisk., 589, 154 Mo., 629, 55 S. W., 874. In As to the right of the supreme court Rabb V. Albright, 93 Iowa, 50, 61 of Nebraska to appoint a receiver N. W., 402, it was held under the pending an appeal, see Fitzgerald v. statute of Iowa that a receiver Fitzgerald & M. C. Co., 44 Neb., might be appointed in an action at 463, 62 N. W., 899; Eastman v. law. Cain, 45 Neb., 48, 63 N. W., 123. CHAP. II.] COURTS. 61 of that court by virtue of an appeal, or of some order or de- cree of the court, and the person against whom the receiver is sought must be subject to its jurisdiction.^ And the Supreme Court of the United States has refused in a particular case to appoint a receiver over the property of a railway, pending an appeal from a decree of foreclosure, but without deciding whether a case might not arise in which the power might be exercised pending an appeal.^ And the same course was fol- lowed by the Supreme Court of Arkansas pending an appeal from a final decree dismissing a bill to foreclose a mortgage.^ In Virginia, a judge of the Supreme Court of Appeals has no original jurisdiction to appoint a receiver and to direct a de- fendant to surrender property to such receiver, such relief having been refused by the court below. ^ But the Supreme Court of Kansas has appointed a receiver to take possession of the property of a non-resident corporation against which an original proceeding by quo warranto was pending to oust it from doing business within the state.''^ § 42. Jurisdiction not exercised by probate courts. The appointment of receivers being a power pertaining to courts which are vested with chancery jurisdiction, a court of pro- bate powers only can not appoint a receiver in aid of the col- lection of the estate of a deceased person. ^ And since a pro- bate court has no power to appoint a receiver, an action by a receiver thus appointed can not be maintained.^ Where, how- ever, a probate or county court, under the code of procedure of the state, is empowered to hear and determine civil causes, 3 Kerr v. White, 7 Baxter, 394. Nebraska, under the constitution And see Allen v. Harris, 4 Lea, 190. and laws of that state, to appoint a 4 Pacific Railroad v. Ketchum, 95 receiver over an insolvent bank. U. S., 1. see State v. Exchange Bank, 34 5 Coleman v. Fisher, 66 Ark., 43, Neb., 198, 51 N. W., 765. 48 S. W., 807. 7 State v. Anheuser-Busch B. 6 Fredenheim v. Rohr, 87 Va., Assn., 76 Kan., 184, 90 Pac, 777. 764, 13 S. E., 193, 266. See Virginia, 8 Scott v. Searles, 13 Miss., 25. T. & C. Steel & Iron Co. v. Wilder, 9 Garrett v. London & L. F. Ins. 88 Va., 942, 14 S. E., 806. As to Co., 15 Okla., 222, 81 Pac, 421. the power of the supreme court of 62 RECEIVERS. [chap. II. and such court has rendered judgment against a debtor in a case properly falling within its jurisdiction, it may appoint a receiver upon proceedings supplemental to execution in the nature of a creditor's bill to enforce the judgment.^^ § 43. Power limited to particular court must be followed strictly. Where, under the laws of a state, the power of appointing receivers is confined to the chancellor alone, and the register of court is specially prohibited from making the appointment, an order of court referring the appointment to the register is not simply error in a case within his jurisdic- tion, but is the exercise of a power clearly beyond his control, and is therefore utterly void. And it is proper for the supreme court of the state to correct such unauthorized action on the part of the chancellor by the writ of prohibition. ^^ So where a statute authorizes the appointment of a receiver and the ap- proval of his bond by the court, but not by the judge or clerk in vacation, the appointment must be made by the judge in term time, and not in vacation; and an appointment by the judge in vacation and the approval of the bond by the clerk will be held invalid. ^2 § 44. Receivers over property in foreign state or coun- try. It would seem to be unnecessary that the property constitut'ng the subject-matter of litigation should be within the jurisdiction of the court, provided the parties in interest are subject to its control, and there are frequent instances where the English Court of Chancery has appointed receivers over estates or property situated in foreign countries.^^ And 10 Second Ward Bank z;. Upmann, (1900) 1 Ch., 602. And see Mer- 12 Wis., 499. cantile I. & G. T. Co. v. River Plate 11 £x parte Smith, 23 Ala., 94. T. L. & A. Co., (1892) 2 Ch., 303, 12 Newman v. Hammond, 46 Ind., where the jurisdiction to grant the 119. relief as to property situated in a 13 See Davis v. Barrett, 13 L. J. foreign country is upheld, although N. S. Ch., 304; Langford v. Lang- the court refused its exercise be- ford, 5 L. J., N. S. Ch., 60; Shep- cause upon the facts of the case a pard V. Oxenford, 1 Kay & J., 491 ; receiver would have been useless. V. Lindsey, 15 Ves., And see, post, § 170. 91 ; In re Maudslay, Sons & Field. CHAP. II.] COURTS. 63 in this country it has been held proper to appoint a receiver over property beyond the jurisdiction of the court where all the parties in interest were within the jurisdiction. ^^ In such cases it would seem to be the better practice that the receiver himself should be within the jurisdiction of the court, and that he should be allowed to appoint his own agent in the foreign country for the management of the property there.^^ It is to be observed, however, that while the power of courts of equity to extend their extraordinary aid over property in a foreign country is thus clearly recognized, it will not be exercised when the parties in interest in the property, or representing it, are not before the court or subject to its control.^^ And a receiver will not be appointed as against a purchaser of the interest of one partner, residing and conducting the business in an- other state. ^"^ But the fact that the property over which a re- ceiver is sought is located partly in one state and partly in an- other, as in the case of a railway corporation whose line ex- tends through two different states, the company being incor- porated in both, will not prevent the courts of one of the states from appointing a receiver to take charge of the railway, in a case otherwise appropriate for the relief.^^ So in an action to wind up a partnership and for a receiver of the partnership property, it is no objection to the appointment of the receiver that a portion of the partnership property is in another state. ^^ And as to personal property within its jurisdiction, the court may appoint a receiver to take possession of and to preserve the property pendente lite, notwithstanding the defendant re- sides beyond its jurisdiction and in another state.^O 14 Eureka Mining, S. & P. Co. v. Alderson, 32 C. C. A., 542, 90 Fed., Lewiston N. Co., 12 Idaho, 472, 86 142, 61 U. S. App., 636. Pac, 49 ; Bayne v. Brewer Pottery 17 Harvey v. Varney, 104 Mass., Co., 82 Fed., 391. But see Miller 436. Brothers v. Perkins, 154 Mo., 629, 18 State v. Northern Central R. 55 S. W., 874. Co., 18 Md., 193. 15 — t/. Lindsey, 15 Ves., 19 Torbert v. Jeffrey, 161 Mo., 91. 645, 61 S. W.. 823. 16 Shaw V. Shore, 5 L. J., N. S. 20 Hellebiish v. Blake, 119 Ind., Ch., 79; Baltimore B. & L. Assn. v. 349, 21 N. E., 976. 64 RECEIVERS. [chap. II. § 45. Receiver in aid of decree of foreign court. It is held to be competent for a court of chancery in one country to appoint a receiver and grant an injunction in aid of the enforcement of a decree in chancery in a foreign country. The power, however, will not be exercised in such a case when it is doubtful, upon the record, whether plaintiffs will ultimately be entitled to a decree in the second action. 21 § 45. Receivers pending litigation concerning probate or administration. Under the practice of the English Court of Chancery, receivers were frequently appointed pend- ing a litigation in the ecclesiastical court over the probate of a will, or the right to administer an estate. The relief was grant- ed in this class of cases, not because of the contest in another court, but because there was no person to receive the assets, and it was therefore the duty of a court of equity to lend its aid for the preservation of the assets pending the litiga- tion. 22 The court, however, was averse to interfering by a receiver with the person in possession under the will, when the property was of small value. 23 And in a contest between two different executors, claiming under two different wills of the deceased, a receiver would not be extended over the rents and profits of real estate held by a defendant claiming under a title adverse to both wills.24 And since the power was exercised only for the preservation of the property, a receiver would not be appointed when no danger was shown, and no reason why the plaintiff could not have administration pen- dente lite to secure and preserve the property.25 Where, how- 21 Houlditch V. Lord Donegal, 8 Cr.. 97 ; Marr v. Littlewood, 2 Myl. Bligh., N. S., 301. As to the cir- & Cr., 454. See, also, Atkinson v. cumstances which will justify the Henshaw, 2 Ves. & Bea., 85; Ball appointment of a receiver to pro- z/. Oliver, id., 96 ; Parkin z;. Seddons, tect the assets of a corporation as L. R., 16 Eq., 34. ancillary to a receivership institut- 23 Whitworth v. Whyddon, 2 Mac. ed over the corporation in another & G., 52. state, see Williams v. Hintermeister, 24 Jones v. Goodrich, 10 Sim., 327. 26 Fed., 889; Parsons v. Charter 25 Richards v. Chave, 12 Ves., Oak Life Ins. Co., 31 Fed., 305. 462; Knight v. Duplessis, 1 Ves., 22Watkins v. Brent, 1 Myl. & 324. CHAP. II.] COURTS. 65 ever, the bill showed a gross case of fraud on the part of de- fendants contesting a will in the ecclesiastical court, and that the whole object of the litigation in that tribunal was to delay probate of the will, equity would take jurisdiction and appoint a receiver over the estate, notwithstanding the power of the ecclesiastical court to appoint an administrator pendente lite.^^ But an act of parliament having authorized the ecclesiastical court, pending a litigation as to the probate of a will, when there was some obstacle or bar in the way of administration, to appoint an administrator pendente lite, with full powers in the management of the property, except as to distributing the residue, and such administrator having been appointed by that court, equity would refuse to appoint a receiver, since the only effect of the appointment would be to produce an unseemly con- flict between the two courts.^'^ If, however, the ecclesiastical court had not yet exercised its power by appointing an ad- ministrator pendente lite, it was held that equity might inter- fere as before the statute, in a proper case, and might appoint a receiver of the personal estate, when probate of the will had been delayed. ^8 § 47. Authority of receiver co-extensive only with that of court ; no extraterritorial powers, except by state com- ity. Questions of much nicety have sometimes arisen in this country as to the extent to which the courts of one state will recognize the functions and powers of a receiver appointed in another state, and as to the right of such receiver to act beyond the territorial jurisdiction of the court appointing him. The better doctrine upon this subject undoubtedly is that the legal authority of a receiver is co-extensive only with the juris- diction of the court appointing him, and that as a matter of strict right the courts of one state are not bound to recognize a receiver appointed in a foreign state. The rule is founded on 26 Atkinson v. Henshaw, 2 Ves. & 329. See, also, Hitchen v. Birks, Bea., 85. See, also. Ball v. Oliver, L. R., 10 Eq., 471. id., 96. 28 Parkin v. Seddons, L. R., 16 27 Veret v. Duprez, L. R., 6 Eq., Eq., 34. Receivers — 5. 66 RECEIVERS. [chap. II. the recognized principle that the laws of one state have no force, proprio vigore, beyond the territorial limits of such state, although, upon considerations of courtesy or comity, they may be permitted to operate in another state for the promotion of justice, when neither the latter state nor its citizens will suffer any inconvenience from the application of the foreign law. The question, then, becomes one of comity between the different states, and it is upon such considerations alone that the courts of one state may recognize and enforce the acts of a receiver appointed in another state, when no detriment is thereby caused to the citizens of the state in which the func- tions of the foreign receiver are asserted. 29 Thus, a receiver of an insolvent corporation appointed under the laws of New Jersey, with power to take possession of all the effects of the corporation, and to convey or assign all its property, real and personal, may assign an indebtedness due to the corporation from a citizen of New York ; and the courts of the latter state may recognize such assignment as giving to the purchaser an equitable right of action, which they will enforce as against the debtor, the rights of citizens of New York not intervening.^^ 29Hoyt V. Thompson, 5 N. Y., 320, reversing S. C, 3 Sandf., 416; Willitts V. Waite, 25 N. Y., 577; Taylor v. Columbian Insurance Co., 55 Me., 290; Irwin v. Granite S. P. Assn., 56 N. J. Eq., 244, 38 Atl., 680; The Willamette Valley, (also sub. nom. Clark v. Chandler), 13 C. C. A., 635, 66 Fed., 565, 29 U. S. App., 447, affirming S. C, 62 Fed., 293, 63 Fed., 130; Sands v. Greeley & Co., 31 C. C. A., 424, 88 Fed., 130, 59 U. S. App., 610. And see Hoyt v. Thompson's Executor, 19 N. Y., 207; Fawcett v. Supreme Sitting, 64 Conn., 170, 29 Atl., 614, 24 L. R. A., 815. And see, post, § 239. Where an action is brought by stockholders against a corporation, receivers ap- pointed in foreign states are not necessary parties to such action. Fitzgerald v. Fitzgerald & M. C. Co., 41 Neb., 374, 59 N. W., 838. 30 Hoyt V. Thompson, 5 N. Y., 320, reversing S. C, 3 Sandf., 416. "It is a conceded principle," says Ruggles, C. J., "that the laws of a state have no force, propria vigore, beyond its territorial limits. But the laws of one state are frequently permitted, by the courtesy of an- other, to operate in the latter for the promotion of justice, where neither that state nor its citizens will suffer any inconvenience from the application of the foreign law. This courtesy or comity is estab- lished not only from motives of re- spect for the laws and institutions of foreign countries, but from con- CHAP. II.] COURTS. 67 Where, however, citizens of a state, who are creditors of a non-resident debtor, have instituted proceedings in attachment ag-ainst the debtor, and have acquired Hens upon his property in the state of their residence, receivers of the debtor, appoint- ed in the foreign state, will not be allowed to deprive such creditors of their rights, and the courts will protect the lien acquired by their own citizens, in preference to the claim or right asserted by the foreign receivers.^i So it is held that a foreign receiver of a non-resident corporation can not maintain a bill in equity to set aside a deed of general assignment for the benefit of creditors where such action will be against the siderations of mutual utility and advantage." SiWillitts V. Waite, 25 N. Y., 577 ; Taylor v. Columbia Insurance Co., 14 Allen, 353 ; Hunt v. Colum- bian Insurance Co., 55 Me., 290; Choctaw C. & M. Co. v. Williams- Echols D. G. Co., 75 Ark., 365, 87 S. W.. 632 ; Solis v. Blank, 199 Pa. .St., 600, 49 Atl., 302; Frowert v. Blank, 205 Pa. St., 299, 54 Atl., 1000; Stockbridge v. Beckwith, 6 Del. Ch., 72, 33 Atl., 620; Sands v. Greeley & Co., 31 C. C. A., 424. 88 Fed., 130, 59 U. S. App., 610; Zacher v. Fidelity T. & S. Co., 45 C. C. A., 480, 106 Fed., 593; Bald- win V. Hosmer, 101 Mich., 119, 59 N. W., 432, 25 L. R. A., 739; Failey v. Fee, 83 Md., 83, 34 Atl., 839, 32 L. R. A., 311, 55 Am. St. Rep., 326 ; Ward v. Pacific M. L. I. Co., 135 Cal., 235, 67 Pac, 124; Grogan v. Egbert, 44 West Va., 75, 28 S. E., 714, 67 Am. St. Rep., 763. And see Thum v. Pyke, 8 Idaho, 11, 66 Pac, 157; Linville v. Hadden, 88 Md., 594, 41 At!., 1097, 43 L. R. A., 222; Patterson v. Lynde, 112 111., 196. And see, post, § 306&. The observations of Mr. Justice Barrow, in Hunt v. Columbian Insurance Co., 55 Me., 290, supra, very clearly illustrate the distinction noticed, as well as the principles on which it is founded. He says, p. 297 : "The receivers, who assert this claim here, are merely the servants of the court in New York, having legal au- thority coextensive only with the jurisdiction of the court by whom they were appointed. Upon princi- ples of comity, often recognized and always acted on, except when they come in conflict with paramount rights of suitors in our courts, they might be admitted here to protect the interests and enforce the claims of the corporation, of whose affairs they are the legal guardians there. But equity does not require us to permit the exercise of such privi- leges to the detriment of our own citizens, who are pursuing appro- priate legal remedies in this court." Under the statute of Massachusetts providing that attachments shall be dissolved by the appointment of a receiver to take possession of the at- tached property, it is held that the statute applies to the appointment of the same person as ancillary re- ceiver in that state who had been 68 RECEIVERS. [chap. II. interest of local creditors."^ So in an action of interpleader brought in California by a sheriff having attached funds in his possession against a creditor of the state and against a receiver appointed in Indiana who claimed the right to the possession of the attached property, it was held that the fund should be decreed to the domestic creditor.^s Nor can the Indiana re- ceiver in such case procure the appointment in California of a local ancillary receiver in order to obtain possession of the fund as against the domestic attaching creditors.34 And the doctrine as above laid down has been applied in a case where the appointment of the receiver had been followed by an as- signment to him by the debtor of all the assets, where it ap- peared that the assignment was not intended to be an inde- pendent voluntary conveyance but was made in invitum and was executed merely in aid of the receivership.^S So it is proper for the courts of one state to appoint a receiver over the assets of a non-resident corporation over which a receiver has been appointed in the state of its organization, where such appointment will result in the protection of the interests of local attaching creditors.36 But where creditors of an in- solvent debtor have voluntarily submitted themselves to the jurisdiction of a foreign court by which a receiver has been appointed and have proved their claims in that proceeding and have received dividends upon them, they will not be heard to object to a recovery by such foreign receiver of assets located in the state of their domicile.^'^ And the rule as above an- nounced applies only where the receiver is compelled to resort appointed in a foreign state Sec- 33 Lackmann v. Supreme Council, ond National Bank v. Lappe T. Co., 142 Cal., 22, 75 Pac, 583. 198 Mass., 159, — N. E., — . But 34 Clark v. Supreme Council, 146 the statute does not apply to a re- Cal., 598, 80 Pac, 931. ceiver appointed by a federal court 35 Zacher v. Fidelity T. & S. V. in Massachusetts. Borden v. En- Co., 109 Ky., 441, 59 S. W., 493. terprise T. Co., 198 Mass., 590, — 36 Security S. & L. Assn. v. N. E., — . Moore, 151 Ind., 174, 50 N. E., 869. 32 Borton v. Brines-Chase Co., 37 Wilson v. Keels, 54 S. C, 545, 175 Pa. St., 209, 34 Atl., 597. 32 S. E., 702, 71 Am. St. Rep., 816. CHAP. II.] COURTS. 69 to the aid of the foreign court to enable him to secure pos- session of assets; and where the property in a foreign state has actually been reduced to his possession, he may stand upon his possessory title and defend his possession against all who can not prove a better title.^^ § 47a. Prior receivership in one state excludes control over receiver by courts of another state. The court origi- nally appointing a receiver in one state retains exclusive juris- diction and control over the property pertaining to the receiver- ship in that state, and this control necessarily excludes the sub- sequent action of the courts of another state. The court whose jurisdiction is thus originally invoked is not bound or conclud- ed by the judgment of a court of another state against the receiver, who has been appointed ancillary receiver in the latter state, even though the receiver was a party to the cause in which such judgment was rendered. Such a judgment, there- fore, is not an adjudication which binds the assets in the hands of the receiver in the state in which he was first appointed.^^ And an ancillary receiver appointed in a foreign state over the property of a railway company can not be held liable for dam- ages for personal injuries suffered in the state of the original appointment and resulting from the operation of the road in that state by the original receiver. '^^ § 48. Court first appointing acquires control; receiver not subject to order of other court; test as to priority. As between different courts appointing the same person receiver in different actions, it is held that the court first appointing him acquires exclusive control over the fund and the receiver hold- ing it, and it will not permit such control to be interfered with by the subsequent appointment of the same person in another cause, but will in the exercise of its powers proceed to disburse 38 Sands v. Greeley & Co., 31 C. firming S. C, 43 N. J. Eq., 211, 10 C. A., 424, 88 Fed., 130, 59 U. S. Atl., 385; Shinney v. North Amer- App., 610. ican S., L. & B. Co., 97 Fed., 9. 39 Reynolds v. Stockton, 140 U. 40 Union Trust Co. v. Atchison, S., 254, 11 Sup. Ct. Rep., 773, af- T. & S. F. R. Co., 87 Fed., 530. 70 RECEIVERS. [chap. II. the fund as may be proper.^i Indeed, when a court of compe- tent jurisdiction has appointed a receiver, who is in possession of and administering the property under its orders, another court of co-ordinate jurisdiction will not entertain a bill to administer the same property, and to take it from the posses- sion of the former receiver, and to appoint its own receiver.^2 In such a case, the parties aggrieved should seek relief in the court which is already in possession of the property through its receiver.4^ So the prior jurisdiction of a court of equity powers over the subject-matter of the appointment of a receiv- er, and the pendency of a motion for an injunction and a re- ceiver in such court, exclude the interference of that court in a subsequent suit for the same relief. And the appointment of a receiver in the suit thus subsequently begun will be held inoperative as against the appointment made in the former cause.^^ So if the court first appointing a receiver has juris- diction, its receiver will not be dispossessed of the property at the suit of a receiver subsequently appointed by a court of co-ordinate jurisdiction ; and this is true, regardless of whether the original appointment was or was not erroneous.^^ And the test as to priority is not to be found in the first actual, man- ual possession of the res, but the court which first asserts ex- clusive control by reason of having taken cognizance of the subject-matter of the litigation is entitled to proceed wath the administration of the estate.^^ Thus, where a bill had been filed and served and an order had been served upon the de- 41 O'Mahoney v. Belmont, 37 N. v. Van Kleeck, 133 Mich., 27, 94 N. Y. Supr. Ct. R., 380; Fernald v. W., 367, See Morgan z^. Gibian, 115 Spokane & B. C T. Co., 31 Wash., Ga., 145, 41 S. E., 495. 219, 71 Pac, 731. 44 Young v. Rollins, 85 N. C., 485. 42 Worth V. Piedmont Bank, 121 45 Bonner v. Hearne, 75 Tex., N. C., 343, 28 S. K, 488. 242, 12 S. W., 38. 43 Young V. M. & E. R. Co., 2 46 Northwestern Iron Co. v. L. Woods, 606 ; State v. Reynolds, 209 & R. I. Co., 92 Wis., 487, 66 N. W., Mo., 161, 114 S. W., 1097; Missouri 515; Palmer v. State, 212 U. S., 118, Pac. R. Co. V. Love, 61 Kan., 433, 29 Sup. Ct. Rep., 230, modifying and 59 Pac, 1072; Gates v. McGee, 15 affirming S. C, 85 C. C. A., 603, 158 S. Dak., 247, 88 N. W., 115; McKay Fed., 705. hnd stt, post, % SO. CHAP. II.] COURTS. • 71 fendants requiring- them to show cause why a receiver should not be appointed, this was held to amount to an equitable levy although no receiver had been appointed and there was no manual seizure of the property, and the subsequent appoint- ment of a receiver by another court was unauthorized and ir- regular and should have been set aside upon the proper show- ing. But in such case the order appointing the receiver in the latter proceeding is not to be regarded as a nullity and the receiver himself is deemed a de facto officer and all his lawful acts and contracts should be considered as binding in the fur- ther administration of the estate and he is entitled to reason- able compensation for his services.'*'^ And a federal court will not entertain a bill brought against receivers previously appointed by the federal court of another circuit the object of which is to compel them to adopt a particular course for the recovery of property and assets, and the fact that the court appointing the receiver has granted leave for the institution of such a proceeding will not be sufficient to confer jurisdiction upon the court. ^^ And a receiver being an officer of court, and being bound to account to the court appointing him for all funds which he receives in his official capacity, he can not be compelled by an order of another court to pay over money in his hands as receiver in satisfaction of an execution issued upon a judgment of such other court, since such a procedure would necessarily have the effect of producing a conflict of jurisdiction, and would prevent the receiver from compliance with the obligations of his bond given to the court appoint- ing him.49 § 49. New York code of procedure; court first moving has exclusive control ; rule not applicable where parties are not the same. Under the New York code of procedure, the appointment of a receiver, like the granting of an injunction, is 47 Northwestern Iron Co. v. L. & 49 Nelson v. Connor, 6 Rob. R. I. Co., 92 Wis., 487, 66 N. W., (La.), 339. 515. 48 French v. Union Pac. R. Co., 92 Fed., 26. 72 RECEIVERS. [chap. II considered as one of the provisional remedies of the courts, the two remedies being regarded as of equal weight and im- portance. And since the courts of that state, under the code, are regarded as having acquired jurisdiction of a cause, and as having control of all the subsequent proceedings, from the time of service of process, or from the allowance of a pro- visional remedy, the granting of an injunction by a court of competent jurisdiction is a bar to appointing a receiver in a subsequent proceeding between the same parties in another court; and the court first moving having acquired control by the granting of an injunction, the second court will decline to interfere by a receiver, or to take jurisdiction of the cause.^^ But the rule has no application where the parties in the two courts are not the same.^^ § 49a. Receivers in United States courts in suits con- cerning allotments among Indians on reservations. Under the act of congress^^ conferring upon the circuit courts of the United States authority to try actions arising within their jurisdictions and involving the right of any person not wholly or in part of Indian blood or descent to any allotment of land under any law or treaty, it is held that the circuit court has full power to determine all disputes which may arise con- cerning the allotment among the Indians upon reservations and may, in the proper case, appoint a receiver as an incident to that power. 52 50 McCarthy v. Peake, 18 How. . . . and the judgment or decree Pr., 138; S. C, 9 Ab. Pr., 164. of any such court in favor of any 51 Carter v. Dime Savings Bank, claimant to an allotment of land 61 Neb., 587, 86 N. W., 29. shall have the same effect, when 52 The Statute in question pro- properly certified to the Secretary vides that the circuit courts of the of the Interior, as if such allotment United States shall have : "Jufis- had been allowed and approved by diction to try and determine any him." Act of February 6, 1901, action, suit, or proceeding arising c. 217, 31 Stat., 760; 3 Fed. Stat. within their respective jurisdictions Ann., 503, amending act of August involving the right of any person, 15, 1894, c. 290, 28 Stat., 286, 305. not wholly or in part of Indian 53 Smith v. United States, 142 blood or descent, to any allotment Fed., 225. of land under any law or treaty CHAP. II.] COURTS. 73 II. Relative Powers of State and Federal Courts. § 50. Court first acquiring control will retain it; not defeated by sub- sequent dissolution of corporation. 51. Proceedings in bankruptcy; state courts assert exclusive juris- diction, if first acquired. 52. Jurisdiction of state courts, if first acquired, recognized by Unit- ed States courts. 53. Contrary doctrine asserted by United States courts. 54. The general doctrine applied to cases of railway mortgages. 55. Bill for account not entertained by United States court against receiver of state court. 56. When bill for receiver by one partner in state court an act of bankruptc}^ 57. Receiver in behalf of assignee in bankruptcy of a copartnership. 58. Conflict between state and federal court ground for a receiver. 59. Receiver of railway appointed by United States court not sub- ject to control of state court. 60. The same; Wisconsin doctrine. 50a. Federal jurisdiction in action by receiver of United States court is independent of citizenship and amount. 60&. Action against receiver of United States court is removable regard- less of citizenship and amount. 61. State court will not grant writ of assistance against receiver of United States court. 62. Right of action of receiver of United States court no greater than of state court. 62a. Power of United States Supreme Court to review final decision of state court. § 50. Court first acquiring control will retain it; not de- feated by subsequent dissolution of corporation. Ques- tions of considerable delicacy and importance have frequently arisen under our peculiar judicial system, touching the rela- tive powers of the state and federal courts in the appointment of receivers over the same subject-matter in litigation in both tribunals. These questions have usually been determined upon principles of comity, and it is now the established doctrine of both the state and federal courts, that that court, whether state or federal, which first acquires jurisdiction of the subject-mat- ter, or of the res, and which is first put in motion, will retain its control to the end of the controversy, and the possession 74 RECEIVERS. [chap. II. of its receiver will not be disturbed by the subsequent appoint- ment of a receiver by the other court.^* Nor is it necessary, in the application of the general doctrine here stated, that the court asserting its exclusive control by reason of having been first to take cognizance of the subject-matter should be the 54 Keep V. Michigan Lake Shore R. Co., U. S. Circuit Court, West- ern District of Michigan, 6 Chicago Legal News, 101; Bill v. New Al- bany, etc., R. Co., 2 Biss., 390; Union Trust Co. v. The Rockford, Rock Island & St. Louis R. Co., 6 Biss., 197; S. C, 7 Chicago Legal News, 33; Gaylord v. Fort Wayne, M. & C. R. Co., 6 Biss., 286; Sedg- wick V. Menck, 6 Blatchf., 156; S. C, 1 Bank. Reg., Second Edition, 675; Alden v. Boston, Hartford & Erie R. Co., 5 Bank. Reg., 230; Storm V. Waddell, 2 Sandf. Ch., 494; Watkins v. Pinkney, 3 Edw. Ch., 533; Spinning v. Ohio Life In- surance & Trust Co., 2 Disney, 336; May V. Printup, 59 Ga., 129; Adams V. Trust Co., 15 C. C. A., 1, 66 Fed., 617; Garner v. Southern M. B. & L. Assn., 28 C. C. A., 381, 84 Fed., 3, 52 U. S. App., 344; Appleton Waterworks Co. v. Central T. Co., 35 C. C. A., 302, 93 Fed., 286; Hutchinson v. Green, 6 Fed., 833 ; Lewis V. American N. S. Co., 119 Fed., 391; Cochran v. Pitts- burg, S. & N. R. Co., 158 Fed., 549; Robinson v. Mutual R. L. I. Co., 162 Fed., 794. And see Beecher v. Bininger, 7 Blatchf., 170; In re Clark and Bininger, 4 Bene- dict, 88; Eisenmann v. Thill, 1 Cin- cinnati Sup. Ct. R., 188; Conkling V. Butler, 4 Biss., 22; Bruce v. M. & K. R. R., 19 Fed., 342; Judd v. Bankers & Merchants Telegraph Co., 31 Fed., 182. But see Mer- chants & Planters National Bank v. Trustees, 63 Ga., 549. And in South Carolina R. Co. v. People's Saving Institution, 64 Ga., 18, it is held that the pendency of a bill in a federal court in another state to foreclose a railway mortgage and for a re- ceiver will not interfere with the operation of the attachment laws, when the attachments are levied be- fore a receiver is appointed in the former suit. In Lake National Bank V. Wolfeborough S. Bank, 24 C. C. A., 195, 78 Fed., 517, 33 U. S. App., 734, it was held that the jurisdiction of the federal court was not ousted by the pendency of a prior suit be- tween the same parties in a state court, where the plaintiff in that ac- tion had discontinued his suit and the defendant had filed a motion to dismiss and the receiver had never had possession of the res. As to the relative jurisdiction of a state court which has entered judgment in a mechanics' lien proceeding and a federal court which has subse- quently appointed a receiver who has taken possession of the property in question, see Rogers & Baldwin Hardware Co. v. Cleveland B. Co., 132 Mo., 442, 34 S. W., 57, 31 L. R. A., 335, 53 Am. St. Rep., 494. In Guaranty Trust Co. v. Galveston C. R. Co., 46 C. C. A., 305, 107 Fed., 311, it was held that the provision of the statute of Texas authorizing the appointment of receivers, defin- ing their powers and duties and regulating their proceedings is not applicable to receiverships in the :hap. II.] COURTS. 75 first to take actual possession of the property by its receiver.^S And where, subsequent to the fihng of a bill for a receiver in a creditor's suit in a federal court, but before the appointment in that court, a bill is filed and a receiver is appointed in a state court, the federal tribunal will refuse to recognize the receiver of the state court, or to rescind its own appointment, even though the bill as originally filed in the federal court was im- perfect, and was amended subsequent to the appointment of the receiver by the state court.56 And a federal court, having ac- federal courts. In Rogers v. Chip- pewa Circuit Judge, 135 Mich., 79, 97 N. W., 154, it was held that a state court should not grant an in- junction to restrain a receiver of a telephone company who had been appointed by a federal court from enforcing a higher rate for service than plaintiff claimed he was enti- tled to charge, since his remedy in such a case was by application to the court which was administering the estate. 55 Union Trust Co. v. The Rock- ford, Rock Island & St. Louis R. Co., 6 Biss., 197; S. C, 7 Chicago Legal News, 33; Gaylord v. Fort Wayne, M. & C. R. Co., 6 Biss., 286; Adams v. Trust Co., 15 C. C. A., 1, 66 Fed., 617; Lewis v. Amer- ican N. S. Co., 119 Fed., 391. And see Liggett v. Glenn, 2 C. C. A., 286. 51 Fed., 381, 4 U. S. App., 438. And see, ante, § 48. But see, contra, Wilmer v. Atlanta & R. A. L. R. Co., 2 Woods, 409 ; East Tennessee, V. & G. R. Co. V. Atlanta & F. R. Co., 49 Fed., 608, where it is held that the court which first appoints the receiver and obtains possession of the property will retain jurisdic- tion, notwithstanding the prior in- stitution of a suit and prior service of process or the granting of an in- junction in the other forum; a dis- tinction being drawn between prior service of process, whicn gives ju- risdiction over the person only, and prior seizure of the property by the appointment of a receiver, which gives jurisdiction over the res. 56 Gaylord v. Fort Wayne, M. & C. R. Co., 6 Biss., 286. "The principle upon this subject," says Drummond, J., p. 290, "is prop- erly stated in the opinion of the circuit court of the northern dis- trict of Illinois, in the case of the Rockford, Rock Island & St. Louis Railroad Company, report- ed in the 7th Chicago Legal New-s, 33: that the court which first takes cognizance of the con- troversy is entitled to retain ju- risdiction to the end of the litiga- tion, and incidentally to take the possession or control of the res, the subject-matter of the con- troversy, to the exclusion of all interference from other courts of concurrent jurisdiction; and that the proper application of this principle does not require that the court which first takes jurisdic- tion of the controversy shall also first take the actual possession of the thing in controversy. Then the question is as to the applica- 7^ RECEIVERS. [chap. II. quired jurisdiction of the parties and of the subject-matter in an action for the foreclosure of a trust-deed and having de- creed a sale of the mortgaged premises, will not surrender its jurisdiction in favor of a receiver subsequently appointed by a state court, although no receiver has been appointed by the federal court. ^7 And where a federal court has appointed a tion of this rule or principle to the present case. It is insisted that because the bill was amend- ed, and, between the date of the filing of the bill and the amend- ment, another creditor instituted a suit in the state court, and had a receiver appointed who took possession, therefore this court lost jurisdiction of the res, and could not permit the imperfect al- legations to be amended, and thereby affect the assumed right of the state court over the res. The only question that arises in this aspect of the case is whether the federal court had jurisdic- tion; if it had, then the principle applies that no other court of concurrent jurisdiction could in- terfere with the res, which was the subject-mater of the con- troversy. It is to be presumed that each court would equally pro- tect the rights of the creditors of the defendant. But which court has first obtained jurisdiction and has the right to call upon credit- ors to come before it for the pro- tection of their rights? In de- ciding this question we have to lay down a rule which would apply to both courts, state and federal; by which we would be bound if the state court first ob- tained jurisdiction of the res, and by which the state courts should also be bound when the federal court has first obtained jurisdic- tion; and we are not prepared to hold that, because the allegations in the bill are imperfectly stated, or because an amendment is made to the bill, that thereby the court loses jurisdiction of the subject- matter. All amendments ger- mane to the bill and allowed by the court relate back to the time when the bill was filed, and are considered as incorporated in, and a part of, the original bill. And it can not affect the question that the amendment asks that the re- ceiver shall do something else, as by adopting a change in the man- ner in administering the assets. We think that there is no other safe rule to adopt in our mixed system of state and federal juris- prudence, than to hold that the court which first obtains jurisdic- tion of the controversy, and thereby of the res, is entitled to retain it until the litigation is set- tled. . . . Of course, in all that has been said it is assumed, what was the fact in this case, that the bill was not only filed first in this court, but that the process was issued and duly served upon the parties, and that they were in court subject to its jurisdiction before any proceed- ing was instituted in the state court." 57 Holland Trust Co. v. Inter- CHAP. II.] COURTS. 77 receiver of a corporation, its prior jurisdiction will not be de- feated by a decree dissolving the corporation entered in a re- ceivership proceeding subsequently instituted for that purpose in a state court, since the receivership proceedings involve the property of the corporation and not the corporation itself. ^^ § 51. Proceedings in bankruptcy; state courts assert exclusive jurisdiction, if first acquired. The doctrine un- der consideration has been frequently applied in cases where proceedings in bankruptcy have been instituted against a de- fendant debtor in the United States courts, subsequent to the appointment of a receiver over the debtor's effects in a state tribunal, and in such cases the state courts have uniformly in- sisted on maintaining their jurisdiction and disposing of the assets.^^ Thus, where a receiver was appointed upon a judg- ment creditor's bill in a state court, and the appointment was completed and the debtor's property vested in the receiver, but the debtor filed his petition in bankruptcy subsequent to the filing of the creditor's bill, and was adjudicated a bankrupt subsequent to the appointment of the receiver, it was held that the assignee in bankruptcy took only such interests as the debtor had when the assignee was appointed, and therefore took the debtor's property subject to the lien acquired by the credi- tor's suit; and the receiver was therefore directed to pay the funds realized from the property to the plaintiff in the credi- tor's suit, rather than to the assignee in bankruptcy.^^ So where a receiver had been appointed in a creditor's suit, and after the filing of the creditor's bill the defendant debtors filed their petition in bankruptcy in the federal court, it was held that the jurisdiction acquired by the latter court by the mere national B. & T. Co., 29 C. C. A., 50 Wash., 642, 91 Pac, 774. See, 460, 85 Fed., 865, 52 U. S. App., also, Eisenmann v. Thill, 1 Cin- 599. cinnati Sup. Ct. R., 188; Spinning 58 Robinson v. Mutual R. L. I. v. Ohio Life Insurance and Trust Co., 162 Fed., 794. Co., 2 Disney, 336. 59 Storm V. Waddell, 2 Sandf. 60 Storm v. Waddell, 2 Sandf. Ch., 494; Watkins v. Pinkney, 3 Ch., 494. Edw. Ch., 533; Springer v. Ayer, 78 RECEIVERS. [chap. II. filing of the petition did not oust the previously acquired control of the state court over the debtors' property, and that it was at liberty to go on and operate upon the defendants and their property until it became vested by assignment in their assignee in bankruptcy. And without passing upon the right of the judgment creditor in the state court to ultimately maintain his lien upon the debtor's property, as against the as- signee to be subsequently appointed in bankruptcy, it was held that defendants should transfer their property to the re- ceiver, notwithstanding the filing of their petition in bank- ruptcy, ^i And when the state court has been the first to 61 Watkins v. Pinkney, 3 Edvv. Ch., 533. This was a motion for an attachment against defendants in a creditor's bill, for refusing to execute an assignment of their property to a receiver, the grounds of refusal being that, since the filing of the creditor's bill, the defendants had filed their petition in bankruptcy. McCoun, Vice-Chancellor, says, p. 534: "The question is, whether the court of chancery, under such circumstances, will proceed to compel a transfer and delivery of property of the bankrupt to a receiver, for the benefit of a par- ticular judgment creditor. 1 thought proper, as it was some- what a novel question, to confer on the subject with the learned judge of the United States dis- trict court, in order to ascertain his views and to avoid anything like collision with the United States courts in the exercise of their jurisdiction under the bank- rupt law. The act of congress becomes the paramount law, to which this court is bound to give effect, even where it comes in contact with the statute of the state. The ground taken by the defendant is, that the moment a party presents his petition in bankruptcy to a court of the United States, that moment he ousts the jurisdiction of the state courts over him and his property, and gives to the United States courts sole and entire jurisdic- tion to pass what property he has at the time of presenting his petition, to the assignee to be appointed under the act. But I find that the judges of the United States courts are not dis- posed to give such an effect to the bankrupt law, because it is in the power of the bankrupt to withdraw his petition; and if he could, by merely presenting his petition, defeat the state court, he could at any time afterwards withdraw it, and thus defeat the operation also of the bankrupt law. The jurisdiction which the district court acquires on the presentation of a bankrupt's peti- tion is not, therefore, such as to defeat proceedings which may have been commenced against him in this court by creditor's bill and which are pending at the CHAP. II.] COURTS. 79 accjuire control over the subject-matter, and has appointed its receiver, who has taken charge of the property in controversy, a receiver subsequently appointed by the United States court may be punished for contempt if he interferes with the receiver time he presents his petition. This court is to go on and operate upon the defendant and his property until such time as he shall make his assignment; and thus vest it in the assignee in bankruptcy under the decree of the United States court. This proceeding is, nevertheless, sub- ject to all questions that may arise under the bankrupt law, between the receiver appointed by this court or the creditors prosecuting here, and the as- signee in bankruptcy. It does not follow, from anything ex- pressed in the act of congress, that the proceedings in bank- ruptcy are to interfere with the proceedings in rem against a debtor in the state courts. They may, therefore, go on without being considered as coming in collision with the United States courts under the bankrupt law. But after the debtor's property has been passed by decree to the assignee in bankruptcy, this as- signee can bring an action against the party who has got possession of the property of the debtor under the proceedings here, and the question will come up in such action, or by petition, either to the United States court or to this court, and it will then be de- termined whether the bankrupt law is to distribute, or the par- ticular creditor is to have the benefit of it. In the English courts, actions are very frequent- ly brought by assignees of bank- rupts' estates to recover property which has got into the hands of a creditor or other person to whom the debtor had no right to make an assignment. The ques- tion now before this court is merely one in relation to the manner of proceeding, and whether this court is to withhold its jurisdiction and say, 'we have no jurisdiction in the case; the debtor has presented his petition to a court of the United States, and we have no further jurisdic- tion in the matter.' It remains, however, yet to be determined whether the jurisdiction which the court of chancery had is taken away. And, until it is de- termined, the court of chancery will go on with this proceeding, but without prejudice to the rights of the assignee in bank- ruptcy to be hereafter appointed. Whether the creditor can main- tain his right to what may pass to the receiver in this cause must be a subject for future considera- tion; but as a matter of practice here, we must go on without ref- erence to the defendant's pro- ceeding in the district court of the United States. I must, there- fore, order that the defendant ap- pear before the master and do what is required of him, and make a transfer of such property as he has and as the master may direct, otherwise the attachment must issue." It was held, how- 80 RECEIVERS. [chap. II. previously appointed by the state court.^^ gg when a receiver is appointed in a state court, and after such order, but before the fihng of the receiver's bond, the property in controversy, consisting of boats, is hbeled under process from a United States district court, upon filing his bond the receiver's title re- lates back to the date of his appointment. And the court may, in such case, enjoin the creditors from proceeding with their action in the United States court.^^ § 52. Jurisdiction of state courts, if first acquired, rec- ognized by United States courts. The federal courts have generally recognized the doctrine under discussion, and have almost uniformly conceded the jurisdiction of the state tribu- nals when the latter have first acquired control over the sub- ject-matter and the parties, or when the receiver of the state court has first acquired possession of the assets, even when the conflict of jurisdiction has been presented to the United States court in the course of proceedings in bankruptcy there. Thus, when a state court has acquired prior jurisdiction over the affairs of an insolvent corporation, and has appointed a re- ceiver, w^ho is in possession and control of the property, a federal court will not thereafter entertain a bill for a receiver over the corporation.^* And the undoubted weight of author- ity in the federal courts supports the proposition that when the state courts have properly acquired control over the sub- ject-matter in controversy, and have appointed receivers who are in possession of the property or fund at the time of insti- tuting proceedings in bankruptcy, the United States courts will not interfere with the jurisdiction already acquired by the state courts, but will respect the title of their receivers and ever, that if the debtor had been 62 Spinning v. Ohio Life Insur- declared a bankrupt, and had de- ance & Trust Co., 2 Disney, 336. livered his property to his as- 63 Jn re Schuyler's S. T. B. Co., signee, this would excuse him 136 N. Y., 169. from making an assignment to 64 Judd v. Bankers & Merch- the receiver, since the bankrupt ants Telegraph Co., 31 Fed., 182. court would, in this event, have put it out of his power to make such assignment. CHAP. II.] COURTS. 81 their right to manage and control the property, at least until it is impeached for some cause for which it is impeachable under the bankrupt act. The jurisdiction of the state court having properly attached, and its right to appoint receivers not being questioned, the property of defendants is regarded as being lawfully in possession of that court by its receivers, and the federal court has no such superior jurisdiction or supervisory power over the state tribunal as will warrant it in taking the property out of the receivers' possession, or interfering with its management.65 fhe bankrupt court will not, therefore, upon the petition of the assignee in bankruptcy, direct its marshal to take the assets out of the hands of the receivers, and it may en- join the bankrupts from interfering with the property in the possession of the receivers.^^ go when a receiver is appointed by a state court over mortgaged premises, in an action for the foreclosure of a mortgage, he will not be dispossessed by an assignee in bankruptcy subsequently appointed over the mort- gagor's estate in a federal court.67 And when a state court, through its receiver, is in possession of the property of a judg- ment debtor, who is afterwards adjudged a bankrupt by a federal court, the latter court will not sanction the forcible seizure of the property in the receiver's possession and its de- livery to the assignee, but will leave the assignee to assert his title by proceedings in accordance with the bankrupt act.^^ So it is held that an assignee in bankruptcy is not entitled to a 65 Sedgwick v. Menck, 6 Blatchf., 67 Davis v. The Railroad Com- 156; S. C, 1 Bank. Reg., Second pany, 1 Woods, 661. Edition, 675; Beecher t;. Bininger, 68 /« re Hulst, 7 Benedict, 17. 7 Blatchf., 170; Alden v. Boston, But in such case, in an examina- Hartford & Erie R. Co., 5 Bank. tion before the register in bank- Reg. 230; In re Clark & Bininger, ruptcy, concerning the affairs of 4 Benedict, 88; Davis v. The Rail- the bankrupt, the receiver may be road Company, 1 Woods, 661. But examined as a witness, and may see, contra, In re Merchants In- be compelled to produce the surance Co., 3 Biss., 162; Piatt v. books of the bankrupt for exami- Archer, 9 Blatchf., 559. nation. In re Hulst, 7 Benedict, 66 /,t re Clark & Bininger, 4 40. Benedict, 88. Receivers — 6. 82 RECEIVERS. [chap. II. receiver in the first instance, upon a bill filed by him, to take possession of the bankrupt's property held by receivers appoint- ed in a state court before the proceedings in bankruptcy. And the fact that defendants in such suit, as receivers of the state court, assert a prior jurisdiction acquired by that tribunal, and claim thereupon the pov^er of the state court to administer it, constitutes no ground for the interference of the United States court by appointing a receiver in limine, especially when it is not shown that the property is in peril of waste or loss in cus- tody of the state court, or that the receivers are violating their duty, or that they are irresponsible or threaten the removal of the property. ^9 /^i^(^ a^^ action can not be maintained in the United States courts, in behalf of an assignee in bankruptcy, to compel a receiver appointed by a state court in a creditor's suit, before the proceedings in bankruptcy, to deliver up the property of the debtor to the assignee. '''^ It would seem, however, to be otherwise when the proceedings in the state court are entirely unauthorized and void, and in such case the decree of the state court appointing a receiver is held to constitute no defense to an action by the assignee against the receiver concerning the property. '^1 § 53. Contrary doctrine asserted by United States courts. While, as is thus shown, the federal courts sitting in bankruptcy have generally recognized the jurisdiction of the state tribunals, and the possession of their receivers, when ac- quired previously to the bankruptcy proceedings, there have been cases holding a contrary doctrine, and insisting upon the exclusive control of the federal court, even though the state court had first acquired jurisdiction, and though its receiver was first in possession. Thus, it has been held that the ap- pointment of a receiver over an insolvent corporation by a state court, under proceedings instituted by the attorney-gen- 69 Beecher v. Bininger, 7 T'O Sedgwick v. Menck, 6 Blatchf., Blatchf., 170. See contra, Piatt v. 156; S. C, 1 Bank. Reg., Second Archer, 9 Blatchf., 559, where the Edition, 675. assignee was himself appointed "J"! Buchanan v. Smith, 16 Wall, a receiver in such a case. 309; S. C, 7 Bank. Reg., 513. CHAP. II.] COURTS. 83 eral of the state for the dissolution of the corporate body in conformity with the laws of the state, was a "taking on legal process," within the meaning of the thirty-ninth section of the national bankrupt act of 1867; and that such a case did not present a question of concurrent jurisdiction between the state and federal tribunals, since the exclusive jurisdiction of the United States court attaches whenever insolvency intervenes, so as to render the debtor a proper subject for the operation of the bankrupt act. And while, in such case, the federal court may recognize the proceedings in the state court, so far as the jurisdiction there is attempted to be exercised for the dissolu- tion of the corporation, it is held that it will not allow the re- ceiver of the state court to retain control of the assets of the corporation, since the federal tribunal exercises exclusive juris- diction in cases of bankruptcy. ''^ Sq where a creditor of an insolvent insurance company had instituted proceedings to obtain a receiver in a state court, and to set aside an assignment by the company of all its property to a trustee, and before the state court had taken any action in the matter a bill was filed in the federal court by non-resident creditors for the same relief, that court took jurisdiction and appointed a receiver, notwith- standing the pendency of the action in the state court.'^^ The doctrine of the cases here cited, however, is plainly repugnant to the weight of authority, as shown in the preceding section. § 54. The general doctrine applied to cases of railway mortgages. As illustrating the general doctrine under discussion, when a trustee in a deed of trust securing the bond- holders of a railway company files his bill for a foreclosure in the federal court, and pending this proceeding, and without leave of this court, he brings an action to foreclose the same 72 In re Merchants Insurance of a corporation, the receiver Co., 3 Biss., 162. And see Piatt v. previously appointed by a federal Archer, 9 Blatchf., 559. In City court was neither a necessary nor Water Co. v. State, 88 Tex., 600, a proper party. .32 S. W., 1033, it was held that in T3 Buck v. Piedmont & Arling- an action brought by the state ton Life Ins. Co., 4 Fed., 849; S. for the forfeiture of the charter C, 4 Hughes, 415. 84 RECEIVERS. [chap. II. trust deed in a state court, where he obtains a receiver and a decree of foreclosure, and sells the property, the United States court nevertheless retains its jurisdiction. It may, therefore, upon a proper show^ing of the necessity for such relief, appoint a receiver upon the application of a bondholder, the interfer- ence of the state court being regarded as unauthorized, and as not affecting the previously acquired jurisdiction of the fed- eral court. "^-^ Nor will the state courts entertain an action for the foreclosure of a mortgage, or to avoid and set aside a previous foreclosure by the mortgagee, when the mortgaged premises are in the possession of a receiver duly appointed by a United States court having jurisdiction for that purpose, since this would necessarily disturb the possession of the re- ceiver, which is the possession of the court appointing him. In such a case relief should be sought in the federal court, which is the more appropriate forum for determining the rights of the parties, it having already taken possession of the property by its receiver, and being empowered to protect the interests of all parties in the distribution of the mortgage fund.'^^ § 55. Bill for account not entertained by United States court against receiver of state court. When a state court has acquiredtjurisdiction of an action against a railway com- pany for the forfeiture of its franchise and for a receiver, and has appointed a receiver and declared the franchise forfeited and the corporation dissolved, a federal court will not entertain a bill against the receiver and the railway company for an accounting, but will leave the person aggrieved to pursue his 74 Bill V. New Albany, etc., R. that the possession of a railway Co., 2 Biss., 390. See, also, Union by a receiver appointed in a state Trust Co. V. The Rockford, Rock court would not bar proceedings Island & St. Louis R. Co., 6 Biss., for the foreclosure of a mortgage 197; S. C, 7 Chicago Legal News, upon the property of the railway 33. in a federal court, and that the 75 Milwaukee & St. Paul R. Co. latter court might proceed with V. Milwaukee & Minnesota R. Co., the foreclosure, but without 20 Wis., 165. But in Mercantile interfering with the receiver, or Trust Co. V. Lamoille Valley R. with his possession of the prop- Co., 16 Blatchf., 324, it was held erty. CHAP. II.] COURTS. 85 remedy by applying to the state court, which alone has control over the receiver.'^^ § 56. When bill for receiver by one partner in state court an act of bankruptcy. Where a business firm is in a condition of actual insolvency, and one partner files a bill in a state court for a dissolution of the firm, and for an accounting and a receiver, his proceeding is regarded as an act of bank- ruptcy within the meaning of the bankrupt law, the appoint- ment of the receiver being a taking of the debtor's property on legal process, and its effect being to delay and defeat the opera- tion of the bankrupt act."^"^ § 57. Receiver in behalf of assignee in bankruptcy of a copartnership. Upon a bill by the assignee in bankruptcy of a copartnership to set aside an assignment for the benefit of creditors, made by the firm when in a condition of insolvency, and to restrain the assignees from doing anything under such assignment, it is proper that a receiver be appointed by the bankrupt court to take charge of the property, and hold it for the benefit of all creditors who may have an interest therein."^^ § 58. Conflict between state and federal court ground for a receiver. A conflict of jurisdiction between a state and federal court concerning property in controversy, there being actions pending in each tribunal by conflicting claimants to the property, and there being imminent danger of collision between the executive officers of the different courts in the en- forcement of the process of their courts, has been held suffi- cient ground to warrant the federal court in granting an in- junction and appointing a receiver over the property, when there was a probability of a bitter and long continued litiga- tion at law, and the property was of a perishable nature and lia- ble to be rendered entirely valueless, unless taken possession of by a receiver and sold.'^^ 76 Conkling V. Butler, 4 Biss., 78 Sedgwick v. Place, 3 Bene- 22. diet, 360. 77 In re Bininger, 7 Blatchf., 79 Crane v. McCoy, 1 Bond, 422. 262. 86 RECEIVERS. [chap. II. § 59. Receiver of railway appointed by United States court not subject to control of state court. When a re- ceiver of a railway company is appointed by a United States court, and he is charged with the duty of operating the road, and is accountable to the court for the proceeds, such proceeds are beyond control of the state courts, the receiver's possession being the possession of the court appointing him. The state courts, therefore, have no authority to enforce as against such receiver the payment of a judgment recovered against the railway for damages resulting from the killing of cattle, even under a statute of the state providing a process for the en- forcement of judgments against railways out of funds in the hands of their receivers or agents. The judgment creditor, in such case, should apply to the federal court, either for leave to sue the receiver, or for an order on him to pay the judg- ment.^<^ And when a bill has been filed in the federal court for a receiver over the property of a railway company and after- wards an injunction is granted by a state court enjoining the company and all persons acting for it from operating the line over certain property, such injunction is inoperative, and a receiver, although not appointed until after the granting of the injunction, can not be held guilty of contempt for continuing to operate the road in violation of the writ.^^ § 60. The same; Wisconsin doctrine. It has been held in Wisconsin, that a state court might entertain an action against a receiver of a railway appointed by a federal court, and might proceed to judgment therein, without leave of the latter court to bring such action, provided there was no actual interference with the receiver's possession.^2 'phis doctrine is, however, plainly repugnant to the well-established principle, hereafter discussed, that no action can be maintained against a receiver without leave of the court from which he derives his 80 Ohio & Mississippi R. Co. v. 82 Kinney v. Crocker, 18 Wis., Fitch, 20 Ind., 498. 74. 81 State V. Miller, 54 Kan., 244, 38 Pac, 269. CHAP. II.] COURTS. 87 appointment.^^ And it is not perceived that the rule requir- ing such permission as a condition precedent to bringing an ac- tion against a receiver is in any manner affected by the fact that he may have been appointed by a federal court and the ac- tion be brought against him in a state court, or vice versa. § 60a. Federal jurisdiction in action by receiver of Unit- ed States court is independent of citizenship and amount. Where a receiver has been appointed by a federal court in a cause which properly comes within the jurisdiction of that court, all actions brought by the receiver for the collection and preservation of assets or for the protection of the property in his custody and all other actions which may become necessary for the proper administration of the estate under his control are to be regarded as ancillary to the main cause, and are there- fore not dependent upon diversity of citizenship or the amount involved, and accordingly such suits may be instituted and maintained in the federal courts regardless of the citizenship of the parties or the amount in controversy.^* § 606. Action against receiver of United States court is removable regardless of citizenship and amount. The rule announced in the preceding section is equally applicable where the action is brought against the receiver. Where, therefore, a federal court has appointed a receiver and through him has assumed the exclusive control and management of the property which has come into his possession, any action or proceeding brought against the receiver which in any way tends to control his official conduct in the management of the property or which affects his administration of the estate in his custody is held to be ancillary to the principal action and as such is removable to the federal court from the state court if instituted there, and the right of removal exists regardless of 83 See § 254, post, and authori- 687, 36 L. R. A., 228; Hampton ties there cited. Roads R. & E. Co. v. Newport 84 White V. Ewing, 159 U. S., News etc., Co., 131 Fed., 534; 36, 15 Sup. Ct. Rep. 1018; Keihl Cole v. Philadelphia & E. R. Co., V. City of South Bend. 22 C. C. A., 140 Fed., 944; Brown v. Allebach, 618, 76 Fed., 921, 44 U. S. App., 156 Fed., 697. 88 RECEIVERS. [chap. II. the citizenship of the parties or the amount in controversy. ^5 Thus, an action for a writ of mandamus brought by the attor- ney-general in a state court against a receiver appointed by a federal court to compel compliance with a statute of the state is removable.^^ So an action brought in a state court against the receiver of a railway company appointed by a federal court to recover damages for personal injuries in an amount less than two thousand dollars may be removed. ^"^ And where the action is brought against the receiver and against others who are citizens of the same state as the plaintiff to establish a joint liability of all the defendants, the action is still to be re- garded as one arising under the laws and constitution of the United States and is therefore removable.^^ § 61. State court will not grant writ of assistance against receiver of United States court. When a receiver, acting under appointment from a United States court, is in actual possession of property, a state court will not grant a writ of assistance to a subsequently appointed receiver in the state tribunal, to enable him to get possession of the property. The right to possession, under such circumstances, will not be de- termined upon a mere motion, since the possession of the re- ceiver of the federal court is regarded as that of a stranger, and to be determined only by an action and not upon motion. ^^ § 62. Right of action of receiver of United States court no greater than of state court. The fact that a receiver derives his appointment from a United States court does not 85 State v. Northern Pac. R. of removal of a receiver of a rail- Co., 75 Fed., 333; Carpenter v. way company, see post, § 395c. N.-:rtb2rr. Pic. R. Co., 75 Fed., 86 State v. Northern Tac. R. Co., 850; Shmney v. i-^ori?^ A'tiK^/ican 75 Fed., 333. S., L. & B. Co., 97 Fed., 9 ; Land- 87 Carpenter v. Northern Pac. ers V. Felton, 73 Fed., 311. In R. Co., 75 Fed., 850. Gableman v. Peoria, D. & E. R. 88 Landers v. Felton, 73 Fed., Co., 82 Fed., 790, the court qualify 311. Contra, Shearing v. Trum- the rule as above announced by bull, 75 Fed., 33. limiting it to cases where the 89 Gelpeke v. Milwaukee & amount in controversy exceeds Horicon R. Co., 11 Wis., 454, the jurisdictional amount of two opinion of Dixon, C. J., and thousand dollars. As to the right Paine, J. CHAP. II.] COURTS. 89 confer upon him any greater power or privileges in respect to bringing actions in the state courts than if he were appointed by those courts, and the question of comity between the two tribunals will not be considered in such case.^*^ § 62a. Power of United States Supreme Court to re- view final decision of state court. The Supreme Court of the United States is empowered to review the final judgment of the highest court of a state in all cases wherein any title, right, privilege or immunity is claimed under any authority exercised under the United States, the decision in which court is against the title, right, privilege or immunity so claimed. ^^ Under this power, when a receiver of a railway, appointed by and operating the road under the order of a United States cir- cuit court, claims immunity from a suit against him in a state court without previous leave of the court by which he is ap- pointed, and when the decision of the highest court of the state is adverse to such claim, the receiver is entitled to a review of such ruling upon writ of error from the Supreme Court of the United States. But, in such case, the question whether the receiver is liable for the acts of his predecessor in office is not a question of federal law, but one of general jurisprudence.^^ 90 Battle V. Davis, 66 N. C, 252. 92 McNulta v. Lochridge, 141 91 R. S. U. S., § 709. U. S., 327, 12 Sup. Ct. Rep., 11. CHAPTER III. OF THE SELECTION AND ELIGIBILITY OF THE RECEIVER. § 63. Reference to master in chancery to select; English and New York practice. 64. Interference with master's selection. 65. Discretion of court in selection of receiver rarely interfered with; may consult with counsel. 66. When appellate court may interfere. 67. Relationship to the parties as affecting eligibility. 68. Person in defendant's interest; solicitor eligible; familiarity with the property. 69. Eligibility as affected by distant residence; residence in state unnecessary. 70. Person not eligible whose duty it is to watch receiver; solicitor; master in chancery; barrister; peer; party to the cause; mem- ber of reorganization committee; creditor. 71. Clerk of court not a receiver ex officio; clerk and master. 72. Officer of corporation usually ineligible as its receiver; when eligible; shareholder; creditor. 73. One corporation may be receiver of another. 74. Trustee not usually eligible; when eligible. 75. Next friend of infants ineligible. 76. Mortgagee eligible as receiver of mortgaged premises. 77. Receiver ox debtor ineligible as his assignee in bankruptcy. 78. Administrator of deceased partner eligible as receiver of firm assets. 79. Particular person nominated in bill; consent of parties. 80. Effect of interest as stockholder and director of a plaintiff cor- poration. 81. Mortgagee of foreign estates eligible. 81a. Objection to eligibility must be made in apt time; how waived. § 63. Reference to master in chancery to select; Eng- lish and New York practice. A receiver being an impar- tial person as between the parties, and being the officer and rep- resentative of the court in the management and control of the property or fund in controversy, considerable importance at- taches to the question of his selection as v^ell as to his qualifica- 90 CHAP. Ill,] SELECTION AND ELIGIBILITY. 91 tions and competency for the management of the trust commit- ted to his charge. The usual course of practice in the EngHsh Court of Chancery, with reference to the selection of a re- ceiver, was to refer the matter to a master in chancery to make the selection. The parties in interest in the cause were then at liberty to appear before the master and to nominate suitable persons for the office, whose qualifications and competency were passed upon by the master, who made the appointment and re- ported his selection to the court.^ A similar practice also prevailed under the New York chancery system prior to the adoption of the code of procedure in that state.2 § 64. Interference with master's selection. When the case has been referred to a master in chancery to make the appointment, and he has made his report approving and recom- mending the appointment of a particular person, his report and approval should stand until the person so recommended is impeached as an improper person.^ And the courts are ex- ceedingly averse to interfering with the discretion exercised by the master in making his selection ; and when, after due in- vestigation, he has made the appointment and reported to the court, it will not interfere with the selection, or entertain excep- tions to the appointment, unless some good and substantial objection can be shown.^ The reason for the reluctance thus manifested in interfering with the appointment of the master 1 For illustrations of this prac- Dawkin, 3 Bro. C. C, 508. And tice in the English Chancery, see see McGilliard v. Donaldsonville Thomas v. Dawkin, 1 Ves. Jun., F. & M. Works, 104 La., 544, 29 452; S. C, 3 Bro. C. C, 508; Gar- So., 254, 81 Am. St. Rep., 145. land V. Garland, 2 Ves. Jun., 137; •* Tharpe v. Tharpe, 12 Ves., Anonymous, 3 Ves., 515; Wilkins 317; In re Eagle Iron Works, 8 V. Williams, id., 588; Tharpe v. Paige, 385; Thomas v. Dawkin, Tharpe, 12 Ves., 317; Wynne v. 1 Ves. Jun., 452. And see Gar- Lord Newborough, 15 Ves., 283; land v. Garland, 2 Ves. Jun., 137; Creuze v. Bishop of London, 2 Anonymous, 3 Ves., 515; Wilkins Bro. C. C, 253. v. Williams, id., 588. In Tharpe 2 See /« re Eagle Iron Works, v. Tharpe, 12 Ves., 317, the 8 Paige, 385. master had appointed a receiver 3 Creuze v. Bishop of London, of the estate of an infant, upon 2 Bro. C. C, 253; Thomas v. the recommendation of the only 92 RECEIVERS. [chap. III. is found in the necessity which exists on the part of the courts of intrusting a considerable degree of discretion to the judg- ment of officers, such as masters in chancery, whom they have appointed for the examination of complicated matters of de- tail.^ The court will not, therefore, disturb an appointment made by the master merely because it may be of opinion that a better selection could have been made. And to induce the court to interfere, it must either be shown that the person ap- pointed by the master is legally disqualified, or that his situation is such as to render it probable that the interests of the parties to the litigation will not be properly managed if intrusted to his hands.^ If, therefore, both of the persons proposed to the master for the receivership are, as to character and qualifica- tions, of equal standing, the court will not interfere with the appointment.'^ And while the party complaining of the mas- ter's selection will not be precluded from making a special case to be presented impeaching the master's judgment, yet upon trustee named in the testator's will, who had acted in the management of the estate. Upon exceptions to the master's report as to the appointment, Lord Er- skine observed, p. 319, as follows: "The cases cited are built upon principles that are not peculiar to this court. All courts place a degree of discretion in officers appointed for the management of concerns full of detail and compli- cated circumstances; and those who impeach the judgment of those officers upon such points must show a reason for the ex- ception. Lord Anvanley, there- fore, in Bowersbank v. Colasseau, 3 Ves., 164, states truly that the judgment of the master is to be disturbed only upon special grounds, a strong case to show that the person appointed ought not to be receiver, and the court will not enter comparisons. No objection appears to the person appointed in this instance. He is a land surveyor, acquainted with business likely to qualify him for such an office; a fit person, there- fore, in that respect. He was recommended to the master by the trustee, in whom the testator reposed this peculiar trust; not selected by the master at his own discretion or pointed out to him by accident. His residence at the distance of fourteen miles only is no objection. The person pro- posed is, therefore, altogether un- exceptionable." And the excep- tions were overruled. 5 Tharpe v. Tharpe, 12 Ves., 317. 6 In re Eagle Iron Works, 8 Paige, 385. 7 Thomas v. Dawkin, 1 Ves., Jun., 452; S. C, 3 Bro. C. C. 508. CHAP. III.] SELECTION AND ELIGIBILITY. 93 the naked allegation that the person rejected by the master was more competent than another, the court will not investigate the particular reason why he preferred the one to the other.^ If, however, the court is of opinion that the master has not given proper attention to the circumstances of the case in making the appointment, it is proper to require him to revise his report.^ § 65. Discretion of court in selection of receiver rarely interfered with; may consult with counsel. The consider- ations stated in the preceding section as applicable to the ap- pointment when made by a master in chancery upon a refer- ence are, of course, equally applicable when the appointment is made by the court itself without a reference. And in all such cases the selection and appointment of a particular person for the receivership, out of several candidates proposed, is re- garded as a matter of judicial discretion, to be determined by the court according to the circumstances of the case.^*^ The exercise of this, like all other matters of judicial discretion, will rarely be interfered with by an appellate tribunal. ^^ And it may be asserted as a general rule, that, to induce an appellate court to interfere with the decision of an inferior tribunal in the selection of a receiver, it is necessary to show some "over- whelming objection" in point of propriety, or some fatal ob- jection upon principle, to the person named.12 And the fact 8 Anonymous, 3 Ves., 515. Pr., 208. As to the inadvisability 9 Wynne .v. Lord Newbor- of appointing more than one re- ough, 15 Ves., 283. ceiver, see Battery Park Bank v. 10 Perry v. Oriental Hotels Co., Western C. Bank, 126 N. C, 531, L. R., 5 Ch. App., 420; Cookes v. 36 S. E., 39. For considerations Cookes, 2 De G., J. & S., 526; affecting eligibility as constitut- Williamson v. Wilson, 1 Bland, ing ground for removal, see post, 418; Jones v. Purcell, 20 App. D. § 821. C, 209; Patterson v. Northern H Cookes v. Cookes, 2 De G., J. Trust Co., 230 111., 334, 82 N. E., & S., 526; Perry v. Oriental Ho- 837; Coltrane v. Templeton, 45 tels Co., L. R., 5 Ch. App., 420. C. C. A., 328, 106 Fed., 370. See, 12 Cookes v. Cookes, 2 De G., J. as to personal considerations & S., 526; McGilliard v. Donald- governing the court in the choice sonville F. & M. Works, 104 La., of a receiver, Smith v. New York 544, 29 So., 254, 81 Am. St. Rep., Consolidated Stage Co., 28 How. 145; In re Eckhardt Mfg. Co., 94 RECEIVERS. [chap. III. that there are great disputes and differences between the parties in interest, one of whom has been appointed receiver, does not of itself constitute suflicient ground for reversing the appoint- ment made by the court below.^^ And while the selection must ultimately rest with the court, there is no objection to the court's consulting with counsel or with the parties interested as to the fitness of the person to be appointed. ^^ § 66. When appellate court may interfere. When, however, the objection urged to the fitness or competency of the person selected by the inferior court is presented as a ques- 114 La., 119, 38 So., 78; Gypsum P. & S. Co. V. Adsit, 105 Mich., 497, 63 N. VV., 518; Shannon v. Hanks, 88 Va., 338, 13 S. E., 437. Cookes V. Cookes, 2 De G., J. & S., 526, was a motion before the Court of Appeal in Chancery, to discharge an order of the Vice- Chancellor, appointing one of the defendants in an action to carry into execution the trusts of a will, receiver of the rents of the real estate in controversy, without salary. Lord Justice Knight Bruce observes, p. 528: "Upon a mere question of the exercise of discretion in the choice of one out of several candidates, if I may use the expression, proposed be- fore the Vice-Chancellor for the ofifice of receiver, the court will find, according to its old practice and habits, the greatest difficulty in acting against the exercise of that discretion. To induce the court to act in such a case, against the decision of the lower judge by whom the selection has been made, it would be necessary to find some, if I may use the ex- pression, overwhelming objection in point of propriety of choice, or some objection fatal in principle." 13 Cookes V. Cookes, 2 De G.. J. & S., 526. Upon this point. Lord Justice Turner observes as fol- lows, p. 531: "Two points have been urged in support of this ap- peal as questions of principle. First, it is said that there are great disputes and differences in this family, and that it is not for the interest of the estate that this gentleman should be appoint- ed receiver. But if the existence of differences and disputes is to be considered as a question of principle afifecting the appoint- ment of a receiver, it is obvious that there could hardly be any case in which it would not be competent to the parties to come here, by way of appeal from the appointment of a receiver; for in cases where receivers are ap- pointed it is almost always in consequence of the differences and disputes between the parties. I think, therefore, that the differ- ences between these parties, un- fortunate as they are, furnish no ground whatever for this appli- cation." 14 Polk V. Johnson, 160 Ind., 292, 66 N. E., 752, 98 Am. St. Rep., 274. CHAP. III.] SELECTION AND ELIGIBILITY. 95 tion of principle, and not one of mere expediency, an appellate tribunal will sometimes interfere with the appointment of the inferior court. Thus, when it is obvious that the person pro- posed by defendants for the receivership, and rejected, is a proper and unobjectionable person for the management of the estate, and that the appointment of another person would result in injury to the estate by causing very great additional expense, the appointment of such other person may be revoked, and the person proposed by defendants may be appointed. ^^ § 67. Relationship to the parties as affecting eligibility. As regards the question of relationship of the person appointed to either of the parties in interest in the litigation, while the fact of such relationship is not, per se, an absolute disqualifica- tion for the receivership, yet it must be allowed to have its prop- er weight in connection with other circumstances. And in a case where the person appointed was the brother of one of the parties to the action and the son of one claiming to be a large creditor, and was admitted by the plaintiff to have taken an ac- tive part in the controversy as his friend and agent, he was regarded as too much enlisted in the cause to permit him to be as unbiased and impartial as a receiver should be, and was therefore removed. ^^ But it is not regarded as an abuse of ju- dicial discretion to appoint as receivers the attorneys of the re- spective parties to the cause, and the action of the court in making such appointment will not be interfered with upon ap- peal. ^"^ And a defendant himself has been appointed when he was already in possession of the estate in controversy, and was otherwise a fit and competent person for its management, no cause being shown against his appointment.^^ 15 Perry v. Oriental Hotels Co., and close up the business in ques- L. R., 5 Ch. App., 420. tion, see Hanover Fire Insurance 16 Williamson v. Wilson, 1 Co. v. Germania Fire Insurance Bland, 418. As to the circum- Co., 33 Hun, 539. stances which will justify the ap- 1'^ Shannon v. Hanks, 88 Va., pointment of one of the parties to 338, 13 S. E., 437; Fisher v. Trust a business transaction, when the Co., 138 N. C, 90, 50 S. E., 592. parties themselves had agreed 18 Robinson v. Taylor, 42 Fed., that such person should manage 803. 96 RECEIVERS. [chap. III. § 68. Person in defendant's interest; solicitor eligible; familiarity with the property. It is regarded as exceed- ingly objectionable to appoint as receiver a person who is in the interest of the defendant, against whom the appointment is made.19 And it is improper to appoint as receiver one of the plaintiffs at whose instance the relief is sought. 20 But a solicitor not concerned in the litigation is eligible to a receiver- ship, although if appointed he can not act as solicitor in any pro- ceedings which it may be necessary for him to take as re- ceiver.2i But it is improper to appoint as receiver over a par- ticular kind of property a person who is entirely unfamiliar therewith, even though he gives an undertaking to attend to the directions of another person familiar with the management of the property, since it is always preferable that the receiver appointed should act upon his own responsibility.22 § 69. Eligibility as affected by distant residence; resi- dence in state unnecessary. The fact of the receiver chos- en residing at a great distance from the estate or property which is to be subjected to his management and control, while not regarded as an absolute disqualification for the office, is a cir- cumstance which should be taken into consideration in making the appointment. 23 But where the person appointed receiver of an estate was a land surveyor, and well qualified for the man- agement of the property, the fact of his residence at a distance of fourteen miles from the estate over which he was appointed 19 Lupton V. Stephenson, 11 Ir. ceiver and of the judge appoint- Eq., 484. See, also, Finance Co. ing him by reason of their inter- s'. Charleston, C. & C. R. Co., 45 est in the administration of the Fed., 436, where it is held that trust estate. "unless in cases of imperative ne- 20 Jordan v. Jordan, 121 Ala., cessity, no person will be ap- 419, 25 So., 855. pointed receiver of a railway 21 Wilson v. Poe, 1 Hog., 332. company who is a party to or of 22 Lupton v. Stephenson, 11 Ir. counsel in the cause, or who has Eq., 484. been an ofificer in, or an official 23 Wynne v. Lord Newborough, of the insolvent corporation." 15 Ves., 283. See 2 Daniell's See Cunningham v. U. S. Nation- Chancery Practice, ch. XXXIX, al Bank, 6 Okla., 184, 51 Pac, 119, § III. as to the disqualification of a re- CHAP. III.] SELECTION AND ELIGIBILITY. 97 was regarded as no valid objection.24 And it is not necessary that the person selected should be a resident of the state or jurisdiction in which the suit is pending. Thus, under the laws of Missouri, a public officer of the state being charged with the duty of instituting proceedings to wind up insolvent insurance companies, and being appointed in that state receiver of such a company, the same person was appointed receiver by a federal court in Tennessee, in a subsequent suit instituted by creditors of the company to reach its assets in the latter state.25 So the United States circuit court in North Carolina has ap- pointed as its receiver one who was a non-resident of that state,26 So it is held to be not an abuse of discretion to ap- point as receiver a non-resident, where he has an interest in the property and a resident is appointed as co-receiver. 2"^ And in the case of receiverships in the federal courts, the court of one circuit will ordinarily, in ancillary proceedings, recognize the appointment of the federal court of another circuit, and will accordingly name the receiver appointed in the original pro- ceeding, although he may not be a resident of the state in which the court is sitting.28 But where one of several receivers is a non-resident, it is proper that his bond should contain a clause providing that he shall appear in the court of his appointment at any time when required by the court, either on notice to him within or without the state or on notice to his counsel. ^9 § 70. Person not eligible whose duty it is to watch re- ceiver ; solicitor ; master in chancery ; .barrister ; peer ; par- ty to the cause; member of reorganization committee; creditor. It is important to observe that courts of equity are exceedingly jealous of appointing any person to a receiver- 24Tharpe v. Tharpe, 12 Ves., 27 Burwell v. Farmers & M. 317. Bank, 119 Ga., 633, 46 S. E., 885. 25 Taylor v. Life Association of 28 Bayne v. Brewer Pottery Co., America, 3 Fed., 465. See S. C, 82 Fed., 391. on final hearing, 13 Fed., 493. 29 Lotte Bros v. American Silk 26 Farmers' Loan & Trust Co. Co., 159 Fed., 499. V. Cape Fear & Y. V. R. Co., 62 Fed., 675. Receivers — 7. 98 RECEIVERS. [chap. III. ship whose duty it would otherwise be to watch the proceedings of the receiver, or to call him to an account for his manage- ment of the trust. 2^ Upon this ground a solicitor under a com- mission of lunacy, under the English practice, should not be appointed receiver of the estate of the lunatic.^^ And upon similar ground, a solicitor in the cause is not a proper person for the receivership, since no person ought to be allowed to con- trol his own accounts in that capacity.^2 go it is improper to appoint as receiver the law partner of the solicitor for com- plainant in the cause, since such partner is presumptively as much interested in the proceedings as complainant's solicitor himself.^^ And a person who is connected with the firm of counsel for the plaintiff at whose instance a receiver is sought, is regarded as ineligible.^"* So it has been held that a master in chancery is not a proper person to be appointed, since he is an officer of the court, whose duty it is to examine the receiv- er's accounts and to check his conduct ; and his appointment is ground for reversing the decree.^^ A barrister, however, is competent to act as receiver,^^ and under the English practice barristers are very frequently appointed. ^"^ It has been held, however, that the fact of the barrister selected being in prac- tice in London at a great distance from the estate, coupled with the fact of his being a member of parliament, while not an ab- solute disqualification, should have been considered by the master in making the appointment.^^ And in England, a re- 30 Stone v. Wishart, 2 Madd., 34 State Trust Co. v. National eZ, 1st American Edition, 374; L. I. & M. Co., 72 Fed., 575. r,Sykes v. Hastings, 11 Ves., 363; 35 Benneson v. Bill, 62 111., 408; \jn re Lloyd, 12 Ch. D., 447. Kilgore v. Hair, 19 S. C, 486; 31 £x parte Pincke, 2 Meriv., Allen v. Cooley, 60 S. C, 353, 38 452. S. E., 622. 32 Garland v. Garland, 2 Ves. 36 Garland v. Garland, 2 Ves. Jun., 137; In re Lloyd, 12 Ch. D., Jun., 137. 447; Watson v. Arundel, Ir. Rep., 37 2 Daniell's Chancery Prac- 9 Eq., 324. tice, ch. XXXIX, § III. 33 Merchants & Manufacturers 38 Wynne v. Lord Newborough, National Bank v. Kent Circuit 15 Ves., 283. Judge, 43 Mich., 292, 5 N. W., 627. CHAP. III.] SELECTION AND ELIGIBILITY. 99 ceiver will not be appointed who is not subject to the ordinary process of the courts by commitment, and against whom the same remedies are not available as against a common citizen. A peer of the realm is, therefore, not a competent person to be appointed. 2^ And, unless under special circumstances, as in partnership cases in some instances, a party to the cause will not ordinarily be appointed without the consent of the other party."^^ But it has been held to constitute no objection to the eligibility of a receiver that he is a member of a reor- ganization committee, although if a conflict in the plan of the reorganization should be foreshadowed, he would promptly be compelled to resign.^^ And a creditor of an insolvent is not as a matter of law disqualified by reason of his interest to act as receiver and may properly be appointed where no facts appear showing that he is disqualified. '*2 § 71. Clerk of court not a receiver ex officio; clerk and master. While there are some reported cases in w^hich the courts have appointed their own clerks as receivers, yet a clerk of a court is not by virtue of his office a receiver of the court, his functions being entirely distinct from those of re- ceiver.'*^ The same distinction is recognized where the offices of clerk and of master in chancery are combined in one and the same person. In such case the court can no more compel him to take upon himself the office of receiver in a given case, than it can compel any private citizen to assume such duties. And when the court has ordered that the receiver in a cause deliver over to the clerk and master the funds of the receivership, and that the clerk and master be appointed receiver, such order will not have the effect of making him the receiver, when noth- ing is done by him in that capacity, and no facts appear from 39 Attorney-General v. Gee, 2 43 Hammer v. Kaufman. 39 111., Ves. & Bea., 208. 87; Waters v. Carroll, 9 Yerg., 40 /n re Lloyd, 12 Ch. D., 447. 102; Kerr v. Brandon, 84 N. C, 41 Fowler v. Jarvis-Conklin M. 128; Rogers v. Odom, 86 N. C, Co., 63 Fed., 888. 432. 42 Barber v. International Co., 73 Conn., 587, 48 Atl., 758. 100 RECEIVERS. [chap. III. which an inference of his acceptance may be drawn. "^^ And it has been held improper to appoint the clerk of the court to act as receiver.^^ § 72. Officer of corporation usually ineligible as its re- ceiver; when eligible; shareholder; creditor. In compul- sory proceedings against corporate bodies for the appointment of receivers, the selection of a proper person for the receiver- ship is a question of much delicacy and grave importance. In this class of cases, it is regarded as manifestly improper to ap- point an officer of or person connected with the management of the corporation itself to the post of receiver.^^ In such cases the courts act upon the principle that if the officers of the corporation are unfit persons for the management of its affairs in their official capacity, they are equally unfit to be intrusted with such management in the capacity of receivers, and the rule of exclusion may be regarded as based upon sound principles of public policy. When, therefore, proceedings are instituted in equity against an insolvent banking corporation, under the statutes of a state authorizing the appointment of receivers of insolvent corporations for the winding up of their affairs, the court will not appoint an officer of the bank the receiver in the cause.'*'^ And, when, in proceedings against a corporation for the appointment of a receiver, the person selected for the trust was the secretary and treasurer of the company, as well as its legal adviser and counselor, and was also the largest single 44 Waters v. Carrol!, 9 Yerg., Co., 157 Fed., 794. See, also, 102. Atkins v. Wabash. St. L. & P. 45 White V. Britten, 72 S. C, R. Co., 29 Fed., 161. But see In 175, 51 S. E., 547. re Fifty-four First Mortgage 46 Attorney-General v. Bnnk of Bonds, 15 S. C, 304. Columbia, 1 Paige, 511; Baker v. 47 Attorney-General v. Bank of Administrator of Backus, 32 111., Columbia, 1 Paige, 511. And see 79; Freeholders v. State Bank, 28 as to considerations governing N. J. Eq., 166; McCullough v. the court in the appointment of Merchants Loan & Trust Co., 29 a receiver of a large banking N. J. Eq., 217; Finance Co. v. corporation, whose assets are of Charleston, C. & C. R. Co., 45 great value. In re Empire City Fed.. 436: Coy v. Title G. & T. Bank, 10 How. Pr., 498. CHAP. III.] SELECTION AND ELIGIBILITY. 101 creditor of the corporation, and was the legal adviser of the complainant, and drew the bill in the cause, he was held to be totally disqualified for the position. ^^ So the vice-president of an insolvent life insurance company, to whom it has assigned all its effects in trust for the benefit of its creditors, is not re- garded as a proper person to be appointed receiver over the company in an action to set aside such assignment.'*^ If, how- ever, the laws of the state providing for the voluntary dissolu- tion of insolvent corporations authorize the appointment of any of the officers or stockholders of the corporation as receivers, it is proper to appoint the president and the book-keeper of the corporation, when not otherwise disqualified, and when it is not shown that their conduct or management of the business has in any manner tended to produce the insolvency of the company.SO But the rule above announced forbidding the ap- pointment of an oflficer of a corporation as its receiver is by no means inflexible and in many cases it has been relaxed. And 48 Baker v. Administrator of Backus, 32 III., 79. The court say, p. 112: "It seems that the secretary and treasurer of the company was A. C. Coventry, a lawyer by profession, and its counselor and adviser. He was, too, the largest single creditor of the company, having claims against it exceeding $3,000. He was the adviser, also, of the com- plainant, Baker, whom the de- fendant in error represents, and drew the bill in the cause. He was, without having disclosed these facts to the court, appoint- ed the receiver of all the property of the company, and, without try- ing the market with it by an oflFering at public sale, he private- ly sold it, one day after he was appointed, and had his claim against the company fully paid out of the proceeds. . . . There was no necessity to ap- point a receiver, because no fraud is alleged or shown, and no suffi- cient proof that such a step was necessary to save the property from material injury, or rescue it from impending destruction. And there was a fatal objection to the person appointed receiver. He was not disinterested; he was the legal adviser of the complainant, and framed the bill; he was the legal adviser of the company; he was the largest single creditor; all these disqualified him, and he should not have been appointed." And see hi re Eckhardt Mfg. Co., 114 La., 119, 38 So., 78. '*9 Buck V. Piedmont & Arling- ton Life Insurance Co., 4 Fed., 849. 50 Jn re Eagle Iron Works, 8 Paige, 385, affirming S. C, 3 Edw. Ch., 385. 102 RECEIVERS. [chap. III. when it appears that an officer or director of a corporation is especially qualified by reason of his knowledge and familiarity with the affairs of the concern and that the best interests of the estate will be promoted by his management, a departure from the rule has been made, and an officer and director has been allowed to act as receiver of the corporation.^^ And in Michi- gan it has been held generally that a creditor, officer or share- holder of a corporation is competent to act as its receiver.^^ And in Louisiana it has been held that a shareholder in a cor- poration may properly be appointed its receiver.^^ But where an officer of a corporation has been appointed one of its re- ceivers and it appears that he has been speculating in the stock of the company, that fact constitutes good ground for his re- moval. ^^ And the president of a competing line of railroad is ineligible to act as receiver of an insolvent railway company.^^ § 73. One corporation may be receiver of another. Upon proceedings in equity against an insolvent corporation for the winding up of its affairs, and the appointment of a receiver, the person selected for the trust need not necessarily be an individual person, and a corporate body may itself be ap- pointed receiveir of another corporation upon the insolvency of the latter. And this is permissible, even though the corpora- tion selected for the office has previously recovered a judg- ment in its capacity of receiver of a former insolvent corpora- tion, against the defendant, so that it is to this extent a credit- or of the defendant ; there being no unbending riile of law that one who is a creditor of an insolvent institution is incompetent 51 Farmers' Loan & Trust Co. Judge, 125 Mich., 6, 83 N. W., V. Northern Pac. R. Co., 61 Fed., 1004. 546; Ralston v. Washington & C. 53 McGilliard v. Donaldsonville R. Ry. Co., 65 Fed., 557. And it F- & M. Works, 104 La., 544, 29 is held that service of process So., 254, 81 Am. St. Rep., 145. upon the president of a corpora- 54 Olmstead v. Distilling & C. tion who is also its receiver is F. Co., 67 Fed., 24. valid. Venner v. U. W. Co., 40 55 St. Louis, K. & S. R. Co. v. Colo., 212, 90 Pac, 623, 122 Am. Wear, 135 Mo., 230, 36 S. W., 357, St. Rep., 1036. 658, 33 L. R. A., 341. 52 Moran v. Wayne Circuit CHAP. III.] SELECTION AND ELIGIBILITY. 103 to act as its receiver.^^ And a corporation is not disqualified to act as receiver for an insolvent corporation because one of the directors of the insolvent concern is a shareholder, director and the president of the receiver corporation. ^'^ § 74. Trustee not usually eligible ; when eligible. As a general rule, courts of equity are averse to appointing as re- ceivers persons who occupy relations of trust toward the prop- erty or estate which is the subject of the receivership. And a trustee or executor, appointed by a testator for the manage- ment of his estate, is usually regarded as an improper person 56 In re Knickerbocker Bank. 19 Barb., 602. The Knickerbock- er Bank being insolvent, the United States Trust Company was appointed receiver. This company had previously, as Re- ceiver of the Knickerbocker Sav- ings Institution, recovered a judgment against the Knicker- bocker Bank. The Trust Com- pany, being the receiver of both institutions, and thus represent- ing both debtor and creditor, ap- plied to the court for instructions as to the course it should pur- sue. The court, Mitchell, J., say, p. 603: "If the appointment of receiver was only for the purpose of suit on behalf of the Savings Institution, there would be a manifest impropriety in making the Trust Company, acting for that institution, receiver also of the bank. But this was not the case. The receiver of the bank was to act for all the creditors of the bank, and was disinterested, except as to the one claim of the Savings Institution. The Trust Company was especially created by the legislature, in part to aid suit- ors and the court by assuming the exercise of trusts when it might be difficult to get others to execute them (as in this case), on account of the largeness of the amount of security that would be required, and the difficulty of ob- taining persons competent to give such security, and to man- age such affairs. More skillful persons to take charge of a trust like this, or more trustworthy, probably could not be found. The papers on the appeal show no objection to them; nor that any others were even named. And as there is no unbending rule of law that one who is a creditor of an insolvent institu- tion shall not be its receiver, the objection to the receiver falls to the ground. The Trust Com- pany being lawfully appointed re- ceiver, and deriving its appoint- ment from the court, or from a justice of the court, it had aright to apply to the court for instruc- tions. And in no case could it be more proper for the receiver to make the application than when it was the representative of both creditor and debtor." 57 Barker v. Wayne Circuit Judge, 117 Mich., 325, 75 N. W., 886. 104 RECEIVERS. [chap. III. to be appointed receiver of the estate.^^ And this is true re- gardless of whether he is a sole trustee, or whether there are others joined with him as co-trustees under the will of the tes- tator.59 The reason for this aversion to the appointment of such persons to receiverships is found in the fact that the court, in this class of cases, expects the trustee to watch the proceedings with an adverse eye, and to see that the receiver does his duty.^*^ The rule rejecting such persons is, however, not inflexible, and when it is apparent, considering the trustee's knowledge of and familiarity with the estate in litigation, that its best interests will be promoted by his appointment, a de- parture from the rule is allowed.^^ But it is held in such cases that the trustee will be allowed to act as receiver only upon condition that he shall derive no emolument from the office.^^ As illustrative of when such a departure from the rule is per- missible, it was held, where a testator had appointed as trustee and executor of his will a person who had for many years acted as receiver of certain of his property, that he was a fit person to be continued as receiver for the protection of an in- fant tenant for life.^^ § 75. Next friend of infants ineligible. It has been shown in the preceding section that the reason for the refusal of the courts to appoint as receivers persons occupying fiduciary relations to the subject-matter of the receivership is based upon the necessity of their watching the proceedings of the receiver adversely, and holding him to a strict account in the perform- ance of his duties. The same reasoning is applicable to the case of a bill filed by the next friend of infants, against the exec- utors of their estate, for an accounting and a receiver. And 58 Sutton V. Jones, 15 Ves., 584; Newport v. Bury, 23 Beav., 30; V. Jolland, 8 Ves., 12; Patterson v. Northern Trust Co., Sykes v. Hastings, 11 Ves., 363. 230 111., 334, 82 N. E., 837. 59 V. Jolland, 8 Ves., 72. 62 Hibbert v. Jenkins, 11 Ves., 60 Sykes v. Hastings, 11 Ves., 363. 363. 63 Newport v. Bury, 23 Beav., 61 Hibbert v. Jenkins, cited in 30. Sykes v. Hastings, 11 Ves., 363; CHAP. III.] SELECTION AND ELIGIBILITY. 105 in such a case the next friend will not be appointed, since it is his duty to watch the accounts and scrutinize the conduct of the receiver, and the two characters are regarded as so incom- patible with each other that the court will not permit them to be combined in one and the same person. ^4 § 76. Mortgagee eligible as receiver of mortgaged premises. An apparent exception to the rule that trustees are ineligible as receivers over the subject-matter of their trust has been recognized in the case of a mortgagee of real estate, occupying the relation of a trustee of the equity of redemption. And such mortgagee has been appointed receiver of the mort- gaged premises, but his position and duties as receiver were held to be paramount to those as mortgagee, and his interest in the latter capacity was held to be subordinate to his duties as receiver 65 § 77. Receiver of debtor ineligible as his assignee in bankruptcy. The position of a receiver of the estate and effects of a debtor, appointed under proceedings in a state court, is regarded as incompatible with that of a trustee or assignee of the estate of the same debtor in bankruptcy. And when pro- ceedings in bankruptcy are subsequently instituted against the debtor in the federal court, the latter tribunal will not permit the receiver of the state court to be elected assignee or trustee of the bankrupt's estate.^^ § 78. Administrator of deceased partner eligible as re- ceiver of firm assets. In partnership cases, the adminis- trator of a deceased partner, if a fit person in other respects, may be appointed receiver of the firm assets, when the surviv- ing partners are guilty of laches and waste in the settlement of the business. For while, primarily, such administrator has no rights in the settlement and adjustment of the partnership affairs, yet if there be unreasonable delay in the performance of this duty by the surviving partners, it becomes the right 64 Stone V. Wishart, 2 Madd., 66 /„ re Stuyvesant Bank, 5 63, 1st American Edition, 374. Benedict, 566; S. C, 6 Bank. Reg., 65 Bolles V. Duff, 54 Barb., 215. 272. 106 RECEIVERS. [chap. III. and duty of the administrator of the deceased partner to file a bill for an accounting and a receiver, and he himself may then be appointed upon giving additional bond with proper secur- ity.67 § 79. Particular person nominated in bill; consent of parties. When the bill prays for the appointment of a par- ticular person as receiver, and such person is appointed by the court, it does not necessarily follow that he was appointed sole- ly because recommended in the bill. And in such case, on ap- peal to a court of last resort, it will be presumed that the court below acted upon its own judgment in making the selection.^^ But in the Irish Chancery, it is said to be contrary to the prac- tice of the court to appoint as receiver a particular person who is nominated by consent of the parties. ^^ § 80. Effect of interest as stockholder and director of a plaintiff corporation. The interest of a stockholder and director in a banking corporation, which was the plaintiff in the action, has been regarded as sufficient to disqualify him for the post of receiver; although in such case, where the inter- est was not known to the court at the time of appointment, and he had entered upon his duties and spent much time in familiarizing himself with the property, and no misconduct or impropriety was shown, he was allowed to continue in office until a new reference could be had to a master, to make a new appointment."^^ § 81. Mortgagee of foreign estates eligible. Notwith- standing the general doctrine regarding receivers as impartial persons between the parties, and not interested in the result of the cause, there may be circumstances justifying the appoint- ment of a party in interest. And a mortgagee of estates located in the West Indies was, in one case, deemed a proper person 67 Miller v. Jones, 39 111., 54. 70 Bank of Monroe v. Schermer- 68 Johns V. Johns, 23 Ga., 31. horn, Clarke Ch., 366. 69 Leach v. Tisdal, 4 Ir. Ch., N. S., 209. CHAP. III.] SELECTION AND ELIGIBILITY. 107 to be appointed in England as receiver of the mortgaged prop- erty, and without requiring him to give the usual security."^^ § 81a. Objection to eligibility must be made in apt time; how waived. An objection to the ehgibihty of a re- ceiver must be made in apt time and unless this is done it will be deemed to be waived. Where, therefore, a decree appoint- ing a receiver has been affirmed upon appeal or writ of error, the competency of the receiver to act in that capacity can not be questioned by an appeal taken or a writ of error sued out for the purpose of reviewing subsequent orders entered in the re- ceivership cause, especially where the party complaining has consented to the entry of orders which recognize the capacity of the receiver to act.'^^ And where a plaintiff who has pro- cured the appointment of a receiver has failed at the proper time to raise any objection to the qualification of the receiver, he can not afterward question such appointment upon the ground that the receiver was disqualified by reason of interest.'^^ 71 Davis V. Barrett, 13 L. J., N. 73 Threadgill v. Colcord, 16 S. Ch., 304. Okla., 447, 85 Pac, 703. T^p^by V. Title G. & T. Co., 166 111., 336, 46 N. E., 1110. CHAPTER IV. OF THE PRACTICE. I. General Rules of Practice § 82 II. Time of Appointment 103 III. Notice of the Application Ill I. General Rules of Practice. § 82. Practice divergent in different states. 83. Receiver appointed on bill; specific prayer not necessary. 83a. Court may appoint of its own motion. 84. Appointment made on notice and affidavits; and only against a party. 85. Affidavits; admissibility of, upon hearing; affidavits must be entitled in the cause. 86. Imperfections in bill or record no bar to appointment. 87. Order should specify over what property receiver is appointed. 88. Facts need not appear in pleadings; affidavits; copies. 89. Affidavits should be distinct and precise; general allegations not sufficient; information and belief; verification may be waived. 90. Reference to master to appoint; exceptions to master's appoint- ment. 91. Successive applications for receiver. 92. When motion reheard after appointment. 93. Practice on extending receivers. 94. Appointment by consent. 95. Effect of demurrer pending; amendment to bill; opportunity to plead or answer when demurrer overruled. 96. English practice as to hearing in court and in chambers. 97. Regularity of original appointment not examined on motion to substitute. 98. Receiver may be appointed on application for an injunction. 99. Omission of receiver to be sworn not fatal; when taking of oath presumed. 100. Order of appointment should not apply proceeds of sale. 101. Appointment no bar to plaintiff dismissing his bill. 101. Order made in the alternative. § 82. Practice divergent in different states. In a gen- eral treatise upon the law of receivers, it is neither expedient 108 CHAP. I\'.] PRACTICE. 109 nor desirable to present in detail the practice prevailing^ in the different states in administering this species of relief, since this, like most other questions of practice, is largely regulated by statute and usage in the different states. Indeed, it is practical- ly impossible to reduce to a harmonious system of rules all questions of practice relating to the appointment of receivers, since the practice and procedure in administering equitable re- lief are widely divergent in the various states. Some general principles, however, which are believed to be recognized by most of the courts, may be deduced from the authorities, and their presentation will occupy the present chapter.^ § 83. Receiver appointed on bill; specific prayer not necessary. The usual practice, both in England and America, is to appoint receivers only upon bills filed for that purpose, and as a general rule the courts will not grant the re- lief merely upon petition, when no cause is actually pending and no bill filed to give the court jurisdiction, unless in very 1 In California it is held, under the statutes of the state, that a judge at chambers has power to appoint a receiver, and upon an ex parte application. Real Estate As- sociates V. Superior Court, 60 Cal., 223. In Virginia, the power to ap- point a receiver in a judgment cred- itor's suit is incidental to the power of granting an injunction; and since a judge may grant an injunction in vacation, he may also appoint a re- ceiver in vacation. Smith v. Butcher, 28 Grat., 144. The appointment of a receiver in vacation is not war- ranted by the statutes of Illinois prescribing the powers which may be exercised by circuit judges in vacation. Therefore, an order of a state court appointing a receiver over a railway in vacation is a nul- lity, and the seizure of the property by a receiver subsequently appointed in a federal court is no interference with the state court. Hammock v. Loan and Trust Co., 105 U. S., 11 . In Indiana it is held that, under the code of procedure, the courts have the same power to appoint receivers, and for the same purposes, as per- tained to courts of equity prior to the adoption of the code. Bitting V. Ten Eyck, 85 Ind., 357. And see this case as to the practice and procedure in appointing receivers in Indiana. To the same point see Hursh V. Hursh, 99 Ind., 500. And it is improper for the court to ap- point a receiver upon its own mo- tion. White V. Britton, 72 S. C, 175, 51 S. E., 547. As to the second appointment of a receiver after a prior appointment of the same per- son under a void order, see Robin- son V. Dickey, 143 Ind., 214, 42 N. E., 638. 110 RECEIVERS. [chap. IV. Special cases of emergency.^ And since a suit in chancery is not begun until the filing of the bill, if a receiver is appointed upon an c.v parte application before the bill is filed, the appoint- ment will be revoked upon appeal, without considering the mer- its of the application.^ And it has been held in England that the court has no power to appoint a receiver upon the applica- tion of a defendant in a cause, even though the plaintiff, after filing his bill for a receiver against the defendant, refuses to move for a receiver and opposes defendant's application.* It is not, however, indispensable that the bill should contain a specific prayer for a receiver, if the facts stated are sufficient to justify the appointment, since the necessity for the relief frequently occurs after the filing of the bill.^ And a receiver may be appointed at the final hearing, even though the bill contains no prayer for such relief.^ § 83a. Court may appoint of its own motion. Where the title to the subject-matter of the controversy is in dispute and both sides claim the right of possession, and it is conceded by all parties that the property should be operated pending the determination of the litigation, it is held that the court, of its own motion, may properly appoint a receiver to take and hold possession of the property pending the litigation.*^ ^ Ex parte Mountfort, 15 Ves., 500; Commercial and Savings Bank 445; Leddel's Executor v. Starr, 4 v. Corbett, 5 Sawyer, 172; McGar- C. E. Green, 159. rah v. Bank, 117 Ga., 556, 43 S. E., 3 Crowder t.-. Moone, 52 Ala., 220; 987; Elk Fork Oil & Gas Co. v. Gold Hunter M. & S. Co. v. Holle- Foster, 39 C. C. A., 615, 99 Fed., man, 3 Idaho, 99, 27 Pac, 413. 495. And see Jordan v. Jordan, 121 ■i Robinson v. Hadley, 11 Beav., Ala., 419, 25 So., 855. But see Au- 614. But upon a bill by a second gusta Ice Mfg. Co. v. Gray, 60 Ala., mortgagee for a foreclosure, a de- 344; Wilson v. Maddox, 46 West fendant, who was a prior mort- Va., 641, 33 S. E., 775. gagee, has been allowed a receiver 6 See observations of the Vice- ,against the mortgagor also joined Chancellor in Osborne v. Harvey, as defendant. Henshaw v. Wells, 1 Y. & C. C. C, 116; Merrill v. 9 Humph., 568. Elam. 2 Tenn. Ch.. 513. See, also, 5 Henshaw v. Wells, 9 Humph., Bowman v. Bell, 14 Sim., 392. 568; Ladd v. Harvey, 21 N. H., 514; 7 Elk Fork Oil & Gas Co. v. Fos- Malcolm v. Montgomery, 2 Mol., ter, 39 C. C. A., 615, 99 Fed., 495. CHAP. IV.] PRACTICE. Ill § 84. Appointment made on notice and affidavits; and only against a party. It is irregular to appoint a receiver when no motion for that purpose has been made, and no proof adduced showing a necessity for the rehef. And the motion should properly be founded on affidavits or papers, copies of which should be served with the notice of the application ; ^ although if the papers on which the moving party seeks the re- lief are already on file in the cause, it is sufficient to refer to them in the notice.^ But a receiver should not be appointed against a person not before the court, and not made a party to the action in which the appointment is sought.^-^ § 85. Affidavits; admissibility of, upon hearing; affi- davits must be entitled in the cause. Upon an application for a receiver after the coming in of the answer, it is proper for the court to permit affidavits to be read in behalf of plaintiff, since the object of the court is to be informed of the true circumstances of the case, in order that it may act advisedly upon the application.^^ In the Irish Chancery, upon a motion for a receiver on bill and answer, affidavits may be read in be- half of plaintiff in reply to the answer, in explanation of a doubtful passage therein, which does not disclose the whole truth to the court, the affidavit disclosing all the facts.^^ And where an application for the appointment of a receiver is made before the defendant has filed his answer, the latter may be heard upon his affidavit by way of defense to the application. ^^ But upon a motion for an interlocutory injunction and receiver pendente lite, it is improper to receive affidavits which are not entitled in the cause and which were not taken for the purpose of being used as evidence.^^ 8 Hungerford v. Gushing, 8 Wis., H Ladd v. Harvey, 21 N. H., 514. 320; Brundage v. Home S. & L. 12 Bell v. M'Loghlin, Flan. & K., Assn., 11 Wash., 277, 39 Pac, 666; 272. Jacobs V. Miller, 10 Hun, 230. iSWhitehouse v. P. D., T. & E. 9 Hungerford v. Gushing, 8 Wis., Ry. Go., 9 Wash., 558, 38 Pac, 152. 320. 14 Warren v. Monni.sh, 97 Ga., 10 Gravenstine's Appeal, 49 Pa. 399, 23 S. E., 823 ; Whitley v. Berry, St., 310. 105 Ga., 251, 31 S. E., 171. 112 RECEIVERS. [chap. IV. § 86. Imperfections in bill or record no bar to appoint- ment. The fact that the bill upon which an injunction and a receiver are sought is multifarious, or that it is liable to ob- jection because of misjoinder of parties, constitutes no suf- ficient objection to a motion for a receiver. Nor is it a suf- ficient answer to the application that the record is incomplete in particulars, or not in such shape as may be necessary to en- able the court to administer complete justice between the parties.15 § 87. Order should specify over what property receiver is appointed. The order of appointment should distinctly state upon its face over what property or fund the receiver is appointed, in order that persons dealing with him may know what property is in possession of the court by its ofificer.^^ And an order which directs a receiver to take possession of all the property and assets of an insolvent is sufficiently broad to in- clude within its scope the possession of real estate belonging to the insolvent, although neither the petition nor the motion upon which the receiver was appointed describes or refers to the real estate. ^"^ And an order appointing a receiver of the "incomes of the outstanding trust property in the pleadings mentioned" is not sufficiently distinct and explicit within the meaning of the rule.^^ But where a receiver is appointed to take charge of all the assets of a corporation, it is not necessary that the petition should allege of what the assets consist or that it should describe them in detail, although he will act at his peril if he takes possession of anything not expressly men- tioned in the order of his appointment.^^ § 88. Facts need not appear in pleadings; affidavits; copies. It is not regarded as necessary or essential to the 15 Evans v. Coventry, 5 DeG., M. 17 Cheney v. Maumee Cycle Co., & G., 911, reversing S. C, 3 Drew., 64 Ohio St., 205, 60 N. E., 207. 75. 18 Crow V. Wood, 13 Beav., 271. 16 Crow V. Wood, 13 Beav., 271; 19 Hale-Berry Co. v. Diamond O'Mahoney v. Belmont, 62 N. Y., State Iron Co., 94 Ga., 61, 22 S. E., 133, affirming S. C, 2,1 N. Y. Siipr. 217. Ct. R., 223. CHAP. IV.] PRACTICE. 113 appointment of a receiver that the facts upon which the ap- plication is based should be set fortli in the pleadings, but it is sufficient if they are presented to the court by affidavit upon the hearing of the motion. Indeed, this would seem to follow necessarily from the very nature of the appointment, which is usually treated as an auxiliary proceeding, and not the ultimate object of the action. 20 But it is not sufficient in the application for a receiver to allege merely the legal conclusions upon which plaintiff relies, and the facts must be averred upon which such conclusions are predicated.^! And where, under the practice of the state, the appellate court or court of final resort rehears and decides cases upon the merits, upon an appeal from an order granting an injunction and appointing a receiver, copies of the affidavits and testimony upon which the motion was granted should accompany the record. ^2 And upon an appeal from an interlocutory order appointing a receiver, where the application has been heard upon affidavits, such affidavits must be incorporated into the record if the reviewing court is to pass upon the merits of the appeal. 23 And such affidavits will only be considered by an appellate tribunal, upon an appeal from an order appointing a receiver, when properly incorpo- rated into the record, as by a bill of exceptions. 2* 20 Hottenstein v. Conrad, 9 Kan., object of a suit. The statute says, 435. This was an action for the 'a receiver may be appointed . . . settlement of partnership affairs, in in the action,' etc. All that the which a receiver was appointed pleadings need disclose is, that the upon notice and motion, supported action pending is one of a class in by affidavits. Brewer, J., says, which the statute says a receiver p. 438: "It is objected that the pe- may be appointed." tition contains no averment that 21 Heavilon v. Farmers Bank, 81 there was danger that the property Ind., 249; Union Boom Co. v. Sam- would be wasted or injured before ish Boom Co., 33 Wash., 144, 74 the answer, or before the trial of Pac, 53. the case. Such an averment was 22 Schlecht's Appeal, 60 Pa. St., entirely unnecessary. The showing 172. of the necessity for a receiver need 23 Chicago & Southeastern Ry. not be in the petition. The appoint- Co. v. McBeth, 149 Ind., 78, 47 N. ment of a receiver is a provisional E., 678. remedy. It is an auxiliary proceed- 24 Barnes v. Jones, 91 Ind., 161. ing. It is not the ultimate end or Receivers — 8. 114 RECEIVERS. [chap. IV. § 89. Affidavits should be distinct and precise; general allegations not sufficient; information and belief; verifica- tion may be waived. Affidavits upon which the appHcation is based should be distinct and precise in their allegations, es- pecially where fraud is one of the grounds relied upon for the interference of the court. And where a receiver is sought of the affairs of a corporation, mere general allegations, in the affidavits supporting the motion, as to the belief of affiants that great frauds have been committed against the corporation, will not justify the relief, when it is not stated by whom the frauds have been committed, or in what they consist. ^^ And it may be stated generally that, upon an application for a receiver pen- dente lite, the verification must be based upon the knowledge of the affiant and if it is based upon information and belief only, it will be held insufficient.^^ Where, however, under 25 Oakley v. Patterson Bank, 1 Green Ch., 173. Under the statute of Alabama it is held that the veri- fication of a bill is sufficient without the subscription of the affiant to the affidavit. Culver v. Guyer, 129 Ala., 602, 29 So., 779. Under the code of Georgia requiring that "petitions for restraining order, injunction, re- ceiver, or other extraordinary equi- table relief should be verified posi- tively by the petitioner, or support- ed by other satisfactory proof," it is held that an affidavit made by the attorney for the petitioner is suffi- cient if it states positive^' *h5t the recitals of the petition are true of his own knowledge. Boston Mer- cantile Co. V. Ould-Carter Co., 123 Ga., 458, 51 S. E., 466. 26 Burgess & Co. v. Martin, 111 Ala., 656, 20 So., 506, followed by Smith-Dimmick Lumber Co. v. Teague, 119 Ala., 385. 24 So.. 4; Pollard V. Southern Fertilizer Co., 122 Ala., 409, 25 So., 169; Schilcer V. Brock, 124 Ala., 626, 27 So., 473 ; Benepe-Owenhouse Co. v. Schei- degger, 32 Mont., 424, 80 Pac, 1024 ; New South B. & L. Assn. v. Wil- lingham, 93 Ga., 218, 18 S. E., 435. It is to be observed that in Pollard V. Southern Fertilizer Co., supra, Schilcer v. Brock, supra, and Ben- epe-Owenhouse Co. V. Scheidegger, supra, the appointment of the re- ceiver was without notice. In Pol- lard V. Southern Fertilizer Co., supra., the verification was that the facts and allegations, so far as they came within affiant's own knowl- edge, were true, and so far as de- rived from the knowledge of others, he believed them to be true. This was held insufficient. In Schilcer V. Brock, supra, the verification was to the efTect that the matters alleged in the bill as facts were true and those alleged upon information and belief, the affiant believed to be true. This was held to be insufficient for the appointment of a receiver with- out notice. CHAP. IV.] PRACTICE. 115 the laws of a state it is made the duty of the attorney-general, upon the insolvency of a banking corporation, to apply for an injunction and a receiver for the winding up of its affairs, it is not necessary that the information filed by the attorney- general for this purpose should be verified by a positive affi- davit as to the insolvency of the bank, but it is sufficient that it is alleged upon information and belief, since only the officers of the bank can swear positively as to its condition.^'^ And where a bill for an injunction is improperly verified at the time of the appointment of a temporary receiver, the plaintiff may, by leave of court, add the proper verification upon an interlocu- tory hearing before the appointment of a permanent receiver.28 And it is to be observed that the necessity for a verification may be waived.29 § 90. Reference to master to appoint; exceptions to master's appointment. Under the English practice, as well as under the chancery practice in New York prior to the adoption of the code of procedure, it was customary to grant an order of reference to a master for the purpose of nominating or appointing a receiver. Under the New York practice, when the matter was referred to a master to report a proper person to be appointed, the appointment was not regarded as complete until confirmed by special order of the court. Where, however, the master was himself directed to appoint the receiver and to take from him the requisite security, no confirmation of the appointment was necessary. In the latter case the master, after approving of the receiver and the sureties offered, took the necessary bond, which he filed with the report of his appoint- ment, stating that he had approved of the bond and that it was duly filed. And upon the filing of such report the appointment was deemed completed and the receiver might at once enter upon his duties. If either party was dissatisfied with the mas- 27 Attorney-General v. Bank of German National Bank, 59 Neb., Columbia, 1 Paige, 511. 229, 80 N. W., 820; Veith v. Ress, 28 Rice V. Dodd, 94 Ga., 414, 20 60 Neb., 52, 82 N. W., 116; Murphy S. E.. 339. V. Fidelity M. F. Ins. Co., 69 Neb.,. 29 Farmers & Merchants Bank v. 489, 95 N. W., 1022. 116 RECEIVERS. [chap. IV. ter's appointment, the practice seems to have been to present his objections to the court by a petition, upon due notice to all parties in interest, praying that the master might review his re- port.20 Under the English practice, when a reference was had to a master with directions to appoint, the appropriate practice in objecting to the master's action was by exceptions to his report. 21 § 91. Successive applications for receiver. It is proper on denying a motion for a receiver to give leave to the moving- party to renew his motion upon additional proof, if it appears that he may, by obtaining new proof, present a strong case for the relief sought.^^ ^^d it is competent for plaintiff to ask and for the court to appoint a receiver after a hearing, and even after a rehearing and refusal, when an altered state of facts is presented showing an appropriate case for the relief.^^ But when the application has once been before the court and has been denied, a receiver will not be appointed upon a subse- quent application upon a simple notice for that purpose, found- ed upon the same papers as before, without affidavits or addi- tional proof showing a necessity for the relief. And this rule holds good, even though the court may have intimated, on the former application, that a receiver might afterward be granted if circumstances should warrant the relief.^'* § 92. When motion reheard after appointment. After a receiver has been appointed upon motion, pending an action against defendant, it is proper for the court to entertain an ap- plication to open and rehear the motion for the receiver, and 30 /n re Eagle Iron Works, 8 tinued to the hearing, and a writ of Paige, 385. error is sued out to reverse such 31 Creuze v. Bishop of London, order of continuance, it is compe- Dick., 687. tent for the court below in term 32 Devlin v. Hope, 16 Ab. Pr., 314. time, and before any remittitur has 33 Attorney-General v. Mayor of been returned from the supreme Galway, 1 Mol., 95. court, to appoint a receiver upon 34 Fenton v. Lumberman's Bank, the same bill and upon the same Clarke Ch., 360. In Georgia it is state of facts. McCaskill v. War- held that when an application for ren, 58 Ga., 286. a receiver made in vacation is con- CHAP. IV.] PRACTICE. 117 to allow defendant to introduce proofs which could not be produced upon the former hearing. And if satisfied that the case is not a proper one for a receiver, the court may, upon such rehearing, deny the motion. ^^ But, since a motion for a receiver in a creditor's suit is not regarded as involving the merits of the cause, being only incidental to the principal re- lief sought, where the courts are prohibited by statute from re- hearing orders made in the progress of a cause which do not involve the merits, a motion for a receiver will not be reheard when once granted. ^^ § 93. Practice on extending receivers. The practice is frequently adopted, when a receiver has been appointed over a particular subject-matter in behalf of one creditor or a class of creditors, of extending the same receiver for the protection of other parties interested in the same subject-matter, for the purpose of saving the expense of a new appointment; or, if appointed over a part only of defendant's estate, he may be ex- tended over the residue for the benefit of other creditors. In all such cases, the order extending the receiver is regarded as substantially an original or new appointment.^"^ And when a receiver has already been appointed in a pending suit and ap- plication is made for like relief in a subsequent suit concern- ing the same property, the court will not ordinarily displace the existing receiver, preferring as a general rule to extend the receivership in the former suit to the latter. But in all such cases of extension the rights of the parties in each suit are substantially the same as if different receivers had been ap- pointed.^^ § 94. Appointment by consent. Under the Irish chan- cery practice, receivers are frequently appointed by consent of 35 Belmont v. Erie R. Co., 52 Association v. Newry & Armagh R. Barb., 637. Co., Ir. Rep., 2 Eq., 1; LeGrand v. 36 Sheldon v. Weeks, 2 Barb., 532. O'Neill, 2 Ir. Ch., N. S., 569; Ab- 37 Corbet v. Mahon, 2 Jo. & Lat., bott v. Stratten, 3 Jo. & Lat, 603. 671 ; Agra & Masterman's Bank v. 38 State v. J., P. & M. R. Co., 15 Barry, Ir. Rep., 3 Eq., 443. See, Fla., 201. also. Imperial Mercantile Credit 118 RECEIVERS. [chap. rv. the parties to a cause, the consent in such cases being made a rule of court. ^^ But such a consent will not be made a rule of court when it provides that the receiver shall not be obliged to account before the master, unless called upon so to do, since this would, in effect, make him merely the private agent of the parties, and not an officer of court.'*^ § 95. Effect of demurrer pending; amendment to bill; opportunity to plead or answer when demurrer overruled. Upon a special motion for a receiver, when notice has been given to defendant's solicitor, who does not appear or oppose the motion, the fact of a dem.urrer pending to the bill affords no objection to granting the order; since, if defendant intends to rely upon such demurrer as a bar to the appointment, he should appear upon the hearing of the motion and urge his objections. ^1 And when an answer has been filed to the origi- nal bill, the court will entertain a motion for a receiver, not- withstanding the original bill has been amended after answer, and a plea has been filed to the amended bill and the plea is still undisposed of.^^ g^t where a demurrer to the bill is over- ruled, the court should ordinarily not appoint a receiver at once but should first give the defendant an opportunity to plead or answer. "^^ § 96. English practice as to hearing in court and in cham- bers. Under the English practice it is held that, when the application for a receiver is made for the first time in the cause, i*- must be heard in court ; but if the application is only to sup- ply the place of a receiver already appointed, and whose office has become vacant by death or otherwise, it may be made in chambers. ^^ § 97. Regularity of original appointment not exam- ined on motion to substitute. Upon a mere formal mo- 39 See Burke v. Burke, Flan. & 42 Thompson v. Selby, 12 Sim., K, 89. 100. 40 Richey v. Gleeson, Flan. & K., 43 People v. District Court, 33 99. Colo., 293, 80 Pac, 908. 41 Howard v. Palmer, Walk. 44 Grote v. Bing, 9 Hare, Appen- (Mich.), 391. dix, 1. CHAP. IV.] PRACTICE. 119 tion to substitute one person in place of another as receiver in the action, the opposing party is not at hberty to examine the regularity of the original appointment, or the regularity of the proceedings had in the suit, since this would operate as a sur- prise upon the moving party, and he is entitled to notice of such objections.^^ § 98, Receiver may be appointed on application for an injunction. It would seem that a receiver may be ap- pointed in a case otherwise proper for the relief, if the facts showing the necessity for the relief and the proper parties are before the court, although the application was made for an injunction, and did not specify the appointment of a re- ceiver.'*^ § 99. Omission of receiver to be sworn not fatal ; when taking of oath presumed. Where a statute, authorizing the appointment of receivers to wind up the affairs of banking corporations, requires them to be sworn before entering upon their duties, the omission to be sworn does not have the effect of vitiating their proceedings, since they are officers of the court and their proceedings are subject to revision by the court.'*'^ And in an action by a receiver to recover money al- leged to be due him in his official capacity, where it appears that he duly qualified by giving bond pursuant to the order of appointment in the receivership proceeding, the taking of the necessary oath will be presumed. ^^ § 100. Order of appointment should not apply proceeds of sale. As regards the form of an order appointing a receiver and authorizing him to sell the property in controver- sy, it would seem to be the better practice not to include in such order a direction as to applying the proceeds of the sale, since 45Fassett v. Tallmadge, 13 Ab. 47 American Bank v. Cooper, 54 Pr., 12. Me., 438. 46 Whitney v. Buckman, 26 Cal., 48 Seymour v. Aultman Co., 109 447; Elk Fork Oil & Gas Co. v. Iowa, 297, 80 N. W., 401. Foster, 39 C. C. A., 615, 99 Fed., 495. 120 RECEIVERS. [chap. IV. this is a matter for adjustment after a final decree settling the rights of all parties in interest. "^^ § 101. Appointment no bar to plaintiff dismissing his bill. When a receiver is appointed upon an interlocutory application, before final decree in the cause, the court does not thereby acquire such absolute control over the cause as to de- prive plaintiff in the action of the privilege of dismissing his bill if he sees f^t.^*^ § 102. Order made in the alternative. There are fre- quent instances to be met with in the reports where the court, although of opinion that plaintiff was entitled to a receiver, has made the order in the alternative, requiring defendant to satisfy plaintiff's demand, or in default thereof that a receiver be appointed.^^ 49 West V. Chasten, 12 Fla., 315; 51 See for such a case, Curling v. Krohn v. Weinberger, 47 West Va., Townshend, 19 Ves., 628. 127, 34 S. E., 746. 50 White V. Lord Westmeath, Beat., 174. CHAP. IV.] PRACTICE. 121 11. Time of Appointment. § 103. Formerly appointed only after answer; modern English prac- tice. 104. Grounds for appointment before answer under English prac- tice. 105. Granted before answer in this country; creditors' suits. 106. Strong case must be shown to warrant relief before answer; illustrations. 107. Application before answer heard on affidavits; motion to dis- charge receiver after answer. 108. Appointment not to be antedated. 109. May be made at the final hearing. 110. Allowed after final decree in cases of emergency; illustrations; appointed pending appeal. § 103. Formerly appointed only after ansv/er; modern English practice. Receivers are usually appointed upon interlocutory application, in the earlier stages of the cause, al- though, as will hereafter be shown, the appointment may be made at the final hearing and as a part of the final decree. Under the earlier English practice, the court would not en- tertain an application for a receiver until after defendant had appeared and answered. The rule, however, was gradually relaxed, and under the modern practice receivers were fre- quently granted before answer. And although the English Court of Chancery was always averse to interference before answer, unless for good cause shown, yet it may be regarded as the settled English practice to grant receivers before answer, in cases of emergency calling for the immediate interference of the court to protect the equities of plaintiffs, and where the merits of the case are sufficiently disclosed by affidavits.^2 52Vann v. Barnctt, 2 Bro. C. C, not granting a receiver before an- 158; Duckworth v. Trafford, 18 swer, was first broken through by Ves., 283; Metcalfe v. Pulvertoft, 1 Lord Kenyon in Vann v. Barnett, Ves. & Bea., 180; Woodyatt v. and that the order then made for a Gresley, 8 Sim., 180. In Duckworth receiver before answer had been V. Trafford, 18 Ves., 283, Lord El- followed since. He seems, however, don observes that the old rule, of to have fallen into an error as to 122 RECEIVERS. [chap. IV. And if defendant has put in an affidavit in opposition to plain- tiff's affidavits upon the motion, the affidavit will be regarded as a sufficient appearance for the purpose of entertaining the. motion. ^^ § 104. Grounds for appointment before answer under English practice. As regards the grounds upon w^hich the application has been entertained before answer, under the English practice, it has been held that where plaintiff shows a good equitable title to the property in controversy, as against which the title of defendant can not prevail, sufficient cause is presented.^* So when habitual and manifest abuse is shown on the part of a defendant executor in the management of his trust, and when he is wasting and endangering the property intrusted to him, a receiver may be appointed before answer. ^^ § 105. Granted before answer in this country; credit- ors' suits. The modern English practice, allowing the ap- pointment of a receiver before answer in cases of emergency, was adopted by the New York Court of Chancery, and has been generally followed in this country. And it may now be regarded as the uniform and well-established practice to en- tertain the application and to grant the relief before answer, where plaintiff can satisfy the court that he has an equitable claim to the property in controversy, and that a receiver is necessary to preserve it from loss, or where a clear case is shown of fraud and imminent danger unless the relief is granted.^^ the first departure froiR the ancient 53 Vann v. Barnett, 2 Bro. C. C, practice, since Lord Kenyon, in 158. Vann v. Barnett, only says that a 54 Metcalfe v. Pulvertoft, 1 Ves. motion for a receiver before answer & Bea., 180. was unusual, and that he would, if 55 Middleton v. Dodswell, 13 Ves., necessary, have made a precedent. 266. Vann v. Barnett was decided in 56 Bloodgood v. Clark, 4 Paige, 1787, and in a note to the case as 574; Bank of Monroe v. Schermer- reported in 2 Bro. C. C, 158, it is horn, Clarke Ch., 214; Jones v. said by the reporter that a receiver Dougherty, 10 Ga., 273 ; Williams v. before answer was granted by Lord Jenkins, 11 Ga., 595; Johns v. Johns, Bathurst in Compton v. Bearcroft, 23 Ga., 31 ; Clark v. Ridgely, 1 Md. Trinity Term, 1773. Ch., 70; United States v. Church, CHAP. IV.] PRACTICE. 123 In other words, if the emergency shown is such as to render it essential to justice that a receiver should be immediately appointed, it may be done before answer, since to delay the re- lief might entirely defeat the object sought by the applica- tion.^'^ The practice is especially salutary in cases of creditors' bills in aid of the enforcement of judgments, and in this class of cases receivers are almost uniformly granted before an- swer -58 § 106. Strong case must be shovs^n to warrant relief before answer; illustrations. While the practice of ap- pointing receivers before answer, in cases of emergency, is thus shown to be well established and generally followed by courts of equity in this country, yet the grounds which will induce the court to interfere at this stage of a cause must be very strong, and there must be clear proof of fraud, or of immediate danger to the property unless it is taken into the custody of the court.^^ And when there are no allegations of defendant's insolvency. 5 Utah, 361. See, also, Baker v. Adm'r of Backus, 32 111., 115, 116; Whitehead v. Wooten, 43 Miss., 523; Davis v. Browne, 2 Del. Ch., 188; Probasco v. Probasco, 30 N. J. Eq., 108. Bloodgood v. Clark, 4 Paige, 574, was an appeal from a decision of the Vice-Chancellor, re- fusing an application for a receiver of the property and effects of de- fendants in a creditor's bill. Wal- worth, Chancellor, says, p. 576: "The Vice-Chancellor was wrong in supposing that a receiver could not be appointed, in a case of this kind, until after the defendants had put in their answer. By the ancient practice of the Court of Chancery in England, a receiver was not ap- pointed until after the coming in of the defendant's answer. This prac- tice appears to have been first broken in upon in the case of Comp- ton V. Bearcroft, in 1773. And Lord Kenyon, the master of the rolls, ap- pointed a receiver before answer in the case of Vann v. Barnett, in 1787, 2 Brown's C. C, 158. He said that, although a motion for a receiver before answer was then unusual, yet had it been necessary he would have made a precedent. And it now appears to be well settled, both here and in England, that a receiver may be appointed before answer, provided the plaintiff can satisfy the court that he has an equitable claim to the property in controversy, and that a receiver is necessary to pre- serve the same from loss." 57 Johns V. Johns, 23 Ga., 31. 58 See Bloodgood v. Clark, 4 Paige, 574; Bank of Monroe v. Schermerhorn, Clarke Ch., 214. 59 Clark v. Ridgely, 1 Md., Ch., 70; Brick Company v. Robinson, 55 Md., 410; Latham v. Chafee, 7 Fed., 525; West v. Swan, 3 Edw. Ch., 124 RECEIVERS. [chap. IV. or of danger to the property and interests concerned, the re- lief will not be granted before answer,^^ So when insolvency is the ground relied upon, but the affidavit on which the application is based merely states that defendant is not deemed a responsible man by those who know him, and the affidavit of defendant fully negatives the insolvency, a receiver will be re- fused.^^ And in an action brought by a shareholder of a cor- poration to cancel certain illegal stock, and to restrain the holders of such- shares from assigning or incumbering them, the appointment of a receiver of the shares is improper upon an ex parte application before answer, when it is not shown that defendants are irresponsible, or that there is any danger of loss from a transfer of the shares.^2 § 107. Application before answer heard on affidavits; motion to discharge receiver after ansv^er. Interlocutory applications for a receiver before answer are usually supported by affidavits of the grounds relied upon, and it would ordinarily seem to be sufficient if the facts upon which the application is based are verified by the affidavit of plaintiff alone.^^ And when plaintiff moves for an injunction and a receiver upon bill filed, before the coming in of the answer, upon grounds of emergency, defendant may be heard by affidavit in opposition to the motion. ^^ If the appointment is made before answer, 420; Baker v. Adm'r of Backus, 32 must be strong and special reasons III., lie, 116; Beecher v. Bininger, for the appointment before answer, 7 Blatchf., 170; Whitehead v. as on proof of fraud, by affidavits, Wooten, 43 Miss., 523. "The ap- or immediate danger to the proper- pointment of a receiver," says Sim- ty, unless at once taken in charge rail, J., in the case last cited, "is a by the court." peremptory remedial measure. Its 60 Simmons v. Wood, 45 How. effect is to deprive the defendant Pr., 269. in possession, temporarily at least, 61 West v. Swan, 3 Edw. Ch., 420. of his property, before final decree 62 People v. Albany & Susque- settling the rights of parties liti- hanna R. Co., 7 Ab. Pr., N. S., 290. gant. If the application is made 63 Jones v. Dougherty, 10 Ga., before the merits of the cause are 273 ; Krohn v. Weinberger, 47 West disclosed, as before a pro confesso Va., 127, 34 S. E., 746. or answer filed, there must be 64 Kean v. Colt, 1 Halst. Ch., 365 strong grounds laid. . . . There CHAP. IV.] ■ PRACTICE. 125 it is proper for the defendant, after filing his answer, to move to discharge the receiver; and if, upon such motion, the bill and answer, taken together, show that a receiver ought not to have been appointed, he will be discharged.^^ § 108. Appointment not to be antedated. It would seem that, as regards the rights of third persons, the appoint- ment of a receiver will not be allowed to take effect or date back by relation to a period prior to his appointment. It is, therefore, improper to insert such a clause in the order of ap- pointment, and its insertion will not be allowed to affect the rights of parties in interest and not notified. ^^ § 109. May be made at the final hearing. Although it is the usual practice to apply for a receiver upon interlocutory motion, yet in a proper case the appointment may be made at the final hearing, and as a part of the final decree.^^ Thus, in case of a judgment or decree dissolving a partnership, when a receiver is necessary to wind up the firm business, the ap- pointment may be made as a part of the decree and for the purpose of carrying it into effect.^s go where the right to a receiver depends upon questions of law of much nicety, as well as questions of title which are involved in considerable doubt, the court may properly refuse the application in limine, and leave it to be determined upon a final hearing of the cause.^^ And the appointment may be made at the final hearing, even though the bill contains no prayer for a receiver.'^*^ § 110. Allowed after final decree in cases of emergency : illustrations; appointed pending appeal. While it rarely happens that courts are called upon to appoint a receiver after 65 PhcEiiix Mutual Life Insurance 68 Shulte v. Hoffman, 18 Tex., Co. V. Grant, 3 MacArthur, 220. 678. 66 Artisans Bank v. Treadwell, 34 69 Hawkins v. Luscombe, 2 Barb., 553. Swans., 375. 67 Shulte V. Hoffman, 18 Tex., "0 See observations of the Vice- 678; Shee v. Harris, 1 Jo. & Lat., Chancellor in Osborne v. Harvey, 91. See, also, Bowman v. Bell, 14 1 Y. &'C. C. C, 116; Bowman v. Sim., 392; Sheldon v. Parker, 66 Bell, 14 Sim., 392. Neb., 634, 92 N. W., 923, 95 N. W., 1015. And see, ante, § 6. 126 RECEIVERS. • [chap. IV. a final decree in the cause, the power of appointment after decree is well settled and is exercised in cases of great emer- gency, or where the relief is indispensable for the protection of the parties in interest."^! Thus, in an action brought by persons beneficially interested under a will, against the trustees and executors, to have the trusts of the will performed under direction of the court, if after decree the conduct of the trus- tees is such as to render a receiver necessary, the court will en- tertain the application, even though the bill contains no prayer for a receiver.'^^ Sq in an action to determine the conflict- ing rights of parties to real estate, when a final decree has been rendered establishing plaintiff's title and right to a portion of the property, but the decree contains no specific directions to defendants to surrender possession of such portion, and they refuse so to do, plaintiff may have a receiver for the purpose of collecting and preserving the rents, and to insure their proper application to the expenses of the estate. In such case, the re- ceiver is not appointed for the purpose of executing the de- cree, or to turn defendants out of possession, but only to pro- tect the rights of plaintiffs in the property. And the fact that the bill did not pray a receiver is no bar to the relief in such case, since the appointment is made because of circumstances subsequent to the decree.''^ So after a decree for the fore- closure of a mortgage, a receiver of the rents of the mortgaged premises was allowed, as against a tenant in possession for more than nineteen years, but who was not a party to the suit, ihe exigency of the case requiring the relief to prevent the ten- ant from setting up an adverse possession of twenty years.*^* And after a final decree confirming a sale of land to a purchas- 71 Wright V. Vernon, 3 Drew., 208, 4 N. W., 124 ; Haas v. Chicago 112; Bowman v. Bell, 14 Sim, 392; Building Society, 89 111, 498. See, Thomas v. Davies, 11 Beav., 29; also, Hiles v. Moore, 15 Beav., 175. Connelly v. Dickson, 76 Ind., 440; 72 Bowman v. Bell, 14 Sim, 392. Brinkman ?/. Ritzinger, 82 Ind., 358; 73 Wright v. Vernon, 3 Drew., Chicago & Southeastern Ry. Co. v. 112. St. Clair, 144 Ind., 371, 42 N. K, 74 Thomas v. Davies, 11 Beav., 29. 225; Schreiber v. Carey, 48 Wis., CHAP. IV.] PRACTICE. 127 er at a judicial sale and awarding a writ of assistance, the pur- chaser being entitled to the rents may have a receiver pending an appeal by defendant, it appearing that defendant is in- solvent, and that if he is permitted to retain possession the rents will be lost to the purchaser.'^^ So, pending an appeal from a decree for the sale of real property in satisfaction of liens thereon, the court below has power to appoint a receiver to care for and rent the property until the further order of the court."^^ So, pending an appeal from a decree dismissing a bill to foreclose a mortgage, the lower court may appoint a re- ceiver to collect the rents and profits pending the appeal.'^''' So when real estate of a debtor has been decreed to be sold in satisfaction of liens and demands of his creditors, a receiver has been appointed by the court below upon the application of the creditors, to receive the rents and profits pending an appeal and supersedeas to such decree, the defendant being insolvent, and the lands being insufficient to satisfy the liens thereon.'''^ But a strong case of probable injury must be made out to warrant the court in entertaining the application at this stage of the cause."^^ And upon a bill by a mortgagor against a mortgagee for redemption of the mortgaged premises, after a decree directing the redemption, the court will not, upon the ex parte application of defendant, entertain a motion for a receiver, such a practice being without precedent or authority. ^^ "^5 Merrill v. Elam, 2 Tenn. Ch., action involving the title to real 513. As to the effect of the appeal property, a decree had been entered upon such order appointing a re- adjudging the title in the plaintiff, ceiver, see Payne v. Baxter, 2 Tenn. whereupon the defendant had prayed Ch., 517. and perfected an appeal, it was held 7^6 Moran v. Johnston, 26 Grat., under the code of Iowa that a re- 108; Adkins v. Edwards, 83 Va., ceiver should be appointed to take 316, 2 S. E., 439. care of the property pending the 77 Coleman v. Fisher, 66 Ark., 43, appeal. Mitchell v. Roland, 95 48 S. W., 807. Iowa, 314, 63 N. W., 606. 78 Beard v. Arbuckle, 19 West 79 Adair v. Wright, 16 Iowa, 385. Va., 145; Hutton v. Lockridge, 27 80 Barlow v. Gains, 8 Beav., 329. West Va., 428. And where, in an 128 RECEIVERS. [chap. IV. III. Notice of the Application. § 111. Courts exceedingly averse to interfering without notice. 112. The rule imperative, not discretionary; want of notice ground for reversal; how taken advantage of; no receiver without notice where injunction is sufficient. 113. What must be shown to warrant departure from the rule. 114. Whether service of process necessary, qiiccre. 115. Notice required in case of insolvent corporation. 116. Personal service of notice not always requisite; parties in court by counsel. 117. Notice dispensed with when defendant has absconded; non- resident defendants; partnership; foreclosure. § 111. Courts exceedingly averse to interfering without notice. Courts of equity are exceedingly averse to the ex- ercise of their extraordinary jurisdiction by the appointment of receivers upon ex parte applications, and this practice is never tolerated except in cases of the gravest emergency, de- manding the immediate interference of the court for the pre- vention of irreparable injury, or in cases where defendant has absconded and wilfully put himself beyond the jurisdiction of the court. And it may be stated as the settled practice, both in England and in America, to require the moving party to give due notice of the application to defendant, over whose efifects he seeks the appointment of a receiver, in order that he may have an opportunity of being heard in defense, and that his property may not be summarily wrested from him upon an ex parte application. Even in exceptional cases of great emer- gency, when the relief is demanded for the prevention of ir- remediable injury, the courts are extremely averse to interfer- ence ex parte, and will ordinarily entertain the application only after notice to defendant, or after a rule to show cause.^^ 81 Verplanck z'. Mercantile Insur- Field v. Ripley, 20 How. Pr., 26; ance Co., 2 Paige, 438; Sandford v. Crowder v. Moone, 52 Ala., 220; Sinclair, 8 Paige, 373; People v. Moritz j;. Miller, 87 Ala., 331, 6 So., Albany & Susquehanna R. Co., 7 269; Thompson v. Tower M. Co., Ab. Pr., N. S., 265, 1 Lans., 308, 87 Ala., 77,2,, 6 So., 928; Bank of 55 Barb., 34, 38 How. Pr., 228; Florence v. United States S. & L. CHAP. IV.] PRACTICE. 129 § 112. The rule imperative, not discretionary; want of notice ground for reversal; how taken advantage of; no receiver without notice where injunction is sufficient. Xhe rule of practice thus stated, requiring notice to defendant before an application for a receiver will be entertained, would seem to be not a matter of discretion with the court, but an inflexible rule which the courts are not at liberty to disregard. Co., 104 Ala, 297, 16 So., 110; Little Warrior Coal Co. v. Hooper, 105 Ala., 665, 17 So., 118; Gilreath v. Union Bank & Trust Co., 121 Ala., 204, 25 So., 581 ; Pollard v. South- ern Fertilizer Co., 122 Ala., 409, 25 So., 169; Ensley Development Co. V. Powell, 147 Ala., 300, 40 So., 137 ; Fischer v. Superior Court, 110 Cal., 129, 42 Pac, 561 ; State v. J., P. & M. R. Co., 15 Fla., 201; Stockton V. Harmon, 32 Fla., 312, 13 So., 833 ; Jacksonville Ferry Co. v. Stockton, 40 Fla., 141, 23 So., 557; Rogers v. Dougherty, 20 Ga., 271 ; Cummings V. Steele, 6 Idaho, 666, 59 Pac, 15; Wabash R. Co. v. Dykeman, 133 Ind., 56, 32 N. E., 823; Continental Clay & M. Co. v. Bryson, 168 Ind., 485, 81 N. E., 210; Henderson v. Reynolds, 168 Ind., 522, 81 N. E., 494; Bisson v. Curry, 35 Iowa, 72, following French v. Gifford, 30 Iowa, 148; Howe v. Jones, 57 Iowa, 130, 8 N. W., 451, 10 N. W., 299; State V. City of New Orleans, 43 La. An., 829; Blondheim v. Moore, 11 Md., 365; Triebert v. Burgess, 11 Md.. 452; Nusbaum v. Stein, 12 Md., 315; Voshell v. Hynson, 26 Md., 83 ; Anderson v. Cecil, 86 Md., 490, 38 Atl., 1074; Whitehead v. Wooten, 43 Miss., 523 ; Buckley v. Baldwin, 69 Miss., 804, 13 So., 851; Meridian N. & P. Co. v. Diem & W. P. Co., 70 Miss., 695. 12 So., 702; Rees v. Andrews, 169 Mo., 177, Receivers — 9. 69 S. W., 4; State v. Dearing, 184 Mo., 647, 111 S. W., 967; State v. District Court, 20 Mont, 284, 50 Pac, 852; Grandin v. La Bar, 2 N. Dak., 206; Fredenheim v. Rohr, 87 Va., 764, 13 S. E., 193, 266; Larsen V. Winder, 14 Wash., 109, 44 Pac, 123, 53 Am. St. Rep., 864; Ruffner V. Mairs, 33 West Va., 655, 11 S. E., 5; Davelaar v. Blue M. I. Co., 110 Wis., 470, 86 N. W., 185; North America Land & T. Co. v. Watkins, 48 C. C. A., 254, 109 Fed., 101; Cabaniss v. Reco M. Co., 54 C. C. A., 190, 116 Fed., 318; Joseph Dry Goods Co. V. Hecht, 57 C. C. A., 64, 120 Fed., 760; Huff v. Bidwell, 81 C. C. A., 43, 151 Fed., 563; Ford V. Taylor, 137 Fed., 149; Caillard V. Caillard, 25 Beav., 512; In re Potts, (1893) 1 Q. B., 648. And see Fisher v. Trust Co., 138 N. C, 90, 50 S. K, 592; Baker v. Baker, 108 Md., 269, 70 Atl., 418. But see Heard v. Murray, 93 Ala., 127, 9 So., 514; Werborn's Adm'r t/. Kahn, 93 Ala., 201, 9 So., 729. Under the statutes of Iowa, a receiver may be appointed in an action at law, be- fore notice to the defendant. Jones V. Graves, 20 Iowa, 596. In Sulli- van Electric L. & P. Co. v. Blue, 142 Ind., 407, 41 N. E., 805, it was held that no sufficient cause was shown for the appointment of a re- ceiver without notice under a stat- ute which provided that receivers 130 RECEIVERS. [chap. IV. And it is held to be error for the court to entertain the appli- cation, and to appoint a receiver without notice to the adverse party.^2 And the fact that a receiver is appointed upon the same day with the filing of the bill, without notice to defendant of the application, is deemed sufficient ground for reversing the action of the court.^^ So when the appointment was made without notice to defendants, who were merchants residing and doing business in the same city, and within a short distance from the court, no imperative necessity being shown for such haste, the order of the court was revoked. ^^ So it is improper to appoint a receiver without notice where the verification of the bill is based merely upon the opinion of the affiant and con- tains no recital of facts upon which such opinion is founded. ^^ And it is held that a court should not appoint a receiver with- out notice for a longer time than is fairly and reasonably neces- sary to allow defendant whose possession is invaded to show cause against the further continuance of the receivership.^^ And especially should the court not appoint a receiver with- out notice where no summons has been issued in the cause.^ And when plaintilT had procured the appointment of a receiver upon an ex parte application, late at night, and the receiver should not be appointed until the 22 Fla., 422; Larsen v. Winder, 14 adverse party should have appeared Wash., 109, 44 Pac, 123, 53 Am. St. or should have had reasonable no- Rep., 864. See, also. Railway Co. tice of the application, except upon v. Jewett, 2>7 Ohio St., 649. sufficient cause shown by affidavit. 83 Nusbaum v. Stein, 12 Md., 315. And see Winchester E. L. Co. v. 84 Triebert v. Burgess, 11 Md., Gordon, 143 Ind., 681, 42 N. E., 914. 452. In Michigan it is held that the ap- 85 Continental Clay & M. Co. v. pointment of a receiver ex parte is Bryson, 168 Ind., 485, 81 N. E., 210. a nullity and that a writ of manda- 86 St. Louis, K. & S. R. Co. v. mils will lie from the supreme court Wear, 135 Mo., 230, 36 S. W., 357, to compel the lower court to vacate 658, 33 L. R. A., 341. In this case such order of appointment. Gold- it was held that the appointment of man v. Manistee Circuit Judge, 155 a receiver without notice with a rule Mich., 47, — N. W., — . to defendant to show cause, which 82 Bisson V. Curry, 35 Iowa, 72, could not be heard for three months, following French v. Gifford, 30 was improper. Iowa, 148; Fricker v. Peters & C. 87 Alexander Gas Co. v. Irish, Co., 21 Fla., 254; Moyers v. Coiner, 152 Ind., 535, 53 N. E., 762. CHAP. IV.] PRACTICE. 131 sold the property early the following morning, the court set aside the sale, and revoked the appointment as contrary to equity, and in conflict with the due and ordinary course of procedure in courts of justice.^^ And a receiver should not be appointed without notice where a temporary restraining order or an interlocutory injunction will afford ample protection.^^ And the judgment of a lower court, revoking the appointment of a receiver, because of want of notice, will be affirmed by a court of error.^o But it is held in Maryland that no advantage can be taken in an appellate court of the want of notice, except by an appeal from the order appointing the receiver.^^ Under the New York chancery practice, however, if the court below had improperly allowed an ex parte application for a receiver and the appointment was clearly irregular, defendant could not appeal directly from that order, but was required first to apply to the court below to set aside or modify the order, and if upon a proper application the court refused so to do, an appeal would then lie from the order denying the application.^^ But where the propriety of the action of the court in appoint- ing a receiver without notice has been considered by the court upon a motion to discharge the receiver and the court has sus- tained the original order by refusing to discharge him, the want of notice of the appointment is thereby cured.^^ But upon an appeal from an order appointing a receiver, if the record is silent as to whether due notice of the application was given to defendant, it will be presumed that the court below did not act without proof of notice.^^ And the statutory re- quirement of notice to the defendant of an application for a receiver is waived where the parties have appeared and con- 88 Simmons v. Wood, 45 How. 91 Voshell v. Hynson, 26 Md., 83. Pr., 268. 92 Gibson v. Martin, 8 Paige, 481. 89 Fischer v. Superior Court, 110 93 Bristow v. Home B. Co., 91 Cal., 129, 42 Pac, 561 ; Henderson Va., 18, 20 S. K, 946. V. Reynolds, 168 Ind., 522, 81 N. 94 Miller v. Shriner, 86 Ind., 493. E., 494. 90 Rogers v. Dougherty, 20 Ga., 271. 132 RECEIVERS. [chap. IV. sented to the appointment or have resisted the application upon grounds other than the want of notice.^^ § 113. What must be shown to warrant departure from the rule. To warrant a court in entertaining an apphca- tion for a receiver without notice, it must be clearly shown that the delay which would result from giving notice would defeat the rights of plaintiff, or would result in great injury to him.^^ Thus, it has been held proper to appoint a receiver without notice where it appeared that there was imminent danger that the property involved would be removed beyond the jurisdic- tion and unlawfully disposed of if notice should be given,^'^ And when the relief is sought upon an ex parte application, upon the ground of extreme necessity, the particular facts and circumstances rendering such summary proceeding necessary should be set forth in the application, and a mere statement of opinion as to such necessity, even though made under oath, will not justify a departure from the established rule requiring notice of the application.^^ And where no notice is given, the 95 Farmers & Merchants Bank v. ance Co., 2 Paige, 438 ; Wabash R. German National Bank, 59 Neb., Co. v. Dykeman, 133 Ind., 56, 32 229, 80 N. W., 820; Veith v. Ress, N. E., 823; Bank of Florence v. 60 Neb., 52, 82 N. W., 116; Murphy United States S. & L. Co., 104 Ala., V. Fidelity M. F. Ins. Co., 69 Neb., 297, 16 So., 110; Gilreath v. Union 489, 95 N. W., 1022. Bank & Trust Co., 121 Ala., 204, 96Maynard v. Railey, 2 Nev., 25 So., 581; Pollard v. Southern 313 ; Culver v. Guyer, 129 Ala., 602, Fertilizer Co., 122 Ala., 409, 25 So., 29 So., 779; Tuttle v. Blow, 176 169; Fricker v. Peters & C. Co., 21 Mo., 158, 75 S. W., 617, 98 Am. St. Fla., 254; Jacksonville Ferry Co. v. Rep., 488; Cole v. Price, 22 Wash., Stockton, 40 Fla., 141, 23 So., 557; 18, 60 Pac, 153; Baltimore Bargain Davelaar v. Blue M. I. Co., 110 House V. St. Clair, 58 West Va., Wis., 470, 86 N. W., 185. In Ver- 565, 52 S. E., 660. For facts justi- planck v. Mercantile Insurance Co., fying the appointment of receivers 2 Paige, 438, Walworth, Chancellor, without notice, see Maxwell v. says, p. 450: "By the settled prac- Peters Shoe Co., 109 Ala., 371, 19 tice of the court in ordinary suits, So., 412; O'Donnell v. First Na- a receiver can not be appointed, ex tional Bank, 9 Wyo., 408, 64 Pac, parte, before the defendant has had 337. an opportunity to be heard in rela- 97 State V. District Court. 22 tion to his rights, except in those Mont., 241, 56 Pac, 281. cases where he is out of the juris- ts Verplanck v. Mercantile Insur- diction of the court, or can not be CHAP. IV.] PRACTICE. 133 bill should, in addition to showing the necessity for the ap- pointment, set forth the reasons justifying the failure to give the necessary notice, or such reasons must at least appear from the affidavits presented in support of the application.^^ And a receiver should not be appointed without notice where at the hearing of the motion there was no testimony of witnesses and the verification of the bill was upon information and be- lief.l § 114. Whether service of process necessary, quaere. As to whether defendant must be actually served with process in the cause, in addition to notice of the motion for a receiver, before the court will entertain the application, is not quite clear from the authorities. It would seem, upon principle, that un- der the prevailing practice of hearing the application before answer, no real necessity exists of formal service of process in the cause as a foundation for the motion, if defendant has due notice of the application. And under the English chan- cery practice, plaintiff was at liberty, immediately upon filing his bill, to serve defendant with notice of the motion before ap- pearance.2 But it has been held that a receiver should not be appointed unless the court has obtained jurisdiction by service of process, as well as notice to the parties in interest of the application.^ And it has been held erroneous to appoint a found ; or where, for some other Ogilvie's affidavit in this case, that reason, it becomes absolutely neces- he was satisfied of the necessity of sary for the court to interfere be- such a proceeding, was not suffi- fore there is time to give notice to cient. He should have stated the the opposite party, to prevent the facts on which his opinion was destruction or loss of property. founded, to enable the court to Formerly it was never done until judge of its correctness." after answer. In every case where 99 Baltimore Bargain House v. the court is asked to deprive the St. Clair, 58 West Va., 565, 52 S. defendant of possession of his prop- E., 660. erty without a hearing, or an op- 1 Benepe-Owenhouse Co. v. portunity to oppose the application, Scheidegger, 32 Mont, 424, 80 Pac, the particular facts and circum- 1024; Henderson v. Reynolds, 168 stances which render such a sum- Ind., 522, 81 N. E., 494. mary proceeding proper should be 2 Meaden v. Sealey, 6 Hare, 620. set forth in the bill or petition on 3 Whitehead v. Woolen, 43 Miss., which such application is founded. 523. "It can not well be seen," say 134 RECEIVERS. [CPIAP. IV. receiver without notice where no summons has been issued in the cause.^ If, however, a receiver is prayed for as a part of the final rehef sought in the action, the process which brings defendant into court to answer is sufficient notice of the final relief prayed. Upon appeal, therefore, from the appointment of a receiver in such case as part of the final decree, it will not be reversed because of the want of other notice of the appli- cation.^ And it has been held by the Court of Appeals of the District of Columbia that, while it is an unusual practice to ap- point a receiver before service of process, yet where the court has jurisdiction of the subject-matter, the power exists to do so in case of an emergency and that the existence of such emer- gency is not subject to collateral inquiry,^ § 115. Notice required in case of insolvent corporation. Even under a statute authorizing the appointment of receiv- ers over insolvent corporations, the appointment will not be made ex parte and without an opportunity to the defendant of being heard. And the practice of the New York Court of Chancery in such cases was, upon the filing of a petition duly verified, setting forth the grounds upon which the application was based, to issue an order to show cause, a copy of which was served upon the proper officers of the corporation, directing them, at a future day therein named, to show cause why the application should not be granted.*^ § 116. Personal service of notice not always requisite; parties in court by counsel. It is not in all cases indis- pensable that the notice should be personally served upon each defendant, provided service be had upon one of the defend- ants authorized to represent the others. Thus, it is held suffi- cient to serve the notice upon a defendant who is the author- the court, Simrall, J., p. 527, "how 4 Alexandria Gas Co. v. Irish, 152 the court can take from a defend- Ind., 535, 53 N. E., 762. ant the possession of property, un- 5 Newell v. Schnull, 72> Ind., 241. less it has jurisdiction by service of 6 Barley v. Gittings, 15 App. D. process and also by notice of mo- C, 427. tion." And see Hyslop v. Hoppock, 7 Devoe v. Ithaca & Owego R. 5 Benedict, 447. Co., 5 Paige, 521. CHAP. IV.] PRACTICE. 135 ized agent of his co-defendant, and who is acting under a power of attorney from him in the management of the very property over which a receiver is sought.^ And the apphcation may be entertained and determined without any previous formal no- tice to the parties in interest, when they are actually repre- sented in court by counsel who appear in resistance to the motion.^ § 117. Notice dispensed with v^hen defendant has ab- sconded; non-resident defendants; partnership; foreclo- sure. While it is the uniform practice, as already shown, to entertain applications for receivers only after due notice to the parties against whom the relief is sought, a departure from this practice is allowed when a defendant has absconded for the purpose of avoiding service of process. And in such cases the application may be entertained without notice, service of process, or appearance by defendant ; i^ especially when plain- tiff has given notice of the application to the agents and ten- ants of defendant's estate, over which a receiver is sought.^l So notice may be dispensed with when defendant has left the state and is not expected to return for several months, and no person is authorized to represent him, and it is necessary to appoint a receiver without delay to collect rents which would otherwise be lost. In such case the order of appointment should reserve to defendant the right to apply for relief against the order upon cause shown.^^ Sq a receiver has been ap- pointed without notice upon a bill by one partner against his copartners, the bill alleging the insolvency of defendants, that 8 Mays v. Rose, Freem. (Miss.), 10 Maguire v. Allen, 1 Ball & B., 703. And see Maguirc v. Allen, 1 75; Dowling v. Hudson, 14 Beav., Ball & B., 75. 423. See Gibbons v. Mainwaring, 9 9 McLean v. Lafayette Bank, 3 Sim., 11; Williams v. Jenkins, 11 McLean, 503; Miller v. Cavanaugh, Ga., 595. 99 Ky., m, 35 S. W., 920, 59 Am. H Maguire v. Allen, 1 Ball & B., St. Rep., 463; Consolidated Barb 75. Wire Co. v. Stevenson, 71 Kan., 64, 12 People v. Norton, 1 Paige, 17. 79 Pac, 1085. See, also, Haugan v. Netland, 51 Minn., 552, 53 N. W., 873. 136 RECEIVERS. [chap. IV. they were collecting debts due to the firm and disposing of its assets, and that they had excluded complainant from the part- nership premises. 12 So, too, the relief has been granted upon a bill to foreclose a mortgage upon growing crops, the bill averring the insolvency of defendant, the mortgagor, that the crops were in danger of being lost or destroyed, that defendant had applied a portion of them in disregard of complainant's rights, and that the security was inadequate.^* And where real estate had been conveyed by a debtor in trust for the payment of his debts, and the trustee had been in possession a number of years without paying, a creditor was allowed a receiver un- til answer, the trustee residing beyond the jurisdiction of the court and not having appeared in the action. ^^ And under a statute authorizing the appointment upon such notice to the adverse party as the court may prescribe, when such adverse party is beyond the jurisdiction of the court in another state, it is not error to make the order without notice, when neces- sary for the prevention of serious loss.^^ So under the code of procedure of New York, it is held that a receiver may be appointed over a partnership in an action for a dissolution, upon the appearance of the resident partners, without notice to a non-resident partner.^"^ But when it does not appear that defendant has left the country to avoid service of process, and no particular circumstances of hardship are shown, an ex parte application for a receiver will not be entertained. ^^ 13 Sims V. Adams, 78 Ala., 395. 16 Maish v. Bird, 59 la., 307, 13 14 Ashurst V. Lehman, 86 Ala., N. W., 298. 370, 5 So., 731. See, also, Hendrix 17 Alford v. Berkele, 29 Hun, 633. V. American F. L. M. Co., 95 Ala., 18 Stratton v. Davidson, 1 Russ. 313, 11 So., 213. & M., 484. 15 Malcolm v. Montgomery, 2 Mol., 500. CHAPTER V. OF THE RECEIVER'S BOND AND LIABILITY THEREON. I. Of the Bond § 118 II. Liability of Sureties 127 I. Of the Bond. § 118. Bond or recognizance required; English practice; when bond dispensed with. 119. Receiver's own recognizance sometimes sufficient; appoint- ment by consent. 120. New York doctrine; security dispensed with. 121. Title does not vest until bond is executed; failure ground for nonsuit; may be filed nunc pro tunc. 121a. Upon filing bond receiver's title relates back to date of ap- pointment. 122. Appointment on final decree; effect of omitting bond. 123. Additional security required on extending receiver. 124. Eftect of bond by defendant to account as receiver. 125. Assignment of mortgage as security for receivership. 126. When bond to be approved by the court. 126c. Statute of limitations. 126b. New bond upon making temporary receiver permanent. § 118. Bond or recognizance required; English prac- tice; when bond dispensed with. Receivers are usually- required, before entering upon their duties, to enter into a bond or recognizance for the faithful performance of their duties, with adequate security, the amount and conditions of the security being usually determined by the court making the appointment, due regard being had to the value of the property or fund intrusted to the receiver's management. Under the practice of the English Court of Chancery, established at an early period, a receiver was required to enter into a recogni- 137 13S RECEIVERS. [chap. V. zance with two sureties,^ and it was customary to require him to give security in all cases when the order was made in the usual way by the court, and a reference had to a master to ap- point ; and it was held that the security could not be dispensed with in such cases, even by consent of the parties to the action.^ If, however, the parties themselves agreed upon a receiver to be appointed, not by authority of court, but by their own consent, and then asked that he should act without giving the usual security, it was regarded as proper to permit this to be done.3 And when a receiver was appointed without salary, it was said to be not unusual to dispense with the security otherwise required.'* And a mortgagee of West Indian estates was in one case appointed receiver in England, without being required to give the usual security.^ § 119. Receiver's own recognizance sometimes suffi- cient; appointment by consent. It was held in an early English case that persons named as receivers by parties to the cause might be appointed upon their own recognizances only.^ And when a receiver was satisfactory to all parties except the defendant, and had been in the previous possession and man- agement of the estate in controversy, it was provided by the terms of the decree that he should be allowed to give security by his individual recognizance."^ But in the Irish Court of Chancery it is held that a receiver will not be appointed with- out giving adequate security, even though the parties in in- terest consent that he may be appointed merely upon his own recognizance.^ § 120. New York doctrine ; security dispensed with. In New York the obligation of a receiver to give adequate se- curity for the faithful performance of his trust is regarded as being founded upon the general practice of courts of equity, 1 Mead v. Orrery, 3 Atk., 235. 5 Davis v. Barrett, 13 L. J., N. S. 2 Manners v. Furze, 11 Beav., 30. Ch., 304. See, also, Tylee v. Tylee, 17 Beav., 6 Ridout v. Earl of Plymouth, 583. Dick., 68. 3 Manners v. Furze, 11 Beav., 30. 7 Carlisle v. Berkley, Amb., 599. 4 Gardner v. Blane, 1 Hare, 381. 8 Bailie v. Bailie, 1 Ir. Eq., 413. CHAP, v.] BOND AND LIABILITY. 139 and it is held to be within the power of the court to dispense with the security in cases where it is plainly unnecessary. For example, where, in proceedings by judgment creditors against their debtor, the same person is appointed receiver in different actions brought by different creditors, it is held that he need not give new security in each successive action, if he has al- ready given ample security.^ § 121. Title does not vest until bond is executed; failure ground for nonsuit; may be filed nunc pro tunc. The re- ceiver's title and authority as well as his right of possession are dependent on and accrue only upon his giving the requisite bond or security as fixed by the order of his appointment.i^ And a failure to execute the bond in due form, as required by the order, is ground for a nonsuit in an action brought by the receiver in his official capacity/^ although a mere informality in the bond, as the fact that it was not executed under seal, can not be taken advantage of in an action brought by the receiver against third parties.^^ But if the order appointing a receiver does not require the giving of any security, the omission to give a bond constitutes no defense to an action brought by the receiver.12 And in an action brought by a receiver pursuant to an order of the court, in the absence of any affirmative or direct evidence as to the giving of a bond, the fact that the court directed the bringing of such action may be taken as presumptive evidence that he had perfected his title by filing a bond. And in such case it is improper to dismiss his action for want of evidence tending to show the filing of the bond.i"^ 9 Banks v. Potter, 21 How. Pr., H Johnson v. Martin, 1 Thomp. & 469. C. (N. Y. Supreme Court), 504. 10 Johnson v. Martin, 1 Thomp. & And see as to receiver's failure to C. (N. Y. Supreme Court), 504; give security as ground for revers- Defries v. Creed, 34 L. J., N. S. ing decree, Tomlinson v. Ward, 2 Eq., 607; Edwards v. Edwards, 2 Conn., 396. Ch. D., 291, reversing S. C, 1 Ch. 12 Morgan v. Potter, 17 Hun, 403. D., 454; Woods ^'. Ellis, 85 Va., 471, 13 Wilson v. Welch, 157 Mass., 7 S. E., 852; Crumlish's Adm'r v. 77, 31 N. E., 712. Shenandoah V. R. Co., 40 West Va., 14 Hegewisch v. Silver, 140 N. Y., 627, 22 S. E., 90. But see Ex parte 414, 35 N. E., 658. Evans, 13 Ch. D., 252. 140 RECEIVERS. [chap. V. If, however, between the date of the appointment and the time of giving the required bond of recognizance, a sohcitor in the cause receives money due as rents or proceeds of the sale of property which is the subject-matter of the receivership, he may be compelled, after the bond or recognizance is perfected, to pay such money to the receiver.^^ And when a receiver exe- cutes his bond in due form, with sufficient sureties, and the bond is approved by the parties, but through inadvertence is not filed with the court, and the receiver takes possession of the assets committed to his charge, it is proper for the court to direct the bond to be filed nunc pro tunc, so as to complete the receiver's appointment and render him liable to account as an officer of the court, for the property which came to his hands subsequent to the time when the bond should have been filed. And this may be done, notwithstanding the parties to the liti- gation have, after the receiver's appointment, submitted the matter in dispute to referees for settlement, and have consent- ed to a decree dividing the property equally between them; since such submission to arbitration does not alter or affect the liability of the receiver to account for the property intrusted to him.l^ So where, on his appointment, a receiver had en- tered into a recognizance with two sureties, and one of them afterward caused himself to be discharged, and the receiver entered into a new recognizance, but the time for enrolling it had elapsed, it was ordered to be entered mine pro tunc.^'^ § 121a. Upon filing bond, receiver's title relates back to date of appointment. Notwithstanding some conflict of authority, the doctrine may now be regarded as well estab- lished that, upon the filing of his bond in accordance with the order of the court, the receiver's title to and right to the pos- session of the property over which he is appointed have rela- tion back to the date of his appointment. Such title will, 15 Wickens v. Townshend, 1 17 Vaughan v. Vaughan, Dick., Russ. & M., 361 ; In re Birt, 22 Ch. 90. D., 604. 16 Whiteside v. Prendergast, 2 Barb. Ch., 471. CHAP, v.] BOND AND LIABILITY. 141 therefore, be upheld as against creditors levying upon the property between the date of the receiver's appointment and the filing of his bond.i^ And this is true, even though such intermediate process issues from a federal court, the receiver having been appointed by a state court, since the question is purely one of jurisdiction, to be determined in favor of the court which first acquires control over the property in contro- versy. ^^ § 122. Appointment on final decree; effect of omitting bond. When a receiver is appointed as a part of the final judgment or decree in the cause, and for the purpose of car- rying out and executing that decree, the fact that the court has failed to require any bond of the receiver constitutes no ground for reversing the decree on error, since the omission will be regarded as the fault of the defendant in not insisting upon a bond.20 And the omission to require a bond is not error when 18 Steele v. Stiirgis, 5 Ab. Pr., 442; In re Christian Jensen Co., 128 N. Y., 550, 28 N. E., 665; In re Schuyler's S. T. B. Co., 136 N. Y., 169, 32 N. E., 623; Maynard v. Bond, 67 Mo., 315; Clinkscales v. Pendleton M. Co., 9 S. C, 318; Regenstein v. Pearlstein, 30 S. C, 192, 8 S. E., 850; Temple v. Glas- gow, 25 C. C. A., 540, 80 Fed., 441, 42 U. S. App., 417, affirming S. C, 73 Fed., 709. And see Ex parte Evans, 13 Ch. D., 252. See, contra, De Fries v. Creed, 34 L. J., N. S. Eq., 607; Edwards v. Edwards, 2 Ch. D., 291, reversing S. C, 1 Ch. D., 454. In Virginia it is held that when a receiver, appointed to col- lect the purchase money of real es- tate, collects such money before fil- ing his bond and defaults as to the proceeds, the purchaser may be com- pelled to again make payment, not- withstanding the receiver files his bond after collecting the money. Woods V. Ellis, 85 Va., 471, 7 S. E., 852. But the case is plainly incon- sistent with the doctrine as stated in the text, that upon filing his bond the receiver's title relates back to the date of his appointment. Un- der the statute of Alabama which provides that before a receiver shall be appointed without notice the plaintiff shall give bond conditioned to pay all damages suffered by the adverse party if the appointment is vacated, it is held error to appoint a receiver without requiring plain- tiff to file such a bond. Capital City Water Co. v. Weatherly, 108 Ala., 412, 18 So., 841; Dreyspring V. Loeb, 113 Ala., 263, 21 So., 11; David V. Levy, 119 Ala.. 241, 24 So., 589. 19 /« re Schuyler's S. T. B. Co., 136 N. Y., 169, 32 N. E., 623. 20Shulte V. Hoffman, 18 Tex., 678. 142 RECEIVERS. [chap. V. no bond is required by the statute or code of procedure under which the proceeding is had.-^ § 123. Additional security required on extending re- ceiver. Under the Irish chancery practice it is customary, Avhen a receiver has been appointed over real property, and subsequent apphcations are made for a receiver over the same estate, to extend the appointment of the former receiver to such apphcations. And on being so extended, he is required to give additional security, or, in defauh thereof, he will be removed and another appointment made.22 § 124. Effect of bond by defendant to account as re- ceiver. Where, upon a bill in equity to enforce an interest in a trust fund and for a receiver pendente lite, the court re- fuses to appoint a receiver, upon condition of defendant exe- cuting a bond to account as receiver for all goods and money which have come into his possession, and to pay them over pursuant to the decree of the court, such a bond will be deemed good as a common-law obligation. And the obligor, although not considered as a receiver or officer of the court, stands in the light of one who, for a personal accommodation, has assumed a legal responsibility, and after receiving the benefits of the obligation he is estopped from denying its legality.^^ § 125. Assignment of mortgage as security for receiver- ship. Where one of three executors of an estate was ap- pointed receiver in another matter, and he, with the other ex- ecutors, united in assigning a mortgage of their testator, held by them as executors, as security for such receivership, although such course was regarded as exceedingly reprehen- sible, it was held that the assignment was good and could not be questioned, and that it must stand as security for whatever amount might be due from the receiver.24 § 126. When bond to be approved by the court. It is customary in the order of appointment to provide that the 21 Dilling V. Foster, 21 S. C, 334. And see, ante, § 9 and, post, §§ 308 22 Wise V. Ashe, 1 Ir. Eq.. 210. and 478. 23 Baker v. Bartol, 7 Cal., 551. 24 Mead v. Orrery, 3 Atk.. 235. CHAP, v.] BOND AND LIABILITY. 143 sureties upon the bond shall be approved by the court, although it is sometimes provided that they may be approved by the clerk. But when the law under which a receiver is appointed authorizes his appointment and the approval of his bond by the court, both acts being required to be performed by the court itself, it is not proper that the bond should be approved by the clerk of the court.25 But it is not necessary that the sureties should be citizens of the state in which the action is pending, and the court may accept non-resident sureties.26 § 126(7. Statute of limitations. It is held in England that money due from a receiver, and not accounted for in the settlement of his accounts, is to be treated as a debt of record, as regards the application of the statute of limitations in an action for the recovery of such money. And it would seem that, as to money due from the receiver and not accounted for, he occupies the relation of a trustee to the parties in interest, and that such indebtedness is not barred by the statute of limi- tations.27 § 126b. New bond upon making temporary receiver per- manent. Where a temporary receiver is appointed and files a proper bond which is approved by the court, if he is afterward, by the judgment of the court, made permanent re- ceiver in the cause, the court, may in its discretion require a new bond, or, if satisfied with the security of the one already on file, may permit him to act without exacting an additional bond, and until required by the court to do so, the receiver is under no obligation to furnish such additional security.28 25 Newman v. Hammond, 46 Ind., 27 Seagram v. Tuck, 18 Ch. D., 119. 296. 26 Taylor v. Life Association of 28 Jones v. Blun, 145 N. Y., 333, America, 3 Fed., 465. 39 N. E., 954. 1 44 RECEIVERS. [chap. V. II. Liability of Sureties. § 127. Sureties held to strict liability; how discharged, 128. On death of one surety receiver must procure another. 129. When liability becomes absolute; right of action; practice. 129a. Independent action against surety. 130. Suit against sureties on death of receiver. 130a. How far sureties concluded by order on receiver. 131. Liability for interest; costs of attachment; surety protected by injunction. 132. Effect of payment by surety to solicitor. 133. Surety may be reimbursed out of balance in receiver's hands; ordered to refund; remedy in equity. 133a. Sureties of clerk of court appointed receiver; liability to credit- ors not named in bond. I33b. Surety not liable for violation of duties beyond scope of ap- pointment. 133(7. Surety may be liable although bill is afterwards dismissed. § 127. Sureties held to strict liability; how discharged. The sureties of a receiver are usually held very strictly to the obligation of their recognizance or bond, and will not be discharged therefrom upon their own application, unless such course appears to be for the benefit of the parties to the cause,^^ or unless fraud is shown, and it is made to appear that the person secured by the recognizance is connected with such fraud ; and if these facts are not shown, a bill to have a recog- nizance vacated will be dismissed. ^^ But it is competent for the parties in interest in a cause to consent that the receiver's recognizance or bond be vacated as to one surety, and that he be discharged, without releasing the remaining surety from his liability. When it is desired to pursue this course, the contin- uing surety and the receiver should enter into a written consent or agreement, providing that the recognizance shall continue to be binding upon them, notwithstanding it has been vacated as 29 Griffith V. Griffith, 2 Ves., 400. 30 Hamilton v. Brewster, 2 Mol., 407. CHAP, v.] BOND AND LIABILITY. 145 to the retiring surety. This agreement should be verified by affidavit, and should state that the parties consent to the vacat- ing of the recognizance as to the one surety, without prejudice to the liability of the receiver and of the other surety, as well for acts before as for those afterward done, and that they will not rely on such discharge in defense of any future proceedings which may be brought against them.^^ Where the premises subject to a receivership have been sold under the final decree in the cause, and the purchaser has been put in possession, this has been held equivalent to a discharge of the receiver, and sufficient ground for vacating his recognizance.^2 § 128. On death of one surety receiver must procure an- other. Where one of the sureties upon the recognizance of a receiver dies, without leaving any property which may be made available for the purpose of satisfying the recognizance, the court will require the receiver to procure a new surety.^s § 129. When liability becomes absolute ; right of action ; practice. When the bond or recognizance given by a re- ceiver is conditioned to be void if he shall duly perform his duties as receiver and account to the court, the obligation be- comes absolute upon his failure so to do.34 It is held, how- ever, that the receiver and his sureties are not liable to an action upon the bond until he has failed to obey some order of the court touching the effects placed in his hands. And the proper practice would seem to be, to first apply to the court for a rule upon the receiver to render his account. After the account is adjusted and approved by the court, and the receiver is or- dered to pay the effects in his hands into court, or to the person entitled thereto, a failure to comply with such order renders himself and his sureties liable. The receiver and his sureties can not, therefore, be sued upon the bond until the court has 31 Callaghan v. Callaghan, 8 Ir. 33Averall v. Wade, Flan. & K., Eq., 572; O'Keeffe v. Armstrong, 2 341. Ir. Ch., N. S., 115. '^^ Maunsell v. Egan, 3 Jo. & 32 Anonymous, 2 Ir. Eq., 416. Lat, 251. Receivers — 10. 146 RECEIVERS. [chap. V. adjudicated the question, and made some order touching the rights of the parties to the property in his hands. ^^ § 129a. Independent action against surety. While a court of equity has the undoubted power, either by its decree or by rule of court, to provide that a receiver and his surety may be proceeded against, in order to enforce the liability of the bond, in the original action, yet, where the court takes from the receiver an ordinary common-law bond with surety, conditioned for the faithful discharge of his duties and a com- pliance with the orders of the court, the obligation of the surety is one which can be enforced only in a separate action at law upon the bond in which he may have his constitutional right of trial by jury. And the court has no power to proceed against him summarily by rule to show cause or by motion in the cause unless he has part of the trust fund in his hands and then only to the extent of such fund.^^ § 130. Suit against sureties on death of receiver. Where, upon the death of a receiver, there is a balance due from him to the estate, the amount of which is not definitely ascer- tained, the court, on petition of the parties in interest, will grant leave to put the recognizance in suit against the sureties. The receiver in such case not having paid the balance into court, there is a forfeiture of the recognizance, constituting a debt due from the receiver, and, there being no means of pur- suing the ordinary remedy against him, resort may be had to the surety.^"^ 35 State V. Gibson, 21 Ark., 140; to the estate, and prayed that the Bank of Washington v. Credit- recognizance into which he had ors, 86 N. C, 323; Atkinson v. entered might be put in suit Smith, 89 N. C, 72. against his real and personal 36 Kirker v. Owings, 39 C. C. A., representatives and his sureties, 132, 98 Fed., 499; Black v. Gent- or that his personal representa- ery, 119 N. C., 502, 26 S. E., 43. tive might forthwith pass the ac- 37 Ludgater v. Channell, 3 Mac. counts of his receipts and pay- & G., 175, reversing S. C., 15 Sim., ments in respect to the estate. 479. The petition in this case al- On appeal from the decision of leged that the receiver had died, the Vice-Chancellor dismissing leaving a balance due from him the petition, leave was granted CHAP, v.] BOND AND LIABILITY. 147 § 130a. How far sureties concluded by order on re- ceiver. In an action against the sureties upon the bond of a receiver of an insolvent corporation, an order made in the cause in which the receiver was appointed, fixing the amount due from him and directing its payment, is competent evidence against the sureties, both as to the breach of the bond and as to the amount due. And in such an action, the omission of the receiver to pay to himself as receiver money which he had borrowed from the corporation before his appointment is a breach of the condition of his bond, for which the sureties are liable. Nor, in such case, can the liability of the sureties be to bring suit against the sureties. Lord Truro observes, p. 179, as follows: "It is of the utmost im- portance that the functions of re- ceivers, who are the officers of this court, should be duly dis- charged. The respondents in the present case are the sureties, and the representatives of the re- ceiver; and the recognizance in question was entered into in pur- suance of a general order of the court. Now the obligation of a receiver is to account once a year, and to pay his balances into court; but here this duty was en- tirely omitted, thus involving a forfeiture of the recognizance, and consequently constituting a debt due by the receiver. Upon the death of the receiver the parties interested in the fund come to the court and state that redress may be had in one of two ways, either against the represent- atives of the receiver, or against his sureties. They present their claim in a double aspect, and call on the court to grant them relief as against one or other of the re- spondents to the petition; and it is obvious that if either of the re- spondents had been omitted, the other would have objected, and with some reason, to his absence. But the administratrix says she is not accountable in this form of pro- ceeding; and the sureties, on their part, allege that there is a positive rule of practice that the surety can not be made to account until the receiver has been called upon, and further, that the mode of proceed- ing in such a case is by bill against the personal representative. I can, however, find no authority for the rule which it is thus sought to es- tablish. . . . The books of prac- tice show that where there are not the means of pursuing the ordinary course against the receiver, the surety may be had recourse to; and the first part of the prayer of the petition is for leave to sue the sureties. Not, therefore, now de- ciding whether the surety shall pay, or whether the administratrix may or may not be called on to account in this form of proceeding, I think that the first part of the prayer of the petition must be granted, and it is unnecessary for me to advert further to the alternative relief sought." 148 RECEIVERS. [chap. V. reduced by the fact that the receiver has rendered vahiable services as such, his compensation for which has not yet been determined or paid.^^ But when the undertaking of the surety is that the receiver will thenceforth faithfully discharge his duties, the surety will not be liable for any default or miscon- duct of the receiver prior to the execution of the bond. And in such case the surety, in an action upon his bond, is not con- cluded by an accounting as to the amount due from the re- ceiver, and by an order fixing the amount, made in the cause in which the receiver was appointed, when the surety was not a party to such accounting, and was not heard thereon. ^^ But if the receiver does in fact receive and collect certain notes, which he is not authorized to receive in payment for the hiring of property which he is authorized to hire, his sureties are liable in an action upon the bond for his failure to account for the proceeds. ^^ § 131. Liability for interest; costs of attachment; sure- ty protected by injunction. As a general rule, the sureties of receivers will be held responsible, not only for all sums of principal for which the receiver is in default, but also for in- terest due thereon, and for which the receiver is liable.^^ This liability of the surety for interest is, however, regarded as somewhat discretionary with the court. ^^ And where the re- ceiver had been bankrupt with full knowledge of all parties for a considerable length of time, and no steps had been taken to compel the passing of his accounts, the sureties were relieved from paying interest.^s But the sureties of a defaulting re- ceiver will be held liable to the extent of the sum secured by 3S Commonwealth v. Gould, 118 ties upon the bond of such former Mass., 300. receiver. 39 Thomson v. MacGregor, 81 N. 41 Dawson v. Raynes, 2 Russ., Y., 592. 466. 40Weems v. Lathrop, 42 Tex., 42 /„ re Herrick's Minors, 3 In 207. And see this case as to the Ch., N. S., 183. right of a receiver, appointed upon 43 Dawson v. Raynes, 2 Russ., the death of a former receiver, to 466. maintain an action against the sure- CHAP, v.] BOND AND LIABILITY 149 the recognizance, for the costs of an attachment against him for not accounting, as well as the costs of an application for his removal, and for the appointment of his successor.^^ When the surety has paid in full the entire balance due from the re- ceiver, he may be protected by injunction from the enforcement of judgment upon his recognizance for anything more.^^ § 132. Effect of payment by surety to solicitor. Where proceedings at law were instituted against the surety to enforce payment of money due from the receiver, who had been dis- charged under the insolvent debtor's act, it was held that pay- ment of the money by the surety to the solicitor prosecuting the proceedings was not a sufficient payment, and the court re- fused to discharge the proceedings against the surety until plaintiff had been served with notice of the application. But notice having been served, and the plaintiff not appearing or resisting, the proceedings against the surety were discharged.^^ § 133. Surety may be reimbursed out of balance in re- ceiver's hands; ordered to refund; remedy in equity. A surety upon a receiver's bond is in a certain sense regarded as an officer of the court, to the extent that he is entitled to be re- imbursed what he has been compelled to pay for the receiver, out of the balance in the latter's hands. The court will not, therefore, permit the receiver to withdraw a balance due him until the surety is reimbursed, and only the balance will be paid to the receiver.47 And when the surety, to indemnify himself for his liability, receives a portion of the funds collected by the receiver, knowing them to be a part of the trust funds in the 44 Mannsell v. Egan, 8 Ir. Eq., out of court the balance due him 372, affirmed on appeal, 9 Ir. Eq., until he should satisfy payments 283; S. C, 3 Jo. & Lat., 251. made by the surety on his account. 45 In re Herrick's Minors, 3 Ir. Lord Eldon observes, page 135 : Ch., N. S., 183. "Where the surety for a receiver 46 Mann v. Stennett, 8 Beav., 189. in this court is called upon to pay, 47 Glossup V. Harrison, 3 Ves. & as the receiver is an officer of the Bea., 134. This was a motion by court, and the surety is so in a the surety of a receiver vnho had sense, if there is anything due in been discharged by order of the account between them, justice re- court, to restrain him from taking quires that upon the application 150 RECEIVERS. [chap. v. liands of the latter, the court has sufficient jurisdiction over the surety by reason of his suretyship and of his intermeddhng with the funds, to act by an order in personam in the cause in which the receiver was appointed, directing the surety to pay such money into court. ^^ And in Mississippi, it is held to be an appropriate exercise of legislative authority to confer upon a court of equity, jurisdiction over the bond of a receiver and over the sureties, such jurisdiction being regarded as an- cillary to its jurisdiction over the subject-matter in controversy. A statute, therefore, authorizing a court of equity to give a remedy by scire facias against the sureties is held to be valid and constitutional.'*^ § 133a. Sureties of clerk of court appointed receiver; li- ability to creditors not named in bond. When the court has appointed its own clerk as receiver in a cause, in the ab- sence of any statute in force at the date of the bond fixing the liability of his sureties in such case, the sureties upon the offi- cial bond of the clerk are not liable for his default as receiver, since they are presumed to have contracted with reference only to his liability as clerk.^^ But, although the bond is conditioned for the payment of certain creditors named, and the creditors have been fully paid, yet if it is further conditioned that the of the surety he shall be indemnified for what he has paid for the re- ceiver out of the balance due him. If that has not been decided, as I think it has, it must be decided upon principle, as it is clearly capa- ble of being maintained upon equi- table grounds. The court, there- fore, can not part with the fund, until an opportunity is given of de- termining the claim of the surety; the amount of which, when ascer- tained, must be paid to him ; and the residue only must be paid to the receiver." 48 Seidenbach v. Denklespeil, 11 Lea., 297. 49 Bank v. Duncan, 52 Miss., 740. As to the right of a surety upon a receiver's bond to appeal from an order for the payment of the amount of the bond, made in the cause in which the receiver was appointed, see In re Guardian Sav- ings Institution, 78 N. Y., 408. 50 Kerr v. Brandon, 84 N. C, 128; Rogers v. Odom, 86 N. C, 432; Syme v. Bunting, 91 N. C, 48. But see Syme v. Bunting, 91 N. C, 48, and Waters v. Melson, 112 N. C, 89, 16 S. E., 918, as to the effect of a statute enlarging the clerk's liability in such cases, and as to the liability of sureties upon his official bond given after the passage of the statute. CHAP, v.] BOND AND LIABILITY. 151 receiver will well and truly account for all moneys received by him, and will pay over all such moneys and comply with all orders of the court concerning the same, a breach of such condi- tion will warrant a recovery against the sureties in behalf of creditors who are not expressly named in the bond.^^ § 133^7. Surety not liable for violation of duties beyond scope of appointment. The liability of a surety upon the bond of a receiver conditioned for the faithful performance of his duties is limited to cases of a violation of those duties which may properly be said to be within the scope of the order of appointment. Accordingly, where a receiver, without any authority from the court, has proceeded to borrow money to pay off a mortgage upon real estate which is in his possession as receiver and fails to account for it, the surety upon his bond is not liable for such misappropriation since the act of the receiver was entirely beyond the scope of the order of his appointment. ^2 § 133c Surety may be liable although bill is afterward dismissed. Where the appointment of a receiver was reg- ularly made in a matter over which the court had assumed jurisdiction, and the receiver afterwards embezzles the pro- ceeds of the sale of certain property which had come into his possession as receiver, the sureties upon his bond are liable for the loss although the entire proceeding is afterwards dismissed for want of jurisdiction.^^ 51 Ross V. Williams, 11 Heisk., 53 Baltimore B. & L. Assn. v. Al- 410. derson, 39 C, C. A., 609, 99 Fed., 52 Preston v. American Surety 489. Co., 104 Md., 40, 64 Atl., 292. CHAPTER VI. OF THE RECEIVER'S POSSESSION. I. Nature of Receiver's Possession § 134 II. Ikterference with Receiver's Possession 163 I. Nature of Receiver's Possession. § 134. Receiver's possession is possession of the court; illustrations. 135. When and to what extent regarded as possession of either party. 136. Title and right to possession vest back to time of appointment, but not beyond; effect of appeal. 137. The doctrine in Maryland. 138. Receiver acquires possession subject to existing liens; liens for taxes; unrecorded mortgage; no liens acquired after ap- pointment. 139. Person asserting claim to property must apply to court. 140. Receiver's possession protected by injunction; illustrations; may proceed by petition in receivership suit. 140o. Property in receiver's hands not subject to seizure for taxes. 141. Property not allowed to be sold under execution; not subject to process of another court. 142. Receiver can pay money only by order of court. 143. Interference with receiver's possession not justified because appointment was improper. 144. Receiver entitled to aid of court to obtain possession. 145. Courts reluctant to interfere by receiver with property of third persons; receiver should assert claim by independent action. 146. Third persons permitted to come in and be heard. 147. Practice of English Chancery to compel defendant to deliver lands to receiver. 148. New York practice as to receiver obtaining possession. 149. Writ of assistance; when right of possession not determined on motion; state and federal courts. 150. Third person forcibly dispossessed by receiver; how redressed. 151. Receiver not subject to attachment or garnishment as to funds in his possession; exceptions; may be garnisheed by leave of court. 152. Possession as between different receivers determined by prior- ity. 152 CHAP. VI.] POSSESSION. 153 153. Right to possession as between receiver and assignee in bank- ruptcy. 154. Rights of common. 155. Mixture of funds by auctioneer; right of receiver. 156. Distraint for rent upon goods which have passed into receiv- er's possession. 157. When receiver of deceased not entitled to fund held by creditor. 158. Possession of wharf by receiver; injunction to restrain inter- ference with. 159. Possession of commercial paper by receiver not that of bona fide holder. 160. Defendant relieved from responsibility for property in receiv- er's possession. 161. Receiver's title not divested by order when he is not a party; effect of appeal on his possession. 162. Disposal of property by final decree. 162a. Right to possession not divested when property taken beyond state or country; when rule not applicable. § 134. Receiver's possession is that of court; illustra- tions. The precise nature of the possession held by a receiver of the property or estate intrusted to his charge is fre- quently a question of much importance in determining the relative rights of conflicting claimants to and parties interested in the property. The general proposition is well established, that, the receiver being the officer or agent of the court from which he derives his appointment, his possession is exclusively the possession of the court, the property being regarded as in the custody of the law, m gremio legis, for the benefit of who- ever may be ultimately determined to be entitled thereto.^ 1 See Robinson v. Atlantic & St. Louis, A. & S. R. Co. v. Ham- Great Western R. Co., 66 Pa. St., ilton, 158 III., 366, 41 N. E., 777; 160; Skinner v. Maxwell, 68 N. C, Town of Vandalia v. St. L., V. & T. 400; Simmons v. Allison, 118 N. C, H. R. R. Co., 209 111., 7Z, 70 N. E., 761, 24 S. E., 740; De Visser v. 662; In re Receivership of the N. I. Blackstone, 6 Blatchf., 235; Mays C. Mill Co., 109 La., 875, 33 So., V. Rose, Freem. (Miss.), 703; Day 903; Bell v. American Protective V. Postal Telegraph Co., 66 Md., League, 163 Mass., 558, 40 N. E., 354, 7 Atl., 608; Angel v. Smith, 857, 28 L. R. A., 452, 47 Am. St. 9 Ves., 335; HefTron v. Gage, 149 Rep., 481; State v. Reynolds, 209 111., 182, 36 N. E., 569; Mulcahey v. Mo., 161, 114 S. W., 1097; Wehrs v. Strauss, 151 III, 70, 37 N. E., 702; Sullivan, 217 Mo., 167, — S. W., — . 154 RECEIVERS. [chap. VI. The recel\er*s possession, therefore, is neither adverse to the plaintiff nor to the defendant in the htigation, being only the possession of the court, which holds the property for the greater safety of all parties in interest, the primary object be- ing to secure the thing in controversy, so that it may be sub- ject to such disposition as the court may finally direct. ^ And the receiver of a court of equity being regarded as its executive of^cer, in much the same light in which a sheriff is the execu- tive officer of a court of law, the property in his possession is regarded as in the custody of the law, to the same extent as if levied upon under an execution or attachment.^ And since the possession of a receiver is that of the court, it is held that a change in the receiver does not have the effect of interrupting such possession.'* And such possession, being that of the court, is not adverse to any of the parties in interest, and it is accordingly held that a defendant in ejectment, claiming by adverse possession, can not tack onto his possession that of a receiver who had held the property, in order to complete So strictly was this doctrine ad- in fact his agent; all the rents are hered to by Lord Eldon that he ob- applied to his use, either by pay- served in Angel v. Smith, supra, ing his debts, or paramount charges, that, after tenants of real estate had or by being handed over to him." attorned to a receiver appointed over See Simmons v. Allison, 118 N. C, the premises, the court itself be- 761, 24 S. E., 740, supra, as to the came the landlord. But it was said power of a receiver, under the or- by Mr. Justice Hargreave, in the der of the court, to make a lease of Landed Estates Court of Ireland, the property in his possession. As In re Butler's Estate, 13 Ir. Ch., to the duty of a receiver of mort- N. S., 456, that "the general prin- gaged property to lease it and to ciple is, that the possession of the reduce the rentals if such a step be- receiver is that of all parties to the comes necessary, see Northwestern suit, according to their titles. As Mutual Life Ins. Co., v. Burr, 60 between the owner and incum- Neb.. 467, 83 N. W., 664. brancers, it is for some purposes 2 Mays 7'. Rose, Freem. (Miss.) the possession of the incumbran- 703; Wilkinson v. Lehman-Durr cers, who have obtained or extended Co., 136 Ala., 463, 34 So., 216. the receiver; as between the owner 3 Blodgett, J., In re Merchants whose possession has been displaced Insurance Co., 3 Biss., 165. and a third party, it is the posses- 4 State v. Reynolds, 209 Mo., sion of the former. The receiver is 161, 114 S. W., 1097. CHAP. VI.] POSSESSION. 155 the statutory period. ^ As illustrating- the doctrine that the receiver's possession is that of the court appointing him, it was said in an English case that after tenants of real estate had attorned to the receiver appointed over the premises, the court itself became the landlord.^ But when property is in the actual possession of a receiver, he is regarded as having such a special interest therein that the ownership may be averred in him in an indictment for larceny of the property^ § 135. When and to what extent regarded as posses- sion of either party. It is sometimes asserted as a general principle in the reported cases, that a receiver being appointed primarily for the benefit of all parties in interest, his posses- sion will be treated as the possession of the party who is ultimately determined to be entitled thereto, and that when the question of right is finally determined, the possession of the party prevailing becomes exclusive throughout the whole period, by relation to the date of the receiver's appointment.^ While this principle is true to a limited extent, as that if any benefit is to ensue to the successful party from the mere act of possession, he will be regarded as having been in posses- sion from the first, and none of his rights will be lost because of the receiver's possession, the principle will not be carried to the extent of prejudicing his rights. And when possession of the property in dispute has been taken from defendant by injunction, and the property has been placed in the hands of a receiver, the injunction rendering the appointment of a re- ceiver indispensable for the protection of all parties, if defend- ant is finally adjudged to be entitled to possession and the in- junction is dissolved, the receiver's possession during the inter- val will not be treated as that of defendant, so as to prevent him from claiming and recovering damages because of the injunction.^ But when plaintiff in a bill to recover possession 5 Wilkinson v. Lehman-Durr Co., 8 See Beverley v. Brooke, 4 Grat., 136 Ala., 463, 34 So., 216. 212; Sharp v. Carter, 3 P. W., 375. 6 Angel v. Smith, 9 Ves., 335. 9 Sturgis v. Knapp, 33 Vt., 486. ''State V. Rivers, 60 Iowa, 3S1. 13 N. W., 73, 14 N. W., 738. 156 RECEIVERS. [chap. VI. of real estate obtains a receiver as against defendant, and ob- tains a verdict in his favor in an action of ejectment to try the title, and the receiver is then ordered to surrender possession to the plaintiff, the receiver's possession will not be deemed that of the defendant, but rather of the plaintiff, who appears to be entitled to the premises. ^^ And when a receiver of mort- gaged premises has been directed to pay the balance in his hands to a mortgagee, and to pass his accounts preliminary to his final discharge, but remains in possession after such order, paying the rents to the mortgagee, his possession after the date of the order will be regarded as that of the mortgagee himself.l^ But it would seem that the appointment of a re- ceiver does not so alter possession of the estate in the person who is ultimately found to have been entitled thereto at the time of such appointment as to prevent the statute of limita- tions from running during the dispute as to the right.^^ § 136. Title and right to possession vest back to time of appointment, but not beyond; effect of appeal. As regards the precise time when the receiver's title and right of possession attach to property which is the subject of the receiv- ership, the better rule would seem to be, as held in New York, that they vest by relation back to the date of the original order appointing him, although the proceedings may not be perfected until a later date; and that the receiver's title and right of possession during the interval between such order and the time of perfecting his appointment are superior to those of judg- ment creditors, or of attaching creditors, who levy upon the property during such interval. ^^ Thus, when an order of 10 Sharp V. Carter, 3 P. W., 375. dleton I\I. Co., 9 S. C, 318; Regen- 11 Horlock V. Smith, 11 L. J., N. stein v. Pearlstein, 30 S. C, 192, S. Ch., 157; S. C, 6 Jur., 478. 8 S. E., 850; Maynard v. Bond, 67 12 Anonymous, 2 Atk., 15. Mo., 315; Ardmore National Bank iSRutter v. Tallis, 5 Sandf., 610; v. Briggs M. & S. Co., 20 Okla., Steele v. Sturges, 5 Ab. Pr., 442; 427, 94 Pac, 533; Horn v. Pere In re Christian Jensen Co., 128 N. Marquette R. Co., 151 Fed., 626. Y., 550, 28 N. E., 665 ; In re Schuy- And see Ex parte Evans, 13 Ch. D., ler's S. T. B. Co., 136 N. Y., 169, 252; Pope v. Ames, 20 Ore., 199, 32 N. E., 623; Clinkscales v. Pen- 25 Pac, 393; Baldwin v. Spear, 79 CHAP. VI.] POSSESSION. 157 reference is made to a master in chancery for the appointment of a receiver, and the appointment is afterward made under and pursuant to such order, the receiver's title will be held to have vested as of the date of the original order, and to have attached upon all property to which the receivership could extend, in like manner and with the same effect as if the original order had named the receiver, instead of directing a reference for that purpose.l^ In all such cases actual possession by the court appointing the receiver is not necessary to complete its juris- diction or control over the property as against other creditors. It is sufficient that the court has assumed jurisdiction over the property in controversy by appointing a receiver, and it is, therefore, as much in the possession of the court as if already in the hands of its receiver, even though he has not yet com- plied with the order requiring the execution of a bond.^^ So when the order provides that, before entering upon the discharge of his duties, the receiver shall execute a bond with sureties, and between the time of such order and the exe- cution of the bond the sheriff levies upon the property, under an execution against the defendants, the receiver's title and right to possession, on perfecting his bond, take effect back to the date of his appointment, and the sheriff will be required to surrender possession of the property to the receiver.i^ So a judgment obtained against a corporation after the appoint- ment of a receiver over the corporation but before the approval of his bond creates no lien upon the corporate property, since the approval of the bond will relate back to the date of the order of appointment.^'^ It is to be observed, however, that the receiver's title does not take effect back to the time of be- Vt., 43, 64 Atl., 235. See, contra, Co., 9 S. C, 318. And see Bank of Farmers Bank v. Beaston, 7 G. & J., Woodland v. Herow, 120 Cal., 614, 421; Defries v. Creed, 34 L. J., N. 52 Pac., 1006, as to mere appoint- S. Eq., 607; Edwards v. Edwards, ment, ipso facto, constituting pos- 2 Ch. D., 291, reversing S. C, 1 Ch. session. D., 454. 16 Steele v. Sturges, 5 Ab. Pr., i4Rutter V. Tallis, 5 Sandf., 610. 442; Maynard v. Bond, 67 Mo., 315. 15 Clinkscales v. Pendleton M. 17 Temple v. Glasgow, 25 C. C. 158 RECEIVERS. [chap. VI. ginning the action in which he was appointed, so as to defeat a levy by the sheriff under a judgment recovered against the defendant prior to the receiver's appointment. ^^ So an attach- ment Hen obtained pending an apphcation for the appointment of a receiver but before he is actually appointed is not invali- dated by his subsequent appointment.^^ And where a bill is filed by stockholders of a railway company, not for the purpose of asserting a lien or enforcing any debt, but merely for the appointment of a receiver to manage the property until arrange- ments may be made for discharging its debts, the filing of the bill and the service of summons will not bring the property of the company under the control of the court so as to prevent the company, prior to the appointment of the receiver, from surrendering certain property and supplies to the person from whom they were purchased in partial payment of the purchase price. 2*^ And when the order appointing a receiver requires him to give a bond before proceeding to act as receiver, until such bond is given he can not maintain an action to recover possession of the property over which he is appointed. ^1 And when the order appointing him is stayed by an appeal and supersedeas, the property will not be deemed in the custody of the law until actually reduced to possession by the receiver after the affirmance of his appointment upon the appeal, until which time it remains in the custody of the original defendant, who is authorized to make necessary contracts for its preser- vation and for the protection of his rights.22 § 137. The doctrine in Maryland. In Maryland it is held that the appointment of receivers, and executing bonds for the faithful performance of their duties, will not operate to sequestrate the property of defendant, or debts due to him, A., 540, 80 Fed., 441, 42 U. S. App., 15 C. C. A., 556, 68 Fed., 515, 30 417, affirming S. C, 73 Fed., 709. U. S. App., 358. IS Artisans Bank v. Treadwell, 21 Phillips v. Smoot, 1 Mackey, 34 Barb., 553. 478. 19 Smith V. Nursery & S. Co., 109 22 Cook v. Cole, 55 Iowa, 70, 7 Iowa, 51, 79 N. W., 457. N. W., 419. 20 Illinois Steel Co. v. Putnam, CHAP. VI.] POSSESSION. 159 until actually reduced to the receiver's possession. And an indebtedness due to a person over whose affairs receivers have been appointed, but who have not taken possession, may be garnished, notwithstanding such appointment. The reason for the rule is said to be, that the defendant's effects not being in possession of the court until taken into the receiver's custody, the court can not interpose its summary jurisdiction to punish any interference with the possession. And it is held that the period when the effects of the defendant are to be considered as under protection of the court, so as to preserve them from attachment, is the time when the court may interpose an attach- ment to punish a disturbance or interference with the receiver's possession.23 § 138. Receiver acquires possession subject to existing liens; liens for taxes; unrecorded mortgage; no liens ac- quired after appointment. It is important to observe that the receiver's possession is subject to all valid and existing liens upon the property at the time of his appointment, and does not divest a lien previously acquired in good faith. 2^ And 23 Farmers Bank v. Beaston, 7 G. Her, 63 Kan., 579, 66 Pac, 617; & J., 421. Graham v. Mutual Aid Society, 161 24 Gere v. Dibble, 17 How. Pr., Mass.. 357, 37 N. E., 447; Kit- 31 ; In re North American Gutta tredge v. Osgood, 161 ]\Iass., 384, 37 Percha Co., 17 How. Pr., 549, 9 N. E., 369; Arnold v. Weimer, 40 Ab. Pr., 79; Rich v. Loutrel, 18 Neb., 216, 58 N. W., 709; Battery How. Pr., 121 ; Talladega Mercan- Park Bank v. Western C. Bank, tile Co. V. Jenifer Iron Co., 102 127 N. C, 432, 37 S. E., 461 ; Ard- Ala., 259, 14 So., 743 ; Bories v. more National Bank v. Briggs M. & Union B. & L. Assn., 141 Cal., 74, S. Co., 20 Okla., 427, 94 Pac, 533; 74 Pac, 552; Mulcahey v. Strauss, Baldwin v. Spear, 79 Vt., 43, 64 151 111., 70, 37 N. E., 702; Chicago Atl., 235; First National Bank v. Title & Trust Co. v. Smith, 158 111., Cook, 12 Wyo., 492, 76 Pac, 674, 78 417, 41 N. E., 1076; Totten & Hogg Pac, 1083; Cohen v. Gold Creek M. I. & S. F. Co. V. Muncie Nail Co., Co., 95 Fed., 580. And see, post, 148 Ind., 372, 47 N. E., 703 ; Amer- § 440. And see Bowling Green ican Trust & Savings Bank v. Mc- Savings Bank v. Todd, 64 Barb., Gettigan, 152 Ind., 582. 52 N. E., 146; Lorch v. Aultman, 75 Ind., 793, 71 Am. St. Rep., 345, and note ; 162. And see Von Roun v. Supe- Smith V. Nursery & S. Co., 109 rior Court, 58 Cal., 358. Iowa, 51, 79 N. W.. 457; Cramer v. 160 RECEIVERS. £CH.AP. VI. when creditors have obtained judgments against tlicir debtor, which are a lien upon his real estate, prior to the appointment of a receiver of the debtor's property and estate, the receiver is seized of the land subject to the lien of the judgments.25 So where creditors obtain judgment and levy upon the prop- erty of the debtor, and a receiver is afterward appointed, who takes possession of the property and sells it, the sheriff who made the levy is entitled to the proceeds of such sale.^^ So a receiver can not maintain replevin for property which has been levied upon and reduced to possession by credit- ors having a paramount lien. 27 And the appointment of a receiver over property which is subject to. taxation in no manner affects or impairs a lien upon the property for taxes.28 So where personal property comes into the possession of a receiver subject to the lien of taxes previously assessed, he takes it subject to such lien, and the municipality to which the tax is due may intervene in the receivership proceeding and estab- lish the claim as one entitled to a preference.^^ The principle extends, also, to choses in action of the defendant which pass to a receiver by virtue of his appointment, and he takes them subject to existing liens thereon. For example, where attor- neys of a bank are employed to foreclose a mortgage, and pend- ing the foreclosure a receiver is appointed of the affairs of the bank, the receiver takes title to the mortgage or its proceeds, subject to the lien of the attorneys for their services, although buch services can not be urged by way of set-off. The right of the attorneys in such case is dependent upon the common- law lien which an attorney has for his fees upon the papers of his client, as well as upon the proceeds of the litigation, and the attorneys will be required to pay to the receiver only the balance of the proceeds, after deducting their fees. But an 25 Gere v. Dibble, 17 How. Pr., 27 Conley v. Deere, 11 Lea, 274. 31. 28 Union Trust Co. v. Weber, 96 26 In re North American Gutta III., 346. Percha Co., 17 How. Pr., 549; S. 29 Duryee v. United States C. S. C, 9 Ab. Pr., 79; Rich v. Loutrel, Co., 55 N. J. Eq., 311, 37 Atl., 155. 18 How. Pr., 121. CHAP. VI.] POSSESSION. 161 individual member of the firm of attorneys can not, in such a case, be allowed any lien upon the proceeds of the foreclosure suit, as against the receiver, for an amount due him for services rendered the bank by him individually.^^ And where property comes into the possession of a receiver subject to pre-existing liens, it is as much his duty to preserve and protect such liens in favor of the holders thereof as it is to make a just distribu- tion of the assets among the unsecured creditors.^^ But where a mortgage of real estate has been executed before the appoint- ment of a receiver but has not been placed upon record until after his appointment, such mortgage does not constitute a valid lien as against the receiver and the latter is entitled to the proceeds of the sale for the benefit of the general creditors as against the mortgagee.^2 And where a receiver has been ap- pointed and has taken possession of property, no liens can be obtained nor preferences acquired without the consent of the court appointing the receiver.^^ § 139. Person asserting claim to property must apply to court. The possession of the receiver being, as already shown, regarded as the exclusive possession of the court from which he derives his appointment, the courts are exceedingly averse to allowing any unauthorized interference therewith, and will not tolerate any attempt to disturb him in his rightful pos- session, without leave of court being first obtained for that purpose.^* And when a person claiming any interest in the 30 Bowling Green Savings Bank & G., 104; Ames v. Trustees of V. Todd, 64 Barb., 146. Birkenhead Docks, 20 Beav., 332; 31 American Trust & Savings Brooks v. Greathed, 1 Jac. & W., Bank v. McGettigan, 152 Ind., 582, 176; DeWinton v. Mayor of Brecon, 52 N. E., 793, 71 Am. St. Rep., 345, 28 Beav., 200; Spinning v. Ohio and note. Life Insurance -and Trust Co., 2 32 Cheney v. Maumee Cycle Co., Disney, 368; Vermont & Canada 64 Ohio St., 205, 60 N. E., 207. R. Co. v. Vermont Central R. Co., 33 Cramer v. Her, 63 Kan., 579, 46 Vt., 792; Ex parte Cochrane, L. 66 Pac, 617. R., 20 Eq., 282; Mulcahey v. 34 Evelyn v. Lewis, 3 Hare, 472; Strauss, 151 III, 70. 2,7 N. E., 702; Angel V. Smith, 9 Ves., 335; Rus- St. Louis, A. & S. R. Co. v. Ham- sell V. East Anglian R. Co., 3 Mac. ilton, 158 111., 366, 41 N. E., 777. Receivers — 11. 162 RECEIVERS. [chap. VI. subject-matter of the litigation is prejudiced by the appoint- ment of a receiver, or desires to assert his rights, the proper course is for the court either to give him leave to bring an action, or to permit him to be examined pro intcresse suo, the latter being generally regarded as the most convenient and desirable practice.^^ Thus, the court will not permit a claimant of real estate which is in possession of its receiver to bring an action of ejectment without first obtaining leave for that pur- pose.^^ So an independent suit can not be maintained against a receiver to foreclose a mortgage upon property in his pos- session, although leave will be given to file such foreclosure bill in the receivership cause.^*^ And ordinarily, when real es- tate is in the actual possession of a receiver, an action of eject- ment can not be maintained against him in another court, but the claimant will be permitted to pursue his remedy against the receiver in the action in which he was appointed. ^^ And if property or funds in the receiver's possession are claimed by third persons not parties to the action in which he was ap- pointed, a petition or motion may be presented to the court for an order on the receiver to deliver over the fund or property to the claimant. ^^ The remedy of a person claiming title to the property is not to regain it by an act of trespass, but to apply to the court for redress or for leave to sue the receiver."*^ And in thus restricting claimants or third parties from inter- fering with the receiver's possession without leave, the rule is And see Baltimore & O. R. Co. v. St. Louis, A. & S. R. Co. v. Hamil- Flaherty, 87 Md., 102. 39 Atl., 524, ton, 158 111., 366, 41 N. E., 777. 1076; Read v. Brayton, 143 N. Y., 37 American Loan & Trust Co. v. 342, 38 N. E., 261. Central V. R. Co., 86 Fed., 390. 35 Brooks V. Greathed, 1 Jac. & 38 Fort Wayne, M. & C. R. Co. W., 176; Brien v. Paul, 3 Tenn. Ch., v. Mellett, 92 Ind., 535. And see 357; Strain v. Palmer, 86 C. C. A., Potter v. Spa Spring Brick Co., 47 618, 159 Fed., 628. See, also, Skin- N. J. Eq., 442, 20 At!., 852. ner v. Maxwell, 68 N. C, 400; 39 Rjggg v. Whitney, IS Ab. Pr., Jacobson v. Landolt, 73 Wis., 142, 388. 40 N. W., 636; Colburn v. Yantis, 40 /„ re Day, 34 Wis., 638; Ex 176 Mo., 670, 75 S. W., 653. parte Cochrane, L. R., 20 Eq., 282. 36 Angel v. Smith, 9 Ves., 335; CHAP. VI.] POSSESSION. 163 applied regardless of whether such persons claim paramount to or under the right which the receiver was appointed to pro- tect.41 § 140. Receiver's possession protected by injunction; illustrations; may proceed by petition in receivership suit. This exclusive possession of the receiver may be and frequently is protected by the aid of an injunction restraining any unau- thorized interference with the property or the unauthorized prosecution of suits against the receiver for its recovery, the granting of an injunction in such cases being a necessary in- cident to the power of appointing a receiver.^^ Thus, when a receiver is appointed over real property which is the subject- matter of the litigation, it is proper to enjoin one of the parties to the cause from distraining for rent against the other, as well as to restrain him generally from all interference with the property in the receiver's possession.^3 And when a claim- ant is asserting his title by an action at law to property held by a receiver, without having obtained leave of the court to institute such action, he may be enjoined, on the application of the receiver, from proceeding with his action, regardless of 41 Evelyn v. Lewis, 3 Hare, 472. to the right of a receiver of an in- 42 Tink V. Rundle, 10 Beav., 318; solvent corporation appointed in Attorney-General v. St. Cross Hos- one state to enjoin in that jurisdic- pital, 18 Beav., 601 ; Evelyn v. tion proceedings under attachments Lewis, 3 Hare, 472; Johnes v. or judgments against the corpora- Claughton, Jac, 573; Woerishoflfer tion in another state, see Schindel- V. North River C. Co., 99 N. Y., holz v. Cullum, 5 C. C. A., 293, 55 398, 2 N. E., 47; In re Christian Fed., 885, 12 U. S. App., 242. Un- Jensen Co., 128 N. Y., 550, 28 N. E., der a statute requiring the giving 665; Marshall v. Lockett, 76 Ga., of an injunction bond, it is held 289; Woodburn v. Smith, 96 Ga., that a receiver seeking the aid of 241, 22 S. E., 964; Vestel v. Tasker, an injunction against a stranger to 123 Ga., 213, 51 S. E., 300; Gard- the cause must file the necessary ner v. Caldwell, 16 Mont., 221, 40 bond and that he is not exempt by Pac, 590; Sevems v. English, 19 reason of his office. Cherry v. W. Okla., 567, 101 Pac, 750; Bibber- W. I. E. Co., 11 Wash., 586, 40 Pac, White Co. V. White River V. E. 136. R. Co., 107 Fed., 176; Hampton 43 Marshall v. Lockett, 76 Ga., Roads R. & E. Co. v. Newport 289. News etc., Co., 131 Fed., 534. As 164 RECEIVERS. [chap. VI. however clear his right may be, or of whether he was apprised of the receiver's appointment when he brought his action at law ; '*'* since the claimant, although he may have a clear legal right to the property, will not be allowed to disturb the re- ceiver's possession until he has established his right by proper proceedings for that purpose. Thus, when a receiver is ap- pointed over certain church property, and a churchwarden, claiming to be legally entitled thereto, takes possession by force and prevents the minister from holding religious services, an injunction may be granted to restrain such unauthorized inter- ference with the receiver's possession. ^^ And it is held that the receiver of a bank may enjoin a defendant from prosecuting an action against the bank in another state, where such action results in preventing or interfering with the collection of the assets of the bank to the possession of which the receiver is entitled. "^^ And an injunction is sometimes granted, althougii the party enjoined is proceeding in the exercise of a right given by statute. Thus, where real estate is in possession of a re- ceiver, and a railway company, desiring a portion of it for the construction of its road, institutes proceedings for condemna- tion in accordance with statute, but without obtaining leave of the court before interfering with the receiver's possession, an injunction may be granted restraining the company from pro- ceeding until further order of court."*"^ And a receiver is en- titled to an injunction to restrain unauthorized interference with the property in his possession even as against strangers who are not parties to the receivership proceeding ; and in such case the court may properly allow him to proceed by petition in the receivership suit and need not require him to resort to an independent action in equity.'*^ 44 Evelyn v. Lewis, 3 Hare, 472. Felton, 43 C. C. A., 189, 103 Fed., 45 Attorney-General v. St. Cross 227; Horn v. Pare Marquette R. Hospital, 18 Beav., 601. Co., 151 Fed., 626; Bibber-White 46 Davis V. Butters Lumber Co., Co. v. White River V. E. R. Co., 132 N. C, 233, 43 S. E.. 650. 107 Fed., 176; Virginia, T. & C. S. 47Tink V. Rundle, 10 Beav., 318. & I. Co. v. Bristol Land Co.. 88 48 Lake Shore & M. S. R. Co. v. Fed., 134. And see, post, § 747. CHAP. VI.] POSSESSION. 165 § 140a. Property in receiver's hands not subject to sei- zure for taxes. As still further illustrating the exclusive character of the receiver's possession and the jealousy with which it is guarded by the courts, it is held that property in the possession of a receiver appointed by a federal court, as in the case of a receivership over a railway, while subject to taxa- tion under the laws of the state in which it is situated, can not be levied upon and sold by an officer of the state in satisfaction of unpaid taxes. The remedy of the officer in such case should be sought by intervention in the suit in which the receiver was appointed, and that court may properly enjoin him from levying upon the property, and has undoubted jurisdiction to punish him for contempt in violating such injunction.'*^ And in such 49 In re Tyler, 149 U. S., 164, 13 Sup. Ct. Rep., 785 ; King v. Wooten, 4 C. C. A., 519, 54 Fed., 612, 2 U. S. App., 651; Oakes v. Myers, 68 Fed., 807; Burleigh v. Chehalis County, 75 Fed., 873, 34 L. R. A., 393; Virginia, T. & C. S. & I. Co. V. Bristol Land Co., 88 Fed., 134. And see McLeod v. City of New Albany, 13 C C. A., 525, 66 Fed., 378, 24 U. S. App., 601. But see, contra, Central Trust Co. v. Wa- bash, St. L. & P. R. Co., 26 Fed., 11. The doctrine of the text deny- ing the right of taxing officers to interfere with property in the pos- session of receivers is clearly set forth in the opinion of Fuller, C. J., In re Tyler, 149 U. S., 164, 13 Sup. Ct. Rep., 785, as follows, p. 182: "The general doctrine that property in the possession of a receiver ap- pointed by a court is in custodia legis, and that unauthorized inter- ference with such possession is punishable as a contempt, is con- ceded; but it is contended that the salutary rule has no application to the collection of taxes. Undoubt- edly property so situated is not thereby rendered exempt from the imposition of taxes by the govern- ment within whose jurisdiction the property is, and the lien for taxes is superior to all other liens what- soever, except judicial costs, when the property is rightfully in the custody of the law; but this does not justify a physical invasion of such custody and a wanton disre- gard of the orders of the court in respect of it. The maintenance of the system of checks and balances characteristic of republican institu- tions requires the co-ordinate de- partments of government, whether federal or state, to refrain from any infringement of the independence of each other, and the possession of property by the judicial department can not be arbitrarily encroached upon, save in violation of this fun- damental principle. The levy of a tax warrant, like the levy of an or- dinary £eri facias, sequestrates the property to answer the exigency of the writ; but property in the pos- session of the receiver is already in 166 RECEIVERS. [CIIAP. VI. case a receiver may have an injunction to restrain the collection of a tax, although tiiere are present none of the grounds of equitable jurisdiction, as where the property seized is per- sonalty and could accordingly be recovered in an action at law. 5^ And the rule under discussion is not confined in its application to the federal courts but has been recognized and followed by the state courts.^^ sequestration, already held in equi- table execution; and while the lien for taxes must be recognized and enforced, the orderly administra- tion of justice requires this to be done by and under the sanction of the court. It is the duty of the court to see to it that this is done; and a seizure of the property against its will can only be predi- cated upon the assumption that the court will fail in the discharge of its duty, an assumption carrying a con- tempt upon its face." 50 Ledoux V. La Bee, 83 Fed., 761. 51 Cleveland v. McCravy, 46 S. C, 252, 24 S. E., 175; Palmer v. Peftingill, 6 Idaho, 346, 55 Pac, 653. And see Spokane County v. /\nnis, 43 Wash., 655, 86 Pac, 1066. And it is held that the right of the state to the payment of taxes upon property in the hands of a re- ceiver is paramount to the rights of creditors, and the receiver will be directed to pay such taxes be- fore distribution of the funds in his hands among creditors. Gree- ley V. Provident Savings Bank, 98 Mo., 458, 11 S. W., 980; Gehr v. Mont Alto Iron Co., 174 Pa. St., 430, 34 Atl., 638; Spokane County V. Annis, 43 Wash., 655, 86 Pac, 1066. And receiver's certificates •may properly be issued for such taxes and given a preference over prior liens. Hanna v. State Trust Co., 16 C. C. A., 586, 70 Fed., 2, 36 U. S. App., 61, 30 L. R. A., 201. But in Massachusetts it is held that the receiver of a corporation is not taxable for personal property of the corporation in his hands. City Na- tional Bank v. Charles Baker Co., 180 Mass., 40, 61 N. E., 223. And it has been held that a foreign state is not entitled to a preference over local creditors on account of an un- paid franchise tax due to the state from an insolvent corporation of that state, over which the receiver has been appointed in the local pro- ceedings. Holshouser v. Copper Co., 138 N. C, 248, 50 S. E. 650. See, further, as to the liability to taxation of funds or property in the hands of receivers, Howard Co. V. Strother, 71 Iowa, 683, 33 N. W., 238; Brooks v. Town of Hartford, 61 Conn., 112, 23 Atl., 697; Spald- ing V. Commonwealth. 88 Ky., 135, 10 S. W., 420. In Wise v. Wise Co., 153 N. Y., 507, 47 N. E., 788, it was held that a specific lien by attach- ment process upon personal prop- erty prior to the appointment of a receiver and the delivery of certain property to him would not be dis- placed in favor of a subsequent claim for taxes upon the same prop- erty where no specific lien had ever been obtained by warrant or other legal process. As to the right of the CHAP. VI.] POSSESSION. 167 § 141. Property not allowed to be sold under execution ; not subject to process of another court. So extremely jealous are courts of equity of any interference, pendente lite, with the possession of their receivers, that they will not ordi- narily permit property which is the subject of the receivership to be sold on execution.^^ p^^^^ while the appointment of a receiver does not destroy existing liens upon the property, it prevents their enforcement by the ordinary legal process and compels the persons asserting such liens to seek their remedy in the cause in which the receiver is appointed. ^^ Even though an execution has been levied upon the property before the ap- pointment of the receiver, it is held that there can not be a law- purchaser at a tax sale of vacant land forming part of the estate of a receiver to take possession under his tax deed, see Metcalfe v. Com- monwealth L. & L. Co.'s Receiver, 113 Ky., 751, 68 S. W., 1100. In Stoner v. Bitters, 151 Ind., 575, 52 N. E., 149, it was held, under a statute providing that it should be the duty of the receiver of any cor- poration to pay the taxes due upon its pro^rty, and where he neglected to do so, the county treasurer might file in the court a statement show- ing the delinquency and the court should thereupon issue an order di- recting the receiver to show cause why the taxes with penalty should not be paid and, upon his failure to show good and sufficient cause, the court should direct them to be paid, that the prior sale by the receiver of the property of the corporation subject to liens was a good and suf- ficient cause under the statute. As to the liability of the receiver of an insolvent corporation for a fran- chise tax incurred in carrying on the business of the corporation, see In re George Mather's Sons' Co., 52 N. J. Eq., 607, 30 Atl., 321; Crews V. United States Car Co., 57 N. J. Eq., 357, 42 Atl., 272. 52 Robinson v. Atlantic & Great Western R. Co., 66 Pa. St., 160; Thompson v. McCleary, 159 Pa. St., 189, 28 Atl., 254; Skinner v. Max- well, 68 N. C, 400; Wiswall v. Sampson, 14 How., 52; Edwards v. Norton, 55 Tex., 405; Ellis v. Ver- non I., L. & W. Co., 86 Tex., 109, 23 S. W., 858; Walling v. Miller, 108 N. Y., 173, 15 N. E., 65 ; Chal- mers V. Littlefield, 103 Me., 271, 69 Atl., 100; Campau v. Detroit Driv- ing Club, 130 Mich., 417, 90 N. W., 49; Gardner v. Caldwell, 16 Mont, 221, 40 Pac, 590; Jones v. Moore, 106 Tenn., 188, 61 S. W., 81, (re- plevin) ; Grosscup z/* German S. & L. Society, 162 Fed., 947. See, also, Russell V. Texas & P. R. Co., 68 Tex., 646, 5 S. W., 686; State v. Judge of Civil District Court, 45 La. An., 1418, 14 So., 308; McDon- ald V. Railroad, 93 Tenn., 281, 24 S. W., 252. •"13 Walling V. Miller, 108 N. Y., 173, 15 N. E., 65; Ellis v. Vernon I., L. & W. Co., 86 Tex., 109, 23 S. W., 858. 168 RECEIVERS. [chap. VI. fill sale under such execution without leave of the court ap- pointing the receiver. ^^ And when the property of an insolvent corporation passes into the custody of a receiver in an action to wind up its affairs, it is held that a sale of real estate of the corporation made after, although under an execution levied before the receivership will pass no title to the property sold.^^ And the sale under execution of the equity of redemption of premises which are in the possession of a receiver pending a foreclosure suit is void and no title thereunder passes to the purchaser.^6 And when a sheriff has levied upon property in the hands of a receiver, equity will not interpose by an injunc- tion in behalf of the sheriff, to restrain an action at law against 54 Walling v. Miller, 108 N. Y., 173, IS N. E., 65 ; Campau v. De- troit Driving Club, 130 Mich., 417, 90 N. W., 49. But in such case the court appointing the receiver may allow a creditor to proceed and sell under a prior execution. Cass v. Sutherland, 98 Wis., 551, 74 N. W., 337. 55 Ellis V. Vernon I., L. & W. Co., 86 Tex., 109, 23 S. W., 858. The cases of Walling v. Miller, 108 N. Y., 173, 15 N. E., 65, Ellis v. Vei-non I., L. & W. Co., 86 Tex., 109, 23 S. W., 858, and Campau v. Detroit Driving Club, 130 Mich., 417, 90 N. W., 49, may be regarded as extending the doctrine of non- interference with the receiver's pos- session to its extreme limits, since the lien of the judgment creditor having been perfected by levying his execution before the appointment of the receiver, it would seem, upon principle, to be the better doctrine that the rights thus acquired are paramount to the receivership, and that the judgment creditor should be permitted to proceed with his levy and sale, without being re- quired to seek relief in the cause in which the receiver is appointed. And in Cole v. Oil-Well Supply Co., 57 Fed., 534, where, prior to the re- ceivership in a federal court, proper- ty of the defendant had been seized by a sheriff under attachment from a state court in an action against the defendant, a foreign corpora.- tion, which action resulted in judg- ment against the defendant and the levy of execution upon the property so attached, the federal court re- fused upon petition of the receiver to order the surrender of the prop- erty by the sheriff. And the doc- trine of non-interference is confined to property which is actually em- braced in the receivership, and does not extend to property of which the receiver may have taken possession but to which he is not entitled. Such property, not being within the scope of the receivership, is not property in custodia legis, and it may, therefore, be sold under exe- cution. St. Louis, A. & T. R. Co. V. Whitaker, 68 Tex., 630, 5 S. W., 448. 56 Grosscup V. German S. & L, Society, 162 Fed., 947. CHAP. VI.] POSSESSION. 169 him for such interference.^''^ The proper remedy for a judg- ment creditor, who desires to question the receiver's right to the property, is to apply to the court appointing him, to have the property released from the receiver's custody, in order that he may proceed against it under his judgment ;^^ since to permit the property, while in custody of the receiver, to be levied upon and sold under the process of another court, would at once give rise to a conflict of jurisdiction and would seriously interfere with and impair the receiver's right to the manage- ment of the property. ^^ So when real estate is in the actual possession of a receiver, pending litigation as to the title, it is not subject to levy and sale under execution to satisfy a judg- ment rendered subsequent to the receiver's appointment.^^ And when the judgment was obtained before the appointment, but the lien was not acquired by placing an execution in the hands of the sheriff until afterward, it was held that a pur- chaser under the execution sale, the real estate being then in the receiver's possession, and the sale being made without leave of court, acquired no title, and the court refused to put him into possession. ^1 And while the principle, as above stated, is not understood as prohibiting absolutely the acquisition of new rights to the fund or property in controversy, pending the re- ceiver's possession, it yet prevents the person so acquiring rights from asserting them by the process of another court, thus compelling him to apply to the court having jurisdiction over the property and the receiver for a determination of his rights. And it matters not, in such case, that the receiver has declined to act, since the property is still in the custody of the law.^^ go a vessel in the posses- 57 Try V. Try, 13 Beav., 422. 60 Edwards v. Norton, 55 Tex., 58 Robinson v. Atlantic & Great 405. Western R. Co., 66 Pa. St., 160; Gl Dugger v. Collins, 69 Ala., 324. Thompson v. McCleary, 159 Pa. St., 62 Skinner v. Maxwell, 68 N. C, 189, 28 Atl., 254; Dugger t'. Collins, 400. The court, Rodman, J., say, 69 Ala., 324. See Wiswall v. Samp- p. 404 : "When a court of equity son, 14 How., 52. has undertaken to adjudicate upon 59 Robinson v. Atlantic & Great and distribute a fund among the Western R. Co., 66 Pa. St., 160. parties entitled to it, it would be 170 RECEIVERS. [chap. VI. sion of receivers appointed by the United States circuit court is not subject to seizure under admiralty proceedings brought to enforce a claim for the wages of seamen, and, upon petition presented to the admiralty court by the receivers, that court will order the release of the vessel. ^^ And where a court which has appointed a receiver, who has property in his possession, permits him to be made a party defendant to an action insti- tuted in anotlier court for the purpose of asserting liens or other claims against the property which existed before his ap- pointment, such permission is to be construed as allowing the prosecution of the action merely for the purpose of determin- ing and establishing such liens and can not be held to go to the extent of authorizing the property to be taken from the pos- session of the receiver and applied by the other court to the satisfaction of the claims if they are established.^^ § 142. Receiver can pay money only by order of court. As still further illustrating the aversion entertained by courts of equity toward any interference with the possession of their receivers, it is held that a receiver is not justified in paying out money in any other manner than upon the order of the inconvenient for the court of law, no right to it can be acquired by or any other court, by its process, sale under execution. And it makes to interrupt the adjudication and no difference that the receiver ap- create new rights in the property pointed declined to act; the prop- itself This rule is not understood erty was nevertheless in the custody as absolutely preventing the acqui- of the law." sition of new rights to the fund in 63 The Jonas H. French, 119 Fed., controversy after the commence- 462. The order entered in this case ment of the proceedings. Any per- was that the petition of the re- son claiming to have acquired such ceivers should be granted as to the an interest pendente lite, while he release of the vessel but that the cannot interfere under the process order of restoration should not is- of another court, may apply to the sue for three days in order that the court which has jurisdiction of the libelants might apply to the circuit fund, pro interesse suo, and his court for leave to proceed with their claim will be heard. The limits of libel. this principle are somewhat uncer- 64 Premier Steel Co. v. McEI- tain, but it is sufficient for the pres- waine-Richards Co., 144 Ind., 614, ent case to say that, while the prop- 43 N. E., 876. erty is in the hands of a receiver, CHAP. VI.] POSSESSION. 171 court appointing him, and that this court will not sanction a payment made by him, even upon the compulsory process of another court. And when a judgment creditor has attached money in the hands of a receiver, under proceedings instituted in a court of law, and has obtained an order therein for pay- ment of the money attached, which order is obeyed by the re- ceiver, such payment will not be allowed by the court in pass- ing his accounts.^^ § 143. Interference with receiver's possession not jus- tified because appointment was improper. Courts of equi- ty will not permit any unauthorized interference with the pos- session of their receivers to be justified upon the ground that the appointment was ill-advised or illegal, and that the parties interfering were, therefore, not bound to regard it. It is suffi- cient that there is a subsisting order of the court appointing a receiver; and parties dissatisfied therewith, or deeming such order erroneous, must take the proper course to question its validity by application to the court itself, and it is not com- petent for any person to interfere with the receiver's posses- sion upon the ground that his appointment was improvidently made.^^ The appropriate course in all cases, where parties are desirous of obtaining possession of property which has 65 De Winton z/. Mayor of Brecon, matter, and to do that which is just 28 Beav., 200. Lord Romilly, Mas- in the cause between the parties, ter of the Rolls, observes, p. 202: It is always to be remembered that "... I apprehend this is clear, the receiver in this case would not that the court never allows any per- have got a penny, except by the or- son to interfere, either with money der of the court enabling him to or property in the hands of its re- receive it, and entitling him to give ceiver, without its leave ; whether it a good discharge to the person who is done by the consent or submis- paid it; and, consequently, it is sion of the receiver, or by compul- strictly money belonging to the sory process against him. The court of chancery, and the receiver court is obliged to keep a strict can only discharge himself by pay- hand over property in the hands of ing it in obedience to the direction a receiver, or which, by virtue of and order of that court." the order of the court, may come 66 Russell v. East Anglian R. Co., into his hands, in order to preserve 3 Mac. & G., 104; Ames v. Trustees entire jurisdiction over the whole of Birkenhead Docks, 20 Beav., 332; 172 RECEIVERS. [CIIAP. VI. come into the hands of a receiver, is to apply to the court from which he derives his appointment; and the rule is not limited to property actually in the receiver's possession, but extends also to property which he has been appointed to receive, but which he has not yet reduced to possession. ^'^ § 144. Receiver entitled to aid of court to obtain pos- session. The receiver, being the ofticer or agent of the court, is entitled to its assistance in obtaining possession of property which is the subject-matter of his receivership, and may have an order of court to procure possession of such prop- erty, not only against defendant in the action, but in a proper case against his agents and employees, although not parties to the record, requiring them to deliver up the specific property.^^ So the receiver of an insolvent corporation may, by petition in the cause in which he was appointed and without the nec- essity of an independent suit, procure the transfer and delivery of a note held by officers of the corporation as a part of its Cook V. Citizens National Bank, 7Z Ind., 256; Missouri Pac. R. Co. v. Love, 61 Kan., 433, 59 Pac, 1072; Williamson v. Pender, 127 N. C, 481, 37 S. E., 495. And see, post, % 165. 6" Ames V. Trustees of Birken- head Docks, 20 Beav., 332. "There is no question," says Lord Romilly, Master of the Rolls, p. 353, "but that this court will not permit a receiver, appointed by its authority, and who is, therefore, its officer, to be interfered with or dispossessed of the property he is directed to re- ceive, by any one, although the or- der appointing him may be perfectly erroneous ; this court requires and insists that application should be made to the court for permission to take possession of any property of which the receiver either has taken or is directed to take possession, and it is an idle distinction (which could not be maintained if it were attempted, which it is not by coun- sel at the bar, though suggested by the affidavits), that this rule only applies to property actually in the hands of the receiver. If a receiver be appointed to receive debts, rents or tolls, the rule applies equally to all these cases, and no person will be permitted, without the sanction or authority of the court, to inter- cept or prevent payment to the re- ceiver of the debts, rents or the tolls, which he has not actually re- ceived, but which he is appointed to receive." 68 /n re Cohen, 5 Cal.. 494. See, also, Geisse v. Beall, 5 Wis., 224; Green v. Green, 2 Sim., 430; JMiller V. Jones, 39 111., 54; Sullivan v. Colby, 18 C. C. A., 193, 71 Fed., 460, 34 U. S. App., 432. CHAP. VI.] POSSESSION. 173 assets, even though such officers are not parties to the cause. ^^ And when a receiver is appointed over real property, of which the owner is in possession, the proper course is to apply to the court to have the owner deliver possession to the receiver, since the latter can not distrain upon the owner in possession, as he is not a tenant of the receiver. "^^^ Such procedure does not con- flict with the principle that no man shall be deprived of his property without due process of law, since the surrender to the receiver does not affect the ultimate question of the right to the property, any more than does the levy of an attach- ment ; the purpose being merely to secure the property by get- ting it into the receiver's possession, so that it may be safely delivered to the party who shall be finally determined to be entitled thereto.'^! And the order for the surrender of prop- erty to the receiver may, if necessary, be enforced by process of attachment J2 And when a receiver has been appointed to take charge of certain trust funds held by defendant, the court may require defendant's attorney to appear before the receiver, and to deliver to him all the trust property which may have come to his hands since the suit was instituted, and to compel him to render an account and inventory of such property, and to verify it under oath,'^^ go when a party to the cause exe- cutes a lease of real property to a third person, both lessor and lessee having full knowledge that a receiver has been appointed over the property, however valid such lease may be as between the parties, it confers no right as against the receiver, and he is entitled to a writ of possession as against the lesseeJ* So a receiver of an insolvent corporation is entitled to an order requiring a banking company to turn over certain securities owned by the insolvent corporation. "^5 69 Brandt v. Allen, 76 Iowa, 50, 72 Miller v. Jones, 39 111., 54. 40 N. W., 82. 73 Geisse v. Beall, 5 Wis., 224. 70 Griffith V. Griffith. 2 Ves., 400. 74 Thornton v. Washington Sav- 71 In re Cohen, 5 Cal., 494; Miles ings Bank, 76 Va., 432. V. New South B. & L. Assn., 95 75 Miles v. New South B. & L. Fed., 919. Assn., 95 Fed.. 919. 174 RECEIVERS. [chap. VI. § 145. Courts reluctant to interfere by receiver with property of third persons ; receiver should assert claim by independent action. It is to be borne in mind, however, in considering the extent to which a court of equity will aid its receiver in obtaining possession, that the court is always reluctant to interfere with the right of possession by par- ties claiming a legal title in the property."^^ And while it is competent for the court, by an interlocutory order, to take pos- session of property by its receiver pending litigation concern- ing the rights of the parties, yet when the rights of third per- sons have intervened who are not parties to the record, as in the case of purchasers in good faith of the property in contest, the court will decline to take possession by its receiver. The interference is withheld under such circumstances, upon the ground that the rights of purchasers in good faith are not to be adjudicated and determined by the summary method of an order to surrender possession to a receiver.'^'^ And when the plaintiff seeks to have an actual delivery of defendant's prop- erty to the receiver, some of which is claimed by a third person under an assignment from defendant, the question as to what property is under defendant's control must first be determined, before he will be directed to deliver it to the receiver.'^^ So when a banker, holding a specific fund in his possession, makes an assignment for the benefit of his creditors, and a receiver is afterward appointed over the fund in question, the court will not, upon summary motion, compel the assignees to pay the money to the receiver.'''^ And the court will not, upon a summary application, compel a delivery to the receiver of prop- erty purchased at a sheriff's sale, under execution against the ''^ Cassilear v. Simons, 8 Paige, cause in which he was appointed 273 ; McCombs v. Alerryhew, 40 and without an independent action. Mich., 721. United States v. Church, 5 Utah^ 77 Levi V. Karrick, 13 Iowa, 344. 538, 18 Pac, 35. But in the case of a merely color- 78 Cassilear v. Simons, 8 Paige, able or fraudulent transfer to third 273. And see Parker v. Browning, persons, it has been held that the 8 Paige, 389. receiver might compel the delivery 79 Coleman v. Salisbury, 52 Ga., of the property by petition in the 470. CHAP. VI.] POSSESSION. 175 defendant, when the purchaser's agent is shown to be exercis- ing control over the property, with the power of reducing it at any time to actual possession. Under such circumstances, the court will first require the purchaser to be made a party to the litigation, that he may have an opportunity to defend his title and right of possession.^^ And where personal property is in the possession of a third person, not a party to the receiver- ship proceeding, under a claim of title, it is improper for the court which appointed the receiver to order him to take posses- sion of such property, but he should be instructed to institute a separate action at law for its recovery ; and the enforcement of such order is properly restrained by writ of prohibition.^^ And where a receiver seeks to set aside a certificate of sale of real estate which was sold subsequent to the appointment of the receiver under an attachment lien which was obtained prior to his appointment, it appearing that the attaching credit- or is a stranger to the receivership proceeding and is in no way interfering with the possession of the receiver, the latter should proceed by independent action and not by petition in the receivership proceeding.^2 § 146. Third persons permitted to come in and be heard. When a receiver is in possession of real estate pendente lite, although the court will not permit his possession to be inter- fered with by third persons without its consent, such persons will be permitted to come in and be heard with reference to their interests, and such orders will be made as are necessary to protect their rights in the subject-matter of the litigation, until they may be finally determined. For example, when a receiver is appointed over the premises in controversy, and a third party is entitled to a portion of the premises in right of his wife, but a proceeding for divorce is pending on the part of the wife against the husband, in which she claims the entire 80 Robeson v. Ford, 3 Edw. Ch., 82 Cherry v. W. W. I. E. Co., 11 441. Wash., 586, 40 Pac, 136. 81 Stnparich Mfg. Co. v. Superior Court, 123 Cal., 290, 55 Pac, 985. And see, post, § 457. 176 RECEIVERS. [chap. VI. rents and profits, while the court will not determine the relative rights of the husband and wife upon an application for payment of the money to the former, it will direct the receiver to pay that portion of the rents into court, to await the result of the litigation between husband and wife.^^ And when a receiver had been appointed of the rents and profits of real estate in be- half of a person having a life estate therein, and directed to pay the rents to such person, and in another action an order for costs had been made against the same tenant for life, the court gave the successful party leave to prosecute proceedings for costs against the life estate, notwithstanding the appoint- ment and possession of the receiver.^* § 147. Practice of English Chancery to compel defend- ant to deliver lands to receiver. Under the practice of the English Court of Chancery, when it was sought to* compel a defendant to deliver up possession of lands to a receiver ap- pointed in the cause, an order was first obtained to deliver pos- session, and a writ of execution of such order was then served upon defendant. And until this was done no further order would be made by the court.^^ § 148. New York practice as to receiver obtaining pos- session. Under the former chancery practice in New York, when a receiver was appointed and invested under decree of the court with the title to real and personal property in controversy, and defendants were required by the decree to deliver the property to the receiver, it w^as held that he himself might take the necessary steps to obtain possession and control of the property, and that he need not wait for the parties to the litigation to move in the matter, it being his duty to pro- tect and preserve the property for the interests of all parties concerned. ^^ 83 Vincent v. Parker, 7 Paige, 65. 417. And see this case for a review 84 Gooch V. Haworth, 3 Beav., 428. of the authorities, English and 85 Green v. Green, 2 Sim.. 430. American, upon the right of the re- See, also, Griffith v. Griffith, 2 Ves., ceiver to initiate any action con- 400. cerning his receivership. 86 Iddings v. Bruen, 4 Sandf. Ch., CHAP. VI.] POSSESSION. 177 § 149. Writ of assistance ; when right of possession not determined on motion; state and federal courts. While a court of equity will, in a proper case, freely extend its aid by a writ of assistance, to enable its receiver to obtain possession of property to which he is entitled, it will not thus interfere upon mere motion, as against the possession of a stranger to the action, claiming a superior title under which he holds pos- session, but will leave the disputed question of title to be deter- mined by an action for that purpose. For example, when a receiver is in possession. of property under appointment from a United States court, the state courts will not grant a writ of assistance to a subsequently appointed receiver in the state tribunal, to enable him to get possession of the same property. The possession of the receiver appointed by the federal court, in such a case, is regarded as the possession of a stranger, whose rights can not be determined arbitrarily and upon a mere mo- tion, but only by a regular action at law. And it can make no difference that the jurisdiction of the federal court, to enter- tain the action in which its receiver was appointed, is assailed and denied, since that is a question of too great importance to be disposed .of merely by a motion in the state court.^'^ So 87 Gelpeke v. Milwaukee & Hori- cuted by the corporation defendant, con R. Co., 11 Wis., 454. "I know When this was made to appear, he of no case," says Dixon, C. J., page should have arrested the proceed- 457, "where it has been adjudged ing, and turned the parties over to that the possession of a stranger, their appropriate remedy by action. who sets up a superior title, in pur- His attempt to adjudicate upon and suance of which he claims to have settle the rights of Mr. Ward, upon entered and to hold, might be thus a mere motion, supported by affi- disturbed. In such cases it has been davits, was unauthorized. Such the uniform rule to leave the par- was not the proper mode of pro- ties to their remedies by action. cecding by which to determine his And in this case I think that the rights. It is only adapted to those circuit judge erred in proceeding cases where the court can say, to award the writ as against Mr. clearly and unhesitatingly, that the Ward, when it appeared that he was possession is subsequent to the com- in possession by virtue of the order mcncement of the action, and sub- of the district court, made in a ject to the decree or order which proceeding to foreclose a mortgage has been made, or that the person which had been previously exe- holding the same has no legal right. Receivers — 12. 178 RECEIVERS. [chap. VI. a receiver is not entitled to a writ of assistance to recover prop- erty in the possession of persons who are not parties to the receivership proceeding and who in good faith deny the right of the receiver to the possession of the property in question.^^ § 150. Third person forcibly dispossessed by receiver; how redressed. While it is true, when property is legally and properly in possession of a receiver, that it is the duty of the court to protect that possession, not only as against acts of violence, but in some instances even against actions at law, so that a third person claiming the property may be compelled to come in and be examined pro intercssc suo in the original action ; yet the case is different if the property is in possession of a third person, under claim of right, and is forcibly taken from his possession by the receiver without any order of court. Under such circumstances, neither the order of court appoint- ing the receiver, nor the construction of its order, being in question, and a complaint being made of misconduct on the part of an officer of the court, acting under color of authority merely, the court may, in its discretion, either take cognizance And it could make no difference son I was opposed to and refused that the jurisdiction of the district to hear its discussi&n in this court court (of the United States) to en- upon the present motion. Courts tertain those actions was assailed can only act, in such cases, where and denied. That, too, was a ques- the rights of the parties are obvious, tion of great gravity and impor- and not the subjects of doubts or tance, and not to be disposed of serious controversy. It was urged with the same speed and facility that unless the question involved that we would strike out an ob- could be determined in this pre- viously frivolous answer or demur- ceeding. that then the receiver was rer. It was one which admitted of, remediless, and there was no form at least, some doubt, and upon ei- of action in which Mr. Ward, ad- ther side of which the most learned mitting his possession to be without counsel would not think it unbe- warrant of law, could be deposed, coming or improper to spend many I can not agree to this proposition, hours or days in earnest argument, I think it may be done by some one before any court where it should be of the forms of action now in use." raised. And the very fact that it See, also, Andrews v. Paschen, 67 would admit of such doubt or argu- Wis., 413, 30 N. W., 712. ment was sufficient to exclude it 88 Musgrove v. Gray, 123 Ala., from the consideration of the court, 376, 26 So., 643, 82 Am. St. Rep., upon such a motion. For that rea- 124. CHAP. VI.] POSSESSION. 179 of the complaint and do justice between its officer and the party aggrieved, or it may permit the latter to bring an action at law for his alleged injury. And the latter course would seem to be preferable, in order that the benefit of a trial by jury may be had.^^ But where a receiver has made a demand for goods 89 Parker v. Browning, 8 Paige, 388. This was an appeal by a re- ceiver from an order allowing cer- tain petitioners to bring an action against the receiver, and other per- sons acting under him, for an al- leged trespass in forcibly entering a store which petitioners claimed to belong to them and to be in their possession, and taking the goods therefrom. Walworth, Chancellor, says, p. 389 : "There is certainly room for doubt in this case, whether the defendant Browning had not some interest in the store of goods. And if the receiver had taken pos- session thereof under the express directions of the court, or if the master had decided that the goods were in the possession and under the power and control of the de- fendant, and had directed him to deliver the possession thereof to the receiver, this court ought to have assumed the exclusive jurisdiction over the subject of complaint, in- stead of suffering its officer to be harassed in a suit at law for obey- ing its order. But as I understand the case, the validity of the order appointing the receiver is not in controversy here, nor is his right to take the property of the defend- ant Browning, as such receiver, in- tended to be questioned. The peti- tioners, on the contrary, claim that the receiver, without any direction to that effect from the court, has forcibly taken goods which belong to them exclusively, out of their possession, under the pretense that such goods were the property of the defendant Browning. Where the authority of the court or the con- struction of its order is not in ques- tion, but the complaint is made against the misconduct of its officer, acting under color of authority merely, this court may, in its dis- cretion, either take to itself the cog- nizance of the complaint and do justice between its officers and the parties aggrieved, or it may permit the latter to bring a suit at law for the alleged injury. And in cases of this description it is more in ac- cordance with the spirit of our in- stitutions to permit the parties com- plaining to proceed at law, where they may have the benefit of a jury trial, than to attempt to settle their rights by a reference to a master. It is not necessary in any case for the receiver to put himself in a situation where he is not entitled to the full protection of this court; as he is under no obligation to attempt to take property out of the posses- sion of a third person, or even out of the possession of the defendant himself, by force, and without an express order of the court directing him to do so. The proper course, as this court has repeatedly decided, where the defendant is directed to deliver over his property to the re- ceiver under the direction of a master, is for the receiver, or the party who wishes for an actual de- livery of the property in addition 180 RECEIVERS. [CIIAP. VI. transferred by an insolvent in fraud of his creditors to a third person who thereupon voluntarily surrenders them to the re- ceiver, the latter is bound to accept the goods and an action of trespass wiU not He against him for so doing.^^ § 151. Receiver not subject to attachment or garnish- ment as to funds in his possession; exceptions; may be garnished by leave of court. The receiver's possession being the possession of the court from which he derives his appointment, he is not subject to process of attachment or gar- nishment as to funds in his hands or subject to his control, and such process will be regarded as a nullity when directed against him.^^ And when a receiver is duly appointed of the effects to the legal assignment thereof, to call upon the master to decide, upon the examination of the de- fendant, and on the evidence before him, what property legally or equi- tably belonging to the defendant, and to which the receiver is entitled under the order of the court, is in the possession of the defendant or imder his power and control. And it is the duty of the master to direct the defendant to deliver over to the receiver the actual possession of all such property, in such manner and within such time as the master may think reasonable. Where such a di- rection is given, the defendant, if he is dissatisfied with the decision of the master, must apply to the court to review the same, or he will be compelled by process of contempt to comply with that decision. And if the property is in the possession of a third person who claims the right to retain it, the receiver must either proceed by suit, in the ordi- nary way, to try his right to it, or the complainant should make such third person a party to the suit, and apply to have the receivership extended to the property in his hands, so that an order for the de- livery of the property may be made which will be binding upon him, and which may be enforced by process of contempt, if it is not obeyed. Where the property is legally and properly in the posses- sion of the receiver, it is the duty of the court to protect that posses- sion, not only against acts of vio- lence but also against suits at law; so that a third person, claiming the same, may be compelled to come ii\ and ask to be examined pro inter- esse suo, if he wishes to test the justice of such claim. But where the property is in the possession of a third person, under a claim of title, the court will not protect the officer who attempts by violence to obtain possession, any further than the law will protect him ; his right to take possession of property of which he has been appointed re- ceiver being unquestioned." 90 Tapscott V. Lyon, 103 Cal., 297, 37 Pac, 225. 91 Field V. Jones, 11 Ga., 413; Taylor v. Gillean, 23 Tex.. 508; Kriesle v. Campbell, 89 Tex., 104, 33 S. W., 852; Richards v. People, CHAP. VI.] POSSESSION 181 of a copartnership, in an action brought by a creditor of the firm, he can not be garnished by judgment creditors of the firm, as to partnership assets in his hands, such assets not being sub- ject to garnishee process.^^ Sq where receivers are appointed over an insolvent corporation, they are not Hable to garnishee process, since the property which they hold is intrusted to them, not by act of the party, but by operation of law.^^ The court of equity being the actual custodian of the property or fund in litigation, it will not yield its jurisdiction to a court of law and permit the right to the property to be there tried. In other words, since the receiver's possession is that of the court, it will not permit itself to become a suitor in another forum con- cerning the property in question. And an additional reason for holding the receiver not subject to process of garnishment 81 111., 551; Blake Crusher Co. v. New Haven, 46 Conn., 473; Cooke V. Town of Orange, 48 Conn., 401 ; Longstaff v. Hard, 66 Conn., 350, 34 Atl., 911; Citizens' Commercial & Savings Bank v. Bay Circuit Judge, 110 Mich., 633, 68 N. W., 649; Walker v. George Taylor C. Co., 56 Ark., 1, 18 S. W., 1056, 19 S. W., 601 ; McGowan v. Myers, 66 Iowa, 99, 23 N. W., 282; Veith v. Ress, 60 Neb., 52, 82 N. W., 116; Commonwealth v. Hide & Leather Insurance Co., 119 Mass., 155; Blum V. Van Vechten, 92 Wis., 378, 66 N. W., 507; Central Trust Co. v. Chattanooga, R. & C. R. Co., 68 Fed., 685. See, also, Columbian Book Co. V. De Golyer, 115 Mass., 67; Smith v. McNamara, 15 Hun, 447. Notwithstanding the doctrine of the text is well established, both upon principle and authority, it is held in Colorado that receivers over a railway company, appointed be- yond the state but operating a rail- road within the state, are subject to garnishee process when such pro- ceeding does not tend to disturb the rights of the receivers under the general orders of the court by which they were appointed. Phe- lan V. Ganebin, 5 Colo., 14. And in such case it is held that the gar- nishee process may be properly served upon the agent of the re- ceivers within the state, in like manner as service upon the agent of a foreign corporation. Phelan V. Ganebin, 5 Colo., 14; Ganebin v. Phelan, 5 Colo., 83. In Kriesle v. Campbell, 89 Tex., 104, 33 S. W., 852, supra, it was held that a garnish- ment proceeding brought against a receiver was not a suit against him within the meaning of a statute which provided for the bringing of suits against receivers without first obtaining leave of the appointing court. As to garnishment against a receiver of a railway, see, post, § 39Sb. 92 Taylor v. Gillean, 23 Tex., 508. 93 Columbian Book Co. v. De Golyer, 115 Mass., 67. See, also, Richards v. People, 81 111., 551. 182 RECEIVERS. [chap. VI. is, that such liability, if recognized, would defeat the very ends for which he was appointed, since a judgment at law upon the garnishment would, if recognized and sustained, entirely divest the jurisdiction of equity. ^^ So when creditors whose judgments against their debtor are not a lien upon his property, which has passed into the hands of a receiver, obtain leave of court to garnish the receiver, they do not thereby acquire any priority over other judgment creditors as to the surplus funds remaining in the receiver's hands.^^ And where a receiver has been appointed over an insolvent corporation at the instance of a mortgage bondholder and has taken possession of the property of the corporation, a creditor who afterward procures judgment against the corporation acquires no legal or equita- ble lien upon the property in the possession of the receiver not covered by the mortgage nor any right greater than he had at the institution of the receivership proceeding.^^ But a receiver is always liable to garnishment where leave of the court appointing him is obtained. ^'^ And where the action in which a receiver has been appointed has been settled or dis- missed and nothing remains for the receiver to do but turn over the fund, or where the receiver has a fund in his hands more than sufficient to satisfy the claims against it, garnish- ment will lie against him.^^ So a receiver may be garnished without leave where nothing remains to be done by him except to pay money to the principal defendant under the final de- cree.^^ And where the appointment of a receiver over an in- solvent corporation is absolutely void, funds in the possession of such pretended receiver are subject to garnishment by any creditor of the insolvent corporation. ^ In Maryland it has 94 Field V. Jones, 11 Ga., 413. 98 Russell v. Millett, 20 Wash., 95 McGowan v. Myers, 66 Iowa, 212, 54 Pac, 44. 99, 23 N. W., 282. 99 Robertson v. Detroit Pattern 96 Mercantile Trust Co. v. South Works, 152 Mich., 612, 116 N. W., ern States L. & T. Co.. 30 C. C. A., 196. 349, 86 Fed., 711, 52 U. S. App., 675. l Smith v. Ely & Walker Dry 97 Van Bianchi v. Wayne Circuit Goods Co., 79 Miss., 266, 30 So., Judge, 124 Mich., 462, 83 N. W., 26. 653. CHAP. VI.] POSSESSION. 183 been held that an indebtedness due to the defendant, over whose effects receivers have been appointed, is subject to garnish- ment at any time before the receivers have taken possession.^ This ruHng, however, is plainly inconsistent with the doctrine of the courts of New York, that the receiver's title and right to possession vest by relation back to the date of the original order for his appointment, although the proceedings may not be perfected until a later date.^ § 152. Possession as between different receivers deter- mined by priority. As regards the right of possession when two different receivers have been appointed, in different proceedings, over the same fund or estate, the question of priority or precedence must be determined with reference to the date of appointment, since the courts will not permit both to act, the title of the one being necessarily exclusive of that of the other.4 And in such case, where an order of reference has been made to appoint, the receiver appointed under the first order of reference will be entitled to possession, the appoint- ment being regarded as dating back by relation to the date of the order of reference ; and the appointment, under proceed- ings begun of a later date, will be treated as having been im- providently made, and the receiver under the first order will be allowed precedence.^ When both appointments have been made on one and the same day, the court may and will inquire into fractions of the day in determining the question of prior- ity, and that one whose appointment is of an earlier hour will be given priority. And the question of precedence being de- termined adversely to the receiver in actual possession of the assets, he will be required to surrender possession to the other.^ 2 Farmers Bank v. Beaston, 7 G. Bank, 121 N. C, 343, 28 S. R, 488; & J., 421. McKay v. Van Kleeck, 133 Mich., .■5 See Rutter v. Tallis, S Sandf., 27, 94 N. W., 367. 610; Steele v. Sturges, 5 Ab. Pr., 5 Deming v. New York Marble 442. Co., 12 Ab. Pr., 66. 4 People V. Central City Bank, 53 6 People v. Central City Bank, 53 Barb., 412; S. C, 35 How. Pr., 428; Barb., 412, 35 How. Pr.,428; Worth Deming v. New York Marble Co., v. Piedmont Bank, 121 N. C, 343, 12 Ab. Pr., 66; Worth v. Piedmont 28 S. E., 488. In the last case cited 184 RECEIVERS. [chap. VI. In no event will a receiver appointed in the subsequent action be justified in interfering with the possession already acquired by the former receiver, without some order or direction of the court.'^ And where there is a controversy between two re- ceivers appointed by the same court as to the right of pos- session of certain property, the proper practice is to proceed by petition or independent bill in the suit in which the receiver in possession was appointed, in order to determine the contro- versy.^ § 153. Right to possession as between receiver and as- signee in bankruptcy. As between the right of possession of a receiver and of assignees of the same estate under subse- quent proceedings in bankruptcy, the doctrine of the English Chancery is, that the appointment of the receiver will not be superseded nor his possession defeated by the bankrupt pro- ceedings. The appointment of the receiver is regarded as a discretionary power, exercised by the court of chancery with as great utility as any power belonging to it, and the receiver first appointed by that court is entitled to possession, and the assignees in bankruptcy and all others will be required to sur- render possession to him.^ the court say: "The test of juris- after a dissolution, for an account diction in such cases is not the first and a receiver of the partnership issuing of the summons, nor the assets. Subsequent to the appoint- first preparation and verification of ment of the receiver, one member the papers, which are the acts of of the firm was adjudicated a bank- the parties, nor which receiver first rupt, and his assignees obtained pos- took possession since that has no session of a portion of the firm eflfect unless legally authorized assets, which the bankrupt had (which it can not be if a prior order clandestinely conveyed away from has been made appointing another), the receiver. The assignees insisted but which court is first "seized of that they were entitled to posses- jurisdiction" by making an order sion, and that the partner who had upon legal proceedings exhibited obtained the receiver must come in before it." and share pari passu with the cred- 7 Ward V. Sv/ift, 6 Hare, 309. itors. Lord Hardwicke said: "A 8 Comer v. Felton, 10 C. C. A., judgment creditor, to be sure, has 28. 61 Fed., 731, 22 U. S. App., 313. no preference under commissions of 9 Skip V. Harwood, 3 Atk., 564. bankruptcy, though execution has This was an action by one partner, been taken out, if not actually ex- CHAP. VI.] POSSESSION. 185 § 154. Rights of common. While the appointment of a receiver over real property does not interfere with the exer- cise of rights of common then actually enjoyed by other parties, yet if the receiver has taken possession, the court will not, as against such possession, permit the exercise of an alleged right of common which had been abandoned for several years. And in such a case, where the person claiming the right of com- mon had turned his cattle into a part of the estate, and the re- ceiver had impounded them, but he persisted in the trespass and brought an action of replevin for the cattle, he was en- joined from further trespassing upon the property, and from further prosecuting his action of replevin, but was given leave to go before a master and be examined, pro inter esse siio, as to the right claimed. i*^ § 155. Mixture of funds by auctioneer; right of receiver. •Where a person doing business as an auctioneer is in the habit of depositing the proceeeds of sales made by him, in the course of his business, in bank to his own credit, and in his own name, and a customer of the auctioneer, familiar with this method of doing business, has permitted the auctioneer to deposit money arising from the sale of his goods, with his own funds in bank, without objecting thereto, as against such a customer the receiver of the auctioneer is entitled to the whole fund in bank, which becomes vested in him by virtue of his appointment, and the customer becomes merely a general credit- or of the auctioneer.l^ § 156. Distraint for rent upon goods which have passed into receiver's possession. With reference to the right of a landlord to distrain for rent due from a defendant, upon ecuted ; but then a commission of provisional only for the more speedy bankruptcy can not supersede a de- getting in of a party's estate, and cree of this court for a receiver, securing it for the benefit of such which is of a different considera- person who shall appear to be en- tion, and is a discretionary power titled, and does not at all affect the exercised by this court with as great right." utility to the subject as any sort of 10 Johnes v. Claughton, Jac, 573. authority that belongs to it, and is H Levy t/. Cavanagh. 2 Bosw., 100. 186 RECEIVERS. [chap. VI. goods of the defendant which have passed into the possession of his receiver, it is held, where the property is actually removed by the receiver from the demised premises before the landlord attempts to exercise his right of distraint, that the landlord's right has terminated with the removal of the goods. In such a case, therefore, if the receiver has done no act to indicate his acceptance of the lease, the landlord has no right to follow the goods, which belong to the receiver and are not the property of the defendant at the time of their removal. ^2 § 157. When receiver of deceased not entitled to fund held by creditor. A receiver appointed to sell the proper- ty of a decedent, pending litigation concerning the adminis- tration of his estate, is not entitled to possession of a fund held by a creditor of the deceased as security for certain lia- bilities of the holder as an indorser for the deceased. The holder of such a fund, having acquired a legal title thereto by agreement w^ith the deceased, will not be compelled to sur- render his title to a receiver, especially when it is not shown that the fund is in any danger.^^ § 158. Possession of wharf by receiver; injunction to restrain interference with. Where, pending litigation con- cerning a block of real estate and certain mills situated thereon, a receiver is appointed with power to take charge of the prop- erty and to perform all other duties pertaining to his office, the receiver is entitled to the possession of and to collect the wharfage due from a wharf or landing upon a river in front of the mills, which was constructed for the purpose of more conveniently conducting the business of the mills, the whole constituting in effect one property, and the receiver holding and renting it for the benefit of all parties interested in the liti- gation. And being thus entitled to possession, he may maintain a bill for an injunction against the authorities of a municipal corporation, who interfere with his possession and attempt to collect the wharfage. ^^ 12 Martin v. Black, 9 Paige, 641. 14 Grant v. City of Davenport. 18 13 Brady v. Fiirlow, 22 Ga., 613. Iowa, 179. It is to be observed that CHAP. VI.] POSSESSION. 187 § 159. Possession of commercial paper by receiver not that of bona fide holder. It is to be observed as regards the possesssion of commercial paper by a receiver, which has come into his hands from the defendant by virtue of his ap- pointment, that he acquires his title thereto by legal process, and not in the regular course of dealing in commercial paper. He does not, therefore, stand in the situation of a bona fide holder for value of such paper.l^ And when a receiver takes possession of notes and securities which are the property of a third person, not a party to the cause, such person may by petition in the cause require the receiver to surrender them.^^ § 160. Defendant relieved from responsibility for prop- erty in receiver's possession. The effect of taking proper- ty from a defendant, and placing it in the possession of a receiver, would seem to be to relieve the defendant from any further responsibility concerning the property. And where, upon a bill to recover certain property consisting of slaves, a receiver is appointed and the slaves are placed in his posses- sion, in accordance with the prayer of the bill, the defendant from whom they are taken will not be held liable for their value, if they are afterwards emancipated by the act of the people. The property, in such case, being put into the receiver's possession, is regarded as being in custodia legis, thereby di- vesting defendant of all control over it.^'^ § 161. Receiver's title not divested by order when he is not a party; effect of appeal. on his possession. After the title to property has become vested in a receiver, by virtue of the order appointing him, it can not be divested merely upon the order of the court made in a proceeding to which he was the statutes of Iowa provide with erty, and generally to do such acts, refer«nce to the powers of receiv- in respect to the property commit- ers, as follows: "Subject to the ted to him, as the court may au- control of the court, a receiver has thorize." power to bring and defend actions, if" Briggs v. Merrill, 58 Barb., 389. to take and keep possession of 16 Kimball v. Gafford, 78 Iowa, property, to collect debts, to receive 65, 42 N. W., 583. the rents and profits on real prop- 17 Lee v. Cone, 4 Cold., 393. 188 RECEIVERS. [chap. VI. not a party.i^ And where, pending litigation, property is placed in the hands of a receiver, who is vested with the usual powers of such officers, and the defendants to the litigation pray an appeal from the final decree of the court below, the effect of the appeal and giving bond thereon is not such as to warrant the court in granting an order against the receiver to turn over the property and money in his hands, and he will still be allowed to retain possession, notwithstanding the ap- peal. ^^ § 162. Disposal of property by final decree. When property has been in a receiver's possession pending litigation, and a final decree is made directing that a sufficient portion be set aside to satisfy the plaintiff's demand, which is accordingly done pursuant to the decree, the property thus set aside be- comes that of the plaintiff, although he may refuse to receive it. And it would seem, on such a state of facts, that the re- ceiver, having ceased to act in that capacity, holds the prop- erty thenceforth only as trustee of the person entitled thereto under the final decree.^O And when the decision of a court of last resort dissolves an injunction against the defendant and discharges a receiver of the fund in litigation, so that de- fendant becomes entitled to the possession of his property, but he has, pendente lite, applied for the benefit of the state insol- vent laws, his trustee under such proceedings becomes entitled to possession of the property, and the receiver will be required to deliver it to such trustee.^i And when the appointment of 18 Rogers V. Corning, 44 Barb., bill. Upon appeal the judgment of 229. foreclosure was reversed because 19 Schenk v. Peay, 1 Dill., 267. the bill failed to describe the mort- To the same effect, see State v. gaged premises with sufficient ex- Reynolds, 209 Mo., 161, 114 S. W., actness to warrant the imposition 1097. In Salisbury v. Wilcox, 128 of a lien or to justify a sale. It Cal., 347, 60 Pac, 979, a bill had was held that the order appointing been filed to foreclose a mortgage the receiver should also be reversed on real estate and a receiver had because there was no res of which been appointed to take possession he could take possession. of a fruit crop growing upon the 20 Very v. Watkins, 23 How., 469. mortgaged premises described in the 21 Glenn v. Gill, 2 Md., 1. CHAP. VI.] POSSESSION. 189 a receiver is reversed, as having been illegal and unauthorized, the court will require him to restore the fund to the person from whom it was obtained.22 Sq when the bill upon which a receiver is appointed is afterward dismissed for want of juris- diction over the person of the defendant, the receiver should be directed to return the property, which has come into his pos- session, to the persons from whom such possession was ob- tained, regardless of the adverse claim of title of other persons thereto. 23 § 162a. Right to possession not divested when property taken beyond state or country; when rule not applicable. While the powers and functions of a receiver are co-extensive only with the jurisdiction of the court appointing him, yet if he has rightfully obtained possession of personal property sit- uated within the jurisdiction of his appointment, and in the discharge of his duties he takes the property into another state, his title and right of possession are not thereby divested. And in such case, an attachment will not be sustained against the property in the latter state in behalf of creditors resident there.24 So where a receiver, who has been appointed over an insolvent railway company by a court of a foreign country, has come into the possession of property of the company which he subsequently brings into this country, where it is attached by local creditors of the insolvent railway company, the re- ceiver may maintain an action of replevin in the courts of this country as against such local attaching creditors.25 But the 22 O'Mahoney v. Belmont, 62 N. Coal Co. v. Diamond State S. Co., Y., 133. affirming S. C, 37 N. Y. 224 Pa. St., 217, — Atl., — . See, Snpr. Ct. R., 380. contra, Humphreys v. Hopkins, 81 23 Warren z: Bunch, 80 Ga., 124, Cal., 551, 22 Pac, 892. See, also, 7 S. E., 270. Grogan v. Egbert, 44 West Va., 75, 24 Chicago, M. & St. P. R. Co. 28 S. E., 714, 67 Am. St. Rep., 763. t/.Packet Co., 108 111., 317, 48 Am. 25 Robertson v. Staed, 135 Mo., St. Rep., 557; Woodhull v. Farmers' 135, 36 S. W., 610, 33 L. R. A., 202, Trust Co., 11 N. Dak., 157, 90 N. 58 Am. St. Rep., 569. And see this W., 795, 95 Am. St. Rep., 712; Jones case as to the proof of the receiver's V. Purcell, 20 App. D. C, 209; Cagill appointment by the court of the for- V. Wooldridge, 8 Baxter. 580; Pond eign country. V. Cooke, 45 Conn., 126; Somerset 190 RECEIVERS. [chap. VI. rule has no application where the Hen asserted is for the pur- pose of enforcing- an indebtedness which has been incurred in the foreign jurisdiction by the receiver himself in the care and management of the property in question. Thus, where a re- ceiver sends a vessel which constitutes part of the receivership estate in his possession beyond the jurisdiction of his appoint- ment and into a foreign state, where necessary supplies are furnished the vessel, the person furnishing such supplies may maintaining proceedings i)i ran in the admiralty court of that jurisdiction to enforce the payment of his demand. ^6 26 The Willamette Valley, (also App., 447, affirming S. C, 62 Fed., sub nom. Clark v. Chandler), 13 293 and 63 Fed., 130. C. C. A., 635, 66 Fed., 565, 29 U. S. CHAP. VI.] POSSESSION. 191 II. Interference with Receiver's Possession. § 163. Interference a contempt of court; punished accordingly; illus- trations; distraint for rent. 164. The doctrine further considered; suit in another jurisdiction; interference by another receiver. 165. Liability for disturbing receiver's possession not dependent upon legality of appointment. 166. Not necessary that person should be officially apprised of re- ceivership. 166a. No liability for interference where order appointing receiver is void. 167. Interference with collection of rents by receiver. 168. Surrender of property by defendant to receiver; void order; surrender by purchaser; what not a contempt. 169. Court itself must decide as to compliance with its order, and as to attachment for contempt. 170. Contempt for interference with receivership in foreign coun- try; what not a contempt. 171. Actual interference necessary to contempt; levy and sale by sheriff under execution. 172. Receiver's title not determined in proceedings for contempt; payment for property as reparation. 173. Contest between different receivers. 174. Receiver liable to attachment for not turning over property as directed by court. 174a. Receiver of corporation entitled to rights under patent. 1746. Form of judgment in contempt proceedings. § 163. Interference a contempt of court; punished ac- cordingly; illustrations; distraint for rent. The receiver being an officer of the court, and his possession being regarded as the possession of the court, any unauthorized interference therewith, whether by taking forcible possession of the prop- erty committed to his charge, or by legal proceedings for that purpose without the sanction of the court from which he derives his appointment, is regarded as a contempt of court, and is punished accordingly, the usual punishment to which resort is had being by attachment for contempt.27 Thus, wliere an 27 Noe V. Gibson, 7 Paige, 513; Skip v. Harwood, 3 Atk.. 564; Hull De Visser v. Blackstone, 6 Blatchf., v. Thomas, 3 Edw. Ch., 236; Anony- 235; Lane v. Sterne, 3 Gif., 629; mous, 2 Mol., 499; Broad v. Wick- 192 RECEIVERS. [chap. VI, ofticer levies an execution upon property of defendants, which has already passed into the hands of a receiver, who distinctly notifies the officer in writing at the time of making his levy that such property is in his possession in his capacity of re- ceiver, the officer is guilty of a contempt of court if he pro- ceeds with the levy.28 So a landlord will not be permitted to take property from a receiver's possession, under a distraint for rent due from defendant in the action in which the receiver was appointed, his proper course being to apply to the court, upon notice to the receiver, for an order requiring him to pay the rent, or that the landlord be at liberty to proceed by dis- traint, or otherwise, as the court may direct. And where, with- out such authority or sanction of the court, the landlord seizes the property under a distress warrant, both he and his officer levying the warrant will be punished by attachment for con- tempt of court.29 So where a receiver has been ordered to col- lect the rents and profits of real estate, he is regarded as being in constructive possession, and any interference with such posses- sion is punishable as a contempt.^^ And where, after the dis- solution of a partnership, one of the partners proceeds to tam- per with the employees in the employ of the receiver of the ham. 4 Sim., 511; Russell v. East Bee, 83 Fed., 761. See People v. Anglian R. Co., 3 Mac. & G., 104; Weigley, 155 III, 491, 40 N. E., 300, Langford v. Langford, 5 L. J., N. S. supra, to the effect that it is im- Ch., 60; Vermont & Canada R. Co. material whether or not the person V. Vermont Central R. Co., 46 Vt., charged is a party to the receiver- 792; Spinning v. Ohio Life Insur- ship proceeding, ance and Trust Co., 2 Disney, 368; 28 Lane v. Sterne, 3 Gif., 629. It Chafee v. Quidnick Co., 13 R. I., is said in this case that the practice 442; Secor v. T., P. & W. R. Co., 7 in the English Court of Chancery Biss., 513 ; King v. O. & M. R. Co., in such cases is not to punish the 7 Biss., 529; People v. Weigley, 155 offense ordinarily by committal, but 111., 491, 40 N. E., 300; St. Louis, that the court uniformly requires A. & S. R. Co. V. Hamilton, 158 111., the offending party to pay the costs 366, 41 N. E., 777 ; Gunning v. Sorg, and expenses occasioned by his im- 214 111., 616, 7Z N. E., 870; Delozier proper conduct. V. Bird, 125 N. C, 493, 34 S. E., 29 Noe v. Gibson, 7 Paige, 513. 643; Royal Trust Co. v. Washburn, 30 Delozier v. Bird, 125 N. C, B. & I. R. Co., 71 C. C. A., 579, 139 493, 34 S. E., 643. Fed., 865 ; dictum in Ledoux v. La CHAP. VI.] POSSESSION. 193 partnership, who is engaged in carrying on the business under the order of the court, and induces them to leave the employ of the receiver for the purpose of engaging in a rival business conducted by such partner, such conduct amounts to an unlaw- ful interference with the receiver's possession and may be re- strained by injunction; and in such case it is immaterial that no contracts are being broken by such employees.^^ But since the refusal of the receiver of the vendee of personal property to accept the property under the terms of the contract prevents the title and the right of possession from vesting in the re- ceiver, the vendor will not be held in contempt for disposing of the property without the consent of the court.^^ § 164. The doctrine further considered; suit in another jurisdiction; interference by another receiver. The doc- trine that an unauthorized interference with a receiver's pos- session constitutes a contempt of court necessarily results from the receiver's position as an officer of the court, acting under its authority and in all things subject to its control. Any un- authorized attempt to interfere with or disturb his possession directly questions the power of the court appointing him, and it becomes the duty of the court to protect him, the same rule be- ing applicable which obtains when sheriffs, trustees or mastei s in chancery have been invested under a judicial order with the control of property pendente lite. In all such cases, the power to protect the receiver or officer of the court necessarily follows from the power to appoint, and the court will extend its pro- tection by punishing as for a contempt any unauthorized in- terference with his possession, even though it be by another receiver afterwards appointed by another court, which had sub- sequently acquired jurisdiction over the matter.^^ Nor can such interference be justified by the fact that it is committed 31 Dixon V. Dixon, (1904) 1 Ch., 33 Spinning v. Ohio Life Insur- 161. ance and Trust Co., 2 Disney, 368. 32 Moore v. Potter, 155 N. Y., 481, SO N. E., 271, 63 Am. St. Rep., 692. Receivers — 13. 194 RECEIVERS. [chap. VI. beyond the jurisdiction of the court and in another state, as by instituting attachment proceedings in another state and garnishing funds due to the receiver. And an attorney who appears for and consents to the appointment of a receiver over a corporation and assists in framing the order, and who then attaches the funds of the corporation in another state to recover for professional services, is guil'v of a plain contempt of court, and will be dealt with accordingly.^^ So when a receiver is appointed over an insolvent partnership, and a manager of a non-resident corporation which is a creditor of the firm, such manager residing within the jurisdiction of the court, insti- tutes proceedings in attachment in a foreign jurisdiction to recover property of the debtor there located, he may be pun- ished for contempt in thus interfering with the rights of the receiver. ^^ So one may be guilty of contempt in interfering with the business of a receiver, even though there is no direct, physical interference with his possession. Thus, when a former clerk of a firm over which a receiver is appointed sends to the customers of the firm a circular containing an unfair and un- truthful statement as to the effect of the proceedings in which the receiver is appointed, and soliciting the customers of the firm, he may be punished for contempt. ^^ So a wilful attempt to interfere with a receiver's operation of a railroad upon the part of persons who are conspiring together in an unlawful combination, the object of which is to injure the business of the railroad, constitutes an unlawful interference with the re- ceiver's possession and as such is punishable as a contempt.^'^ And so jealous are courts of equity in protecting the rights of their receivers, that they will not sanction any unauthorized interference with property or funds to which the receiver is entitled, even though not yet reduced to possession.^S Thus, 34 Chafee v. Quidnick Co., 13 R. 37 Thomas v. Cincinnati, N. O. & I., 442. T. P. R. Co., 62 Fed., 803. 35 Sercomb v. Catlin, 128 111., 556, 38 Richards v. People, 81 111., 551 ; 21 N. E., 606. Hazelrigg v. Bronaugh, 78 Ky., 62. 36Helmore v. Smith, 35 Ch. D., 449. CHAP. VI.] POSSESSION. 195 one who, with full knowledge of the appointment of a receiver, attempts by garnishee proceedings to reach credits which are due to the receiver, but of which he has not yet obtained pos- session, will be punished for contempt of court. ^^ § 165. Liability for disturbing receiver's possession not dependent upon legality of appointment. The liability of one who disturbs the possession of a receiver, like that of a defendant in violating an injunction,^^ jg ^ot dependent upon the regularity or legality of the appointment, and it affords no justification for an unauthorized interference with the receiver's possession that the order may have been illegally or improvi- dently made. While the order continues in existence, the court requires that it shall receive implicit obedience, and will not permit its legality to be questioned by disobedience, the court itself being always open to any proper application calling in question the legality or propriety of its order. If, therefore, a sheriff has levied executions upon property in the custody of a receiver, the officer making the levy being fully notified and apprised of the receiver's appointment and possession, up- on a motion to commit for contempt of court, the respondent can not justify his interference upon the ground that the ap- pointment was improperly made, and the court will not, upon such a motion, consider the merits of the original order.^l 39 Richards v. People, 81 111., 551. 396; Billard v. Erhart, 35 Kan., 616, 40 See for a discussion of this 12 Pac, 42; State v. Pierce, 51 principle in cases of injunctions, Kan., 241, 32 Pac, 924; Central Moat V. Holbein, 2 Edw. Ch., 188; Union T. Co. v. State, 110 Ind., Woodward v. Earl of Lincoln, 3 203, 10 N. E., 922, 12 N. E., 136; Swans., 626; Richards v. West, 2 In re White, 113 Cal., 282. 45 Pac, Green Ch., 456; People v. Sturte- 323; Loven v. The People, 158 111., vant, 9 N. Y., 263; Sullivan v. 159, 42 N. E., 82; Wilber t;. Wooley, Judah, 4 Paige, 444 ; Partington v. 44 Neb., 739, 62 N. W., 1095 ; State Booth, 3 Meriv., 148; Rogers Mfg. v. Markuson, 7 N. Dak.. 155. 7Z N. Co. V. Rogers, 38 Conn., 121; Peo- W., 82; Silliman v. Whitmer, 173 pie V. Van Buren, 136 N. Y., 252, Pa. St., 401, 34 Atl., 56; State v. 32 N. E., 775, 20 L. R. A., 446; Circuit Court, 98 Wis., 143, 73 N. Cape May & S. L. R. Co. v. John- W., 788; Laramie National Bank v. son, 35 N. J. Eq., 422 ; Fleming v. Steinhoff, 7 Wyo., 464, 53 Pac, 299. Patterson, 99 N. C, 404, 6 S. E., 41 Russell v. East Anglian R. Co., 196 RECEIVERS. [chap. VI. And in proceedings for contempt for interfering with a re- ceiver's possession, the court will not consider whether the or- der appointing the receiver was erroneous, since such order can not be assailed in a collateral proceeding, if the court had 3 Mac. & G., 104. This was an ap- peal from an order of the Vice- Chancellor upon a motion to com- mit a sheriff and under-sheriff for an alleged contempt of court, in having interfered with the posses- sion of a receiver by levying upon and taking from him certain goods and chattels under a A. fa., in favor of judgment creditors of the de- fendants. Lord Truro observes, p. 115: "When the motion to com- mit was made the answer given to it was that, although the receiver, at the time of the levy, gave notice that he was in possession of the property as an officer of the court of chancery, yet that the plaintiffs in the execution considered the order, under which the receiver was appointed, an ill-advised, illegal and indiscreet order, and that therefore they were justified in treating it as a nullity. It was contended, on the other side, that it was wholly irrele- vant to the application whether the order was or was not such an order as this court on further considera- tion would deem it right to have made; that it was a subsisting or- der; that the officer was acting un- der it when he was interrupted by the sheriff; that an officer so acting under the authority of the court was entitled to the protection of the court ; that if the order was incor- rect in a degree which interfered with the legal rights of the plaintiffs in the execution, it was open to them to come to the court to ques- tion the propriety of that order in a proper manner, but that it was not open to them to do so by dis- obeying it, and by interrupting the officer of the court. The case was discussed at considerable length, and the Vice-Chancellor appears to have entertained doubts, which I think were well founded, with re- gard to that order; but he stated, and it appears to me correctly, that that was not the occasion on which the court could be properly called upon to decide on the validity of the objection to the order, and he therefore declined to express any determinate opinion upon that sub- ject, intimating that they might be proper matters to be discussed here- after. ... I have looked with care through the very numerous au- thorities that have been cited, but it is not necessary for me to go through them. The result appears to be this : that it is an established rule of this court that it is not open to any party to question the orders of this court, or any process issued under the authority of this court, by disobedience. I know of no act which this court may do which may not be questioned in a proper form and on a proper application ; but I am of opinion that it is not competent for any one to interfere with the possession of a receiver, or to disobey an injunction, or any other order of the court, on the ground that such orders were im- providently made. Parties must take a proper course to question their validity, but while they exist CHAP. VI.] POSSESSION. 197 jurisdiction of the parties and of the subject-matter. ^2 So upon an appeal from an order adjudging a defendant debtor guilty of contempt in refusing to assign his property to a re- ceiver in a judgment creditor's suit, the court will not review or consider the propriety of appointing the receiver.^S Sq ^^qj^ a petition filed by a receiver for an injunction against an action of trover which had been instituted against him without leave of court, the decree appointing the receiver can not be assailed because erroneously or improperly made."** § 166. Not necessary that person should be officially apprised of receivership. It is also a well-established prin- ciple, that, to render a defendant or other person liable by at- tachment for contempt in disturbing or interfering with prop- erty of which a receiver is entitled to possession, it is not nec- essary that he should be officially apprised of the receiver's appointment, or even that the formal order should have been actually drawn, provided he has actual notice of the receiver- ship, or of the order of court directing the appointment. Any actual knowledge of the granting of the order is sufficient to fix defendant's repsonsibility for its violation, the same prin- ciple being applicable in such cases as in case of the violation of an injunction.45 Thus, where defendants have knowledge they must be obeyed. I consider Lewis, 52 Kan., 660, 35 Pac, 287. the rule to be of such importance See, ante, § 39a. to the interests and safety of the 43Bagley v. Scudder, 66 Mich., public, and to the due administra- 97, 33 N. W., 47. tion of justice, that it ought on all 44 Montgomery v. Enslen, 126 occasions to be inflexibly main- Ala., 654, 28 So., 626. tained. I do not see how the court 45 Hull v. Thomas, 3 Edw. Ch., can expect its officers to do their 236; Skip v. Harwood, 3 Atk., 564; duty, if they do it under the peril Lewis v. Singleton, 61 Ga., 164. of resistance, and of that resistance And see the same doctrine dis- being justified on grounds tending cussed and applied to the violation to the impeachment of the order of injunctions, in Howe v. Willard, under which they are acting." And 40 Vt., 654 ; Hearn v. Tennant, 14 see, ante, § 143. Ves., 136; McNeil v. Garratt, Cr. & 42 Cook V. Citizens National Ph., 98; Poertner v. Russell, 33 Bank, 73 Ind., 256; Richards v. Wis., 193 ; Fleming t;. Patterson, 99 Ptople, 81 111., 551. See, also, In re N. C, 404, 6 S. E., 396; Powell v. 198 RECEIVERS. [chap. VI. of the granting of an injunction against their disposal of cer- tain property, and the appointment of a receiver over the prop- erty, they are in contempt of court if they dispose of it, even though the order of the court is not yet served upon them.^^ And where a defendant is present in court during the hearing of a cause, and knows that an order granting a receiver of his estates has been allowed, although the decree itself has not yet been drawn, he is guilty of a contempt of court if he removes a portion of the property and puts it beyond the receiver's pos- session for the purpose of evading the decree, and he can not justify on the ground that the decree has not yet been entered.^'^ So where an order had been entered requiring one who had money in his possession to turn it over to a receiver, it is not necessary that he should be officially served with a copy of such order to render him liable for failure to obey it.^^ § 166a. No liability for interference v^here order ap- pointing receiver is void. The rule as announced in the preceding sections must always be understood as applying Follett, Dick., 116; Murphy v. was of opinion that, "where a per- Harker, 115 Ga., 77, 41 S. E., 585; son, as Mr. Harwood has done, Lake Shore & M. S. R. Co. v. attends a cause to which he is a Taylor, 134 III., 603, 25 N. E., 588; defendant, the whole time of the Kempson v. Kempson, 61 N. J. Eq., hearing, and had notice of the de- 303, 48 Atl., 244, modified and af- cree by being present when it was firmed in 63 N. J. Eq., 783, 52 Atl., pronounced in court, if he does any 360, 625 ; Fowler v. Beckman, 66 act that is a contravention to the N. H., 424, 30 Atl., 1117; Ex parte decree he is guilty of a contempt, Richards, 117 Fed., 658. and punishable for it, notwithstand- 46 Hull V. Thomas, 3 Edw. Ch., ing the decretal order is not drawn 236. up; and there are several instances 47 Skip V. Harwood, 3 Atk., 564. of this kind, or otherwise it would This was a bill between two part- be extremely easy to elude decrees, ners, after a dissolution, for an some of which in their nature re- accounting and a receiver. The de- quire a considerable length of time fendant, Harwood, was present in before they can be completely court during the hearing, which drawn up." The defendant was ac- occupied three days, and knew of cordingly committed to the Fleet the order appointing a receiver, but for his contempt of court. before the decree was drawn or 48Drakeford v. Adams, 98 Ga., entered he removed a large portion 722, 25 S. E., 833. of the firm assets. Lord Hardwicke CHAP. VI.] POSSESSION. 199 only to cases where the court had jurisdiction of the subject- matter of the controversy and where the complaint is therefore merely one of an irregular or erroneous exercise of such juris- diction, which should have been corrected upon appeal or by application to the appointing court. Where, therefore, the court which appointed the receiver was entirely without juris- diction of the subject-matter of the suit and had no power under any circumstances to grant the principal relief sought, its order appointing the receiver is to be regarded as a nullity and an unauthorized interference with the possession of such receiver is therefore not punishable as a contempt of court. '^^ § 167. Interference with collection of rents by receiver. When a receiver is appointed to collect rents, it is his duty, upon being apprised by the tenants of interference with the rents by defendant, to move the court for an attachment against de- fendant, and the receiver's affidavit upon information and belief is sufficient foundation for the proceedings in attach- ment.^^ And when a person has taken forcible possession of estates over which a receiver has been appointed, an order for his commitment may be made, upon proof of service of notice of the motion, without a rule nisi being first obtained.^l But when a receiver was appointed over mortgaged premises, pending an action to foreclose the mortgage, and a third person not a party to the action had collected the rents, under an as- signment thereof from the owner of the equity of redemption made prior to the receiver's appointment, he was held not liable as for a contempt of court, although he was apprised 49 People V. Weigley, 155 111., 491, rett, 203 111., 99, 67 N. E., 742; In 40 N. E., 300; Town of Vandalia re Sawyer, 124 U. S., 200, 8 Sup. V. St. L., V. & T. H. R. R. Co., 209 Ct. Rep., 482 ; Morgan v. County 111., 73, 70 N. E., 662. And see, Court, 53 West Va., 372, 44 S. E., post, §§ 168 and 203. For the ap- 182; State v. Superior Court, 105 plication of the same principle in Wis., 651, 81 N. W., 1046, 48 L. cases of injunctions, see Walton v. R. A., 819; State v. Milligan, 3 Develing, 61 111., 201 ; Darst v. The Wash., 144, 28 Pac, 369 ; State v. People, 62 III., 306; Andrews v. Theard, 48 La. An., 1448, 21 So., 28. Knox Co., 70 111., 65 ; Dickey v. 50 Anonymous, 2 Mol., 499. Reed, 78 111., 261; People v. Bar- 51 Broad z/. Wickham, 4 Sim., 511. 200 RECEIVERS. [chap. VI. of the receivership, the receiver having taken no steps to col- lect the rent or to secure the attornment of the tenant.^2 /^^d when a third person, not a party to a suit in which a receiver is appointed over an insolvent debtor, claims title to certain prop- erty, under a conveyance from such debtor, it is not proper to determine the disputed question of title upon proceedings for contempt in collecting the rents of such property, the appro- priate proceeding being by an order directing the receiver to bring an action to set aside the conveyance.^^ • § 168. Surrender of property by defendant to receiver; void order ; surrender by purchaser ; what not a contempt. A defendant, over whose property a receiver is appointed, may be attached for contempt, if he refuses to comply with an order of court directing him to surrender all his property, under oath, to the receiver. ^^ jsJqj- ^j-e such attachment pro- ceedings a violation of the constitutional restriction against imprisonment for debt, since the order directing the defendant to deliver property or money to the receiver is not an order for the payment of an indebtedness, and the receiver holds the fund as a trustee for the benefit of whoever may be entitled thereto.^^ So the refusal of an officer of a railway company, over which a receiver is appointed, to comply with an order directing the delivery to the receiver of all books of the com- pany, and the collection by such officer and depositing in bank to the credit of the company of moneys due to it, after the re- ceiver's appointment, constitute a contempt of court.^^ But the refusal in such case constitutes no contempt where the order was beyond the jurisdiction and authority of the court.^'^ And when defendant is ordered to assign and deliver his prop- 52 Bowery Savings Bank v. Rich- 55 Ryan v. Kingsbery, 88 Ga., 361, ards, 6 Thomp. & Cook, N. Y. S. C, 14 S. E., 596. 59, 3 Hun, 366. 56 American C. Co. v. Jackson- 53£;r parte Hollis, 59 Cal., 405. ville, T. & K. W. R. Co., 52 Fed., 54 People V. Rogers, 2 Paige, 103 ; 937. Ryan v. Kingsbery, 88 Ga., 361, 14 57 St. Louis, K. & S. R. Co. v. S. R, 596; Williamson v. Pender, Wear, 135 Mo., 230, 36 S. W., 357, 127 N. C, 481, 37 S. E., 495. 658, 33 L. R. A., 341. CHAP. VI.] POSSESSION. 201 erty to a receiver, under oath, under direction of a master in chancery, if the plaintiff seeks an actual deUvery of the property in addition to a legal assignment, when a portion of it is claimed by a third person under an assignment from the debtor, he must first have the master determine what property is under defendant's control, and obtain an order upon him to deliver over such property. And until this is done, defendant is not in contempt for disobeying the order of the court.^^ And a purchaser of property at a sheriff's sale, under execution against a defendant over whose effects a receiver has been ap- pointed, is not in contempt for refusing to comply with the order of a master, commanding him to surrender possession of the property to the receiver, if such purchaser has not been made a party to the litigation, and has had no opportunity of asserting his rights before the court.^^ And where a defendant has been ordered by the court to deliver certain notes, held by him in trust, to a receiver previously appointed in the action, he will not be held in contempt for a refusal to deliver the notes to the plaintiff in the action, or his attorney, when the receiver himself has not demanded the notes. In such a case the defendant has not, in strictness, refused to comply with the order of the court, and can not, therefore, be punished for an alleged contempt for refusing to deliver the notes to the plaintiff.^^ And where funds which were on deposit in a bank to the credit of a receiver have been attached and the bank garnished, the refusal of the cashier to turn such money over to the receiver upon his presentation of his check therefor con- stitutes no contempt where the order of appointment was abso- lutely void and beyond the jurisdiction of the court to enter. ^^ And where an order has been entered upon the appointment of 58 Cassilear v. Simons, 8 Paige, 61 State v. District Court, 21 273. And see Parker v. Browning, Mont., 155, 53 Pac, 272, 69 Am. St. id., 389. Rep.", 645. And see, ante, § 166a 59 Robeson v. Ford, 3 Edw. Ch., and, post, § 203. 441. 60 Panton v. Zebley, 19 How. Pr., 394. 202 RECEIVERS. [chap. VI. a receiver of a corporation directing that the property of the corporation be turned over to the receiver, one who is not a party to the suit can not be held guilty of contempt for re- fusing to surrender property claimed by the receiver, which he believes in good faith belongs to others to whom he would in fact be responsible if it did so belong to them. ^2 § 169. Court itself must decide as to compliance with its order, and as to attachment for contempt. As regards the power of punishing a defendant, by attachment or other- wise, for a contempt of court in refusing to obey an order to surrender his property to the receiver, the court issuing the order is the only competent judge as to the question of com- pliance. An attachment, therefore, for contempt in such a case should be issued or withheld, sustained, modified, or set aside, only by the direct order of the court itself ; and it is improper to make the issuing of such attachment dependent upon the judgment of a special commissioner, appointed by the court to take an account of the property involved. ^^ § 170. Contempt for interference with receivership in foreign country; what not a contempt. The power of a court of equity over persons within its jurisdiction and sub- ject to its process, to appoint a receiver of their property, sit- uated in foreign country, is, as has elsewhere been shown,^^ well established. And while the court may not have the means of sending its officers into the foreign country, to carry into effect its orders there, yet if the defendant within the jurisdic- tion of the court instructs his representatives or agents in the foreign country to resist the enforcement of the order for the receiver, he is guilty of resistance to the mandate of the court, and liable to punishment as for contempt. ^^ But where the 62 State V. Denhatn, 30 Wash., within the jurisdiction of the Court 643, 71 Pac, 196. of Chancery there, a receiver was 63 Geisse v. Beall, 5 Wis., 224.' appointed over his estates in Ire- 64 Ante, § 44. land. The defendant instructed his 63 Langford v. Langford, 5 L. J., solicitor in Ireland "to oppose, as N. S. Ch., 60. In this case the de- far as the law would permit, the fendant being in England, and receivers of such rents and profits CHAP. VI.] POSSESSION. 203 property is located in a foreign country and is therefore not in the possession of the receiver, a person, not a party to the suit, who takes proceedings in that country is not guiUy of contempt for interfering with the receiver's possession.66 § 171. Actual interference necessary to contempt; levy and sale by sheriff under execution. To render a person liable to attachment for contempt of court in interfering with the possession of a receiver, there must be an actual interfer- ence with or disturbance of the possession.^'!' Where, therefore, a receiver is in the actual possession of defendant's real estate, which is subject to the lien of a judgment against the defend- ant, the levy upon and sale of defendant's interest in the real estate by a sheriff does not disturb the receiver's possession, and is not a contempt of court. The sheriff, in such case, merely sells the interest of the judgment debtor in the real es- tate, subject to all just claims of the receiver or of any other from receiving the same." The so- licitor accordingly notified defend- ant's tenants in Ireland that the order of the English Court of Chancery appointing a receiver was of no effect in Ireland, and that de- fendant would still enforce pay- ment of his rents as before. The English receiver was thus pre- vented from receiving any rents. Upon motion for a sequestration against the defendant for the con- tempt, Lord Langdale, Master of the Rolls, held as follows : "That this is a contempt, I have no doubt. It is true that this court has not the means of sending its officers to carry into effect its orders in Ire- land; but it has jurisdiction over all persons in this country, and can compel obedience to its orders. The defendant sends to his solicitors in Ireland to oppose by all lawful means the receiver appointed by this court from receiving the rents. If he meant by all lawful means in this country, there should be no resistance at all; because a party is not justified in opposing the order of the court; but he says by all lawful means in Ireland ; that is to say, because this court can not send its process into Ireland, there- fore Lord Langford's agent is to use all means in Ireland to oppose the order of the court here." His Honor said he hoped that Lord Langford would see his error, and know that he could not resist the order of this court ; and that the order for a sequestration must, therefore, be made, unless his Lord- ship ceased to interfere with the officer of the court. 66 In re Maudslay, Sons & Field, (1900) 1 Ch., 602. 67 Albany City Bank v. Schermer- horn, 9 Paige, 372; Same v. Same, 10 Paige, 263. 204 RECEIVERS. [chap. VI. person, and does not, therefore, commit a contempt of court.^^ And a mere formal levy by the sheriff upon property construct- ively under the receiver's control does not constitute such a disturbance of possession as to render the sheriff liable to at- tachment therefor, when immediately upon making the levy he consents that the receiver may take possession of the interest levied upon and dispose of the same, holding the proceeds sub- ject to the order of the court by which the receiver was appoint- ed. In such a case the possession of the court is not disturbed, since the property is placed in the same situation which it would have occupied had the receiver in the first instance reduced it to actual possession and retained it throughout.^^ And it has been held that the fact that the property was in the hands of a receiver would not prevent the prosecution of an action to es- tablish a mechanic's lien against the property. '^^ § 172. Receiver's title not determined in proceedings for contempt; payment for property as reparation. In a proceeding for contempt instituted against a claimant of prop- erty, who has taken it from the receiver's possession without the sanction of the court, the court will not determine the question of the receiver's title or ultimate right to the property, since this can only be tried in some action appropriate for that pur- pose, to be instituted against the receiver. But when, in such proceedings for contempt, the claimant has taken the property out of the state, and it is impossible for the court to compel its restoration to the receiver, it is proper to order him to pay the receiver the value of the property by way of reparation. "^^ § 173. Contest between different receivers. While courts of equity will not justify any unauthorized interference with the possession of a receiver regularly appointed, yet as be- tween two different receivers appointed over the same property in different actions, in a contest as to their right of possession, 68 Albany City Bank v. Schermer- 70 Richardson v. Hickman, 32 horn, 9 Paige, 372. Ark., 406. 69 Albany City Bank v. Schermer- 71 hi re Day, 34 Wis., 638. horn, 10 Paige, 263. CHAP. VI.] POSSESSION. 205 the court will hesitate to exercise its extreme powers against the second receiver by commitment for contempt in interfer- ing with the possession of the first, when the dispute as to pos- session has been determined, and the only object of the appli- cation is to compel payment of costs.'^2 ^nd where, as between two receivers of the same property, appointed in different pro- ceedings, the question of priority is determined adversely to the receiver in possession, and he is required to surrender the property to the other, he will not be punished by attachment for disobedience of the order of the court appointing the other receiver, when it is apparent that he has acted in good faith, under authority of the order appointing him, since he was entitled to regard such order as valid until the question of prior- ity could be determined by a competent tribunal.'^^ § 174. Receiver liable to attachment for not turning over property as directed by court. Since a receiver is not properly entitled to an appeal from an order of the court discharging him from his trust, not being a party in interest, but merely the officer or representative of the court, he may be compelled to turn over the property as directed by the order for his discharge, notwithstanding he has prayed an appeal to an appellate court and has filed an appeal bond. And if he refuses to comply with such order as to the disposition of the assets, obedience may be enforced by attachment. But the court will not, under such circumstances, direct an attachment to issue in the first instance, when the receiver expressly dis- claims any intentional disregard of its authority. "^4 § 174a. Receiver of corporation entitled to rights under patent. When a corporation is dissolved and its property and assets are vested in a receiver, who is authorized by the court to continue the business, the corporation having been vested with the exclusive right to manufacture certain articles 72 Ward V. Swift, 6 Hare, 309, 12 74 /„ re Rachel Colvin, 3 Md. Ch., Jur., 173. 300. 73 People V. Central City Bank, S3 Barb., 412, 35 How. Pr., 428. 206 RECEIVERS. [chap. VI. under letters patent, this right passes to the receiver by virtue of his appointment. And in such case, a former officer of the corporation who engages in the business of manufacturing the same articles, even under a license from the patentee, is guilty of such an interference with the possession and rights of the . receiver as to render him liable for contempt of court.'^^ § 1 74^. Form of judgment in contempt proceedings. A proceeding instituted by a receiver in the cause in which he is appointed against an officer of a corporation defendant, for contempt of court in withholding funds to which the receiver is entitled, is not regarded as a civil action for the recovery of money. The appropriate judgment in such case, if respondent is found guilty, is by fine or imprisonment, or both, and it is improper to render a money judgment against respondent for the recovery of the amount of money which he has refused to surrender to the receiver.'^^ 75 In re Woven Tape Skirt Co., 76 Edrington v. Pridham, 65 Tex., 12 Hun, 111. 612. CHAPTER VII. OF THE RECEIVER'S FUNCTIONS. I. General Nature of His Functions § 175 II. Sales by Receivers 191 I. General Nature of His Functions. § 175. Office one of trust; limited discretion; not an assignee; repre- sents all parties; not an adverse party; hiring employees; can not profit at expense of trust; should make inventory; may make admissions in cause. 176. Discretion in accepting or rejecting bids; degree of care neces- sary. 177. Subject to court in settlement of demands or suits. 178. No discretion in application of funds; when not allowed offset; payments made in good faith. 179. Enlargement of powers by court; protection of court. 180. Power as to making repairs. 181. Not allowed to originate action under English and Irish prac- tice; practice in this country. 182. Custodians in the nature of receivers; same rules applicable. 183. Exemption from arrest while attending court. 184. Effect of receivership as regards statute of limitations. 185. Abatement of cause does not determine receiver's functions; order of removal necessary. 186. Power of court over receiver's contract; assignee of contract with receiver; lease of offices. 187. Relative functions as between different receivers. 188. Entitled to advice and instruction of court; may have his own counsel; must show necessity therefor; attorney and counsel; should not employ counsel of party. 189. May receive money not yet due. 190. Effect on receiver's functions of appeal and supersedeas. 190o. Court may make administrative orders for care of property notwithstanding appeal and supersedeas. § 175. Office one of trust; limited discretion; not an assignee ; represents all parties ; not an adverse party ; hir- ing employees; can not profit at expense of trust; should make inventory; may make admissions in cause. The of- fice of recei'/er is treated as one of confidence and trust, al- 207 208 RECEIVERS. [chap. VII. though his discretionary powers are limited. As a rule he may do nothing to impair the funds in his hands without the order of the court, and may make no dividend without the special sanction of the court, since the funds in his possession are considered as in custodia legis for whoever may ultimately es- tablish a title thereto.^ And a receiver has no greater rights than the guardian of a ward's estate, and is not an assignee of the person over whose estate he is appointed, being simply an officer of the court appointed to take charge of the prop- erty pending litigation. ^ And it is necessary to a proper un- derstanding of the functions of a receiver, and of the real na- ture of his office, to bear in mind that he is not appointed for the benefit merely of the plaintiff on whose application the ap- pointment is made, but for the equal benefit of all persons who may establish rights in the cause, and that he is not the plain- tiff's agent, but is equally the representative of all parties in his capacity as an officer of the court.^ And since a receiver is the representative of all the parties, he is in no sense an adverse party within the meaning of a statute requiring the service of 1 Hooper v. Winston, 24 111., 353. was held that, where a receiver was 2 King V. Cutts, 24 Wis., 627. appointed to manage and control 3 Delany v. Mansfield, 1 Hog., the property of a debtor under the 234; McLeod v. City of New Alba- orders of the court, it was no part ny, 13 C. C. A., 525, 66 Fed., 378, of the duty of the receiver to pre- 24 U. S. App., 601. In the case last sent the claim of a creditor, and cited it was held that, since a re- where the receiver's report had been ceiver represented all parties to a filed and approved and the assets suit in defending against an inter- distributed, a claim which the cred- vening petition filed by a munici- itor, through his own negligence, pality to enforce the payment of had failed to present was barred, back taxes upon the property in the In Luderbach Plumbing Co. v. Its possession of the receiver, the lat- Creditors, 121 La., 371, 46 So., 359, ter, upon an appeal from an order it was held that the brother of a re- directing such payment, could not ceiver might buy up claims against object that certain of the parties to the estate where there was no sug- the proceeding had not been form- gestion that the receiver was in any ally notified of the filing of the way interested with him in the pur- intervening petition. In Halsted v. chase. Forest Hill Co., 109 Fed., 820, it CHAP. VII.] FUNCTIONS. 209 notice of an appeal by appellant upon the adverse party.* If he is empowered by the court to continue the management of the business over which he is appointed, he may employ such persons as may be necessary for this purpose, and the court will not interfere with his discretion as regards such employ- ment unless some abuse is shown. ^ And since a receiver occu- pies a position of confidence, he will not be permitted to profit at the expense of his trust. Thus, where a receiver purchases at a discount claims which are payable out of the funds in his possession, he is not entitled to credit in the settlement of his accounts for the full face value of such claims but only for the amount which he actually paid for them.^ And it is held that a trusted clerk of a receiver can not, by taking advantage of his knowledsfe of the affairs of the debtor over whom the receiver has been appointed, buy up claims and make a secret profit out of the administration of the estate; and having made such a profit ^nd having invested the proceeds in real estate, it was held that the receiver could maintain a bill in equity to declare a constructive trust in the land."^ And one of the first duties of a receiver, immediately after his appointment, is to make a complete inventory of all the property which has come into his hands. 8 xA.nd as the representative and custodian of the estate in his possession, a receiver may, subject to the supervision of the court, bind it by admissions made in good faith in the progress of a suit.^ § 176. Discretion in accepting or rejecting bids; degree of care necessary. In the management of property in- trusted to their charge, receivers are vested with a certain de- 4 Medynski v. Theiss, 36 Ore., 8 Jn re Receivership of the N. I. 397, 59 Pac, 871. C. Mill Co, 109 La., 875, 33 So., 5 Taylor v. Sweet, 40 Mich., 736. 903. As to management of business by 9 Bosworth v. St. Louis Terminal a receiver generally, see ante, § 36. R. Assn., 174 U. S., 182, 19 Sup. Ct. 6 Roller v. Paul, 106 Va., 214, 55 Rep., 625, 43 L. Ed., 941, modifying S. E., 558. and affirming S. C, 26 C. C. A., 279, 7 Gilbert v. Hewetson, 79 Minn, 80 Fed., 969, 53 U. S. App., 302. 326, 82 N. W, 655, 79 Am. St. Rep., 486. Receivers — 14. 9 210 RECEIVERS. [chap. VII. gree of discretion for which they are responsible to the court appointing them, and in the exercise of which they are subject to its control ; and if they act in good faith and without preju- dice to the rights of the parties in interest, their action will be sustained by the court. For example, when receivers have ad- vertised for proposals for leasing property under their control, they may exercise a wide discretion in accepting or rejecting bids received, and are not bound to lease the property for the highest price offered, without regard to the bidder or to the dis- position he may make of the property. And the advertisement of the receivers, in such a case, does not constitute such a con- tract with the bidder as to compel them to take the highest bid, nor does it limit them to a certain time within which to receive bids. If, therefore, the receivers, in the exercise of their dis- cretion, have awarded the lease of the premises to a particular bidder, and have acted prudently in the matter and with regard to the best interests of the trust committed to their charge, the court will not entertain the application of another bidder to compel the receivers to execute a lease to him.^*^ And in handling the trust estate in his possession, a receiver should exercise the same degree of discretion which an ordinarily prudent man of business would exercise in the management of his own affairs.ll § 177. Subject to court in settlement of demands or suits. The power of courts over their own receivers, in- cluding their authority to control them in the settlement of all demands against the property held by them in their capacity as receivers, is well established, and as officers of the court it is their duty to obey all orders of the court in this regard. And it is equally the duty of the court appointing a receiver to com- pel the settlement of claims against the property in his posses- sion in the most expeditious manner, and so as to avoid litiga- 10 Knott V. Receivers of Morris H McKennon v. Pentecost, 8 Canal & Banking Co., 3 Green Ch., Okla., 117, 56 Pac, 958. 423. CHAP. VII.] FUNCTIONS. 211 tion and expense to the fund in charge of the court.^2 /^ri^j the right of a receiver to settle claims and compromise actions with the approval and sanction of the court is well recognized. ^^ And, in the absence of an abuse of discretion, the action of the court in authorizing its receiver to compromise an action will not be disturbed upon appeal. ^^ § 178. No discretion in application of funds; when not allowed offset; payments made in good faith. A receiver has in general no discretion in the application of funds in his hands by virtue of his receivership, but holds them strictly sub- ject to the order of the court, to be disposed of as the court may direct.^^ He will usually be required to pay over funds in his hands to the persons who are ratably entitled thereto, rather than to invest them, when the persons entitled are al- ready ascertained, and when there can be no difficulty in carry- ing out the direction of the court in this respect.^^ And when he is ordered to make any particluar disposition of funds in his hands, as, for example, to return money to the person from whom he collected it, he will not be allowed to offset his own personal claims against the person to whom he is directed to return the money, since to allow this would render the dis- position of the money as uncertain as before the receiver's appointment, and would thus defeat the very object of his appointment.^'^ He will be protected as to payments made 12 Guardian Savings Institution 16 Collins v. Case, 25 Wis., 651. V. Bowling Green Savings Bank, 65 17 Johnson v. Gunter, 6 Bush, Barb., 275. 534, Mr. Justice Peters, for the 13 Alexander t/. Maryland T. Co., court, says, p. 536: "If the mere 106 Md., 170, 66 Atl., 836; State v. agent or instrument of the court Bank of Rushville, 57 Neb., 608, 78 can be permitted, after receiving N. W., 281 ; Insurance Commis- funds under its order, to set up sioner v. C. M. Ins. Co., 20 R. I., claims to them wholly foreign to 7, 36 Atl., 930. And see, /'o.j/, § 336. the object of his appointment, the 14 State V. Bank of Rushville, 57 position of a receiver is perverted Neb., 608, 78 N. W., 281. into that of a speculator in funds, 15 Johnson v. Gunter, 6 Bush, constructively at least in court, and 534; State Central Savings Bank v. their destiny becomes as uncertain Ball-Bearing Chain Co., 118 Iowa, after they enter the precincts of the 698, 92 N. W., 712. court as before. The court will 212 RECEIVERS. [chap. VII. in good faith, under an existing order of court, although such order is afterwards reversed upon appeal. In such case he will not be directed in the first instance to repay the mon- ey to the person who is found to be entitled thereto; but if the money has been applied under the order of court to a particular purpose, as in payment of counsel fees, the court may compel its restitution to the receiver, who may then be required to make payment to tlie proper person. l^ § 179. Enlargement of powers by court; protection of court. It frequently happens that an enlargement of a receiver's powers becomes necessary in order that he may properly discharge his trust, or because of obstructions or resistance which he may receive in attempting to perform his duties. In such cases it is the province of the court which has appointed him, upon the facts being properly presented, to en- large his powers and to afford him the necessary protection in the performance of his duties.^^ § 180. Power as to making repairs. Receivers are not usually permitted, at their own discretion, to apply funds in their hands in repairing or improving the premises under their control, without a previous application to the court and obtain- ing leave so to do.^*^ If, however, a receiver has made repairs without permission, a reference may be had to a master to in- quire whether they were reasonable. ^l And if, upon reference to a master, it is found that the repairs were necessary and proper, and for the lasting benefit and improvement of the es- tate, they may be allowed by the court.^^ And a general direc- tion to a receiver of landed property to manage it, authorizes him to propose to the master, from time to time, to make all not thus permit itself to be made a 20 Blunt v. Clitherow, 6 Ves., quasi suitor." 799; Attorney-General v. Vigor, 11 18 In re Home P. S. F. Associa- Ves., 563. tion, 129 N. Y., 288, 29 N. E., 323. 21 Attorney-General v. Vigor, 11 I'? Ohio Turnpike Co. v. Howard, Ves., 563. 1 Western Law Journal 216; State 22 Blunt v. Clitherow, 6 Ves., V. City of New Orleans, 106 La., 799. 469, 31 So., 55. CHAP. VII.] FUNCTIONS. 213 ordinary repairs, and a special application to the court for that purpose is unnecessary in such case.^S § 181. Not allowed to originate action under English and Irish practice; practice in this country. It seems to be the estabhshed rule in England, that a receiver in a cause is not allowed to originate any steps or proceedings therein of his own motion, but should leave the parties to the cause to make all applications for that purpose. The rule, however, is not without exception, and when the parties are guilty of great delay or laches in moving, the receiver is justified in himself proceeding.24 Under the practice of the Irish Court of Chan- cery, it is also held that a receiver should not, of his own mo- tion, interfere with the rights of parties to the cause by ap- plications to the court, and that court has always manifested an extreme reluctance to granting orders upon motions made by a receiver himself, upon the ground that he should not assume to himself the management of the cause.^^ Thus, a motion made by a receiver to let certain lands under his control has been re- fused by that court, on the ground that such a motion should properly come from the plaintiff in the cause. ^6 So it has been held that an application to the court for directions as to whether a mortgage on the lands subject to the receivership should be paid, should be made by the parties to the cause, and not by the receiver.27 So, too, a motion by a receiver for permission to bring an ejectment against certain lands in possession of one of the defendants has been denied, on the ground that it was not the proper function of the receiver to carry on plaintiff's cause upon a question involving the relative rights of the par- ties. 28 In this country, however, the courts have inclined to a broader view of the proper functions of a receiver, and it is 23Thornhill v. Thornhill, 14 see Callaghan v. Reardon, Sail. & Sim., 600. Sc, 682; Clark v. Fisher, id.. 684. 24 Ireland v. Eade, 7 Beav.. 55 ; 2G Wrixon v. Vize, 5 Ir. Eq., 276. Parker v. Dunn, 8 Beav., 497. 27 O'Connor v. Malone, 1 Ir. Eq., 25 O'Connor v. Malone, 1 Ir. Eq., 20. 20; Wrixon v. Vize, 5 Ir. Eq., 276; 28 Comyn v. Smith, 1 Hog., 81. Comyn v. Smith, 1 Hog., 81. And 214 RECEIVERS. [chap. VII. believed that his right to apply to the court for directions as to the management of the estate, or for leave to institute any nec- essary proceedings connected therewith, is generally recognized by the courts in most of the states.^^ § 182. Custodians in the nature of receivers; same rules applicable. When custodians of a fund which is in litiga- tion occupy the same relation to the fund and to the court as regularly appointed receivers, their functions or possession differing only in name, it would seem that they are to be gov- erned as to their rights and liabilities by the same rules which apply in the case of receivers. And it follows, necessarily, that since they are bound to obey the orders of the court in relation to the fund in their possession, they are entitled to the protec- tion of the court against all loss by reason of disbursements which were necessary and proper, and such as a reasonable and prudent man, acting as receiver, would have been justified in incurring.^^ § 183. Exemption from arrest while attending court. Under the Irish chancery system, a receiver is exempt from arrest while in attendance upon the court ; and when a receiver was in attendance upon a motion made against him in the course of his receivership, and was arrested for debt under a ca. sa., he was discharged upon the ground that he was privi- leged from arrest. ^1 § 184. Effect of receivership as regards statute of limi- tations. The appointment of a receiver over an estate or property does not alter or affect the rights of parties as regards the operation of the statute of limitations.^^ And a payment made by a receiver to one of the parties in the cause, out of funds collected by him in his receivership, is not regarded as a payment made by the debtor, to the extent of being an acknowl- edgment of the indebtedness so as to take the cause out of the 29 See Neun v. Blackstone B. & 32 Harrison v. Dignan, 1 Con. & L. Assn., 149 Mo., 74, 50 S. W., 436. Law., 376 ; Kyme v. Dignan, 4 Ir. 30 Adams v. Haskell, 6 Cal., 475. Eq.," 562. But see Kirkpatrick v. 31 Brabazon v. Teynham, 2 Ir. McElroy, 41 N. J. Eq., 539, 7 Atl., Ch., N. S., 563. 647. CHAP. VII.] FUNCTIONS. 215 Statute of limitations, since such payment is made by the receiv- er in his official capacity and as an officer of the court,^^ But it has been held that the appointment of a receiver prevents the statute of limitations from running, at least in a court of equity, in favor of a stranger to the suit.^^ § 185. Abatement of cause does not determine receiv- er's functions; order of removal necessary. The abate- ment of the cause in which a receiver was appointed does not necessarily determine his functions, and his authority is regard- ed as continuing until an order for his removal. And until such order, he may continue to take the necessary steps to en- force the collection of rents, which it is still his duty to receive and account for.^^ § 186. Power of court over receiver's contract; assignee of contract with receiver ; lease of offices. Since a receiver is an officer of the court, and all contracts made with him are subject to ratification by the court, it has undoubted power to vacate or modify any agreement or contract which the receiver has made, and to direct the making of another agreement; but it will not exercise such power without notice and without hearing the contracting parties. ^^ And where one who enters into a contract with a receiver assigns his interest therein to another, who agrees to be bound by the conditions of the con- tract, such assignee thereby submits himself to the jurisdiction of the court ; and the court, upon proper notice, has the power to vacate the contract on account of the refusal of the assignee to fulfil his obligations thereunder.^'^ And since a receiver has no power to make contracts without the authority of the court, all persons contracting with him are chargeable with knowledge 33 Whitely v. Lowe, 2 DeG. & J., corporation to enforce its contracts, 704, affirming S. C, 25 Beav., 421. see Florence Gas, E. L. & P. Co. v. 34 Wrixon V. Vize, 3 Dr. & War., Hanby, 101 Ala., 15, 13 So., 343. 104. And see Lazear v. Ohio Valley S. 35 Newman v. Mills, 1 Hog., 291. F. Co., 65 West Va., 105, — S. E., 36 Mooney v. British Commercial — . Life Insurance Co., 9 Ab. Pr., 37 Pacific Lumber Co. v. Pres- N. S., 103. As to the right of the cott, 40 Ore., 374, 67 Pac, 207. court to authorize the receiver of a 216 RECEIVERS. [chap. VII. of his functions in this regard and contract at their peril. ^^ So a receiver of a railway has no power, without the sanction of the court, to lease offices for a term of years, even though by tlie order appointing him he is authorized to make all contracts which may be necessary in carrying on the business of the road, subject to the supervision of the court. -^^ § 187. Relative functions as between different receivers. A receiver may be appointed to take charge pendente lite of the fund in controversy, notwithstanding a receiver has previously been appointed over the same fund in another action. But in such case the powers and functions of the second re- ceiver are subordinate to those of the first, and he is only en- titled to custody of the fund, or of so much as remains of it, after the first receiver has become functus oificioA^ § 188. Entitled to advice and instruction of court; may have his own counsel; must show necessity therefor; at- torney and counsel; should not employ counsel of party. A receiver being always regarded as an officer of the court, and at all times subject to its direction and orders, it is proper, in the discharge of his official duties, that he should on suitable occasions apply to the court for instruction and advice ; and he is at all times entitled to such advice from the court, and should not hesitate to apply for it when questions of intricacy or diffi- culty occur.'*^ Such an application may be made ex parte/^ although it is deemed the better practice to give notice to all 38 Tripp V. Boardman, 49 Iowa, 41 Jn re Van Allen, 37 Barb., 225 ; 410; Ellis V. Little, 27 Kan., 707; Smith v. New York Consolidated Hendrie & Bolthoff Co. v. Parry, Stage Co., 28 How. Pr., 377, 18 Ab. Z7 Colo., 359, 86 Pac., 113. Pr., 431; Curtis v. Leavitt, 1 Ab. 39 Chicago Deposit Vault Co. v. Pr., 274 ; Lottimer v. Lord, 4 E. D. McNulta, 153 U. S., 554, 14 Sup. Ct. Smith, 191 ; Cammack v. Johnson, Rep., 915, 38 L. Ed., 819. To the 1 Green Ch., 163; People v. Secu- same effect, see Braman v. Farmers' rity Life Insurance Co., 79 N. Y., L. & T. Co., 51 C. C. A., 644, 114 267. Fed., 18. 42 Allen v. Cooky, 53 S. C, 414, 40 Bailey v. Belmont, 10 Ab. Pr., 31 S. E., 634. N. S., 270; Bailey v. O'Mahoney, 33 N. Y. Supr. Ct. R., 239. CHAP. VII.] FUNCTIONS. 217 parties in interest in the estate or fund.'*^ And a receiver acts at his peril where he assumes to determine as between different claimants to the fund in his possession without seeking the ad- vice of the court."*^ And since the receiver in a cause is not the representative or receiver of the person at whose instance he is appointed, he should not act under his advice or that of his counsel, but in all cases of doubt, and especially when there is a conflict of interest, he should obtain the direction of the court; and he will be allowed to and should obtain counsel for him- self.^^ Indeed, it has been held reversible error to make an al- lowance of counsel fees to a receiver's attorney who also repre- sented the plaintiff in the action. ^^ But while a receiver is entitled as a matter of right to counsel where the nature of his duties requires it and while he usually selects his own counsel, he can not make any contract for hiring or agreement for compensation which will in any way be binding upon the court, for it is the function of the court to determine the necessity for the employment of counsel and the compensation to be allowed.'*''^ Nor will a receiver be permitted to employ counsel unless the services of one are reasonably necessary and then only to the extent that they are thus required ; nor should a re- ceiver, in such case, except under extraordinary circumstances, employ different persons, one as his attorney and another as counsel.'*^ And in making an application for the employment of counsel, the receiver must show some necessity for such em- ployment.'*^ And it is held that the action of the lower court in advising and instructing its receiver will not be disturbed upon appeal unless there has been a clear abuse of discretion.^*^ 43 Smith v. New York Consol- 47 Hickey v. Parrott S. & C. Co., idated Stage Co., 28 How. Pr., 32 Mont., 143, 79 Pac, 698. 377, 18 Ab. Pr., 431. 48 Harrigan v. Gilchrist. 121 44 In re Hone, 153 N. Y., 522, 47 Wis., 127, 437, 99 N. W., 909, 1008. N. E., 798. 49 Terry v. Martin, 7 New Mex., 45Lottimer v. Lord, 4 E. D. 54, 32 Pac, 157. Smith, 191. 50 State v. Bank of Rushville, 57 46 Veith V. Ress, 60 Neb., 52, 82 Neb., 608, 78 N. W., 281. N. W., 116. And see, post, § 216. 218 RECEIVERS. [chap. VII. § 189. May receive money not yet due. When a re- ceiver is appointed pendente lite, and is authorized by the order of the court to sue for and collect such debts as are due and may become due, he may properly receive not only money which is actually due, but money not yet due, and may give a receipt and satisfaction therefor.^^ So if he is author- ized by the order of the court appointing him to execute and acknowledge for record formal satisfaction of all real-estate mortgages which come to his hands as receiver, upon payment or collection by him of the debts which they were given to se- cure, he may receive payment of and discharge a mortgage which is not yet due.^^ § 190. Effect on receiver's functions of appeal and su- persedeas. If an appeal is taken from an order appointing a receiver, and the appellate court grants a supersedeas and directs the receiver to undo what he has done, and to restore to its original owners the property which he has taken, his author- ity is thereby completely suspended and rendered nugatory by operation of law\ And while the supersedeas does not render nugatory or unlawful any action of the receiver, had under the order of the court below before the appeal was taken, it forbids that court and its officer from further acting in the matter. The power of the court below being suspended, the power of its officer necessarily becomes inoperative. If, therefore, the receiver refuses to obey the mandate of the ap- pellate court, and continues to exercise the functions of his office, he is guilty of a contempt of court, and may be pun- ished by imprisonment until he complies with the order.^^ And where a receiver has been appointed and has taken pos- session of the property of the defendant, and afterward an appeal is taken from the order of appointment and a supersedeas bond is filed in accordance with the provisions of the statute, the 51 Olcott V. Heermans, 3 Hun, 53 State v. Johnson, 13 Fla., 33. 431. And see, ante, §§ 29 and 161. 52 Heermans v. Clarkson, 64 N. Y., 171. CHAP. VII.] FUNCTIONS. 219 power of the receiver is entirely suspended thereby, and upon being notified of the filing of the bond, it is his duty to imme- diately restore to the defendant the possession of the proper- ty. 5'* So where, upon the granting of an appeal, the reviewing court has issued a writ of supersedeas requiring a receiver to restore to the defendants the possession of certain property which had been taken from them as the result of the receiver- ship proceeding, the refusal of the receiver to obey the writ constitutes a contempt for which he may be punished by impris- onment. And in such case it is no defense that the action of the receiver was based upon the advice of counsel. And while, ordinarily, the fact that the action was based upon such ad- vice will be received in mitigation of the punishment, this re- sult will not follow where it is clear that this defense is a mere pretense and that the action of the receiver was willful and de- liberate. Nor can the receiver defend upon the ground that the writ was too broad in its effect, since his remedy in such case was to apply to the court for a modification. ^5 And where an appeal has been perfected and a supersedeas bond filed, the court has no jurisdiction to pass the final account of the re- ceiver and order his discharge.56 But when by a final decree the receiver is directed to pay over the fund in his hands to the person found to be entitled thereto, he may properly make such payment before an appeal from the decree is perfected by giv- ing a bond to operate as a supersedeas. And in such case, al- though the decree is finally reversed upon appeal, the receiver can not be again required to account for the money so paid.^'^ 54 Farmers' National Bank v. A., 615, 106 Fed., 775. And see Backus, 63 Minn., 115, 65 N. W., this case to the effect that where 255 ; Buckley -v. George, 71 Miss., the punishment is fixed at imprison- 580, 15 So., 46; State v. Hirzel, 137 ment, the costs of the contempt Mo., 435, 37 S. W., 921, 38 S. W., proceedings should not be taxed 961 ; Rumney v. Donovan, 28 Mont., against the receiver. 69, 72 Pac, 305. And see State v. 56 Brundage v. Home S. & L. Bell, 36 Wash., 196, 78 Pac, 908. Assn., 11 Wash., 288, 39 Pac, 669. Contra, Bristow v. Home B. Co., 57 Hovey v. McDonald, 109 U. 91 Va., 18, 20 S. K, 946. S., ISO, 3 Sup. Ct. Rep., 136. 55 Tornanses v. Mel sing, 45 C. C. 220 RECEIVERS. [chap. VII. § 190(7. Court may make administrative orders for care of property notwithstanding appeal and supersedeas. An appeal from a linal decree in a receivership cause and the grant- ing of a supersedeas upon the tiHng of the proper bond will not have the effect of depriving the lower court of the right to make all necessary administrative orders for the proper care and preservation of the property in its charge. In such case the property is still in the custody of the court through its re- ceiver and it is the duty of the receiver, under the directions of the court, to protect and preserve the property or fund for the benefit of the persons who shall ultimately be adjudged to be entitled thereto. ^^ 58 Lamb v. Rowan, 81 Miss., 369, 33 So., 4. CHAP. VII.] FUNCTIONS. 221 11. Sales by Receivers. § 191. Sale subject to action of court; does not divest existing liens; may be conducted by master in chancery or agent of receiver. 192. Court vested with power of sale whenever necessary, although rights in property not ascertained; sale of steamboat. 193. Receiver can not purchase at his own sale; general rule as to trustees applicable; can not purchase in name of wife. 194. Illustrations of the rule; purchase in receiver's interest set aside. 195. Departure from rule by consent of parties. 196. Order for receiver's sale can not be questioned collaterally; illustrations. 197. Satisfactory evidence required as to necessity for sale; order should be specific; sale to pay taxes. 198. Discretion as to sales in bulk or by parcels; private sale; ex parte application; stockholder of corporation may object; improper advertisement; notice of sale; order of sale appeal- able; same of order confirming sale of real estate. 199. Receiver's power to execute deed; when deed should be made. 199fl. Sale subject to incumbrances; title of third person; partner- ship; dower interest. I99b. Doctrine of caveat emptor applied. 199c. Confirmation of sale unnecessary; when confirmation not re- fused; no redemption from sale. \99d. Fraudulent sale by receiver. 199c. Sale must take place at time designated by court. § 191. Sale subject to action of court; does not divest existing liens; may be conducted by master in chancery or agent of receiver. The functions and powers of receiv- ers touching the sale of property committed to their charge, unless defined or regulated by statute, rest upon and are governed by the orders of the court appointing them. Good faith and fair dealing are required of receivers in the execution of such orders, and if a receiver fraudulently imposes upon and deceives the court in obtaining an order of sale, the sale may be vacated and the parties may be restored to their original position. 59 And when, acting under a misapprehension as to 59 Hackley v. Draper, 60 N. Y., And see Tozer v. O'Gorman, 60 88. affirming S. C, 4 Thomp. & C. Minn., 42, 61 N. W., 895. (N. Y. S. C), 614, 2 Hun, 523. 222 RECEIVERS. [chap. VII. the value of certain assets, a receiver sells them at a grossly in- adequate price, and upon learning the real facts he refuses to complete the sale and to deliver the property, the court may, in the exercise of its discretion, refuse an application by the purchaser to compel the completion of the sale. Such a contract of sale, while it remains executory, is subject to the supervision of the court, and the purchaser will be presumed to have pur- chased subject to the implied condition that the court may, in the exercise of a sound discretion, sanction or disapprove the sale, as it shall see fit.^^ And since the appointment of a receiv- er does not divest existing liens upon the property which is subject to the receivership, it follows that a sale by a receiver of a partnership property mortgaged by the firm gives to the purchaser only such interest as the firm itself had in the prop- erty, and does not divest or impair the paramount mortgage lien of a stranger to the action in which the receiver was ap- pointed.^l And where real estate which is sold by a receiver is subject to a judgment lien, the purchaser takes title subject to the lien. ^2 Sq where a mechanic's lien has attached to property which subsequently comes into the possession of a receiver, such lien is not disturbed by the appointment of the re- ceiver, and, upon a sale of the property, the lien attaches to the fund.^'^ So when executions have become liens upon per- sonal property, a sale of such property by a receiver subsequent- ly appointed in an action to. which the lien-holders were not parties will not divest their liens, which may still be enforced notwithstanding such sale.^* Nor will the fact that the order of the court, directing a sale by a receiver, does not specifically provide that the property shall be sold to pay off adjudged liens 60 Attorney-General v. Continen- 62 /„ re Coleman, 174 N. Y., 373, tal Life Insurance Co.. 94 N. Y., 66 N. E., 983. 199; South Baltimore B. & T. Co. 63Totten & Hogg I. & S. F. Co. V. Kirby, 89 Md., 52, 42 At!., 913. v. Muncie Nail Co., 148 Ind., 372, 61 Lorch V. Aultman, 75 Ind., 47 N. E., 703. 162; McLaughlin t;. Taylor, 115 Ga., 64 Dann Manufacturing Co. v. 671, 42 S. E., 30. And see, post, Parkhurst, 125 Ind., 317, 25 N. E., § 199a. 347. CHAP. VII.] FUNCTIONS. 223 cut off such liens or compel the lienors to look to the property in the hands of the purchaser.^^ So when a corporation over which a receiver is appointed has, prior to such appointment, conveyed lands to trustees to secure the holders of stock of the corporation, and thereafter, and before the receiver is appoint- ed, the equity of redemption in such lands is also sold under execution against the corporation, and the time for redemption expires without redemption being made, the receiver takes no title to such lands, and a sale by him will convey no title. ^^ And, in the absence of any statutory prohibition, a receiver's sale may be conducted by a master in chancery or agent upon behalf of the receiver, and it need not necessarily be conducted by the receiver himself; nor need such master or agent give bond or take an oath before conducting the sale.^'^ § 192. Court vested with power of sale whenever neces- sary, although rights in property not ascertained; sale of steamboat. A court of equity appointing a receiver to take possession of property, pending a litigation concern- ing the rights of the parties thereto, is vested with the power of selling the property in the receiver's hands, when- ever such course becomes necessary to preserve the in- terests of all parties. ^^ Thus, in an action to determine the rights of conflicting claimants to a steamboat which was placed in the hands of a receiver pendente lite, and was operated under his direction for two years, the court, upon being satisfied that it was highly inconvenient and unfit to con- tinue in possession and operate the boat for a longer period, ordered it sold, although the bill on which the receiver was al- lowed was not framed for the purpose of effecting a sale.^^ 65 Mueller v. Stinesville & B. S. As to the circumstances which will Co., 154 Ind., 230, 56 N. E., 222. justify the court in directing a re- 66 Fitch V. Wetherbee, 110 111., ceiver's sale of the real and per- 475. sonal property of an insolvent cor- 67 Threadgill v. Colcord, 16 poration and in retaining the fund Okla., 447, 85 Pac, 703. to be distributed upon a final hear- 68 Crane v. Ford, Hopk. Ch., 114; ing, see Forsaith Machine Co. v. Smith V. Burton, 67 Vt., 514, 32 Lumber Co., 109 N. C, 576, 13 S. E., Atl., 467. 869. 6» Crane v. Ford, Hopk. Ch., 114. 224 RECEIVERS. [CIIAP. VII. And a sale may be decreed in such case, although the rights of the parties to the property have not yet been ascertained and estabhshed ; nor is it an objection to the sale that a petition has not been filed therefor, where the bill prays for a sale and a receivership pending the sale.'^^ § 193. Receiver can not purchase at his own sale; gen- eral rule as to trustees applicable; can not purchase in name of wife. A receiver is regarded as occupying a fiduciary relation, in the sense that he will not be allowed to purchase for his own benefit property connected with or forming a part of the subject-matter of his receivership, or in his possession in that capacity. The courts will not permit him, any more than any other trustee, to subject himself to the temptation arising from a conflict between the interest of a purchaser and the duty of a trustee. And the rule has its foundation in grounds of public policy, and in the peculiar relation sustained by a re- ceiver to the fund or estate in his custody, which resembles in this respect that of a solicitor, trustee, or any other fiduciary relation of a like nature where the same rule of equity prevails. Unless, therefore, it clearly appears that it would be for the benefit of the parties in interest to hold the receiver to his purchase, he will not be permitted to derive any benefit from a purchase made by himself of property pertaining to his receiv- ership ; and whatever purchase he may make will be held to be for the benefit of the real parties interested, whose interests he as receiver represents, and his purchase will be held voidable at their election. "^^ And a court of equity will not ordinarily . Littlejohn, 12 La. An., ceedings in the suit in which he re- 298. This was an action by the re- ceived his appointment, would in a ceiver of a partnership, who upon great measure deprive the parties the trial, to prove his official ca- of the benefit of his appointment, pacity, introduced a certificate of and unnecessarily increase the cost the judge of the court, certifying of every suit brought by the re- his appointment in the action after ceiver. We think that the certified considering the evidence, the plead- copy of the entry alone making the ings and the law. It was objected appointment ought to be deemed that the certificate did not show prima facie proof that the court that the judge had the proper par- had the proper parties before it ties before him, and that the re- when the appointment was made, ceiver should have produced the leaving the opposite side to rebut entire record. Merrick, C. J., says : the presumption." "There is force in the objection H Ocean Steamship Co. z*. Wilder, under the ordinary rules of evi- 107 Ga., 220, 33 S. E., 179. CHAP. VIII.] ACTIONS. 271 III. Suits by Receivers in Foreign Courts. § 239. Receiver's jurisdiction; no extraterritorial right of action. 240. The rule further illustrated. 241. Departure from the rule sometimes allowed upon principles of comity. 241a. Receiver may sue in foreign court when he has title or is quasi-assignee. 242. Receiver of insolvent corporation may prove debt in bank- ruptcy in another district. 243. Receiver allowed to foreclose mortgage in another state. 244. When allowed to sue for property in another state; assign- ment to receiver; descriptio personce. 244a. When jurisdiction of foreign court not presumed. § 239. Receiver's jurisdiction; no extraterritorial right of action. Upon the question of the territorial extent of a receiver's jurisdiction and powers, for the purpose of institut- ing actions connected with his receivership, the prevailing doc- trine, established by the Supreme Court of the Unted States and sustained by the weight of authority in various states, is that the receiver has no extraterritorial jurisdiction or power of official action, and can not, as a matter of right, go into a foreign state or jurisdiction and there institute a suit for the recovery of demands due to the person or estate sub- ject to his receivership. His functions and powers, for the purposes of litigation, are held to be limited to the courts of the state within which he was appointed, and the principles of comity between nations and states, which recognize the judi- cial decisions of one tribunal as conclusive in another, do not apply to such a case, and will not warrant a receiver in bringing an action in a foreign court or jurisdiction.^^ When, therefore, 12 Booth V. Clark, 17 How., 322; 51, 128 Fed., 321, which reversed S. Hale V. Allison, 188 U. S., 56, 23 C, 111 Fed., 38; Hilliker v. Hale, Sup. Ct. Rep., 244, 47 L. Ed., 380, 54 C. C. A., 252, 117 Fed.. 220, re- affirming S. C, 45 C. C. A., 270, versing S. C, 109 Fed., 273; Fowler 106 Fed., 258, which affirmed S. C, v. Osgood, 72 C. C. A., 276, 141 102 Fed., 790; Great Western Min- Fed., 20; Brigham v. Luddington, ing & M. Co. V. Harris, 198 U. S., 12 Blatchf., 237; Hazard v. Durant, 561, 25 Sup. Ct. Rep., 770, 49 L. Ed., 19 Fed., 471 ; Wigton v. Bosler, 102 1163, affirming S. C, 63 C. C. A., Fed., 70; Edwards v. National W. 272 RECEIVERS [chap. VIII. upon a creditor's bill filed against a judgment debtor in the courts of New York, a receiver was appointed of all the assets and effects of the debtor, and the debtor afterwards went into New Hampshire, and took the benefit of the national bankrupt act, and an assignee was appointed of his estate, upon a bill filed by the New York receiver, in the District of Columbia, to get possession of a fund due to the debtor, it was held upon ap- peal that the court below properly dismissed the bill, since it could not recognize the power of a receiver to institute the proceedings in a jurisdiction other than that of his appoint- G. J. Assn., 139 Fed., 795; Covell V. Fowler, 144 Fed., 535 ; Ward v. Pacific M. L. I. Co., 135 Cal., 235, 67 Pac, 124; Stockbridge v. Beck- with, 6 Del. Ch., 72, 33 Atl., 620; Holbrook v. Ford, 153 III., 633, 39 N. E., 1091, 27 L. R. A., 324, 46 Am. St. Rep.,' 917; Parker v. Lamb & Sons, 99 Iowa, 265, 68 N. W., 686, 34 L. R. A., 704; Wyman v. Eaton, 107 Iowa, 214, 77 N. W., 865, 43 L. R. A., 695, 70 Am. St. Rep., 193 ; Homer v. Barr P. E. Co., 180 Mass., 163, 61 N. E., 883, 91 Am. St. Rep., 269; Farmers & Merchants Insurance Co. v. Needles, 52 Mo., 17; Hope Mutual Life Ins. Co. v. Taylor, 2 Rob. (N. Y.), 278; War- ren V. Union National Bank, 7 Phila., 156; Bank v. Motherwell Iron, etc., Co., 95 Tenn., 172, 31 S. W., 1002, 29 L. R. A., 164; Fillcins V. Nunnemacher, 81 Wis., 91, 51 N. W., 79. And see, ante, § 47. See, also, Graydon v. Church, 7 Mich., 36; Rust V. United Waterworks Co., 17 C. C. A., 16, 70 Fed., 129. 36 U. S. App., 167; Olney v. Tanner, 10 Fed., 101, affirmed on appeal, 21 Blatch., 540; Bartlett v. Wilbur, 53 Md., 485 ; Day v. Postal Telegraph Co., 66 Md., 354, 7 Atl., 608; How- ard V. Chesapeake & O. R. Co., 11 App. D. C, 300. But see, contra, Metzner v. Bauer, 98 Ind., 425 ; Hale V. Harden, 37 C. C. A., 240, 95 Fed., 747, reversing S. C, 89 Fed., 283; Hale V. Tyler, 104 Fed., 757. And see Runk v. St. John, 29 Barb., 585. See Hale v. Allison, 188 U. S., 56, 23 Sup. Ct. Rep., 244, 47 L. Ed., 380, supra, as to maintaining the ac- tion in order to prevent a multi- plicity of suits. But the rule does not apply in the case of an action brought by a receiver in another court of the state of his appoint- ment. Hause v. Newel, 60 Minn., 481, 62 N. W., 817. And since a receiver has no extraterritorial ju- risdiction, the appointment of a re- ceiver over a foreign corporation which has a local agent in another state does not affect the service of process upon such agent in the courts of that state. Pollock v. B. & L. Assn., 48 S. C, 65, 25 S. E., 977, 59 Am. St. Rep., 695. As to the right of the receiver of an in- solvent corporation to maintain an action in a foreign state for the pur- pose of enforcing the statutory lia- bility of stockholders, see. post, §§ 317^ and 317c. CHAP. VIII.] ACTIONS. 273 ment.^^ Nor does the fact that the receiver is appointed by a federal court in one circuit, and sues as receiver in the federal court in another circuit, alter the rule, or entitle him to main- tain the action, since such courts exercise only a local and limit- is Booth V. Clark, 17 How., 322, the leading case upon the subject. The court, Mr. Justice Wayne de- livering the opinion, say, p. 338: "He (the receiver) has no extra- territorial power of official action; none which the court appointing him can confer, with authority to enable him to go into a foreign ju- risdiction to take possession of the debtor's property; none which can give him, upon the principle of comity, a privilege to sue in a for- eign court or another jurisdiction, as the judgment creditor himself might have done, where his debtor may be amenable to the tribunal which the creditor may seek. In those countries of Europe, in which foreign judgments are regarded as a foundation for an action, whether it be allowed by treaty stipulations or by comity, it has not as yet been extended to a receiver in chancery. In the United States, where the same rule prevails between the states as to judgments and decrees, aided as it is by the first section of the fourth article of the constitu- tion, and by the act of congress of 26th of May, 1790, by which full faith and credit are to be given in all of the courts of the United States, to the judicial sentences of the differ- ent states, a receiver under a cred- itors' bill has not as yet been an actor as such in a suit out of the state in which he was appointed. This court considered the effect of that section of the constitution, Receivers — 18. and of the act just mentioned, in M'Elmoyle v. Cohen, 13 Pet., 324-327. But, apart from the ab- sence of any such case, we think that a receiver could not be ad- mitted to the comity extended to judgment creditors without an en- tire departure from chancery pro- ceedings as to the manner of his appointment, the securities which are taken from him for the per- formance of his duties, and the direction which the court has over him in the collection of the estate of the debtor, and the application and distribution of them. If he seeks to be recognized in another jurisdiction, it is to take the fund there out of it, without such court having any control of his subse- quent action in respect to it, and without his having even official power to give security to the court, the aid of which he seeks, for his faithful conduct and official ac- countability. All that could be done upon such an application from a re- ceiver, according to chancery prac- tice, would be to transfer him from the locality of his appointment to that where he asks to be recognized, for the execution of his trust in the last, under the coercive ability of that court; and that it would be dif- ficult to do, where it may be asked to be done, without the court ex- ercising its province to determine whether the suitor, or another per- son within its jurisdiction, Avas the proper person to act as receiver." 274 RECEIVERS. [chap. VIII. ed jurisdiction, and their receivers can not sue in another terri- torial jurisdiction.!^ Nor can the action be maintained by rea- son of the fact that the receiver sues in tlie name of his princi- pal or that the court of his appointment has entered an order directing him to bring the suit in question. ^^ And if, under the law or statutes of the state where the receiver is appointed, he can not maintain an action of the kind which he seeks to maintain in a foreign state, or if the statute permits the action only after the performance of conditions precedent which have not been performed, it follows that the action can not be main- tained by the receiver in the foreign state.^^ And the refusal of a court of a state other than that in which the receiver was thus appointed to entertain such an action by the receiver, does not amount to a failure to give full faith and credit to the laws and judgment of the state of appointment within the meaning of the federal constitution. i"^ § 240. The rule further illustrated. In further illustra- tion of the rule, it has been held in a garnishee proceeding in- stituted in the courts of Pennsylvania, against a debtor of a corporation existing in and under the laws of the state of Ten- nessee, where judgment was had against the garnishee, that a receiver of the Tennessee corporation, appointed in a credi- l4Brigham v. Luddington, 12 23 Sup. Ct. Rep., 244, 47 L. Ed., Blatchf., 237; Great Western Min- 380, affirming S. C, 45 C. C. A., ing & M. Co. V. Harris, 198 U. S., 270, 106 Fed., 258, which affirmed 561, 25 Sup. Ct. Rep., 770, 49 L. S. C, 102 Fed., 790 ; Evans t;. Nellis, Ed., 1163, affirming S. C, 63 C. C. 187 U. S., 271, 23 Sup. Ct. Rep., 74, A., 51, 128 Fed., 321, which reversed 47 L. Ed., 173. But see dictum in S. C, 111 Fed., 38; Edwards v. Hanson v. Davison, IZ Minn., 454, National W. G. J. Assn., 139 Fed., 76 N. W., 254. And see the strong 795. dissenting opinion of Mr. Justice 15 Great Western Mining & M. Canty in the case last cited. And Co. V. Harris, 198 U. S., 561, 25 see, contra. Hale v. Harden, 37 C. Sup. Ct. Rep., 770, 49 L. Ed., 1163, C. A., 240, 95 Fed., 747, reversing affirming S. C, 63 C. C. A., 51, 128 S. C, 89 Fed.. 283. Fed., 321, which reversed S. C. Ill 17 Finney v. Guy, 189 U. S., 335, Fed., 38. And see Fowler v. Os- 23 Sup. Ct. Rep., 558, 47 L. Ed., good, 72 C. C. A., 276, 141 Fed., 20. 839, affirming S. C, 106 Wis., 256, 16 Hale V. Allison, 188 U. S., 56, 82 N. W., 595, 49 L. R. A., 486. CHAP, viir.] ACTIONS. 275 tors' suit in that state, could not contest plaintiff's right to the verdict obtained by them in the garnishee suit in Pennsyl- vania. ^^ So when an insurance company, incorporated under the laws of Illinois, had passed into the hands of a receiver duly appointed in that state, it was held in Missouri, that the receiver could not maintain an action in the latter state upon a note running to the corporation, and that the suit must be brought in the name of the corporation itself.^^ So the re- ceiver of an insolvent corporation can not maintain a bill in a foreign state for an injunction to restrain creditors of the corporation in that state from enforcing judgments recovered by them in garnishment proceedings based upon claims against the corporation. 20 So, also, a receiver who has been appointed by the court of a foreign state to wind up the affairs of a cor- poration of that state but who is in no way vested with any title 18 Warren v. Union National Bank, 7 Phila., 156. See, also, Wil- litts V. Waite, 25 N. Y., 577; Hunt V. Columbian Insurance Co., 55 Me., 290; Taylor v. Columbian Insurance Co., 14 Allen, 353. 19 Farmers and Merchants Insur- ance Co. V. Needles, 52 Mo., 17. See, also, Hope Mutual Life Insur- ance Co. V. Taylor, 2 Rob. (N. Y.), 278. In Farmers and Merchants Insurance Co. v. Needles, 52 Mo., 17, Ewing, J., observes, p. 18: "This is an action on a promissory note alleged to have been executed by defendant to plaintiff. An amended petition was filed, which alleges substantially that the insur- ance company is a corporation duly incorporated under the laws of the state of Illinois, with power to sue, etc.; that W. H. Benneson was duly appointed receiver by the cir- cuit court of Adams county, in the state of Illinois, with the rights, property and assets of the plaintiff, in 1869, and gave bond which was duly approved, etc. That as such receiver he is in possession of the property and effects of said corpo- ration. The petition then alleges the execution of the note by de- fendant to plaintiff, said corpora- tion, and that said note is part of the assets and property which came to the hands of said receiver, and that the same is due and unpaid. . . . It is admitted by the demur- rer that Benneson was duly ap- pointed receiver, and as such is in possession of the property and ef- fects of the corporation, including the note in controversy. And as it does not appear by any averment in the petition that the note has ever been assigned or transferred by the payee thereof, the corpora- tion only can maintain an action thereon, unless the receiver as such has a right of action. A receiver can not sue in a foreign jurisdic- tion for the property of the debtor." 20 Stockbridge v. Beckwith, 6 Del. Ch., 72, 33 Atl., 620. 276 RECEIVERS. [chap. VIII. to the property of the corporation, can not maintain an action in the federal court of another state to recover funds there lo- cated as against attaching creditors in the latter state, even though subsequent to the attachment a general conveyance is executed and delivered by the corporation to the receiver.21 And since a receiver's rights of action in a state other than that in which he is appoiitted are recognized only as a matter of comity, it is held in Indiana that a receiver of an insolvent part- nership appointed in Illinois, the firm residing and doing busi- ness in that state, can not recover funds due from a debtor to the firm in Indiana which have been attached by a citizen of Connecticut, Nor, in such case, does the fact that the firm has executed an assignment of all its effects to the receiver vary the rule, since such assignment, as against non-resident credi- tors, confers upon the receiver no better title than that ac- quired under the order appointing him.22 Nor can an action be maintained by a receiver in the court of a foreign state upon principles of comity, where the courts of the state in which the receiver was appointed hold that an action similar to the one brought in the foreign jurisdiction can not be maintained in the state of his appointment.^^ Nor will an action by the re- ceiver of an insolvent foreign insurance company be permitted in the courts of a foreign state upon principles of comity, where the company has failed to comply with the statutes governing foreign insurance companies doing business in the state.^^ And the doctrine of comity which, as will hereafter be shown, recognizes the right of a receiver in certain cases to sue in courts beyond his jurisdiction, has never been carried to the extent of allowing a receiver in a foreign jurisdiction to in- 21 Zacher v. Fidelity T. & S. Co., 23 Hale v. Allison, 188 U. S., 56, 45 C. C. A., 480, 106 Fed., 593. And 23 Sup. Ct. Rep., 244, 47 L. Ed., 380, see this case as to the right of a affirming S. C, 45 C. C. A., 270, 106 creditor whose attachment is made Fed., 258, which affirmed S. C, 102 subsequent to the conveyance by the Fed., 790. corporation to the receiver. 24 Parker v. Lamb & Sons, 99 22 Catlin v. Wilcox Silver-Plate Iowa, 265, 68 N. W., 686, 34 L. R. Co., 123 Ind., 477, 24 N. E., 250. A., 704. CHAP. VIII.] ACTIONS. 277 terfere, by attorney or otherwise, in the conduct of Htigation in a cause where the local court has already appointed its own re- 25 ceiver. § 241. Departure from the rule sometimes allowed upon principles of comity. While, as is thus seen, the courts have generally denied the receiver's extraterritorial right of ac- tion as a question of strict right, it has frequently been recog- nized as a matter of comity.26 Thus, it has been held that receivers of a foreign corporation, appointed in other states, might sue in New York, in their official capacity, in cases where no detriment would result to citizens of the latter state, the privilege of thus suing being regarded as based rather upon courtesy than upon strict right, and the courts declining to extend their comity so far as to work detriment to citizens of their own state who have been induced to give credit to the foreign corporation. ^'7 And the same doctrine prevails in 25 Johnson v. Southern B. & L. Assn., 99 Fed., 646. 26Runk V. St. John, 29 Barb., 585; Hoyt v. Thompson, 5 N. Y., 320, reversing S. C, 3 Sandf., 416; Bagby v. A., M. & O. R. Co., 86 Pa. St., 291 ; Bank v. McLeod, 38 Ohio St., 174; Comstock v. Frederickson, 51 Minn., 350, 53 N. W., 713 ; Oilman V. Ketcham, 84 Wis., 60, 54 N. W., 395; Falk v. Janes, 49 N. J. Eq., 484, 23 Atl., 813 ; Metzner v. Bauer, 98 Ind., 425; McAlpin v. Jones, 10 La. An., 552; Lycoming Fire Insur- ance Co. V. Wright, 55 Vt., 526; Barley v. Gittings, 15 App. D. C, 427; dictum in Person v. Leary, 127 N. C, 114, 37 S. E., 149; Sands v. Greeley & Co., 31 C. C. A., 424, 88 Fed., 130, 59 U. S. App., 610; Lewis V. Clark, 64 C. C. A., 138, 129 Fed., 570; Rogers v. Riley, 80 Fed., 759; Lewis V. American N. S. Co., 119 Fed., 391. And see Bidlack v. Ma- son, 26 N.J. Eq., 230; Sobernheimer V. Wheeler, 45 N. J. Eq., 614, 18 Atl., 234; Hunt v. Columbian In- surance Co., 55 Me., 290; Taylor v. Columbian Insurance Co., 14 Allen, 353 ; Rogers v. Haines, 103 Ala., 198, 15 So., 606; Phenix Insurance Co. V. Schultz, 25 C. C. A., 453, 80 Fed., 337, 42 U. S. App., 483, reversing S. C, 77 Fed., 375. As to the proof of the appointment of a foreign re- ceiver in an action brought by him in a court of another state, see Per- son V. Leary, 126 N. C, 504, 36 S. E., 35. 27Runk V. St. John, 29 Barb., 585; Hoyt v. Thompson, 5 N. Y., 320, reversing S. C, 3 Sandf., 416; Sands v. Greeley & Co., 31 C. C. A., 424, 88 Fed., 130, 59 U. S. App., 610. In Runk v. St. John, 29 Barb., 585, the court, Gierke, J., say: "The plaintiffs are receivers of a corpo- ration chartered in the states of Pennsylvania and New Jersey, and were appointed under the decree 278 RECEIVERS. [chap. VIII. Minnesota. 28 And in Indiana, it is held, as a matter of com- ity, that receivers duly appointed and qualified in another state may, to the extent of their authority, maintain actions in the courts of Indiana. 29 Upon similar grounds of comity it is held in Pennsylvania, that when a receiver is appointed over a railway in another state, the courts of Pennsylvania will rec- og"nize his right to property of the railway company in Penn- sylvania, when not in conflict with the rights of citizens of that state. And in such case, a creditor residing in the state in which the receiver is appointed will not be permitted by attachment proceedings in Pennsylvania, to reach the assets and credits of the company claimed by the receiver.^^ So a, receiver over a railway appointed in foreclosure proceedings in Kentucky, with full power to take possession of all property of the company and to institute all necessary actions in his own name, may maintain an action in Ohio, to recover rolling stock of the company covered by the mortgages, which has been seized in Ohio, by a Kentucky creditor, pending the applica- tion for the receiver and before his appointment.^^ And when dissolving the corporation, made by rights of creditors in this state. All the court of chancery in the latter that has been settled by the deci- state, and were confirmed by an act sions to which we have been re- of the legislature of the former. ferred on this subject, is, that our The defendant's counsel denies the courts will not sustain the lien of capacity of receivers, appointed in foreign assignees or receivers, in other states and countries, to sue in opposition to a lien created by at- the courts of this state. The laws tachment under our own laws. In and proceedings of other sovereign- other words, we decline to extend ties have not, indeed, such absolute our wonted courtesy so far as to and inherent vigor as to be effica- work detriment to citizens of our cious here under all circumstances. own state, who have been induced But in most instances, they are rec- to give credit to the foreign corpo- ognized by the courtesy of the ration." courts of this state; and the right 28 Comstock v. Frederickson, 51 of foreign assignees or receivers to Minn., 350, 53 N. W., 713. collect, sue for, and recover the 29 Metzner v. Bauer, 98 Ind., 425. property of the individuals or cor- 30 Bagby v. A., M. & O. R. Co., porations they represent, has never 86 Pa. St., 291. been denied, except where their 31 Bank v. McLeod, 38 Ohio St., claim came in conflict with the 174. CHAP. VIII.] ACTIONS. 279 property to which a receiver is entitled has been fraudulently removed beyond the jurisdiction of the court appointing him and into another state, he has been allowed to maintain an action in such other state for its recovery.^2 Sq ^ receiver over a foreign corporation, appointed in the state of its creation, may be admitted to defend an action brought against the corpo- ration in New Jersey, both as a matter of comity and under a statute subjecting foreign corporations to the provisions of the state law. And when thus admitted to defend an action brought upon a mortgage given by the corporation, he may question its validity, being regarded for that purpose as the representative both of the corporation and of its creditors.^^ It is also held in New Jersey, that a New York receiver, appoint- ed in proceedings supplementary to execution in behalf of a judgment creditor residing in New Jersey, may maintain an action in the latter state for the recovery of the debtor's prop- erty located there, the rights of no New Jersey creditors being impaired by the proceeding.^^ So a receiver over a partner- ship, appointed in another state, may maintain an action in New Jersey to set aside a sale of partnership assets made in the latter state by one partner in fraud of the rights of his co- partner, no New Jersey creditors being affected and the only person to be benefited by the suit being the partner who has been defrauded.35 And it is held in Wisconsin, that a receiver ap- pointed in New York in a suit for the dissolution of a corpora- tion of that state in which creditors have been enjoined from bringing actions against the corporation, may recover funds in Wisconsin which have been attached by a New York creditor after the receiver's appointment, the rights of the New York receiver being recognized in such case upon principles of com- ity.36 So, upon principles of comity, a foreign receiver may 32 McAlpin V. Jones, 10 La. An., 34 Palk v. Janes, 49 N. J. Eq., 484, 552. See, also, Paradise v. Farm- 23 Atl., 813. ers & Merchants Bank, 5 La. An., 35 Sobernheimer v. Wheeler, 45 710. N. J. Eq., 614, 18 Atl., 234. 33 National Trust Co. v. Miller, 36 Gilman v. Ketcham, 84 Wis., 33 N. J. Eq., 155. 60, 54 N. W., 395. 280 RECEIVERS. [chap. VIII. maintain an action to recover real estate in the possession of defendant, where the action will not result in detriment to citi- zens of the state.^'^ And it has been held that a receiver ap- pointed by a court of Virginia over an insolvent corporation of that state may intervene in a receivership proceeding against the corporation in which a receiver has been appointed by a court of the District of Columbia and that it was error to dis- miss such petition before a final decree in the administration of the affairs of the corporation by the court of the District of Columbia, since the Virginia receiver would be entitled at least to receive for transmission to the court of his appoint- ment whatever surplus there might be after the payment of costs and claims by the court of the District of Columbia. ^^ And a receiver appointed by the courts of Tennessee over an insolvent building and loan association of that state may main- tain a bill in equity in the federal court in Kentucky to enforce the liability of stockholders in the insolvent corporation, where there are no domestic creditors whose interests would be im- paired by the action. ^^ And where a receiver had been ap- pointed over a corporation which was thereupon dissolved, and the receiver had become the successor of the corporation and the only person who might enforce its rights, it was held that he could maintain an action in a foreign state to recover an indebtedness due the corporation.'*^ It is thus apparent that the exceptions to the rule denying to receivers any extraterri- torial right of action have become as well recognized as the rule itself, and the tendency of the courts is constantly toward an enlarged and more liberal policy in this regard. And it is believed that the doctrine will ultimately be established giving to receivers the same rights of action, in all states of the Union, with which they are invested in the state or jurisdiction in which they are appointed. 37 Small V. Smith, 14 S. Dak, 39 Rogers v. Riley, 80 Fed., 759. 621, 86 N. W., 649, 86 Am. St. Rep., 40 Avery v. Boston S.-D. & T. 807. Co., 72 Fed., 700. 38 Barley v. Gittings, 15 App. D, C, 427. CHAP. VIII.] ACTIONS. 281 § 241a. Receiver may sue in foreign court when he has title or is quasi-assignee. The rule as above announced has reference to cases of ordinary receivers appointed under gen- eral chancery powers, where the receiver is vested with no sort of legal title but is regarded as a mere custodian of the fund or property while it remains under the control of the court. And where, by the law or statutes of a state, a receiver is made a quasi-assignee and is thus vested with the title to the fund or property, his right to maintain actions connected with his trust in the courts of states other than that of his appointment is well recognized.^^ § 242. Receiver of insolvent corporation may prove debt in bankruptcy in another district. It has also been held that a receiver of an insolvent corporation, appointed by the courts of a particular state, may prove a debt in bankruptcy due to the estate which he represents, although the proceedings in bankruptcy are pending in a federal court in a state other than that in which the receiver was appointed. The federal court in which the bankruptcy proceedings are pending will, it is held, take judicial notice of the laws of all the states and of the powers of the state officers, whether executive or judicial. And the receiver, being clothed with full power to represent the corporation by the laws of the state where he is appointed, stands, by virtue of his appointment, in the shoes of the cor- poration, and will be allowed to prove a claim in bankruptcy in the federal court of another district as fully as if vested with his powers as receiver by virtue of a decree of a court within the district in which the proceedings in bankruptcy are pend- ing.42 4lBernheimer v. Converse, 206 377, 45 Atl., 752; King v. Cochran, U. S., 516, 27 Slip. Ct. Rep., 755, 72 Vt., 107, 47 Atl., 394. And see, 51 L. Ed., 1163; Goss v. Carter, 84 post, § 317c. C. C. A., 402, 156 Fed., 746; Con- 42 h^; ^ar?^ Norwood, 3 Biss., 504. verse v. Hears, 162 Fed., 767; Ho- "To my mind," says Blodgett, J., warth V. Lombard, 175 Mass., 570, p. 512, "there is, to say the least, 579, 56 N. E., 888, 891 ; King v. a strong analogy between the right Cochran, 76 Vt., 141, 56 Atl., 667. of the receiver in this case to prove And see Miirtey v. Allen, 71 Vt., the debt due the estate he repre- 282 RECEIVERS. [chap. VIII. § 243. Receiver allowed to foreclose mortgage in an- other state. When a citizen of one state has recognized the appointment of a receiver in another state, by incurring ob- ligations to him in his official capacity, sufficient to create a right of action, there would seem to be no satisfactory reason, sents, and the right of the executor or administrator appointed in an- other state to represent the right of a deceased creditor before this court, and prove a debt due his tes- tator or intestate, and such right has never been drawn in question. Under authority of all the bank- rupt laws which have been passed by the congress of the United States, the practice has been uni- form, so far as I can ascertain, to allow guardians, executors, admin- istrators, and all persons acting in a representative capacity, to appear before the bankrupt court and prove the claims pertaining to the estate which they severally repre- sent. If the bankruptcy proceed- ings in this case were pending be- fore a United States court in the state of New York, there can be no doubt that such a court would recognize the rights of the receiver in this case, and allow him to prove this claim. Why should a federal court of the state of New York recognize the authority of this re- ceiver, appointed under the laws of the state of New York, without any relation to the federal laws or the bankrupt law, any more than this court should? Do state lines make any difference? The federal courts take judicial notice of the laws of all the states and of the powers of all state officers, whether executive or judicial. It seems to me it would be applying a very narrow rule to the provisions of the bank- rupt law, and limit the usefulness of that statute very considerably, if the federal courts should require all executors, administrators, guard- ians of minors, or conservators of insane or idiotic persons, as a con- dition precedent to the proving of their claims against the estate of their debtors, to take out auxiliary or supplemental letters of adminis- tration or guardianship from the state courts, within the jurisdiction of the court where the bankruptcy proceedings were pending. The bankrupt law is national in its ap- plication. It is intended to serve all creditors alike, and gives all creditors acting in a representative capacity, resident out of the dis- trict, as well as those within the district wherein the proceedings are pending, all the rights to prove their debts which natural persons might exercise, and it seems to me that this court would do gross in- justice to the principles of the law to hold that this receiver, clothed as he is with full powers, by the laws of the state of New York, to represent the estate of the Lorillard Insurance Company, and standing, by virtue of the decree of the su- preme court of the state of New York, in the shoes and place of the Lorillard Fire Insurance Company, should not be allowed to prove his debt here as fully as if he had been vested with those powers by virtue of a decree from any court within this district." CHAP. VIII.] ACTIONS. 283 either upon principle or authority, why the receiver should not be allowed to maintain his action in the state where such citizen resides. It has accordingly been held, when a mortgage of property situated in one state was executed to receivers ap- pointed by the courts of another state, and the receivers re- signed, and successors were duly appointed, that such succes- sors to the original receivers might maintain an action in their own names to foreclose the mortgage in the state where the premises were located, and that the use of the word receivers, in such cases, was merely a description of the person.^^ And when a receiver obtains judgment in an action brought by him in the state of his appointment, he may then maintain an action upon such judgment in another state, since he then sues in the capacity of a judgment creditor rather than that of a re- ceiver.^'* § 244. When allowed to sue for property in another state; assignment to receiver; descriptio personae. When the rights of the receiver do not rest merely upon his appoint- ment by the courts of another state, but, in addition thereto, and for the purpose of carrying out the objects of the receiv- ership, the defendant over whom he is appointed has made an assignment of all his property to the receiver, sufficient to pass the title to real estate, which assignment is recorded in the proper recorder's office in another state where real property of the defendant is situated, the receiver may, by virtue of such assignment, bring an action in that jurisdiction concern- ing the property. In such case, he sues, not strictly in his official capacity as receiver by virtue of his appointment in the former state, but in his capacity as assignee. And he need not go behind the assignment and prove the prior proceedings, or any order of the court appointing him, but the matters in the assignment will be taken as true until disproven.^^ So, where a mortgage which a foreign receiver seeks to foreclose in an- 43 Iglehart v. Bierce, 36 111., 133. 45 Graydon v. Church, 7 Mich., 36. 44 Wilkinson v. Culver, 25 Fed., 639. 23 Blatchf., 416. 284 RECEIVERS. [chap. vni. other state, has actually been assigned to him by the mort- gagee, he becomes vested with the legal title and may maintain an action in another state regardless of any considerations of comity.^^ And in such case, his designation in the pleadings as receiver may be treated as a descriptio pcrsonceA'^ So a receiver appointed by the court of a foreign state may maintain his action in the federal court of another state to recover pos- session of real property there located, where he is relying upon a conveyance from the former owners and not alone upon the decree vesting title in him.'*^ And where a statute creating the liability of stockholders in a corporation, provides that the court may appoint a receiver to enforce such liability, with power to maintain actions in other jurisdictions, such a re- ceiver, appointed by the court of one state, may maintain an action against a stockholder in a foreign state to enforce his liability.49 So when a court, having jurisdiction of the parties and of the subject-matter, and having the property in contro- versy within its control, appoints a receiver over such property, who reduces it to actual possession, and sends it under the order of the court into another state for sale, where it is attached, the receiver may maintain replevin in the latter state to recover the property. And in such case, third persons, not parties to the original suit in which the receiver was appointed, can not avail themselves of irregularities in his appointment.^^ But the courts of Texas have refused to recognize a title acquired by a receiver appointed in another state to real estate in Texas, as against creditors in that state, upon the ground that the re- ceiver has no official capacity or power beyond the jurisdiction of the court creating him. Thus, when attaching creditors in Texas levied upon lands of a Tennessee corporation, over which a receiver had been appointed in the latter state, and to whom a conveyance of the lands had been executed under his receiv- 46 Hale V. Harris, 112 Iowa, 372, 48 Oliver v. Clark, 45 C. C. A., 83 N. W., 1046. 360, 106 Fed., 402. 47Graydon v. Chufch, 7 Mich., 49 Burr v. Smith, 113 Fed., 858. 36; Hale v. Harris, 112 Iowa, 372, 50 Cagill z/. Wooldridge, 8 Baxter, 83 N. W., 1046. 580. And see, ante, § 162o. CHAP. VIII.] ACTIONS. 285 ership, it was held that the title thus acquired could not pre- vail as against the attachment proceedings. ^^ § 244a. When jurisdiction of foreign court not pre- sumed. In an action brought by a receiver deriving his appointment from the courts of another state, if the jurisdic- tion of the court appointing him is denied by answer, and no proof is offered as to the powers of such court, either from the laws of the state or otherwise, its jurisdiction to appoint a re- ceiver will not be presumed, when it does not appear from the record whether it was a court of general or of special juris- diction.^2 51 Moseby v. Burrow, 52 Tex., 52 Kronberg v. Elder, 18 Kan., 396. 150. 286 RECEIVERS. [chap. VIII. IV. Defenses to Actions by Receivers. § 245. General rule; same defenses available as against original party. 246. Defense of fraud not available where all parties participated. 247. General rule as to set-ofTs; its applications. 248. Rule applied to suit by receiver of insolvent corporation. 249. Set-ofif accruing after receiver's appointment not allowed; counter-claim for services rendered receiver. 250. Set-off inadmissible when receiver represents creditors. 251. Suit to recover notes of bank illegally transferred; counter- claim denied. 252. Suit by receiver of insolvent debtor on notes; judgment against receiver not a set-ofif. 253. Rent due on premises used by partnership not a set-off in suit by receiver of firm. 253a. Notes not subject to attachment in another state. § 245. General rule; same defenses available as against original party. Since the appointment of a receiver in limine does not affect any questions of right involved in the action, and does not change any contract relations or rights of action existing between parties,^^ it follows as a general rule that in ordinary actions brought by a receiver in his official capacity, to recover upon an obligation or demand due to the person or estate which has passed under the receiver's control, the de- fendant may avail himself of any matter of defense which he might have urged had the action been brought by the original party instead of by his receiver.^^ For example, when a banking corporation advances money to a depositor, upon his 53 Williams v. Babcock, 25 Barb., 234; Newport Cotton Mill Co. v. 109; Bell v. Shibley, 2,2> Barb., 610. Mims, 103 Tenn., 465, 53 S. W., 736. And see Savage v. Medbury, 19 See, also, Williams v. Babcock, 25 N. Y., 32; Shaughnessy v. The Barb., 109; Thomas v. Whallon, 31 Rensselaer Insurance Co., 21 Barb., Barb., 172; Colt v. Brown, 12 Gray, 605. 233 ; Van Wagoner v. Paterson Gas 54 Moise V. Chapman, 24 Ga., 249 ; Light Co., 3 Zab., 283 ; Berry v. Cox V. Volkert, 86 Mo., 505 ; Deven- Brett, 6 Bosw., 627; Hyde v. Lynde, dorf V. Beardsley, 23 Barb., 656; 4 N. Y., 387; People's State Bank Marion Trust Co. v. Blish, 170 Ind., v. Francis, 8 N. Dak., 369. 79 N. 686, 84 N. R, 814, 85 N. E., 344; W., 853. Hutchins v. Langley, 27 App. D. C, CHAP. VIII.] ACTIONS. 287 agreement that his balance on deposit, and that of the firm of which he is a member, shall be applied in payment of the ad- vances, such agreement amounts to an equitable appropriation of the balances, and if the bank passes into the hands of a re- ceiver before the balances are actually thus applied, and an ac- tion is brought for the receiver's use upon a note given for such advances, the defendant is entitled to have such balances de- ducted from the amount due, to the same extent as if they had actually been thus applied on the books of the bank.^^ § 246. Defense of fraud not available where all parties participated. Where, however, the defense relied upon in an action brought by a receiver of a corporation is that the note or obligation upon vv'hich the receiver sues was given with- out consideration, and in aid of a fraudulent and illegal trans- action, such defense can not be maintained if it is apparent that all parties to the transaction, including the defendant him- self, were participants in the fraud. ^^ § 247. General rule as to set-offs; its applications. The question as to the grounds which may be urged in defense of actions brought by receivers is most frequently presented in cases where it is sought to interpose a demand due to the de- fendant by way of set-off to the receiver's action. The general principle governing this subject is, as regards demands or choses in action in favor of the original party over whom a receiver is appointed, that the reciever takes such choses in ac- tion subject to any equitable set-offs which defendant might have urged against the original party holding the legal title.^'^ Thus, when receivers of a banking corporation institute an ac- tion upon a promissory note or bill of exchange due to the bank, the defendant will be allowed to set off against such demand 55 Chase v. Petroleum Bank, 66 strong, 146 U. S., 499, 13 Sup. Ct. Pa. St., 169. Rep., 148, reversing S. C, 36 Fed., 56 Farmers & Mechanics Bank v. 63; Nix v. Ellis, 118 Ga., 345, 45' Jenks, 7 Met., 592. S. E., 404, 98 Am. St. Rep., 111. 57 Colt V. Brown, 12 Gray, 233; See, also, Hade v. McVay, 31 Ohio Armstrong v. Warner, 49 Ohio St., St., 231. 376, 31 N. E., 877; Scott v. Arm- 2SS RECEIVERS. [CIIAP. VIII. bills and notes of the bank, received by him in the ordinary courses of business before the insolvency of the bank, or be- fore the injunction sequestrating and setting apart the assets of the bank for the benefit of its creditors. ^^ But the bills of the bank received after such injunction will not be allowed as a set-off.^^ In accordance with the same general principle, it is held that in an action by a receiver of an insolvent insurance company, to recover upon a premium note given for a policy of insurance, the maker of the note may set off a demand in his favor against the company, which was liquidated before the re- ceiver's appointment.^*^ But in an action by a receiver of an insolvent bank to recover upon a demand due to the bank, if defendant seeks to set off a demand against the bank, the bur- den of proof rests upon him to show that such demand accrued in his favor before the receivership. ^^ And in such case, a cause of action or demand against the bank, which is assigned to the defendant after the filing of the bill for a receiver, or after his appointment, can not be set off against the receiver's action. ^2 ^n^j where a corporation had made a lease of cer- tain property to another corporation and at the same time and as part of the same transaction had made a conveyance of cer- tain other property to the corporation with covenants of war- ranty and of seisin, which were in fact broken when made be- cause of the existence of a prior mortgage upon the property, and the grantor corporation afterward became insolvent and a receiver was appointed who obtained judgment against the grantee for rentals due under the lease, and after the rendition of such judgment the holder of the prior mortgage instituted foreclosure proceedings by which the grantee was totally de- 58 Colt V. Brown, 12 Gray, 233; 59 Colt v. Brown, 12 Gray, 233. Van Wagoner v. Paterson Gas 60 Berry v. Brett, 6 Bosw., 627. Light Co., 3 Zab., 283. And see, 61 Smith v. Mosby, 9 Heisk., 501. further, as to set-offs which may be 62 Lanier v. Gayoso Savings Insti- allowed by receivers of banking tution, 9 Heisk., 506, Van Dyck v. corporations, State Bank v. Receiv- McQuade, 85 N. Y., 616; Stone v. ers of Bank of New Brunswick, 2 Dodge, 96 Mich., 514, 56 N. W., 75. Green Ch., 266. CHAP. VIII.]i ACTIONS. 289 I prived of the property, it was held that since, at the time of the rendition of the judgment, the full damage to the grantee re- sulting from the breach of warranty was unascertained and unliquidated and could therefore not be set off in the action, such damage was entitled to be set off in equity in a proceeding brought by the receiver for the enforcement of the judgment.^^ § 248. Rule applied to suit by receiver of insolvent cor- poration. The general rule above stated as to set-offs in this class of actions is recognized in New Jersey, in actions brought by a receiver of an insolvent corporation appointed under a statute for the prevention of frauds by incorporated companies, the statute fixing the functions of such receivers and authorizing them to allow just set-offs in all cases where it shall appear that they ought to be allowed according to law or equity. The transfer of the property from the corporation to its receivers in such case, being by operation of law, passes all rights of the corporation in the same condition, and subject to the same equities, as when held by the corporation itself. And when the receivers of an insolvent banking corporation, appointed under such a statute, sue upon a note due to the bank, the makers of such note may set off against the demand the amount of their deposit in the bank at the time of its in- solvency.^* The rule is otherwise, however, when the debts 63 Central Appalachian Co. v. regarded as voluntary assignees and Buchanan, 33 C. C. A., 598, 90 Fed., personal representatives of the cor- 454, 62 U. S. App., 195 ; S. C, 33 poration. The statute, moreover, in C. C. A., 682, 91 Fed., 1001. cases of mutual dealing between the 64 Van Wagoner v. Paterson Gas corporation and any other person Light Co., 3 Zab., 283. "The as- or persons, expressly authorizes the signment to the receiver," says receivers to allow just set-offs in Green, C. J., p. 292, "being by op- favor of such persons in all cases in eration of law, passes the rights which it shall appear to the receiv- and property of the corporation pre- ers that the same ought to be al- cisely in the same plight and con- lowed according to law and equity. dition, and subject to the same equi- The claim of the defendants in this ties, as the corporation held them. case does not, as has been seen from The receivers are not assignees for technical considerations, constitute a valuable consideration, in the or- a set-off at law. But as the claim dinary sense of that term, but are was a clear, legal and equitable set- Receivers — 19. 290 RECEIVERS [chap. VIII. do not exist Between the parties in the same right or capacity. Thus, when the action is brought by a receiver of an insolvent bank against a shareholder to recover an unpaid subscription to capital stock, the defendant can not set off the amount of his individual deposit in the bank, since the capital stock is a trust fund for the benefit and security of creditors, and to allow a shareholder to set off a debt due to him from the bank in such case would give him preference as a creditor.^^ § 249. Set-off accruing after receiver's appointment not allowed; counter-claim for services rendered receiver. It is also to be observed that the rule recognizing such set-offs to actions brought by receivers as might have been urged in defense of the action as between the original parties, does not extend to demands in defendant's favor accruing after the receiver's appointment. And in an action upon a promissory note, brought by a receiver of the payee against the maker, the defendant will not be allowed to set off a demand alleged to be due to him from the payee, but which had not accrued before maturity of the note, or before the receiver was appointed.^^ And where a receiver has been appointed to wind up the affairs of a banking association, a debtor of the firm can not set off against his indebtedness the amount of a check of the firm which he had acquired with knowledge of the suspension, even though he acquired it prior to the appointment of the receiver.^'^ But in an action brought by a receiver in his official capacity to re- cover upon a note due to the estate over which he is appoint- ed, the defendant is entitled by way of counter-claim to a de- mand for services which he has rendered to the receiver, under off against the bank at the time of against the demand of the receiv- the insolvency, and as the receivers ers." took the rights and property of the 65 Williams v. Traphagen, 38 N. corporation in the same plight and J. Eq., 57. condition, and subject to the same 66 United States Trust Co. v. equities that the bank held them, Harris, 2 Bosw., 75. it is clear that the claim of the de- 67 Jn re Hamilton, 26 Ore., 579, fendants is an equitable set-off 38 Pac, 1088. CHAP. VIII.J ACTIONS. 291 an employment by the latter for the benefit of the estate.^^ And one who has rendered services to a corporation pending an action for the appointment of a receiver over its property, but before the property passes into the receiver's hands, may set off the value of such services against a demand due from him to the corporation prior to the receivership, but can not set off an account for services rendered after the receivership.^^ § 250. Set-off inadmissible when receiver represents creditors. When the receiver, for the purposes of the liti- gation, is the representative, not of the title or interest of the original party, but of creditors for w^hose benefit he sues, a dif- ferent principle prevails, and in such case no set-off can be al- lowed in favor of the defendant upon a demand against the or- iginal party, which is not binding against the receiver in the capacity in which he acts. Thus, in an action brought by re- ceivers of an insolvent corporation against a shareholder, for the recovery of illegal dividends paid by the corporation while in a condition of insolvency, the defendant can not set off against the demand of the receivers a claim growing out of in- dependent matters between the corporation and himself. The foundation of the action being the illegal payment of dividends in fraud of the creditors, and the reparation sought being the restoration of the fund for the creditors' benefit, the receiver is regarded as the representative of the creditors and not of the corporation, and hence the defense is unavailable.*^^ § 251. Suit to recover notes of bank illegally trans- ferred; counter-claim denied. It is also held, that in an ac- tion by receivers of an insolvent banking corporation, to recov- er notes of the bank illegally transferred to one of its directors knowing the insolvent condition of the bank, the defendant can not be allowed by way of counter-claim the amount actually paid by him for the notes, since such defense rests upon his own illegal conduct."^^ 68 Davis V. Stover, 58 N. Y., 473. 70 Osgood v. Ogden, 4 Keyes, 70. 69 Cook V. Cole, 55 Iowa, 70, 7 71 Gillet v. Phillips, 13 N. Y., 114. N. W., 419. 292 RECEIVERS [chap. VIII. § 252. Suit by receiver of insolvent debtor on notes; judgment against receiver not a set-off. In an action by the receiver of an insolvent debtor, appointed in behalf of cred- itors, upon notes due to the debtor, the maker of such notes can not set off against the action a judgment which he has ob- tained against the receiver upon a note of the debtor, since this would virtually give the defendant a preference over the other creditors; and the judgment in defendant's favor against the receiver is treated as being only a legal determination of the amount and validity of defendant's demand, and not that it shall take preference over demands of other creditors. '^^ § 253. Rent due on premises used by partnership not a set-off in suit by receiver of firm. Where the assets of a partnership pass into the hands of a receiver to await a settle- ment between the partners, and are sold by him under order of the court, in an action brought by the receiver to recover the purchase price, the purchaser can not set off a claim or demand which he himself holds against the partnership, as for rent of premises occupied by the firm; since to allow such a set-off would be to give the defendant a preference over other cred- itors.'^^ § 253a. Notes not subject to attachment in another state. When receivers over an insolvent corporation in New York, receive as part of the assets of the corporation notes due from a resident of Massachusetts, it is no defense to an action brought by the receivers upon such notes in New York, that, after the receivers' appointment, the notes were attached in an action brought by a creditor of the corporation in Massa- chusetts. In such case, the notes being transferred to receivers in New York, for the benefit of creditors, they are not subject to the jurisdiction of the courts of another state.*^^ 72 Clark v. Brockway, 3 Keyes, 74 Osgood v. Maguire, 61 N. Y., 13; S. C, 1 Ab. Ct. Ap. Dec, 351. 524. 73 Singerly v. Fox, 75 Pa. St., 112. CHAP. VIII.] ACTIONS. 293 V. Actions Against Receivers. § 254. Receiver may not be sued without leave of court; exceptions to the rule. 254a. Conflict of authority as to leave being jurisdictional; presump- tion as to leave; court may fix forum. 254&. Usual practice by petition; trial by jury; action for tort; dis- missal of action begun without leave; granting leave dis- cretionary; no appeal from order granting leave. 254c. Practice on petitions of intervention. 254J. Revocation of leave to sue; leave may be conditional. 255. Court itself may give relief on motion, or may authorize suit; receiver of railway; liability not a personal one. 256. Courts may enjoin unauthorized suits against their receivers; illustrations. 257. Suit against receiver for mere trespass not enjoined. 258. Receiver as a party to action against original debtor; must file plea; receiver as party to appeal. 259. Effect of receiver over one defendant in foreclosure suit. 260. Receivers of corporations as parties defendant. 261. Receiver's appearance waives objection as to want of leave. 262. Courts will not enjoin their own receivers; relief granted in receivership proceeding; mandatory injunction against re- ceiver. 263. Rival claimants against receiver; bill of interpleader. 264. Receivers not allowed to waive defense; when receiver not required to make particular defense. 264o. When receiver may appeal from orders entered in receivership cause. 264&. Receiver can not appeal from administrative orders; nor from order of distribution; costs on unauthorized appeal. 265. Notice of application for leave to sue receiver; when corporate creditors not necessary parties to action by stockholders against receiver of corporation. 266. English practice as to defending actions of ejectment against receivers. 267. When receiver not entitled to costs. 268. Effect of receiver's discharge. 268a. When receiver concluded by judgment. § 254. Receiver may not be sued without leave of court ; exceptions to the rule. A receiver being an officer of the court, acting under its direction, and in all things subject to its authority, it is contrary to the established doctrine of courts of equity to permit him to be made a party defendant to liti- 294 RECEIVERS. [CIIAP, VIII. gation, unless by consent of the court appointing him. And it is in all cases necessary that a person desiring to bring suit against a receiver in his official capacity, should first obtain leave of the court by which he was appointed, since the courts will not permit the possession of their receivers to be disturbed by suit or otherwise, without their consent and permission.'^^ The rule is established for the protection of receivers against 75 Taylor v. Baldwin, 14 Ab. Pr., 166; Wray v. Hazlett, 6 Phila., 155; DeGroot v. Jay, 30 Barb., 483, 9 Ab. Pr., 364; Miller v. Loeb, 64 Barb., 454; Randfield v. Randfield, 3 DeG., F. & J., It^i, reversing S. C., 1 Dr. & Sm., 310; Barton v. Barbour, 104 U. S., 126, affirming S. C, 3 i\Iac- Arthur, 212; Comer v. Felton, 10 C. C. A., 28, 61 Fed., 731, 22 U. S. App., 313: Ridge v. Manker, 67 C. C. A., 596, 132 Fed., 599; Thompson V. Scott, 4 Dill., 508, 3 Central Law Journal, IZT ; Kennedy v. I., C. & L. R. Co., 3 Fed., 97, 2 Flippin, 704; Searle v. Choate, 25 Ch. D., 723; Southern Granite Co. v. Wads- worth, 115 Ala., 570, 22 So., 157; Baker v. Carraway, 133 Ala., 502, 31 So., 933 ; Links v. Connecticut River B. Co., 66 Conn.. 277, 33 Atl., 1003 ; Graffenried v. Brunswick & Albany R. Co., 57 Ga., 22 ; Mulcahey V. Strauss, 151 111., 70, Zl N. E., 702; St. Louis, A. & S. R. Co. v. Hamilton, 158 111., 366, 41 N. E., ni; Keen v. Breckenridge, 96 Ind., 69; Wayne Pike Co. v. State, 134 Ind., 672, 34 N. E., 440; Meredith Village Savings Bank v. Simpson, 22 Kan., 414 ; Chalmers v. Littlefield, 103 Me., 271, 69 Atl., 100; Burk v. Muskegon M. & F. Co., 98 Mich., 614, 57 N. W., 804; Earle v. Humphrey, 121 Mich., 518, 80 N. W.. 370; Smith V. St. Louis & S. F. Ry. Co., 151 Mo., 391, 52 S. W., 378, 48 L. R. A., 368, and note; Melendy v. Barbour, 78 Va., 544. See, also, Evelyn v. Lewis, 3 Hare, 472; In re Persse, 8 Ir. Eq., Ill; Parr v. Bell, 9 Ir. Eq., 55 ; Tink v. Rundle, 10 Beav., 318; Payne v. Baxter, 2 Tenn. Ch., 517; Schmidt v. Gayner, 59 Minn., 303, 61 N. W., ZZZ, 62 N. W., 265 ; Sligh V. Shelton S. R. Co., 20 Wash., 16, 54 Pac, 763 ; Littlefield v. Maine Central R. Co., 104 Me., 126, — Atl., — . See, contra, Kinney v. Crocker, 18 Wis., 74; Paige v. Smith, 99 Mass., 395; St. Joseph & Denver City R. Co. v. Smith, 19 Kan., 225. In Tennessee it would seem that an action for the recovery of damages for personal injuries may be maintained against the re- ceiver of a railway company with- out the leave of the appointing court, although all questions as to the manner of the payment of any judgment will be left entirely for the determination of that court. Burke v. Ellis, 105 Tenn., 702, 58 S. W., 855. See Walker v. Green, 60 Kan., 20, 55 Pac, 281, as to the practice of giving leave generally to all persons to institute suits in courts of competent jurisdiction against a receiver without leave of the ap{)ointing court. By section 3 of the act of congress approved March 3, 1887 (c. 373, 24 Stat., 554), as revised and corrected by an act approved August 13, 1888 (c. 866, CHAP. VIII.] ACTIONS. 295 unnecessary and expensive litigation, and in most instances a party aggrieved may have ample relief by application on mo- tion to the court appointing the receiver. And when an action is instituted against a receiver in his official capacity, without first obtaining leave of the court, the plaintiff in such action is guilty of a contempt of court and will be punished according- ly."^^ It is not, however, usual for the court to refuse leave to a person upon application to contest a right which he claims as against a receiver, unless it is perfectly apparent that there is no foundation for the demand.''"^ But to warrant a court in granting leave to sue its receiver, the applicant should show by his petition at least a probable ground of recovery ; and when, upon the face of his petition, it is apparent that he has no cause 25 Stat., 436), it is enacted as fol- lows : "That eveo' receiver or man- ager of any property appointed by any of the courts of the United States may be sued in respect of any act or transaction of his in car- rying on the business connected with such property, without the previous leave of the court in which such receiver or manager was appointed ; but such suit shall be subject to the general equity jurisdiction of the court in which such receiver or manager was appointed, so far as the same shall be necessary to the ends of justice." 1 U. S. Comp. Stat. 1901, p. 582 ; 4 Fed. Stat. Ann., p. 387. As to the construction of this act, see, post, § 395&. 76 Thompson v. Scott, 4 Dill., 508; S. C, 3 Central Law Journal, 7Z7 ; Taylor v. Baldwin, 14 Ab. Pr., 166 ; Lane v. Capsey (1891), 3 Ch., 411; Southern Granite Co. v. Wadsworth, 115 Ala., 570, 22 So., 157; DeGroot V. Jay, 30 Barb., 483, 9 Ab. Pr., 364. In the latter case, as reported in 30 Barb., 483, the court observe, p. 484: "The receiver is the officer of the court, and, by the well-settled prac- tice, permission of the court was necessary to warrant an action against him. This rule is essential for the protection of receivers against unnecessary and oppressive litigation, and should be carefully maintained. It is a contempt of the court to sue a receiver without such permission. In most cases of claims against a receiver, or the fund or property in his hands, the remedy by special motion is adequate. Any person having such a claim may re- sort to this summary remedy. The fund or property being held by the court, by its receiver, in trust for those entitled to it, or to be paid out of it, the court may administer justice to claimants without suit, upon special application. In the present case, all the relief sought, to which the plaintiff is entitled, might be obtained in that mode. And that mode is commended by considerations of economy as well as expedition." 77 Randfield v. Randfield, 3 DeG., 296 RECEIVERS. [chap. VIII. of action, leave will not be granted. "^^ And it is necessary to aver in the complaint or declaration against a receiver, that leave of court has been granted to bring the action, and the ab- sence of such an averment is fatal upon demurrer.'^^ But per- mission to bring suit against a receiver is regarded as extend- ing to his successor in office. When, therefore, by leave of the court appointing him an action is brought against a receiver, who resigns pending such action, his successor being then joined as a defendant, it constitutes no objection to maintaining the action that no permission was granted to bring suit against such successor.^^ And where an action is brought against a receiver appointed by the court of a foreign state to remove a cloud upon the title of real estate, and the receiver is in neither the actual nor the constructive possession of the property, leave of the appointing court to institute the action is not necessary.^! And a mortgagee of chattels belonging to an insolvent corpora- tion in the hands of a receiver may maintain an action to en- force his mortgage without first procuring leave of the court which has appointed the receiver, where the property is in the possession of a third person claiming to have purchased it and has never been in the possession of the receiver.^2 jsjor does the general rule apply where the unauthorized suit against the receiver was instituted in a court of the same county, al- though of a different district, as that of the court of appoint- ment and one over which the same judge presides. The rea- son for the general rule is to prevent the unauthorized inter- ference by one court with the possession of another, and in such F. & J., 766, reversing S. C, 1 Dr. 804; Earle v. Humphrey, 121 Mich., & Sm., 310. 518, 80 N. W., 370. 78 Jordan v. Wells, 3 Woods, 527. 80 Fordyce v. Dixon, 70 Tex., 694, 79 Keen v. Breckenridge, 96 Ind., 8 S. W., 504. 69; Malott v. State, 158 Ind., 678, 81 Egan v. North American L. 64 N. E., 458; St. Louis, A. & S. Co., 45 Ore., 131, 76 Pac, 774, 77 R. Co. V. Hamilton, 158 111., 366, 41 Pac, 392. N. E., 777; Burk v. Muskegon M. 82 Kidder v. Beavers, 33 Wash., & F. Co., 98 Mich., 614, 57 N. W., 635, 74 Pac, 819. CHAP. VIII.] ACTIONS 297 case, the reason failing, the rule ceases to apply.^^ And a trustee appointed by a court of equity to execute the trusts created by a will does not stand in the position of a receiver in the respect under discussion, and it is therefore not regarded as a contempt to institute proceedings against such a trustee without first obtaining the consent of the court which made the appointment.^'* § 254a. Conflict of authority as to leave being jurisdic- tional; presumption as to leave; court may fix forum. The authorities are far from reconcilable upon the question whether the want of leave to bring an action against a receiver is jurisdictional, and therefore fatal to maintaining the action, or whether it is merely an omission, which will subject the par- ty suing without such leave to proceedings for contempt of the court appointing the receiver, but without impairing the juris- diction of that court to proceed with and determine the cause. While the better considered authorities formerly supported the proposition that leave to sue the receiver was jurisdictional in its na^are, the great weight of authority, as the result of the later decisions, sustains the opposite view, and it is accordingly held that the failure to obtain leave is not jurisdictional and that its omission is not fatal to maintaining the action. ^^ And 83 RatcHff V. Adler, 71 Ark., 269, v. Bearse, 194 Mass., 596, 80 N. K, 72 S. W., 896. 623 ; Flentham v. Steward, 45 Neb., 84Nevitt V. Woodburn, 190 111., 640, 63 N. W., 924; dictum in Wil- 283, 60 N. E., 500. son v. Rankin, 129 N. C, 447. 40 S. 85 Kinney t;. Crocker, 18 Wis., 74; E., 310; Tobias v. Tobias, 51 Ohio Lyman v. Central Vermont R. Co., St., 519, 38 N. E., 317; Sigwald v. 59 Vt., 167, 10 Atl., 346; Roxbury City Bank, 82 S. C, 382, — S. E., — ; V. Central Vermont R. Co., 60 Vt, Payson v. Jacobs, 38 Wash.. 203. 80 121, 14 Atl., 92; St. Joseph & Den- Pac, 429; Ridge v. Manker, 67 C. vcr City R. Co. v. Smith, 19 Kan., C. A.. 596, 132 Fed., 599. See, con- 225; Mulcahey v. Strauss, 151 111., ira, Barton v. Barbour, 104 U. S., 70, 37 N. E., 702; Shedd v. Seefeld, 126, affirming S. C, 3 MacArthur, 230 111., 118, 82 N. E., 580; Fox 212; Keen v. Breckenridge, 96 Ind., River Paper Co. v. Western En- 69; Brown v. Rauch, 1 Wash., 497 velope Co., 109 111. App., 393; Man- (Territorial Supreme Court) ; Mar- ker V. Loan Association, 124 Iowa, tin v. Atchison, 2 Idaho, 590, 33 341; American Steel & Wire Co. Pac, 47. And see, post, § 261. In 298 RECEIVERS. [chap. VIIL where the want of leave to sue a receiver is held not to be juris- dictional, the objection is not available upon appeal unless it has been properly urged in the lower court.^*^ And in a collateral proceeding, the court will presume, if necessary, that such leave was obtained where the record is silent.^'^ But where the want of leave to bring the action is held to go to the jurisdiction of the court and is not merely error, the question may be raised at any stage of the cause and even upon appeal from a judg- ment against the receiver, and when he has not raised the ques- tion in the court below.^^ And upon an application to the court for leave to sue its receiver, the court may determine the forum in which the action shall be brought. It may, therefore, grant leave to sue the receiver in its own jurisdiction, and may refuse to permit him to be sued in another court. And when the order is made in this form, and the action is brought in the court by which the receiver was appointed, but the plaintiff then files a petition and bond for the removal of the cause to a federal court, it is not error for the former court, of its own motion, to revoke the permission to sue its receiver and to dismiss the action.^^ So when a receiver is appointed by a state court, the refusal of that court to permit a claimant against its receiver to bring an action, such claimant being by reason of his citizen- Maine the failure to procure leave versies, and not by challenging the would seem to be jurisdictional, jurisdiction of other tribunals. Chalmers v. Littlefield, 103 Me., When, therefore, a receiver is sued 271, 69 Atl., 100. As to whether in a court other than that by which want of leave is jurisdictional in he was appointed, an averment in Michigan, see Prather Engineer- his answer that he is such receiver ing Co. V. Detroit, F. & S. Ry., 152 raises no question as to the jurisdic- Mich., 582, 116 N. W., 376. In St. tion of the court in which the ac- Joseph & Denver City R. Co. v. tion is brought. Smith, 19 Kan., 225, supra, it is 86 Payson v. Jacobs, 38 Wash., held that the ordinary jurisdiction 203, 80 Pac, 429. of the courts is not taken away or 87 Payson v. Jacobs, 38 Wash., impaired by the appointment of a 203, 80 Pac, 429. receiver by another court, and while 88 Brown v. Ranch, 1 Wash., 497 that court may draw to itself all (Territorial Supreme Court), controversies to which he is a 89 Meredith Village Savings Bank party, it does so by acting directly v. Simpson, 22 Kan., 414. upon the parties to such contro- CHAP. VIII.] ACTIONS. 299 ship entitled to sue in a federal court, is not error, it being dis- cretionary with the court to grant leave to sue, or to determine the controversy upon petition in the cause in which the receiver was appointed. ^*^ § 2546. Usual practice by petition ; trial by jury ; action for tort ; dismissal of action begun without leave ; granting leave discretionary; no appeal from order granting leave. The more common practice, and that which has been generally commended by the courts, is to hear and determine all rights of action and demands against a receiver by petition in the cause in which he was appointed, without remitting the parties to a new and independent suit.^^ And it rests wholly within the discretion of the court to grant leave to bring an independent action against its receiver, or to determine the controversy up- on petition in the original cause, directing, if necessary, an is- sue to be tried by a jury as to questions of fact or of damages. ^^ And the right to a trial by jury in such cases is wholly discre- tionary with the court, which may direct the issues of fact to be tried by a jury, or may refer them to a master for deter- mination. ^^ And where a claimant might, under the act of congress,^^ have instituted an action at law against the re- ceiver of a railway company without leave of court, he waives his right to a trial by jury by intervening in the receivership proceeding and submitting himself to the jurisdiction of the chancery court, and in such case the verdict of the jury in favor of the petitioner is merely advisory and the court may set it 90 Reed V. Axtell, 84 Va., 231, 4 Gatch, 37 Ore., 5, 60 Pac, 383; S. R, 587. Harrigan v. Gilchrist, 121 Wis., 127, 91 Citizens' Savings Bank v. Per- 280, 99 N. W., 909, 952; De Forrest son, 98 Mich., 173, 57 N. W., 121. v. Coffey, 154 Cal., 444, — Pac, — ; Winchester v. Davis Pyrites Co., 14 dictum in Blake v. State Savings C. C. A., 300, 67 Fed., 45, 28 U. S. Bank, 12 Wash., 619, 41 Pac, 909. App., 353, affirming S. C, 64 Fed., And see, post, § 395a. 664. And see, ante, § 139. 93 Kennedy v. I., C. & L. R. Co., 92MeIendy v. Barbour, 78 Va., 3 Fed., 97, 2 Flippin, 704; Shedd v. 544; Kennedy v. I., C. & L. R. Co., Seefeld, 230 111., 118, 82 N. E., 580. 3 Fed., 97, 2 Flippin, 704; Stephens 9* For the citation of this statute, V. Augusta T. & E. Co., 120 Ga., see, ante, § 254, note. 1082, 48 S. E., 433; Goodnough v. 300 RECEIVERS. [chap. VIII. aside and dismiss the petition. ^^ And since the question of permitting an independent action against a receiver is one lying within the discretion of the court, mandamus will not lie to compel the court to grant leave for the commencement of an independent suit against the receiver.^^ And it is proper for the court, when application is made for leave to sue its receiv- er, to investigate the subject-matter of the petition, and if it appears that the case is free from difficulty, or that it involves no question which must necessarily be determined by an action at law, the court may itself determine the matter upon peti- tion. ^'^ So if an equitable right or title is asserted in property W'hich is in the custody of a receiver, the court will not ordi- narily permit an action to be brought against him, but will re- quire the claimant to proceed by petition. ^^ And persons hav- ing a claim or lien upon a fund in a receiver's hands should as- sert such claim by petition, rather than by an action against the receiver.99 And where a person, asserting a claim to property in the possession of a receiver, institutes an independent ac- tion against him, it is proper for the court in which the action was begun to dismiss it ; and the fact that the plaintiff has se- cured leave of the appointing court to commence his suit upon an ex parte hearing and without notice to the parties in interest will not preclude the court from thus dismissing the proceed- ing.i And where a court, having jurisdiction of the subject- matter and of the parties, has appointed a receiver and or- dered him to take possession of certain property, which he has done, an action of trespass will not lie against the receiver at the suit of a stranger to the receivership proceeding, claiming title to the property, to recover damages for the taking of it by the receiver, his remedy in such case being by intervention in 95 Flippin V. Kimball, 31 C. C. A., 98 Porter v. Kingman, 126 Mass., 282, 87 Fed., 258, 59 U. S. App., 1. 141. 96 De Forrest v. Cofifey, 154 Cal., 99 Olds v. Tucker, 35 Ohio St., 444, — Pac. — . 581. 97 Lehigh C. & N. Co. v. Central 1 Goodnough v. Gatch, 37 Ore,., R. Co., 38 N. J. Eq., 175. 5, 60 Pac, 383. CHAP. VIII.] ACTIONS. 301 the receivership proceeding.^ And a petition filed in a re- ceivership proceeding seeking the payment of a claim alleged to be due petitioner for which the receiver is liable is defective where it contains no allegations that there are funds in the hands of the receiver out of which the claim can be paid, and a demurrer is properly sustained.^ If, however, the cause of action is in tort, it is regarded as the more appropriate practice to apply for leave to bring an action, rather than to submit the matter upon petition.* And in an action of tort against the receiver of an insolvent lessee street railway company, it is proper to join the lessor company as a joint tort-feasor.^ But when the court has appointed a receiver over an insolvent cor- poation and has entered an order requiring all creditors to come in and prove their demands, its refusal to grant leave to a mortgagee to institute an independent action to foreclose his mortgage upon the property of the corporation is not error. ^ And since the question whether an independent action shall be brought, or the party aggrieved shall be permitted to intervene in the suit in which the receiver was appointed, rests wholly within the discretion of the court, the refusal to grant leave to bring such action will not be reviewed upon appeal unless there has been a manifest abuse of judicial discretion.'^ And an ap- 2 Steele v. Walker, 115 Ala., title of the cause without prefixing 485, 21 So., 942, 67 Am. St. Rep., it with "as" renders such word 62. In this case it is not clear merely descriptio persons; and the whether or not the action had been defect is not cured in such case by commenced against the receiver by an allegation that the receiver has leave of the court which had ap- the charge and control of the prop- pointed him. erty of the company, where it is 3 Empire Distilling Co. v. M'Nul- not averred that he has such charge ta, 23 C. C. A., 415, 77 Fed., 700, 46 and control as receiver. Vasele v. U. S. App., 578. Grant Street E. R. Co., 16 Wash., 4 Palys V. Jewett, 32 N. J. Eq., 602, 48 Pac, 249. 302, distinguished in Shedd v. See- 5 Tandrup v. Sampsell, 234 111., feld, 230 111., 118, 82 N. E., 580. 526, 85 N. E., 331, 17 L. R. A., (N. Where an action is brought against S.), 852. a railway company and its re- 6 Meeker v. Sprague, 5 Wash., ceiver to recover damages for per- 242, 31 Pac, 628. sonal injuries, the use of the word ''^ Mechanics National Bank v. "receiver" after his name in the Landauer, 68 Wis., AA, 31 N. W., 302 RECEIVERS. [chap. VIII. peal will not He from an order of a federal court granting leave to sue its receiver in a state court.^ § 254c. Practice on petitions of intervention. When a court of equity has taken jurisdiction of an estate by its re- ceiver, as in the case of an insolvent corporation, upon proceed- ings in the nature of a judgment creditors' bill, creditors as- serting liens or claims upon the property as found in the re- ceiver's possession may file their petitions of intervention in the suit in which the receiver was appointed.^ Such petitions are substantially independent suits and may proceed to final judg- ment, allowing or rejecting the demand or claim asserted, inde- pendent of the judgment in the principal cause. Every such intervention is regarded as, in effect, a suit against the receiver, and any party to the cause who may be dissatisfied with the final order made upon such petition may appeal therefrom.^^ And the effect of such an intervention is to create an equitable levy and to fasten upon the property in the hands of the receiver an equitable lien for the satisfaction of the petitioner's judg- ment or claim, subject to prior liens and superior equities.^^ § 254(/. Revocation of leave to sue; leave may be con- ditional. The power of the court to appoint a receiver and to grant leave that he shall be sued either in the court of his appointment or in any other court necessarily implies the power to revoke such leave in the proper case. Accordingly, where the appointing court has granted leave that an action may be brought against a receiver in another court, and, after such action was instituted, the plaintiff therein amends his bill with- out notice to the receiver defendant and obtains an order of in- junction restraining the receiver from applying to the appoint- 160; Stephens v. Augusta T. & E. 10 Pagan v. Boyle I. M. Co., 65 Co., 120 Ga., 1082, 48 S. E., 433. Tex., 324; Voorhees v. Indianapolis 8 New York Security & T. Co. v. C. & M. Co., 140 Ind., 220, 39 N. E., Illinois T. R. Co., 44 C. C. A., 161, 738. 104 Fed., 710. H Atlantic Trust Co. v. Dana, 62 9 Pagan v. Boyle I. M. Co.. 65 C. C. A., 657, 128 Fed., 209. Tex., 324; Crutchfield v. Hunter, 138 N. C, 54, 50 S. E., 557. CHAP. VIII.] ACTIONS. 303 ing court for relief concerning the property in his possession, the latter court may require the plaintiff to have such improper injunction dissolved, and, in default thereof, may revoke the order permitting the plaintiff to join the receiver as a defend- ant to his action.i2 Sq, also, the court, in granting leave to sue its receiver, may impose such reasonable conditions as it sees fit, such, for example, as that the action shall not be insti- tuted within a specified time ; and if the plaintiff commences his proceeding before the expiration of the time limited, he is guil- ty of contempt; nor will he be allowed, upon proceedings against him for contempt, to assert that the condition in ques- tion was unreasonable.^^ And where leave has been granted to commence garnishment proceedings against a receiver, the court may, in its discretion, set aside such order if improvident- ly made ; and, in the absence of an abuse of discretion in so do- ing, a reviewing court will not interfere with such action.^"* But after the court has granted permission to bring an action against its receiver for the recovery of property claimed by him, and an action is brought accordingly and a large amount of costs is incurred, it is regarded as an abuse of the discre- tionary powers of the court to revoke such permission and to dismiss the action. ^^ § 255. Court itself may give relief on motion, or may authorize suit ; receiver of railway ; liability not a personal one. While it is the more commonly recognized practice for persons having claims or demands against an estate, over which a receiver is appointed, to apply, by petition or other- wise, to the court appointing the receiver for the relief desired, yet this method of obtaining redress does not exclude the rem- edy by action against the receiver, in cases where an action is proper. And when complaint is made against a receiver for in- juries sustained by reason of negligence in the discharge of his 12 Ray V. Trice, 53 Fla., 864, 42 ings Bank v. Bay Circuit Judge, So., 901. lib Mich., 633, 68 N. V^., 649. 13 In re Battersby, 31 L. R. In, 15 Conwell v. Lawrence, 46 Kan., 73. 83, 26 Pac, 461. 1* Citizens' Commercial & Sav- 304 RECEIVERS. [chap. VIII. official duties, the court appointing him may either take cog- nizance of the complaint and administer justice between the parties, or it may permit the party aggrieved to bring his ac- tion for the injury sustained. And in case of an action brought against the receiver of a railway corporation, for injuries al- leged to have been sustained through negligence of employees in the management of the road, the receiver can not object to the action that he is a public officer, and as such not responsible in his official capacity for the negligence of his employees.i^ But it may be observed generally, that in an action instituted against a receiver in his official capacity, he incurs no personal liability, and whatever judgment is obtained against him should be so entered as to be enforced only out of funds properly chargeable to him in the capacity of receiver.^''' § 256. Courts may enjoin unauthorized suits against their receivers; illustrations. Courts of equity are so jealous of permitting any unauthorized interference with their receivers, that they frequently interpose by injunction to re- strain the prosecution of actions against them, when leave of court has not been first obtained. ^^ And when a person is pro- ceeding to assert his claims to property held by a receiver, by an action at law, without obtaining permission of the court to bring such action, the court may, on application of the receiver, enjoin him from proceeding with his suit, regardless of how- ever clear his right may appear to be, or of whether he was ap- prised of the receiver's appointment at the time of bringing his action.19 So when a railroad company has instituted proceed- 16 Meara's Administrator v. Hoi- St. Rep., 47, and note, as to the con- brook, 20 Ohio St., 137. clusiveness of a judgment rendered 17 Commonwealth v. Rvmk, 26 Pa. against a receiver upon the parties St., 235; Meara's Administrator v. whom he represents. Holbrook, 20 Ohio St., 137; Bart- 18 Evelyn v. Lewis, 3 Hare, 472; lett V. Cicero Light Co., 177 111., Tink v. Rundle, 10 Beav.. 318; In 68, 52 N. E., 339, 68 L. R. A.. 78, 69 re Persse, 8 Ir. Eq., Ill; Parr v. Am. St. Rep., 206; Brown v. Brown, Bell, 9 Ir. Eq., 55; Montgomery v. 71 Tex., 355, 9 S. W., 261. And see, Enslen, 126 Ala., 654, 28 So., 626. post, § 398&. See Painter v. Paint- 19 Evelyn v. Lewis, 3 Hare, 472. «r, 138 Cal., 231. 71 Pac, 90, 94 Am. CHAP. VIII.] ACTIONS. 305 ings to condemn for the use of its road certain real estate in the custody of a receiver, without obtaining leave of court, an in- junction has been allowed ex parte, to restrain the company from proceeding until further order.^O And where tenants, without leave of court, have brought actions of replevin or of trespass against a receiver, who has distrained for their rent, they may be enjoined from proceeding with such actions.^l So an injunction is properly granted at the instance of a receiver appointed by a federal court to restrain the prosecution of ac- tions at law brought against him in a state court without leave to recover the possession of property in his custody, the case not being one in which, under the provisions of the act of con- gTess,22 an action may be instituted without leave of court. ^3 § 257. Suit against receiver for mere trespass not en- joined. Notwithstanding the extreme jealousy thus shown by the courts in protecting their receivers against unauthor- ized interference by suit, such protection will not be extended to acts which are outside and in excess of the functions of the re- ceiver, or to matters in which he occupies the attitude of a mere trespasser, as in dealing with or assuming possession and con- trol of property which is not embraced in his receivership. Thus, when suit is brought against a receiver in another court for acts committed by him as an individual, as for taking and retaining possession of property not pertaining to his receiver- ship, and as to which he is a mere trespasser, such action will not be enjoined by the court appointing the receiver.24 Nor will a writ of prohibition lie to restrain an inferior court from entertaining an action against a receiver in such case.^^ And an action of replevin has been maintained for the recovery of such property, although leave of court had not been obtained to bring the action. And it has been held that an action against 20 Tink V. Rundle, 10 Beav., 318. 26 C. C. A., 46, 81 Fed., 529, 52 U. 21 /n re Persse, 8 Ir. Eq., Ill; S. App., 253. Parr v. Bell, 9 Ir. Eq., 55. 24 /„ re Young, 7 Fed., 855. And 22 For the citation of the act in see Curran v. Craig, 22 Fed., 101. question, see ante, § 254, note. 2.'. Sherwood v. New England K. 23 J. I. Case Plow Works v. Finks, Co., 68 Conn., 543, 37 Atl., 388. Receivers — 20. 306 RECEIVERS. [chap. VIII. a receiver in his official capacity, concerning matters pertaining to his receivership, will not be enjoined, on motion of the re- ceiver, upon the ground that the matters in controversy have been passed upon by the court in other proceedings, since, if this be true, it furnishes a complete and sufficient defense to the action sought to be enjoined, and the receiver should avail himself of it in that action. 26 § 258. Receiver as a party to action against original debtor; must file plea; receiver as party to appeal. As re- gards actions instituted against a debtor or person over whom a receiver is appointed, there would seem to be no necessity for making the receiver a party defendant to such actions, wdiere the rights and remedies of the plaintiff terminate with the orig- inal debtor, and when the receiver is not to be adjudged or compelled to do anything for plaintiff's benefit. And in order to make the receiver a proper co-defendant with the original debtor in an action against the latter, some right to relief at the receiver's hands should be stated, and some relief prayed as against him.^^ But it is to be observed with reference to ac- tions already begun against a debtor, over whose affairs a re- ceiver is subsequently appointed, that the receiver can have nc status in court until he has become a party to the action, the' proper course, if he desires to be made a party, being to ap[Jy to the court for that purpose ; and until this is done he can not appear or take any action in the cause.^^ And where, per /jng an appeal from a judgment against a railway company a re- ceiver is appointed over the property of the company, int re- 26 Jay's Case, 6 Ab. Pr., 293. the mortgagee seeking t. redeem 27 Arnold v. Suffolk Bank, 27 the mortgaged premises be tore fore- Barb., 424. And see Decker v. closure, a receiver having the equit- Gardner, 124 N. Y., 334, 26 N. E., able title to the mortgagu and the 814. And see, post, § 344b. As to sole authority to enfon e it is a the right of a receiver to be admit- necessary party to the vroceeding. ted to defend an action brought Southern Mutual B. & 1 .. Assn. v. against the persons over whose af- Andrews, 122 Ala., 598, 25 So., 113. fairs he is appointed, see Honegger 28 Tracy v. First National Bank V. Wettstein, 94 N. Y., 252. Upon of Selma, 37 N. Y., 523. a bill filed by a mortgagor against CHAP. VIII.] ACTIONS. 307 ceiver is not a necessary party to such appeal, where there is no attempt to charge the assets in his hands with the payment of plaintiff's judgment.^^ But the receiver of an insolvent debtor is a necessary party to an appeal from a judgment ren- dered in the debtor's favor prior to the appointment of the re- ceiver,^^ And where the receiver of an insolvent debtor has been made a party defendant to an action previously com- menced against the debtor, he can not complain that a judgment rendered against the debtor is erroneous where he has wholly failed himself to file a plea to the declaration. ^^ § 259. Effect of receiver over one defendant in foreclo- sure suit. The appointment of a receiver over the effects of one of the defendants, in an action for the foreclosure of a mortgage, constitutes no bar to the continuance of the action, if properly begun ; and such appointment can at most only ren- der the action defective as to parties, so as to render it neces- sary for the plaintiff to bring the receiver before the court by a supplemental bill in the nature of a bill of revivor.32 And even this course is not necessary when the parties in interest are suffi- ciently represented before the court to enable it to properly de- termine the controversy.^^ And where a foreclosure suit is in- stituted against two mortgagors, a receiver appointed at the in stance of one of the mortgagors over the other to wind up the affairs of a partnership existing between them is not vested, by the order of appointment and in the absence of a conveyance, with such an interest in or title to the partnership property as to render him a necessary party to the foreclosure proceeding.^'* § 260. Receivers of corporations as parties defendant. In an action to foreclose a mortgage given by a corporation, when a decree pro confesso is taken against the corporation, b}i 29 Keeley v. Union Pac. Ry. Co., 32 Wilson v. Wilson, 1 Barb. Ch., 58 Kan., 161, 48 Pac, 843. 592. 30 Scannell v. Felton, 57 Kan., 33 Wilson v. Wilson, 1 Barb. Ch,. 468, 46 Pac, 848. 592; St. Louis, C. G. & F. S. Ry. 31 Braddock Brewing Co. v. Co. v. Holladay, 131 Mo., 440, 33 S. Pfaudler V. F. Co., 45 C. C. A., 491, W., 49. 106 Fed., 604. 34 Heffron v. Gage, 149 111., 182, 308 RECEIVERS. [CIIAP. VIII. which plaintiff's right to recover is estahhshed, and receivers of the corporation are afterward appointed, it is not necessary that they should be made parties defendant to the proceeding, although the court may properly admit them as parties at any stage of the cause, if they seek to be so admitted.^^ And the question whether a receiver shall be permitted to defend an ac- tion brought against the person or corporation over whose af- fairs he is appointed, rests wholly in the discretion of the court appointing him, and is not a matter of right upon the part of the receiver. When, therefore, a receiver of a corporation is denied permission to defend an action for the foreclosure of mortgages given by the corporation, such action of the court will not be reversed upon appeal.^^ But when a corporation is dissolved, and a receiver is appointed in an action in the state of its domicile, and a court of another state proceeds to render judgment against the corporation in an action there pending, without making the receiver a party, such judgment is not bind- ing against the receiver of the corporation in the state wliere it was dissolved.^'^ And when the action will, if sustained, re- sult in relieving the receivers of the corporation of a consider- able portion of their duties, being equivalent to that extent to a removal from their office, it is manifestly proper and right that they should be made parties defendant, and be allowed an op- portunity of being heard in their own behalf.^^ 36 N. E., 569, followed by Manu- Adriatic Fire Ins. Co., 148 N. Y., facturers Paper Co. v. Lindblom, 80 34, 42 N. E., 515. 111. App., 267. 38 Smith v. Trenton Delaware 35Willink v. Morris Canal & Falls Co., 3 Green Ch., 505. Since Banking Co., 3 Green Ch., 377. an action against the receiver of a 36 Patrick v. Eells, 30 Kan., 680, corporation is in effect against the 2 Pac, 116. corporation itself, service of pro- 37 McCulloch V. Norwood, 58 N. cess may be had in such an action Y., 562, reversing S. C, 36 N. Y., upon an agent of the corporation, Supr. Ct. R., 180. See, also, Pen- under a statute providing that when dleton V. Russell, 144 U. S., 640, an action is brought against a cor- 12 Sup. Ct. Rep., 743, affirming S. poration, service may be had upon C. sub. nom. People v. Knicker- a local agent. Farris v. Receivers, bocker Life Insurance Co., 106 N. 115 N. C, 600, 20 S. E., 167; Grady Y., 619, 13 N. E., 447; Rodgers v. CHAP. VIII.] ACTIONS. 309 § 261. Receiver's appearance waives objection as to want of leave. It has already been shown that the weight of authority supports the doctrine that want of leave to sue a receiver is not jurisdictional.39 And where the rule thus pre- vails, it follows that where a receiver against whom an action has been instituted without the leave of the appointing court enters his voluntary appearance in the cause or in any other way submits himself generally to the jurisdiction of the court and defends upon the merits, the objection is thereby deemed to be waived.'**^ Thus, a motion to dismiss an action brought against a receiver, upon the ground that leave of court was not first had before beginning the action, is waived by the appear- ance of counsel for the receiver, such appearance being an ad- mission that the defendant has been regularly brought into court. Want of permission, therefore, to bring the action can not be urged as a ground for dismissal after such appearance on the part of the receiver.^i So it is held that when a receiver, who is sued with other defendants, joins in answering to the merits of the action, without raising the objection that leave of court was not had to bring suit against him, he will not be heard to make the objection upon motion in arrest of judg- ment.'*2 go where a creditor has commenced attachment suits in a foreign state to reach assets of his debtor over whom a re- ceiver has been appointed in another state, but has failed to pro- cure leave of the court making such appointment, the failure of the creditor to dismiss such attachment suits upon being noti- fied of the receivership is waived by the entry of the receiver's V. Richmond & D. R. Co., 116 N. C, v. Steward, 45 Neb., 640, 63 N. W., 952, 21 S. E., 304. 924; American Steel & Wire Co. v. s'o See, ante, § 254a. Bearse, 194 Mass., 596, 80 N. E., 40Hubbell v. Dana, 9 How. Pr., 623; Manker v. Loan Association, 424; Elkhart Car Works v. Ellis, 124 Iowa, 341. 113 Ind.. 215, 15 N. E., 249; Ridge 41 Hubbell v. Dana, 9 How. Pr., V. Manker, 67 C. C. A., 596, 132 424. See, also, In re Young, 7 Fed., Fed., 599; Holbrook v. Ford, 153 855. 111., 633, 39 N. E., 1091, 27 L. R. A., 42 Elkhart Car Works v. Ellis, 324, 46 Am. St. Rep., 917; Flentham 113 Ind., 215, 15 N. E., 249. 310 RECEIVERS. [chap. VIII. appearance in the attachment proceedings accompanied by a motion to dismiss.^^ § 262. Courts will not enjoin their own receivers; relief granted in receivership proceeding; mandatory injunction against receiver. Courts of equity will not ordinarily en- tertain a bill for an injunction against their receivers, the prop- er remedy for the party aggrieved being to apply to the court for leave to assert his rights and to enforce his remedies in the action in which the receiver was appointed.^^ And where a receiver appointed by a federal court is maintaining an obstruc- tion to a highway which amounts to a nuisance, a third person injured thereby may intervene in the receivership proceeding and is entitled to an injunction restraining the continuance of the nuisance.^^ So where a receiver of a railway company has unlawfully and without authority taken possession of certain tracks and switches of another company, the latter, by inter- vening in the receivership proceeding, may not only obtain a prohibitory injunction restraining such use and occupation but may have a mandatory injunction against the receiver requir- ing the removal of certain tracks and switches. ^^ And since a receiver, authorized by the court to bring an action, is bound to proceed therewith, the court will not permit him to be en- joined from so proceeding. The proper course, in such case, 43 Holbrook v. Ford, 153 111., 633, manage and operate such property 39 N. E., 1091, 27 L. R. A., 324, 46 according to the requirements of the Am. St. Rep., 917. valid laws of the state in which 44 Smith v. Earl of Effingham, 2 such property shall be situated, in Beav., 232. the same manner that the owner or 45 Felton V. Ackerman, 9 C. C. A., possessor thereof would be bound 457, 61 Fed., 225, 22 U. S. App., to do if in possession thereof." Sec- 154. This decision is based upon tion 2, of Act of March 3, 1S87, c. section 2, of the act of congress of Z7Z, 24 Stat., 554, as amended by August 13, 1888, which defines the Act of August 13, 1888, c. 866, 25 jurisdiction of circuit courts of the Stat., 436; 1 U. S. Comp. Stat., United States and provides that 1901, p. 582; 4 Fed. Stat. Ann., ;,. where, in any cause pending in such 386. court, "there shall be a receiver or 46 Chattanooga Terminal Ry. Co. manager in possession of any prop- v. Felton, 69 Fed., 273. erty, such receiver or manager shall CHAP. VIII.] ACTIONS. 311 for parties dissatisfied with the receiver's conduct, is to apply to the court appointing- him for relief, instead of seeking to en- join him by another suit.^'^ § 263. Rival claimants against receiver; bill of inter- pleader. When there are different and rival claimants to a fund in the hands of a receiver, each of whom has insti- tuted proceedings against him for the fund, it is proper for the receiver to bring an action in the nature of a bill of interpleader against such claimants, and to compel them to interplead and to determine their conflicting rights to the fund.'^^ § 264. Receivers not allowed to waive defense; when receiver not required to make particular defense. It is held, in actions against receivers in their official capacity, that they may not, either expressly or impliedly, waive any legal or equitable defense on which their principal might have relied had the action been brought against him. Receivers of an in- surance company may not, therefore, in an action brought against them to recover upon a policy of insurance issued by the company, waive or dispense with the conditions of the pol- icy as to notice of loss.^^ And although leave may be granted to sue a receiver, he is at liberty to assert any defense which he may have to the action, either by plea, answer or demurrer.^^ But the court appointing a receiver will not, at the instance of a party interested, require the receiver to set up certain matters in defense to an action against him, where, upon investigation, he is satisfied that such matters are not in accordance with the facts and are incapable of proof. ^^ 47 Winfield v. Bacon, 24 Barb., Rep., 625, 43 L. Ed., 941, modifying 154. and affirming S. C, 26 C. C. A., 48 Winfield v. Bacon, 24 Barb., 279, 80 Fed., 969, 53 U. S. App., 154. 302, the court say : "It becomes 49 McEvers v. Lawrence, Hoffm., important to consider what are the 172. rights and duties of a receiver in 50 Davis V. Duncan, 19 Fed., 477. respect to claims made against the 51 Land Title & Trust Co. v. As- estate in his possession. It is often phalt Co., 121 Fed., 192. In Bos- said that he is merely the hand of worth V. St. Louis Terminal R. the court which has appointed him; Assn., 174 U. S., 182, 19 Sup. Ct. and for certain purposes that is not 312 RECEIVERS. [chap. VIII, § 264(7, When receiver may appeal from orders entered in receivership cause. As to the right of a receiver to appeal from orders and judgments entered in the course of the receivership proceedings, it is held that he has the same right of appeal from an adverse judgment for the recovery of funds pertaining to his receivership, as the party over whom he was appointed would have had.^^ ^nd where a claim for damages for personal injuries has been allowed in a receivership proceed- ing, the receiver, being the representative of all parties to the suit and being under obligation to protect the property in his possession, has the right to appeal from such order.^^ And where, upon an intervening petition filed by a third person in the receivership cause, an injunction has been granted restrain- ing the receiver from continuing a nuisance, the receiver may appeal from such in junctional order, and his action in so doing is regarded as consonant with his relation to the court. ^^ And an inapt expression. He is charged with the duty of carrying into exe- cution the orders of that court, but he is also a custodian of property, and has by virtue of such custody .certain obligations to the parties owning or interested therein. First. A receiver may defend, both in the court appointing him and by appeal, the estate in his posses- sion against all claims which are an- tagonistic to the rights of both par- ties to the suit. For instance, he may thus contest a claim for taxes, because if valid they are superior to the rights of both parties; in a case like the present, superior to the rights of mortgagor and mortgagee. Second. He may likewise defend the estate against all claims which are antagonistic to the rights of either party to the suit, subject to the limitation that he may not in such defense question any order or decree of the court distributing bur- dens or apportioning rights between the parties to the suit, or any order or decree resting upon the discre- tion of the court appointing him. In the case at bar one defense, as shown by the exceptions taken to the report of the master, was that the claim of the intervener was not against the estate, but against some third party. That defense the re- ceiver had a right to make. We do not mean that he alone can act ; we do not stop to inquire what rights either party to the suit may have in this respect. All we now decide is that the receiver is a proper party to make the defense." 52 Melendy v. Barbour, 78 Va., 544; Kavanagh v^ Bank of Ameri- ca, 239 111., 404, 88 N. E., 171. 53Thom V. Pittard, 10 C. C. A., 352, 62 Fed., 232, 8 U. S. App., 597. 54 Felton V. Ackerman, 9 C. C. A., 457, 61 Fed., 225, 22 U. S. App., 154. CHAP. VIII.]' ACTIONS. 313 the right of appeal has been recognized to the extent of hold- ing that, where an application is made to the court to effect a settlement with a receiver, which is represented to be advan- tageous to all parties, and an order is entered requiring the re- ceiver to accept the settlement in question, the receiver, if dis- satisfied, may maintain an appeal from such order.^^ And a receiver's right of appeal from the allowance of a claim against the estate in his possession does not necessarily fail when the receivership has been terminated to the extent of surrendering the property to the parties entitled thereto. ^^ § 2646. Receiver can not appeal from administrative or- ders; nor from orders of distribution; costs on unauthor- ized appeal. An appeal will not lie, how^ever, upon behalf of a receiver from purely administrative orders which the court in the exercise of its discretion, may make in the cause for the proper care and management of the property in its custody. Thus, where a receiver has been appointed over the property of a railway company, an order which has in view the safe op- eration of the road is purely administrative and, as such, whol- ly within the discretion of the court, and an appeal from such an order by the receiver will therefore be dismissed. ^'^ Nor can a receiver maintain an appeal from an order directing the dis- ss McGregor v. Third National decrees which may finally be entered Bank. 124 Ga., 557, 53 S. E., 93. against the estate." 56 Bosworth v. St. Louis Termi- S7 Hunt v. Illinois Central R. Co., nal R. Assn., 174 U. S., 182, 19 Sup. 37 C. C. A., 548, 96 Fed., 644. In Ct. Rep.. 625, 43 L. Ed., 941, modi- Bosworth v. St. Louis Terminal R. fying and affirming S. C, 26 C. C. Assn., 174 U. S., 182. 19 Sup. Ct. A., 279, 80 Fed., 969, 53 U. S. App., Rep., 625, 43 L. Ed., 941, modifying 302. In this case the court say: and affirming S. C, 26 C. C. A., "It is common practice in courts of 279, 80 Fed., 969, 53 U. S. App., 302, equity, anxious as they are to be the court say: "He (the receiver) relieved of the care of property, to may not appeal from an order dis- turn it over to the parties held en- charging or removing him, or one titled thereto, even before the final directing him in the administration settlement of all claims against it, of the estate, as for instance to issue and at the same time to leave to the receiver's certificates, to make im- receiver the further defense of such provements, or matters of that kind, claims, the party receiving the prop- all of which depend on the sound crty giving security to abide by any discretion of the trial court." 314 RECEIVERS. [chap. VIII. tribution of funds in his hands among the different creditors or claimants entitled thereto.^^ And since he is the mere serv- ant or agent of the court, he will not be allowed of his own volition to appeal from an order made in the progress of the cause in which he is appointed. When, therefore, without au- thority of the court, he prosecutes such an appeal, it may be dismissed on motion.^^ Even under a statute allowing ap- peals "as a matter of right on the application of either party, or his personal representatives," a receiver is not entitled to an appeal from an order directing him to pay a claim which has been allowed by the court, since he is not a party to the cause.^^ And where a receiver thus takes an unauthorized appeal, it is proper to tax the costs of the appeal against the receiver per- sonally.^^ § 265. Notice of application for leave to sue receiver; when corporate creditors not necessary parties to action by stockholders against receiver of corporation. When per- SSKnabe v. Johnson, 107 Md., 616, 69 Atl., 420; Battery Park Bank V. Western C. Bank, 127 N. C, 432, yj S. E., 461. See Hoffman v. Bank, 4 N. Dak., 473, 61 N. W., 1031. In Bosworth v. St. Louis Terminal R. Assn., 174 U. S., 182, 19 Sup. Ct. Rep., 625, 43 L. Ed., 941, modifying and affirming S. C, 26 C. C. A., 279, 80 Fed., 969, 53 U. S. App., 302, the court say: "Neither can he question any subse- quent order or decree of the court distributing the estate in his hands between the parties to the suit. It is nothing to him whether all of the property is given to the mortgagee or all returned to the mortgagor. He is to stand indiflferent between the parties, and may not be heard either in the court which appointed him, or in the appellate court, as to the rightfulness of any order which is a mere order of distribution be- tween the parties. In this connec- tion it must be noticed that an in- tervenor, although for certain pur- poses recognized as a party to the litigation, is not such a party as comes within the scope of the limi- tation just announced. He is one who comes into the litigation assert- ing a right antagonistic or superior to that of one or both of the parties thereto, and a receiver, who repre- sents, so far as the property is con- cerned, the interests of the parties, may rightfully challenge his claim; provided that in such challenge he does not question any orders of the court heretofore referred to." 59 McKinnon v. Wolfenden, 78 Wis., 237, 47 N. W., 436. SODorsey v. Sibert, 93 Ala., 312, 9 So., 288. 61 First National Bank v. Bunt- ing, 7 Idaho, 27, 59 Pac, 929, 1106. CHAP. VIII.] ACTIONS. 315 sons apply for and obtain leave of court to bring an action against a receiver in his official capacity, it is not essential to the jurisdiction of the court over the receiver, or to the validity of the order, that the application should be based upon notice to the parties in the action wherein the receiver was appointed. It is sufficient that leave be granted by the court having control over the receiver, upon notice to him, against whom alone the cause of action exists, and against whom the proceedings must be brought. 62 And where an action is brought by shareholders of a corporation against the receiver of the corporation to set aside a decree providing for an assessment upon the subscribers to the stock, the creditors of the corporation are held not to be necessary parties to the action against the receiver.63 § 266. English practice as to defending actions of eject- ment against receivers. The practice of the English Court of Chancery, with reference to defending actions of ejectment brought against receivers, seems to have been to apply to the court for leave to defend. And an order of reference to a mas- ter was sometimes made, to ascertain and report whether it was for the best interests of the parties that the receiver should de- fend the ejectment. 6^ § 267. When receiver not entitled to costs. As regards the liability for costs incurred by a receiver in defense of an ac- tion, it has been held that he is not entitled to the costs of defending, when he has not first obtained leave of the court ap- pointing him to defend. 65 § 268. Effect of receiver's discharge. After a receiver has been duly discharged and has parted with all the assets which came to his possession, the court will not entertain an application by a claimant or creditor for payment of his de- mand by the receiver. In such case, the receiver being functus officio and no longer the agent or representative of the court, «2 Potter V. Bunnell, 20 Ohio St., 64 Anonymous, 6 Ves., 287. 150; Atlantic Trust Co. v. Dana, 62 65 Convers v. Crosbie, 6 Ir. Eq, C C. A., 657, 128 Fed.. 209. 657. 63 Farwell v. Great Western Tel. Co., 161 III., 522, 44 N. E., 891. 316 RECEIVERS [chap. VIII. and having no funds in his hands, the remedy of a creditor should be sought by an apphcation to vacate the order of dis- charge, and while such order stands, he can not enforce his de- mand against the receiver.^^ If, however, a receiver is dis- charged pending an appeal from a judgment against him, and the judgment is afterward affirmed, the discharge is no bar to the final entry of judgment against the receiver as affirmed. ^'^ And the rescinding of an order for a receiver, without preju- dice to any person in interest, constitutes no defense to an ac- tion against him to recover property of which he had taken pos- session under such appointment. ^^ And when a receiver is ap- pointed without notice to defendant, under a statute providing that an order appointing a receiver without notice shall be void, the owner of the premises in controversy may maintain an ac- tion against the receiver to recover rents which he has collected by virtue of such appointment.^^ § 268a. When receiver concluded by judgment. A re- ceiver, like any other suitor, will be concluded by a judgment in an action to which he was in effect a party, although not joined as such by name. Thus, when a receiver of an insolvent bank in Illinois, whose funds in New York are attached by creditors after the receiver's appointment, causes the appearance of the bank to be entered in the attachments in New York and pro- cures the giving of a bond to release the funds attached, and thereby obtains possession of such funds, if the attachments re- sult in judgments in favor of the creditors, the receiver will not be allowed to enjoin such creditors from enforcing their judg- ments by actions upon such bond or otherwise. And in such case, although no formal order of the court authorized the re- 66 New York & W. U. T. Co. v. defense to the receiver when finally Jewett, lis N. Y., 166, 21 N. E., called upon for satisfaction of the 1036. See, contra, Miller v. Loeb, judgment. 64 Barb., 454. 68 Johnson v. Powers, 21 Neb., 67 Woodruff V. Jewett, 115 N. Y,. 292, 32 N. W., 62. 267, 22 N. E., 156. But Mhe court 69 Johnson v. Powers, 21 Neb., decline to pass upon the question of 292, 32 N. W., 62. the effect of such discharge as a CHAP. VIII.] ACTIONS. 317 ceiver to appear in the New York suits, yet the retention by the court of the funds thus accruing to the receiver is held to be equivalent to a ratification of his action in that regard."^^ iO Smith V. United States Express Co., 135 III, 279, 25 N. E., 525. CHAPTER IX. OF THE RECEIVER'S LIABILITIES. § 269. Receiver responsible directly to court; liabilities to third per- sons, how and when enforced; not accountable to other court. 270. Receiver liable for injury to property while in his possession; plaintiff not liable. 271. Leave of court necessary before bringing suit against receiver. 272. Not personally liable on covenant made in official capacity; when personally liable on note given in carrying on business. 273. Not liable on covenants of original party; when liable for rent. 273a. Becomes liable by adoption of covenant; election to adopt lease; lessor's lien; no personal liability for rent. 273b. Rule further illustrated; question of adoption of covenant one of discretion. 273c. Liability for rent; stipulated rent or rent based on reasonable rental value. 273d. Can not impair contract liability of original party. 274. Liability for loss of funds on failure of bank; liable for ming- ling funds. 274a. When receiver of bank liable to pay deposit or draft in full; check; del credere commission. 275. Liability dependent upon receiver's negligence; bills of ex- change of failing tradesman; misconduct of attorney. 276. When liable for employing property in his private business; speculative profits. 277. Liable as trespasser for selling mortgaged property; liable for tort; liable for rent of real estate. 278. Liability does not terminate until discharged; appointed trustee in insolvent proceedings, still liable as receiver. 279. Receivers of railway liable in another state for breach of duty as common carriers. 280. Liable to commitment for failure to pay balance into court; the practice in such cases. 28L When not liable to landlord for rent of partnership premises. 282. Liable for paying money to persons not entitled. 283. Not liable for loss to real property remaining in owner's possession. 284. Solicitor assuming to act as receiver, liable for loss in rents. 318 CHAP. IX.] LIABILITIES. 319 § 285. Receiver's liability extended to his administrator. 286. Dismissal of bill does not discharge liability; receiver pro- tected by order. 286o. Claims for damages for tort of receiver's agents, when a charge upon the fund. 286b. Remedy for fraudulent conversion of estate by receiver and his attorney; supplemental bill in receivership cause. § 269. Receiver responsible directly to court; liabilities to third persons, how and when enforced ; not accountable to other court. A receiver is responsible for his official acts directly to the court appointing him, and this responsibility con- tinues until he is finally discharged.^ This immediate and di- rect responsibility to the court, however, does not relieve him from liabilities which he may incur toward third parties, and these liabilities are generally recognized and frequently en- forced by the same court which has appointed him. And when a party to the cause, who is interested in the funds in the re- ceiver's hands, ascertains that the receiver has made improper payments or has misapplied the funds, or any portion of them, he may apply to the court for relief at any stage of the cause, and it is not necessary that he should wait until the receiver passes his accounts, and then have the improper payments dis- allowed.2 As a general rule, however, a receiver can only be called to account by the court appointing him, and another court will not entertain a bill to compel him to account for the per- formance of his trust, since he is not the receiver of the second court, and can not be called upon to answer as such.^ And he can only be divested of the fund intrusted to him as receiver by an order of the court appointing him, made in the action in which he was appointed.'* § 270. Receiver liable for injury to property while in his possession; plaintiff not liable. When property in liti- gation passes by order of court into the hands of a receiver, who gives a bond for the faithful execution and performance 1 Henry v. Kaufman, 24 Md., 1. 3 Conkling v. Butler, 4 Biss., 22. See Conkling v. Butler, 4 Biss., 22. •* Galster v. Syracuse Savings 2 DeWinton v. Mayor of Brecon, Bank, 29 Hun, 594. 28 Beav., 200. 320 RECEIVERS. [CIIAP. IX. of his trust, the remedy for injury done or alleged to be done during- the receiver's possession should be sought against him and his sureties, and not against the plaintiff in the action in which he was appointed. The receiver being appointed for the benefit, not of the plaintiff alone, but of all parties in interest, and being an officer of the court, he is liable for any fraud or negligence of his own whereby injury accrues to the property intrusted to him. In the absence, therefore, of any evidence of fraud or collusion on the part of the plaintiff in the action, he will not be held liable for injury to the property while in the re- ceiver's possession. 5 § 271. Leave of court necessary before bringing suit against receiver. It is important to observe, that while the receiver's liability to the parties in interest, for misconduct or injury to the property intrusted to his care, is generally rec- ognized by courts of equity, they will not ordinarily permit such liability to be enforced against him by legal proceedings, unless leave of court is first obtained for that purpose. Being the rep- resentative of the court, it will not permit him to be made a defendant without its consent having first been given. And persons desirous of enforcing demands against a receiver are, therefore, required either to apply to the court, by motion or petition, for relief against the receiver, or to ask leave of the court to institute an action against him.^ § 272. Not personally liable on covenant made in official capacity ; when personally liable on note given in carrying on business. A receiver will not be held personally liable, in his individual capacity, upon a covenant or instrument made by him in his official capacity, and the only remedy upon such covenant must be sought against the estate of which he was re- ceiver. Thus, when the receiver of a banking corporation sells and assigns certain judgments in favor of the bank, and the in- 5 Kaiser v. Kellar, 21 Iowa, 95; 77; Downs v. Allen, 10 Lea, 652. Robinson v. Arkansas L. & T. Co., And see, post, § 645. 74 Ark., 292, 85 S. W., 413. See, 6 See chapter VIII, subdivision V. also, Terrell v. Ingersoll, 10 Lea, Actions against Receivers. CHAP. IX.] LIABILITIES. 321 strument of assignment is executed strictly in his official, and not in his personal, capacity, and contains a covenant that the several judgments sold are due and unpaid, no personal liabil- ity is incurred by the receiver upon such covenant, and it will be presumed, under such circumstances, that the purchaser trust- ed to the receiver in his official capacity.''' So when, upon the settlement of the receiver's accounts, the court fixes the amount to be paid as counsel fees for services rendered to the receiver, upon notice to such counsel and his appearance upon the ap- plication, and the court thereupon accepts the final account of the receiver and discharges him from his trust, no action will lie against him for the recovery of a balance claimed to be due for such services.^ But in Iowa it has been held that, where the order appointing a receiver authorized him to purchase stock and material to carry on a business, and a note is given by him for such purchases signed by him as receiver, such note is beyond the authority of the receiver and does not bind the es- tate in his possession and he consequently remains personally liable upon it.^ § 273. Not liable on covenants of original party; when liable for rent. As a rule, receivers are not liable upon the covenants of the persons over whose effects they are appointed, but become liable solely by reason of their own acts.^^ And receivers who have been appointed over a corporation, and who have accepted the trust and taken possession of the assets, do not thereby become liable for rent of the premises held by the company under a lease; nor can they be held liable until they elect to take possession of the premises, or until the doing of some affirmative act which would in law be equivalent to such 7 Livingston v. Pettigrew, 7 Lans., 10 Wells v. Hartford Manilla Co., 405. See, also, Ellis v. Little, 27 76 Conn., 27, 55 Atl., 599; Scott v. Kan., 707. Rainier P. & R. Co., 13 Wash., 108, 8 Walsh V. Raymond, 58 Conn., 42 Pac, 531 ; Casey v. Northern Pac. 251, 20 Atl., 464. R. Co., 15 Wash., 450, 48 Pac, 53; 9 Peoria Steam Marble Works v. Central Trust Co. v. East T. L. Co., Hickey, 110 Iowa, 276, 81 N. W.. 79 Fed., 19. 473, 80 Am. St. Rep., 296. Receivers — 21. jJZ RECEIVERS. [CIIAP. IX. an election. 1^ Nor does the receiver, merely by virtue of taking possession of leased property, forming a part of the assets or estate of the receivership, become an assignee of the term or liable for the rent in accordance with the covenants of the lease. He is entitled to a reasonable time after taking possession to de- termine whether he will elect to affirm the lease and to retain the premises. ^2 Nor can the liability created by the contracts 11 Commonwealth v. Franklin In- surance Co., 115 Mass., 278; Gaither V. Stockbridge, 67 Md., 222, 9 At!., 632, 10 Atl., 309. And see Common- wealth V. Franklin Insurance Co., 115 Mass., 278, and Dayton Hy- draulic Co. V. Felsenthall, 54 C. C. A., 537, 116 Fed., 961, as to what constitutes such an election. And see Griffith v. Blackwater B. & L. Co., 46 West Va., 56, 33 S. E., 125 ; Tennis Bros. Co. v. Wetzel & T. Ry. Co., 140 Fed., 193. i2Quincy, M. & P. R. Co. v. Humphreys, 145 U. S., 82, 12 Sup. Ct. Rep., 787; St. Joseph & St. L. R. Co. V. Humphreys, 145 U. S., 105, 12 Sup. Ct. Rep., 795; United States Trust Co. v. Wabash West- ern R. Co., 150 U. S., 287, 14 Sup. Ct. Rep., 86; Seney v. Wabash Western R. Co., 150 U. S., 310, 14 Sup. Ct. Rep., 94; Carswell v. F. L. & T. Co., 20 C. C. A., 282, 74 Fed., 88, 43 U. S. App., 300; Empire Distilling Co. v. M'Nulta, 23 C. C A., 415, 77 Fed., 700, 46 U. S. App., 578; Mercantile Trust Co. v. Far- mers' L. & T. Co., 26 C. C. A., 383, 81 Fed., 254, 49 U. S. App., 462, affirming S. C, 71 Fed., 601 ; Central Trust Co. V. Continental Trust Co., 30 C. C. A., 235, 86 Fed., 517, 58 U. S. App., 604; Dayton Hydraulic Co. V. Felsenthall, 54 C. C. A., 537, 116 Fed., 961; Johnson v. Lehigh V. T. Co., 130 Fed., 932; Spencer V. World's Columbian Exposition, 163 111., 117, 45 N. E., 250; DeWolf V. Royal Trust Co., 173 111., 435, 50 N. E., 1049; Link Belt Machinery Co. V. Hughes, 174 111., 155, 51 N. E., 179; Bell v. American Protective League, 163 Mass., 558, 40 N. E., 857, 28 L. R. A., 452, 47 Am. St. Rep., 481 ; Stoepel v. Union Trust Co., 121 Mich., 281, 80 N. W., 13; Nelson v. Kalkhoff, 60 Minn., 305, 62 N. W., 335; Stokes v. Hoffman House, 167 N. Y., 554, 60 N. E., 667, 53 L. R. A., 870. See, contra, People V. Universal Life Insurance Co., 30 Hun, 142. And see Stockton V. Mechanics etc.. Bank, 32 N. J. Eq., 163; Klein v. Gavenesch Co., 64 N. J. Eq., 50, 53 Atl., 196 ; McGraw V. Union Trust Co., 135 Mich., 609, 98 N. W., 390. See, post, % 394/?. In Fleming v. Fleming Hotel Co., 69 N. J. Eq., 715, 61 Atl., 157, it was held, under a lease providing for a forfeiture by the lessor in case the lessee failed to pay the rent, that where a receiver had been appointed and had gone into possession of the premises, the lessor could not forfeit the lease until it should be made to appear that the receiver was unable or unwilling to pay the past due rent. In People v. St. Nicholas Bank, 151 N. Y., 592, 45 N. E., 1129, the premises had been leased to a corporation which afterward became insolvent and over which a receiver CHAP. IX.] LIABILITIES. 323 or covenants of an insolvent company be imposed upon the re- ceiver upon the ground that the receivership is based upon the insolvency and fraudulent management of a trust estate as dis- tinguished from a proceeding brought for the foreclosure of liens.i^ § 273(2. Becomes liable by adoption of covenant; elec- tion to adopt lease; lessor's lien; no personal liability for rent. Upon the other hand, w^hile the mere acceptance of the trust will not render the receiver liable, yet where, by his unequivocal acts, he has indicated an intention to receive and accept the benefits of the contract of his principal, he will be held to have elected to be bound thereby and accordingly he becomes subject to the liabilities thereby created. i'* And where a receiver has taken possession of the demised premises under a lease of his principal and has remained in possession after the lapse of a reasonable time in which to make his election, he will be held, by implication, to have accepted the lease and to be bound thereby; and having thus become bound by the cov- enants of the lease, he is held to have adopted it as a whole, and he can not afterward escape liability as to the unexpired portion of the term by serving notice upon the lessor and surren- dering possession. 15 And in such case, where the lease pro- vides that the lessor shall have a lien for rent upon the property was then appointed, who took pos- 13 General Electric Co. v. Whit- session of the premises but shortly ney, 20 C. C. A., 674, 74 Fed., 664, afterward vacated them. The lessor 41 U. S. App., 165. thereupon leased them at a reduced !■* Spencer v. World's Columbian rental for the balance of the term. Exposition, 163 111., 117, 45 N. E., This was a claim for the difference 250. in rental for the balance of the term l^DeWolf v. Royal Trust Co., and it was held that the receiver 173 III., 435, 50 N. E., 1049. And should recognize the claim. From it is held in New Jersey, under a the report of the case it is not clear statute providing that leased prem- whether the claim was presented for ises shall not be liable to be taken preference as one of the expenses of under execution, attachment or the receivership or merely as the "other process," unless the person claim of a general creditor to be at whose instance such process is paid /jro rata with those of other issued shall first pay to the landlord creditors. all rent due, that the appointment 324 RECEIVERS. [chap. IX. of the lessee and the receiver has taken possession and adopted the lease, he is bound by such provision, and the lessor is there- fore entitled to a lien upon the proceeds of the sale of the in- solvent's estate for the payment of the rent due under the lease.i^ But where a receiver has surrendered the demised premises upon the expiration of the receivership, he can not be held personally liable under the lease for rent accruing there- after, since no privity exists between him and the lessor which could render him personally liable.^'^ § 273b. Rule further illustrated; question of adoption of covenant one of discretion. As further illustrating the rule under discussion, it is held that the receivers of a railway company are not bound by a contract to carry passengers en- tered into by the company prior to their appointment. ^^ So the receiver of an insolvent corporation may elect whether he will be bound by an executory contract which had been made by the corporation for the purchase of real estate or abide the dam- ages resulting from its breach. ^^ And upon similar principles, it is held that a receiver who' succeeds a former receiver is not bound by the contracts of the latter and is under no obligation to carry them out.20 And a receiver who is directed to con- tinue a business temporarily for the purpose, among other things, of finishing uncompleted contracts, while not bound to finish them or warranted in so doing where the property would not otherwise be jeopardized, should at least investigate them and should pass judgment whether the best interests of of a receiver over, and his taking 16 Link Belt Machinery Co. v. possession of such premises, is such Hughes, 174 111., 155, 51 N. E., 179. a taking under "other process" as 17 Johnston v. Robuck, 114 Iowa, brings the case within the statute. 530, 87 N. W., 491. The receiver may, therefore, be re- 18 Casey v. Northern Pac. R. Co., quired to pay to the landlord the 15 Wash., 450, 48 Pac, 53. rent due at the filing of the bill 19 Central Trust Co. v. East T. L. for a receiver in preference to the Co., 79 Fed., 19. claims of general creditors. Wood 20 Kansas Pacific Ry. Co. v. V. McCardle W. & F. C. Co., 49 Bayles, 19 Colo., 348, 35 Pac, 744. N. J. Eq., 433, 24 Atl., 228. CHAP. IX.] LIABILITIES. 325 the estate require their fulfillment.^! And the question whether a receiver shall renounce the covenants of his principal or elect to be bound by them is one of administrative policy resting M^holly within the discretion of the chancellor, and his action in this regard will not be disturbed upon appeal. ^2 § 273c. Liability for rent; stipulated rent or rent based on reasonable rental value. Where a receiver takes pos- session of the demised premises which had been occupied by his principal under a lease and makes his election to be bound by the covenants thereof, he becomes subject to all the obligations of the lease, and in such case, it is, of course, clear that he is liable for the rent at the rate stipulated in the instrument and not upon the basis of the reasonable rental value of the premises. ^3 Where, however, the receiver has renounced the lease and has elected not to be bound by the obligations thereof, there is a direct conflict of authority as to whether he becomes liable for the rent during the period of his occupancy at the rate stipu- lated in the lease or only for the reasonable rental value. It has been held that, although the receiver elects not to be bound by the covenants of the lease, nevertheless, if he continues in possession, he becomes liable for the stipulated rent.24 This view is founded upon the theory that although not bound by any of the covenants of the lease, he is nevertheless in possession under it, since otherwise he would be a trespasser, and, since his possession is thus under the lease, the rental accruing for such possession must be determined by that instrument. The oppo- site and, undoubtedly, the better view is supported by the weight of authority which holds that where the receiver renounces the 21 Harrigan v. Gilchrist, 121 Wis., 23 Spencer v. World's Columbian 127, 352, 99 N. W., 909, 978. Exposition, 163 111., 117, 45 N. E., 22 Mercantile Trust Co. v. Far- 250; Dayton Hydraulic Co. v. Fel- mers' L. & T. Co., 26 C. C. A., 383, senthall, 54 C. C. A., 537, 116 Fed., 81 Fed., 254, 49 U. S. App., 462, 961. affirming S. C, 71 Fed, 601 ; Cen- 24 Nelson v. Kalkhoff, 60 Minn., tral Trust Co. v. Continental Trust 305, 62 N. W., 335. Co., 30 C. C. A, 235, 86 Fed., 517, 58 U. S. App., 604. 326 RECEIVERS. [chap. IX. lease, he is subject to none of the obHgations created by it, and his Hability is accordingly held to be limited to the reasonable rental value of the premises.25 § 2Tid. Can not impair contract liability of original party. While, as has already been shown, a receiver is in no way bound by the contracts or covenants of the person over whose estate he is appointed, it is equally true that where a valid and subsisting contract has been entered into by his principal and a third person, a receiver who is afterward appointed can do no act which will in any way impair the obligations of such contract, and the obligee may therefore maintain an action against the insolvent to recover damages resulting from a vio- lation of the agreement, and to such action the receiver is neith- er a necessaiy nor a proper party.26 Where, therefore, at the time of the appointment of a receiver, a valid lease was out- standing whereby a liability was created for the payment of rent thereunder upon the part of one of the parties who subsequent- ly becomes insolvent, the receiver can not, by serving notice of his intention of terminating the lease, relieve his insolvent from liability for the rent, and an action may therefore be maintained against the latter to recover damages resulting from the vio- lation of the covenants of the lease. And in such case the re- ceiver is not a necessary party to the action and it is therefore not error to refuse to render judgment against him where he was joined as a party defendant to the proceeding.27 So, where a national bank, upon selling certain bonds, has made a valid agreement to repurchase the bonds upon certain conditions, and such contract is a binding and outstanding obligation against the bank at the time of the appointment of a receiver over it, the 25 Bell V. American Protective 16 Slip. Ct. Rep., 439; Wolf v. Na- League, 163 Mass., 558, 40 N. E., tional Bank of Illinois, 178 III., 85, 857, 28 L. R. A., 452, 47 Am. St. 52 N. E., 896. Rep., 481 ; Stoepel v. Union Trust 27 Chemical National Bank v. Co., 121 Mich., 281, 80 N. W., 13. Hartford Deposit Co., 156 111., 522, 26 Chemical National Bank v. 41 N. E., 225; S. C, 161 U. S., 1. Hartford Deposit Co., 156 111., 522, 16 Sup. Ct. Rep., 439. 41 N. E., 225; S. C, 161 U. S., 1. CHAP. IX.] LIABILITIES. 327 laiter has no power to impair the obligation thereby created, and an action may therefore be maintained against the bank to recover damages for a violation of its undertaking.^^ But it is to be observed, in such case, that any judgment which may be rendered should run against the obligor only and not against his receiver.29 § 274. Liability for loss of funds on failure of bank; lia- ble for mingling funds. The question of a receiver's lia- bility for loss of the funds intrusted to him, by reason of the misconduct of another, is one of importance, and has sometimes arisen in cases of the failure of banks having funds of receivers in their custody. The question would seem to depend upon the manner of keeping the account, and it has been held that if a receiver remits to his bank money which comes to his hands in his official capacity, to be deposited with his private account, and not to a separate account as receiver, thereby mingling the trust funds with his individual funds, he will be liable for the loss on the failure of the bank.^^ So when a receiver deposits the funds of his receivership with his bankers and receives from them for his own benefit interest upon the balances remaining on deposit, he will be held liable for any loss which may result from their bankruptcy, and will be compelled to make good such loss.^l And a receiver will be held accountable for the loss of all funds of the receivership occasioned by the failure of a banker with whom they are deposited, if deposited in such man- ner as to be beyond his absolute control. For example, when a receiver, in order to induce certain persons to become his sure- ties, enters into an arrangement with them whereby the funds of his receivership are to be deposited in bank in the joint names of the sureties, to be drawn therefrom upon drafts drawn by a partner of one of the sureties and signed by the receiver, and 28 Wolf V. National Bank of Illi- tional Bank of Illinois, 178 111., 85. nois, 178 111., 85, 52 N. K, 896. 52 N. E., 896. 29 Chemical National Bank v. 30 Wren v. Kirton, 11 Ves., 377. Hartford Deposit Co., 156 111., 522, 31 Drever 2'. Maudesley, 13 L. J.. 41 N. E., 225; S. C, 161 U. S., 1, N. S. Ch., 433; S. C, 8 Jur., 547. 16 Sup. Ct. Rep., 439; Wolf v. Na- 328 RECEIVERS. [chap. IX. the bankers fail, thereby causing a loss to the fund, the receiver and his sureties are liable for such loss, since the receiver has parted with his exclusive control over the fund by associating with himself the authority of another person. ^^ /^i-^^\ ^ re- ceiver of an estate of infant heirs who deposits the funds ac- cruing from such estate, without authority of court, in a bank in another state, taking a certificate of deposit to himself as receiver, may be held liable for a loss resulting from a failure of such bank, although he acted in good faith and believed the bank to be solvent. ^^ But in the selection of a bank as a de- positary of the funds of a receiver, it is held to be no objection that the bank is a creditor of the estate over which the receiver has been appointed.^^ § 274a. When receiver of bank liable to pay deposit or draft in full ; check ; del credere commission. The question of the liability of the receiver of a bank to payment in full of moneys which had been specially deposited in or remitted to the bank, would seem to be controlled by the fact as to whether such funds were kept separate and distinct from the general funds of the bank, so as to be capable of identification, or wheth- er they were mingled with the general funds, with no means of discriminating between them. Thus, money collected by an in- solvent bank upon a draft sent to it for collection and mingled with its general funds, with no marks of distinction, can not be recovered in full against a receiver of the bank, such money being incapable of identification or of being distinguished from the funds belonging to the general creditors.^^ So when a sav- ings bank is made, by an order of court, the depositary of the funds belonging to suitors in such court and held by its officers, such funds being received by the bank from time to time like all 32 Salway v. Salway, 2 Russ. & 34 State v. Corning State S. Bank, M., 215, reversing S. C, 4 Russ., 60, 128 Iowa, 597, 105 N. W., 159. and affirmed on appeal to the House 35 Illinois Trust & Savings Bank of Lords, sub nom. White v. Baugh, v. Smith, 21 Blatchf., 275. 9 Bli., N. S., 181. S3 State V. Gooch. 97 N. C, 186, 1 S. E.. 653. CHAP, IX.] LIABILITIES. 329 other deposits, and mingled with its other funds with no means of identification, a receiver of the bank will not be re- quired to pay such deposit in full, and it will only be entitled to share pro rata with other depositors and creditors. Nor, in such case, does the fact that the bank did not pay interest on such deposit, as on others, change the principle. And this is true, even though the court making the deposit is the same which appoints the receiver, it having no other or greater rights under such circumstances than those of any other creditor.^^ And since a check drawn in the ordinary form, and not describ- ing any particular fund out of which it is payable, does not ope- rate as an assignment of funds in the hands of the drawer, if a receiver is afterward appointed over the drawer of the check, who takes possession of the entire fund on deposit before the check is presented, the drawee is not entitled to payment in full at the hands of the receiver, having no specific lien upon the fund.^'^ And to entitle the payee of a draft drawn upon a bank, but not paid before the appointment of a receiver over the bank, to payment in full as against the receiver, the specific fund must be traced into the hands of the receiver against which the draft was drawn, or which, before the receivership, had been set apart to its payment in such manner as to constitute it a trust fund, the equitable title to which had vested in the payee of the draft. And when this does not appear, the payee can not, as against the receiver, claim priority over other creditors.^^ But since the proceeds of goods consigned to a factor to be sold on a del cred- ere commission continue to be the property of the consignor so long as they may be traced and identified, they may likewise be claimed as against a receiver of the factor, who only succeeds to the factor's rights in this respect. And the proceeds of goods thus consigned having been kept distinct, the receiver may be required to apply them in payment of drafts drawn by the con- 36 Otis V. Gross, 96 111., 612. 38 People v. Merchants & Mechan- 37 Attorney-General v. Continen- ics Bank, 78 N. Y., 269. tal Life Insurance Co., 71 N. Y., 325. See, also, Butler v. Sprague, 66 N Y., 392. 330 RECEIVERS. [chap. IX. signor upon the factor, which have passed into the hands of third parties. ^^ § 275. Liability dependent upon receiver's negligence; bills of exchange of failing tradesman; misconduct of at- torney. The extent of a receiver's habihty for the miscar- riage or fault of another is dependent in a large degree upon whether the loss occurred through the receiver's own negligence or default, and in the preceding section it has been shown that, in cases of loss occurring by reason of his own negligence or misfeasance, the receiver will be held liable. Where, however, he has acted with evident caution and for what he deemed the best interests of the estate, and a loss occurs without fault of his own, he will not ordinarily be required to make good such oss."^^ And where a receiver collected a large sum of money due the estate, and, deeming it unsafe to remit the money in specie, he purchased bills of exchange of a tradesman then in good credit, but who soon afterward failed, the receiver having had no knowledge of his failing circumstances, it was held that he was not personally liable for the loss.^^ So when a loss occurs through the fraud or misconduct of an attorney, as by his mis- appropriation of funds collected for the receiver, if the receiver uses due and reasonable care in selecting such attorney, he will not be charged with the loss.^^ Sq where it becomes necessary in the course of the administration of the estate to employ coun- sel, and the receiver, acting in good faith, does so employ an attorney and follows the advice given by him, he can not be held liable for consequent loss.'*^ 39 Francklyn v. Sprague, 10 Hun, 42 Powers v. Loughridge, 38 N. J. 589. Eq., 396; Union Bank Case, 11 N. 40 Knight V. Plimouth, 3 Atk., J. Eq., 420, affirmed on appeal sub 480; Union Bank Case, 37 N. J. Eq., nom. Sandford v. Clarke, 38 N. J. 420, affirmed on appeal sub nom. Eq., 265. Sandford v. Clarke, 38 N. J. Eq., 43 State v. Germania Bank, 106 265; Powers v. Loughridge, 38 N. Minn., 164, 118 N. W., 683. J. Eq., 396. 41 Knight V. Plimouth, 3 Atk., 480. CHAP. IX.] LIABILITIES. 331 § 276. When liable for employing property in his pri- vate business; speculative profits. When property is placed in a receiver's hands for an indefinite period, with a prob- ability of remaining there for a number of years pending the lit- igation, and it is of such a nature that it may be profitably em- ployed by hiring, it would seem to be the receiver's duty so to do. And if, instead of so hiring it, he employs the property in and about his own private business, he thereby receives a benefit from the trust committed to him for which he will be held ac- countable, and which should be charged to him in his ac- counts.^^ But when a receiver sells property belonging to his receivership, he is liable for the proceeds only upon the basis of actual sales and receipts ; and in the absence of negligence, mis- conduct or bad faith on his part, he is not liable for probable or speculative profits which might have been realized had he con- tinued the management of the property.'*^ § 277. Liable as trespasser for selling mortgaged prop- erty; liable for tort; liable for rent of real estate. When a receiver, without permission of court, and pending an injunc- tion restraining him from so doing, forcibly takes possession of property which had been mortgaged by the defendant debt- or before the receiver's appointment, and sells the same, he becomes liable therefor as a trespasser, and will be deemed as much a trespasser as the mortgagor himself would have been had he undertaken to seize and sell the property after giving the mortgage."*^ So a receiver may become personally liable for a tort, as for the wrongful taking possession and disposing of property, although he acts under color of his official author- ity, and in such case his official character will not protect him from the consequences of his tortious act.^'^ So where an order 44 Battaile v. Fisher, 36 Miss., against the receiver as a trespasser 321 in such case was sustained, but the 45 Demain v. Cassidy, 55 Miss.. case was reversed for misjoinder of 320. parties. And see S. C, 10 Bosw., 46 Manning v. Monaghan, 1 231, when tried again in the court Bosw., 459. See S. C, 23 N. Y., below. 539, where the right of action 47 Gutsch v. Mcllhargey, 69 332 RECEIVERS. [chap. IX. authorizing a receiver to take possession of real estate is totally- void because the real estate is in no way involved in the suit he becomes liable to the owner for the rents and profits collected by him as receiver.^^ § 278. Liability does not terminate until discharged; appointed trustee in insolvent proceedings, still liable as receiver. The liability of a receiver to the court appoint- ing him does not terminate until his discharge. And when a defendant, whose property the receiver has taken into posses- sion and sold by order of the court, afterward takes advantage of the insolvent laws of the state, and the receiver is appointed as his trustee in the insolvent proceedings, such appointment does not relieve him from his responsibility to the court of equity as receiver. The power of that court in such a case is regarded as ancillary to the jurisdiction of the insolvent court, and the receiver may be required by the court of equity to bring the fund into that court.'*^ § 279. Receivers of railway liable in another state for breach of duty as common carriers. The general doctrine already considered, that receivers are liable only to the court appointing them, has been somewhat modified in Massachu- setts, in the case of receivers over railways. And it is there held that, when receivers are operating a railway under ap- pointment from a court of chancery of another state, and the courts of that state hold them liable as common carriers and they are acting in that capacity, they are liable to an action in the courts of Massachusetts, for a breach of duty as common carriers.^^ This doctrine, however, is plaintly inconsistent with the weight of authority, in so far as it recognizes a right of ac- tion against receivers, without permission of the court ap- pointing them.^^ Mich., 377, 37 N. W., 303; Kenney 49 Henry v. Kaufman, 24 Md., 1. V. Ranney, 96 Mich., 617, 55 N. W., 50 Paige v. Smith, 99 Mass., 395. 982. 51 See chapter VIII, subdivision 48 Bowman v. Hazen, 69 Kan., V, Actions against Receivers. 682, 77 Pac, 589. CHAP. IX.] LIABILITIES. 333 § 280. Liable to commitment for failure to pay balance into court; the practice in such cases. When a receiver fails to comply with an order requiring him to pay into court a balance reported to be in his hands, he is liable to be com- mitted for disobeying the order. But the proper practice is not to grant an order for the commitment in the first instance, but to make the order in the alternative, requiring him to pay the money within a given time or to stand committed.^^ j^^^^ where a receiver has misappropriated funds which, under the order of the court, he had deposited in a bank, and he has thereupon been ordered to turn over the amount to the clerk of the court, his failure to comply with such order amounts to a continuing contempt for which he may be imprisoned until such time as he purges himself. ^^ When he is in default in the payment into court of interest upon a balance due from him, and has disobeyed orders of the court for its payment, he may be punished by committal.^'* And since the receiver is an officer of the court, he need not be served with a writ of exe- cution of a decretal order of the court, but only with a copy of the order, and if he disobeys this, he is liable to be commit- ted.^^ So the refusal of a receiver to pay over moneys in ac- cordance with the order of the court constitutes a contempt and may be punished as such. And upon appeal by the re- ceiver from an order adjudging him guilty of contempt for such refusal, the court will not review the propriety of the order directing such payment, since if the court below had power to make the order, and if it is not appealed from, its propriety can not be questioned upon an appeal from the order adjudg- 52 Davies v. Cracraft, 14 Ves., 143. S. E., 450, 849. As to the right of See Fields v. United States, 27 App. the court to release the receiver in D. C, 433, for an indictment against such case upon the showing of his a receiver for embezzlement of inability to pay, see Nisbet v. Tin- funds which have come into his dall, 115 Ga., 374, 41 S. E.. 569. hands as receiver. 54 /,j re Bell's Estate, L. R., 9 53 Tindall v. Nisbet, 113 Ga., Eq., 172. 1114, 39 S. E., 450, 55 L. R. A., 225; 55 Anonymous, Mos., 40. Tindall v. Nisbet, 114 Ga., 224, 39 334 RECEIVERS. [chap. IX. ing the receiver guilty of contempt. ^^ Nor, in proceedings against a receiver for contempt in refusing to turn over money in accordance with tlie direction of the court, can he justify such refusal upon the ground that he has been garnished as to the money in question. ^"^ And the appropriation by the re- ceiver to his own use of the funds in his possession, without leave of court, constitutes a gross breach of his trust, and a contempt of court which may be punished either by fine or im- prisonment, or by both, at the discretion of the court. And in such case, the object of an attachment and commitment for the contempt being not merely to compel the restoration of the mone}' illegally taken by the receiver, but to punish the offense as well, the discretion of the court will not be controlled by the fact that the receiver has no present means of repaying what he has abstracted. ^^ So when the appointment of a re- ceiver is revoked and he is ordered to restore to the proper parties the property and money received by him, he may be punished for contempt if he refuses to obey such order, ^^ And where a receiver is committed for contempt in not com- plying with the order of the court directing him to turn over funds which he has wrongfully converted, the court should not place a limit upon the term of his imprisonment, but he should be confined until he complies w^ith the order of the court or until othenvise discharged by due process of law.^^ § 281. When not liable to landlord for rent of partner- ship premises. When a receiver is appointed of the effects of a partnership, but the only assets which come into his hands are notes and book accounts of the firm, it has been held that he is not liable to the landlord of the premises where the business 56 Clark v. Bininger, 75 N. Y., 230; People 7'. Zimmer, 238 111., 607, 344. And see this case as to the 87 N. E., 845. And see Cartwright's practice upon proceedings against a case, supra, for the procedure in receiver for contempt under the such cases. statutes of New York. fJO People v. Jones, 33 Mich., 303. 57 People V. Brooks, 40 Mich., 333. P-o People v. Zimmer, 238 111., 607, 58 Cartwright's Case, 114 Mass., 87 N. E., 845. CHAP. IX.] LIABILITIES. 335 was conducted for the rent thereof, since he was not possessed of any property on which the landlord had a right to distrain. ^^ § 282. Liable for paying money to persons not entitled. It has been said that if a receiver pays money to persons who prove not to be entitled thereto, although he may have acted innocently and supposed them to be entitled in right of the parties to the cause, he should be held liable to the parties in interest, upon the ground that in making such payments he de- parts from the strict line of his duty, and is, therefore, liable for any error which he may commit in so doing.^2 § 283. Not liable for loss to real property remaining in owner's possession. Under the practice of the English Court of Chancery, in the case of a receiver over real property, it was proper for the parties to the cause to make application to the court that the owner be required to deliver possession to the receiver. And if a loss occurred because of the owner being allowed to remain in possession, it was held to be the fault of the parties in interest in the cause in not applying for such an order, rather than the fault of the receiver.^^ § 284. Solicitor assuming to act as receiver, liable for loss in rents. When a solicitor in a cause has improperly assumed the character of a receiver, and has acted in that capacity without having been appointed, thereby leading the parties in interest to believe that he had been duly appointed as receiver, he will be held liable for any loss in the collection of the rents which may occur through his negligence.^'* § 285. Receiver's liability extended to his administrator. It would seem that the liability of a receiver may sometimes be extended to his administrator. For example, when the admin- istrator of a deceased receiver submits to an accounting as to rents which came to the receiver's hands during his lifetime, the court may order him to pay over the amount which ap- pears to be due.^^ 61 In re Brown, 3 Edw. Ch., 384. 63 Griffith v. Griffith, 2 Ves., 400. 62 McCan v. O'Ferrall, West H. 6^ Wood v. Wood, 4 Russ., 558. L., 593. 65 Magan v. Fallon, 5 Ir. Eq., 409. 336 RECEIVERS. [CIIAP. IX. § 286. Dismissal of bill does not discharge liability; re- ceiver protected by order. It is to be observed, as regards the receiver's accountability to the court from which he de- rives his appointment, that the dismissal of the bill upon which he was appointed does not have the effect of releasing him in any manner; and, being an officer of the court, he is subject to its orders in relation to the fund or effects placed in his hands, until he is finally discharged by the court. ^^ But when the funds of the receivership have been regularly distributed under the orders of the court among the creditors of the estate whose claims have been duly proven, the receiver is not liable in an action for further demands or claims made by other cred- itors.^^ And an order appointing a receiver in a cause in which the court has full jurisdiction, affords protection to the receiver for all acts done under and in conformity with such order, even though it is afterward reversed for error. An action can not, therefore, be maintained against a receiver to recover rents collected and paid over by him as receiver out of real es- tate of a judgment debtor, the court having full jurisdiction of the matter, even though the appointment is subsequently re- versed upon the ground that the property in question was ex- empt from execution, and, therefore, not subject to the ap- pointment of a receiver.^8 § 286(7. Claims for damages for tort of receiver's agents, when a charge upon the fund. Damages for torts resulting from the negligence of the agents or servants of a receiver become a charge upon the receivership estate in the nature of operating expenses and are payable out of the net income or out of the proceeds in case of a sale. And since the receiver him- self, in the absence of personal fault, incurs no responsibility for such damages, the liability follows the fund after his dis- charge. And where the estate, after the termination of the receivership, has been turned back to the debtor, the latter be- comes liable for the damages in question to the extent to which 66 State v. Gibson, 21 Ark., 140. 68 Holcombe v. Johnson, 27 Minn., 67 Keene v. Gaehle, 56 Md., 343. 353. 7 N. W., 364. CHAP. IX.] LIABILITIES. 337 the net income has been applied for the permanent improvement of the property.69 And in such case it is immaterial that suc- cessive receivers have been appointed, since the receivership continues, although the personnel of the receiver may change.'^^ § 286&. Remedy for fraudulent conversion of estate by receiver and his attorney ; supplemental bill in receivership cause. Where a receiver and his attorney have wrongfully and fraudulently paid out and disposed of the property and as- sets in the hands of the receiver as part of a conspiracy by which the officers and directors of an insolvent corporation are to se- cure a preference over general creditors in the administration of the affairs of the corporation and in the distribution of its assets, it is proper for the court, by a supplemental bill in the receivership proceeding, even after the discharge of the re- ceiver and the settlement of his accounts, to make the guilty parties defendants in the pending suit with some creditor or creditors as plaintiff or plaintiffs, and to broaden the scope of the proceeding sufficiently to cover all such fraudulent trans- actions and to include in the general decree entered in the cause judgments and recoveries against all such guilty parties accord- ing to the nature and extent of their liabilities. In such case the guilty ones are to be regarded as in the nature of trustees, and the jurisdiction is based upon the general power of courts of equity to interfere for the protection of the interests of the beneficiaries of a trust. No statutory authority is necessary to warrant such a proceeding by the court nor is it a defense to the proceeding that the specific property misappropriated can not be followed into the hands of the beneficiaries.'^^ Nor is 69 Bartlett v. Cicero Light Co., in his very elaborate and masterly 177 III., 68, 52 N. E., 339, 68 L. R. opinion in this case, uses the fol- A., 78, 69 Am. St. Rep., 206; Knic- lowing language, (121 Wis., p. 225, kerbocker v. Benes, 195 111., 434, 63 99 N. W., p. 933) : "With the views N. E., 174. And see, post, § 397a. above expressed, notwithstanding, '!'0 Knickerbocker v. Benes, 195 as indicated, it seemed that there 111., 434, 63 N. E., 174. was practical submission to the 71 Harrigan v. Gilchrist, 121 Wis., power of the trial court in this case 127, 99 N. W., 909. Marshall, J., by appellants, when the appeals were Receivers — 22. 338 RECEIVERS. [chap. IX. the jurisdiction defeated by the fact that it is customary in such cases to cite the receiver into court without the use of any proc- ess and to try tlie disputed matters in his account in a sum- mary way, or, if compHcated, by reference to the master, where taken up for decision, after a full argument thereof upon the merits, we were confronted at the threshold of our deliberations by the necessity to determine whether such court had not gone so far in an attempt to do justice as tp transgress its jurisdiction. Doubts in that regard became so serious that it seemed that counsel for the respective par- ties should have a full opportunity to aid the court to the best of their ability in reaching a right conclu- sion, and to that end this question was formulated, definitely covering the subject, and a reargument there- on ordered : 'The property of an insolvent corporation having been placed under the control of a re- ceiver appointed by the court in a winding-up suit, and it being claimed that such receiver, in the course of his administration, has wrongfully lost such property or some portion thereof, his attorneys and others participating in the wrong; is it competent for the court to make the alleged guilty parties defendants in the pending suit with some creditor, or creditors, standing for all persons so circumstanced, as plaintiff or plaintiffs, broaden out the complaint so as to cover the new matters by a supplemental bill, litigate the same, and include in the general decree in such suit recoveries against all of such alleged guilty parties according to the nature or extent of their lia- bilities?'" The court further say, (121 Wis., p. 302, 99 N. W., p. 960) : "If it is alleged as to a receiver, that during the course of his administra- tion he pursued a systematic course hostile to the primary beneficiaries, concealing his conduct from the knowledge of the court till the trust fund was, by him and those fraudu- lently colluding with him, wasted or put beyond the reach of such bene- ficiaries, except so far as the same could be recovered by judicial pro- ceedings, and there is probable ground for believing that the charge is true, and the issues raised in the action in respect to the trust are still open, it is competent for the court, on such showing, to permit the claim on behalf of the creditors, against the receiver and his alleged guilty participants, to be treated as a part of the original subject of the action, and to be brought into it for trial by supplemental bill. "If an action is commenced osten- sibly to administer the assets of an insolvent corporation, but really pur- suant to a fraudulent agreement be- tween its officers or its officers and others, to enable them to control the corporate assets for their own bene- fit, and in execution of such fraudu- lent scheme those controlling the suit induce the court, by false pre- tenses, to appoint as receiver one of their own number who will use his office to enable them to effect their wrongful purpose, and he does so use it, the court may, upon being satisfied of a probability that such fraud has been committed, for the purpose of having the truth of the matter judicially determined, permit CHAP. IX.] LIABILITIES. 339 resort may not be had to such summary methods.'^^ And in such case, where the entire property and assets of the corpora- tion have thus been improperly disposed of and converted, it is not necessary that the creditors seeking rehef should procure the appointment of another receiver, since adequate relief may be had merely bv an account without the necessity for such appointment."^^ the creditors to treat such receiver as having been the agent of the cor- poration and its officers, and the as- sets of the corporation to have been by his aid continued under their control, though being ostensibly un- der the control of the court. In such circumstances it is eminently proper for the court — the condition of the suit being such that under any circumstances a supplemental complaint might be made — to allow such officers and such agents to be made parties defendant and charged as trustees for creditors, as to the property of the corporation still in their hands, and the value of all wrongfully appropriated by them or otherwise lost through their wrong- ful conduct, or that of either of them, in execution of the original fraudulent design. To bring such parties into the suit as defendants on either of the contingencies men- tioned, it is believed, would not be a stretch of judicial discretion, and on the last one mentioned would be a very wise exercise of judicial power. "Upon a review of the whole situ- ation, we can see no legitimate ground for appellants to complain. They had as full an opportunity to be heard in their defense as they would have had if any other method, adequate under the circumstances to meet the case, had been adopted. Certainly, no good ground exists for the court to hold that the practice adopted was such an abuse of ju- dicial power as to constitute juris- dictional error. On the contrary, in view of the feature of the case as to Rust (the receiver) being really the arm of the corporation defend- ant and its officers, instead of that of the court, the practice adopted meets with our approval." 72 S. C, 121 Wis., p. 253, 99 N. W., p. 943. 73 S. C, 121 Wis., p. 270, 99 N. W., p. 949. CHAPTER X. OF RECEIVERS OVER CORPORATIONS. I. Principles Governing the Jurisdiction § 287 II. Functions, Duties and Rights of Action of the Receiver. . 313 III. Receivers of Insolvent Corporations 343 IV. Receivers of National Banks 358 I. Principles Governing the Jurisdiction, § 287. Jurisdiction of equity over corporations enlarged by statute. 288. Power to wind up corporation conferred by statute; receiver not usually granted under general equity powers. 289. Statutes enlarging the jurisdiction strictly construed; method prescribed must be strictly followed. 290. Corporation a necessary party to the proceeding; omission of, may be taken advantage of by writ of error; corporate functions suspended by appointment of receiver. 291. Receiver need not be made a party to subsequent proceeding for another receiver; bill not demurrable because it prays receiver. 292. General allegations of fraud insufficient; insolvency alone in- sufficient; receiver not appointed when no fraud or danger shown; insolvency and fraud. 293. Breach of trust by corporate officers; no place of business and no corporate officers; trust deed securing unauthorized notes of bank; deadlock among directors. 294. Receiver of unauthorized issue of stock, when refused; share- holder who has parted with his interest not entitled to relief, 295. Long acquiescence of shareholder a bar to relief; receiver of rents and tools refused; effect of shareholder's participation in fraud. 295a. Bill by minority shareholders; when receiver not appointed. 295&. The same; when receiver appointed; action against directors; when demand on receiver to sue unnecessary. 295c. The same; demand upon officers and directors to proceed. 296. Legislation and decisions of other states, when considered in refusing receiver over new issue of stock. 297. Sequestration for benefit of creditors; rights of attaching cred- itors subordinate; transfer to new corporation. 340 CHAP. X.] CORPORATIONS. 341 § 298. Right of judgment creditors to receiver over corporation, con- ferred by statute. 299. Officers and shareholders required to account to receiver to pay judgment creditors. 300. Judgment creditor allowed receiver over rents and tolls of bridge company. 301. Creditor not entitled to receiver before judgment; nor when there is a remedy at law. 302. Prior lien of judgment creditor not divested or affected by re- ceivership; title to real estate not divested. 303. Title divested by appointment of receiver on final dissolution; departure from common-law rule. 304. Waste of trust fund by officers of insurance and loan associa- tion, ground for receiver; insolvency and assignment; build- ing and loan association; foreign life insurance company. 305. Receivers in behalf of creditors of foreign corporations. 306. Receiver appointed in one state over assets of corporation organized in another state. 306a. Domiciliary receiver of mutual benefit association, when en- titled to possession of assets in another state; ancillary re- ceiver. 306&. Ancillary receiverships. 307. In proceedings by quo warranto against corporation, receiver not appointed before judgment of forfeiture; nor upon in- voluntary dissolution by expiration of charter. 308. Corporation allowed to give bond to judgment creditor in lieu of receiver; case retained for accounting. 309. Appointment of receiver no defense to action against share- holder for unpaid subscription. 310. Registration of shares in receiver's hands. 311. Receiver not granted over dividends due from college fellow- ship. 312. One corporation may be appointed receiver over another. 312a. Duty of officers to deliver assets to receiver. Z\2b. Receiver's certificates. 312c. Conflict of authority as to preference for labor and supply claims incurred before receivership. Z\2d. Weight of authority is opposed to preference. 312(?. Abuse of corporate franchise as ground for receiver in quo warranto proceeding for forfeiture of charter. § 287. Jurisdiction of equity over corporations enlarged by statute. In most of the states of this country, as well as in England, the jurisdiction of courts of equity over corpora- tions has been extended by legislative enactments to the ap- pointing of receivers and sequestrating the property of the cor- 342 RECEIVERS. [chap. X. poration, in proper cases; and in some of the states the juris- diction has even been enlarged by statute to the extent of wind- ing up the affairs of the corporation, and to the forfeiture of its franchise. While these legislative enactments vary largely in the different states, their general purpose and scope are to provide a more effectual method for the protection of creditors and shareholders than may be had by the ordinary process of courts of law. And while in the decisions of the courts under these various statutes, there is sometimes manifested a lack of harmony and uniformity, certain well-defined principles have yet been established which serve as precedents for future guid- ance, and the discussion of these will occupy the present chap- ter. § 288. Power to wind up corporation conferred by stat- ute; receiver not usually granted under general equity powers. It is to be observed, at the outset, that the gen- eral jurisdiction of equity over corporate bodies does not ex- tend to the power of dissolving the corporation, or of winding up its affairs and sequestrating the corporate property and effects, in the absence of express statutory authority. And courts of equity will not, ordinarily, by virtue of their gen- eral equitable jurisdiction, or of their visitorial powers over corporate bodies, sequestrate the effects of the corporation, or take the management of its affairs from the hands of its own officers and intrust it to the control of a receiver of the court, upon the application either of creditors or shareholders.^ And while equity may properly compel officers of corporations to 1 Bangs V. Mcintosh, 23 Barb., mick Lumber Co. v. Teague, 119 591; Howe v. Deuel, 43 Barb., 504; Ala., 385, 24 So., 4; People v. Dis- Waterbury v. Merchants Union Ex- trict Court, 33 Colo., 293. 80 Pac, press Co., 50 Barb., 157; Belmont v. 908; People v. Weigley, 155 111., 491, Erie R. Co., 52 Barb., 637; In re 40 N. E., 300; Coquard v. National Coleman, 174 N. Y., 373, 66 N. E., Linseed Oil Co., 171 111., 480, 49 N. 983; Davis v. Flagstaff S. M. Co., E., 563; Wallace v. Pierce-Wallace 2 Utah, 74; Neall v. Hill, 16 Cal., Publishing Co., 101 Iowa, 313, 70 145; French v. Bank Case, 53 Cal., N. W., 216, 38 L. R. A., 122, 63 495; Murray v. Superior Court, 129 Am. St. Rep., 389; Vila v. Grand Cal., 628, 62 Pac, 191 ; Smith-Dim- Island E. L., I. & C. S. Co.. 68 Neb., CHAP. X.] CORPORATIONS. 343 account for any breach of trust in their official capacity, yet in the absence of statutes extending its jurisdiction, it will usu- ally decline to assume control over the manag-ement of the af- fairs of a corporation, upon a bill filed by a stockholder alleg- ing fraud, mismanagement and collusion on the part of the cor- porate authorities, since such interference would necessarily result in the dissolution of the corporation, and the court would thus accomplish indirectly what it has no power to do direct- ly. The remedial power exercised by courts of equity, in such cases, ordinarily extends no further than the granting of an injunction against any special misconduct on the part of the corporate officers ; and although the facts shown may be suffi- cient foundation for such an injunction, the court will not en- large its jurisdiction by taking the affairs of the corporation out of the management of its own officers, and placing them in the hands of a receiver.2 222, 94 N. W., 136, 97 N. W., 613; Ardmore National Bank v. Briggs M. & S. Co., 20 Okla, 427, 94 Pac, 533. See, also. Baker v. Adminis- trator of Backus, 32 111., 79; Pond V. F. & L. R. Co., 130 Mass., 194; Hinckley v. Pfister, 83 Wis., 64, 53 N. W., 21; Florence Gas, E. L. & P. Co. V. Hanby, 101 Ala., 15, 13 So., 343 ; State Investment & Insur- ance Co. V. Superior Court, 101 Cal., 135, 35 Pac, 549 ; Walters v. Anglo- American M. & T. Co., 50 Fed., 316; Taylor v. Decatur M. & L. Co., 112 Fed., 449. But see Blatchford v. Ross, 54 Barb., 42, 5 Ab. Pr., N. S., 434, 37 How. Pr., 110; Adler v. Milwaukee Patent Brick Manufac- turing Co., 13 Wis., 57. As to the power of congress to enact a law repealing a charter granted to a re- ligious corporation by a territorial legislature, and as to the right to a receiver under such act of congress, see United States v. Church, 5 Utah, 361, 15 Pac, 473. As to the statu- tory power of appointing a receiver over a corporation, which has been dissolved by judgment of ouster in Pennsylvania, see Commonwealth v. Order of Vesta, 156 Pa. St., 531, 27 Atl., 14; Fraternal Guardian's Es- tate, 159 Pa. St., 603, 28 Atl., 479. As to the right of the attorney-gen- eral to procure the appointment of a receiver over a state bank under the statute of California of March 24, 1903, as amended by the act of March 20, 1905, see People v. Bank of San Luis Obispo, 154 Cal., 194, — Pac, — . 2 Waterbury v. Merchants Union Express Co., 50 Barb., 157; Neall v. Hill, 16 Cal., 145; Howe v. Deuel, 43 Barb., 504; Belmont v. Erie R. Co., 52 Barb., 637; Mason v. Su- preme Court, 77 Md., 483, 27 Atl., 171 ; Richardson v. Clinton Wall Trunk Co., 181 Mass., 580, 64 N. E., 400. Waterbury f. Merchants Union 344 RECEIVERS. [chap, X. § 289. Statutes enlarging the jurisdiction strictly con- strued; method prescribed must be strictly followed. When the jurisdiction of courts of equity has been extended by legislation to the appointment of receivers over incorporated companies, the power thus conferred is treated by the courts as a delegated authority, the exercise of which requires the most careful consideration. The effect of appointing a re- ceiver being to take the property of the corporation out of the control of its own officers, to whom it has been intrusted by its stockholders, the courts proceed with extreme caution in the exercise of so summary a power.^ And, in construing Express Co., 50 Barb., 157, was an action brought by a stockholder of the defendant corporation, against the company and its executive or managing committee, to obtain a dissolution of the corporation and the appointment of a receiver for winding up its affairs. Barnard, J., denying the motion for a receiver, observes, p. 166 : "The remaining grounds for the relief which the plaintiff demands resolve them- selves into the alleged personal misconduct of the executive or managing committee. This has, I think, nothing to do with the pres- ent motion for a receiver. The in- fidelity or misconduct of some, or even of all, of the trustees or man- agers of such an association, affords no ground for taking away the rights of the shareholders who con- stitute the company, either by dis- solving it, or taking away its man- agement and placing it in the hands of an officer of the court. In such a case, the principles of remedial or preventive justice go no further than to enjoin or forbid the mis- conduct, or remove the unfaithful officer. I am not aware of any au- thority for dissolving a corporation. or an unincorporated stock associa- tion, or for taking its management from its proprietors or sharehold- ers, on the mere ground that one, or even all, of its trustees, are un- faithful. The court may enjoin the trustee, or suspend and remove him, and if necessary may order a new election, but can not substitute its own officer." But in Blatchford V. Ross, 54 Barb., 42, 5 Ab. Pr., N. S., 434, 37 How. Pr., 110, the court inclined to the opinion that the action of the executive commit- tee of a corporation in repeatedly voting to themselves large sums of money in addition to their regular compensation, for their services as promoters or originators of the com- pany, was sufficient ground for ap- pointing a receiver in behalf of stockholders, but a decision as to the appointment was reserved on other grounds. 3 Oakley v. Paterson Bank, 1 Green Ch., 173 ; Clark v. National Linseed Oil Co., 45 C. C. A., 53, 105 Fed., 787. See, also, Davis v. United States, E. P. & L. Co., 77 i\Id., 35, 28 Atl., 982. In Kentucky, it is held that a water company seeking to enjoin the collection of CHAP. X.] CORPORATIONS. 345 such statutes, they are inchned to give them a strict construc- tion, and require the prescribed method of obtaining jurisdic- tion of the person and of the subject-matter to be strictly fol- lowed. Thus, when a statute authorizes the court, upon ap- plication of any judgment creditor of a corporation, after exe- cution returned unsatisfied, to sequestrate the property, stock and choses in action of the corporation, and to appoint a re- ceiver, the statute will be strictly construed, since the exer- cise of the jurisdiction which it confers involves the virtual dissolution of the corporate body, and the loss of its franchises.^ And when the statute authorizes the court to interfere upon the petition of the person obtaining such judgment, the court can not acquire jurisdiction by any other means than a peti- tion by the judgment creditor himself, and a petition by his attorney will not suffice.^ And it by no means follows, be- cause an injunction has been granted against the operations of the corporate body, that a receiver should necessarily be ap- pointed, since the two questions are independent of and dis- tinct from each other, and circumstances may call for and de- mand a suspension of the business of the corporation, while its officers in charge are not implicated, and are the most proper persons to wind up its affairs.^ § 290. Corporation a necessary party to the proceeding ; omission of, may be taken advantage of by writ of error; corporate functions suspended by appointment of receiver. Since the appointment of a receiver over a corporation is gen- erally equivalent to a suspension of its corporate functions, and of all authority over its property and effects,'^ and is also equiv- taxes upon its property, upon the ing. Clark v. Louisville Water Co., ground that it is exempt by law 90 Ky., 515, 14 S. W., 502. from taxation, may be required to 4 Bangs v. Mcintosh, 23 Barb., pay the amount of the taxes into ^^ • ^ , ^-, t^ , . , r ,. r J • xi. ^ ^ Bangs V. Mcintosh, 23 Barb., court, or m default of so domg that _ . the management of the company 6 Oakley v. Paterson Bank, 1 may be intrusted to a receiver until Green Ch. 173. a sufficient sum is realized to pay 7 Linville v. Hadden, 88 Md., 594^ the taxes and costs of the proceed- 41 Atl., 1097. 43 L. R. A., 222. 346 RECEIVERS. [chap, X. alent to an injunction restraining its agents and officers from intermeddling with its property, the courts will not exercise this extraordinary power when the corporate body, as such, is not made a party to the action, and is not before the court.^ And this is true, even when the bill is filed against the stock- holders of the company, assailing the franchise itself, and as- serting that the company is not a corporation proper, but a mere partnership. The object of such a proceeding being to take away the corporate franchise, the corporation itself must be made a party defendant to enable it to be heard ; and, being an indispensable party to the proceedings, the omission to join it is not a mere formal error, but one of substance, which may be taken advantage of by the stockholders on writ of error.^ And since the appointment of a receiver over a corporation operates as a suspension of its corporate functions and of all its authority over its property and effects, the delivery by an officer of the corporation, after the appointment of a receiver, of a deed which had been executed by the corporation prior to such appointment is of no effect.!^ § 291. Receiver need not be made a party to subsequent proceeding for another receiver; bill not demurrable be- cause it prays receiver. Notwithstanding the corporation over which a receiver is sought is itself an indispensable party to the suit, as above shown, yet when a receiver has already been appointed, he need not be joined as a party to subsequent proceedings having for their object the appointment of a re- ceiver over the same corporation. Thus, upon a bill filed against a banking association by one of its creditors, charging that defendants are only a nominal or pretended corporation, having fraudulently combined to deceive their creditors, and 8 Gravenstine's Appeal, 49 Pa. St., ceiver to resist an order made by 310; Baker v. Administrator of the court for the sale of its real Backus, 32 111., 79. See State v. estate. Fawcett, 58 Neb., 371, 78 N. W., 9 Baker v. Administrator of Back- 636, as to the right of an insolvent us, 32 III, 79. banking corporation which has con- 10 Brynjolfson v. Osthus, 12 N, sented to the appointment of a re- CHAP. X.] CORPORATIONS. 347 being only a voluntary association in the nature of a partner- ship, it is not necessary to join as a party defendant a receiver of the bank appointed upon proceedings instituted by another creditor. Nor is such a bill demurrable because it prays the appointment of a receiver, since, whether a receiver be or be not necessary, the objection because of the prayer for his ap- pointment can not sustain a demurrer.^ And the fact that a receiver has been appointed in an action to foreclose a mort- gage given by a corporation is no bar to appointing a receiver in a subsequent suit to sequestrate the property of the corpora- tion for the benefit of its creditors under the insolvent laws of the state. 12 § 292. General allegations of fraud insufficient; insol- vency alone insufficient; receiver not appointed where no fraud or danger shown; insolvency and fraud. It has al- ready been shown that courts of equity proceed with extreme caution in the appointment of receivers over corporate bodies, under legislative enactments enlarging their general jurisdic- tion for this purpose. 13 And in proceedings under such stat- utes, mere general allegations in the affidavits in support of the motion for a receiver, as to the belief of affiants that great frauds have been committed, are not sufficient ground for the interference, when it is not stated in what the frauds consist, or by whom they were committed. 14 Nor is the loss of the property of a corporation or its failure to continue business sufficient ground for a receiver in the absence of a showing of gross mismanagement, nor will general averments of negli- gence and mismanagement supply the deficiency, nor the be- lief of the plaintiff that frauds have been committed, where it is not clearly shown of what such frauds consist. 1^ Nor is Dak., 42, 96 N. W., 261. 14 Oakley v. Paterson Bank, 1 11 Wheeler v. Clinton Canal Bank, Green Ch., 173. And see State v. Harring. (Mich.), 449. Bearing, 184 Mo., 647, 111 S. W., 12 St. Louis Car Co. v. Stillwater 967. Street R. Co., 53 Minn., 129, 54 N. 15 Clark v. National Linseed Oil W., 1064. Co., 45 C. C. A., 53, 105 Fed., 787. 13 See, ante, § 289. 348 RECEIVERS. [chap. x» there any necessity for appointing a receiver when no fraud is alleged or shown, and when no satisfactory proof is produced that the court should interfere to save the property from ma- terial injui*y, or to rescue it from impending destruction. ^^ So mere insolvency, unaccompanied by any charge of frauds wa^te or mismanagement in the affairs of the corporation, nev- er of itself constitutes sufficient ground for the appointment of a receiver.!"^ So where there is no charge of insolvency or of fraud or mismanagement upon the part of the directors, the court will not appoint a receiver, where the only question is as to the policy in regard to the management of the business. ^^ And where a corporation is perfectly solvent and no fraud is charged, a receiver will not be appointed at the instance of a shareholder and director, who is also a creditor, upon general charges of mismanagement which will result in injury and waste and the total loss of the property. ^^ Nor will a re- 16 Baker v. Administrator of Backus, 32 111., 79; Fort Payne F. Co. V. Fort Payne C. & I. Co., 96 Ala., 472, 11 So., 439; Trust & De- posit Co. V. Spartanburg W. Co., 91 Fed., 324; Murray v. Superior Court, 129 Cal., 628, 62 Pac, 191. See, also, Rathbone v. Gas Co., 31 West Va., 798, 8 S. E., 570 ; Neitzel V. Lyons, 48 Neb., 892, 67 N. W., 867; Donald v. Manufacturers' Ex- port Co., 142 Ala., 578, 38 So., 841. As to the appointment of a receiver under the statutes of South Dakota, see Dudley v. Dakota H. S. Co., 11 S. Dak., 559, 79 N. W., 839; Gates V. McGee, 15 S. Dak., 247, 88 N. W., 115; Kelly v. Fargo M. Co., 16 S. Dak., 73, 91 N. W., 350. IT' Murray v. Superior Court, 129 Cal., 628, 62 Pac, 191 ; Trust & De- posit Co. V. Spartanburg W. Co., 91 Fed., 324. But it is held under the statute of Washington that a simple contract creditor of a corporation. whose claim is not controverted, is entitled to a receiver over the corpo- ration upon a mere showing of in- solvency. Davis V. Edwards, 41 Wash., 480, 84 Pac, 22. In this case the court say: "Whatever the rule may be in other jurisdictions, the rule is established in this state that a simple contract creditor, whose claim is not controverted, is entitled to a receivership against a debtor corporation upon a mere showing of insolvency." 18 Hunt V. American Grocery Co., 80 Fed., 70. But in Tompkins Co. V. gatawba Mills, 82 Fed., 780, it was held that dissensions among the officers and directors of a corpora- tion which were deep-seated and could not be healed made a receiver imperatively necessary even though there was no showing of the insol- vency of the corporation. 19 Little Warrior Coal Co. v. Hooper, 105 Ala., 665, 17 So., 118. CHAP. X.] CORPORATIONS. 349 ceiver be appointed to wind up the affairs of a corporation merely because of dissension among the shareholders, where it appears that the corporation is quite solvent and that its bus- iness is prosperous.20 Nor is the fear upon the part of a share- holder that a certain action pending against an officer of a solvent corporation will not be diligently prosecuted sufficient ground for the appointment of a receiver in the absence of charges of fraud or mismanagement.^! Nor does it constitute sufficient ground for a receivership of a corporation, at the in- stance of a shareholder, that the directors are holding over in •default of an election of their successors, or that the plaintiff has been denied access to the corporate books and papers, or that the directors refuse to disclose material facts connected with the business of the corporation. ^2 And it is held that a receiver should not be appointed over a corporation at the in- stance of a majority of the shareholders, where it appears that there are no scattered assets to be marshalled and there are no charges of fraud or mismanagement in the affairs of the com- pany, .and the only effect of the receivership would be to hinder and delay the collection of a valid claim. ^^ And where a cor- poration is a prosperous, solvent, going concern, a receiver should not be appointed in a proceeding brought by a share- holder against the corporation and its officers to compel the latter to account for profits made by them as individuals in selling real estate to the corporation at fraudulently excessive valuations.24 Nor can one of two equal co-owners of the stock of a corporation have a receiver over the corporation up- on the ground that there are irreconcilable differences between the two and that the other has assumed the control and manage- ment of the business and excludes the plaintiff from partici* 20 Sternberg v. Wolflf, 56 N. J. 23 Bell v. Wood & Co., 181 Pa. Eq., 555, 42 Atl., 1078. St., 175, 37 Atl., 201. 21 Griffin v. Griffin Iron Co., 96 24 Klein v. Independent B. Assn., Fed., 577. 231 III., 594, 83 N. E., 434. 22 Alabama Coal & Coke Co. v. Shackelford, 137 Ala., 224, 34 So., S33, 97 Am. St. Rep., 23. 350 RECEIVERS. LCHAP. X. pating in it.^^ If, ho\ve\'er, the corporation is insolvent and its directors have been guilty of fraudulent mismanagement of its affairs, and if it has ceased to transact the business for which it was incorporated, its financial embarrassments being such as to render it impracticable to resume, a fit case is presented for a receiver, in order to preserve the property of the corporation for the benefit of its creditors and stockholders.26 And where one of two shareholders of a corporation has constituted him- self a trustee for the collection and distribution of the assets of the corporation and has made false statements as to his col- lections and has proved generally unfaithful to his trust, a re- ceiver is properly appointed to take charge of the collection of the assets of the corporation. 27 But ordinarily a receiver will not be appointed over a corporation upon a preliminary ap- plication, where all the charges of insolvency, fraud and mis- management upon which the right to the belief is based are ful- ly and unequivocally denied by affidavit. ^^ § 293. Breach of trust by corporate officers ; no place of business and no corporate officers ; trust deed securing un- authorized notes of bank; deadlock among directors. In New York, the jurisdiction over corporations conferred by statute upon courts of equity powers is sufficient to authorize the appointing of a receiver, when it is apparent that the cor- poration has ceased to act as such, and when the president and principal shareholders have assumed to use the corporate prop- erty as their own, and the president has been guilty of a breach of trust in making an assignment of such property. 29 So when it is apparent to the court that the corporation against which the proceedings are instituted is without any office or place of 25 Wallace v. Pierce-Wallace Pub- 27 Bauer v. Haggerty, 42 Wash., lishing Co., 101 Iowa, 313, 70 N. W., 313, 84 Pac, 871. 216, 38 L. R. A., 122, 63 Am. St. 28 Taylor v. Cuban L. & S. Co., Rep., 389. 106 Fed., 437; Brady v. Bay State 26 Coal & Mining Co. v. Edwards, Gas Co., 106 Fed., 584. 103 111., 472; Doe v. Northwest C. 29 Conro z;. Gray, 4 How. Pr. K/). & T. Co., 64 Fed., 928. See Stevens And see Consolidated T. L. Co. v. V. South O. L. Co., 14 Utah, 232, Kansas City V. Co., 43 Fed.. 204. 47 Pac, 81. CHAP. X.] CORPORATIONS. 351 business, that it has no officers to attend to its affairs and no person authorized to take charge of and manage its business, it is proper to appoint a receiver, upon a bill by a stockholder, to preserve the effects of the company for the benefit of the stockholders generally.^^ And when a banking association has issued notes, which are unauthorized and expressly pro- hibited by the banking laws of the state, and has secured these notes by a deed of trust of certain securities, upon a bill to set aside such trust deed, the court may appoint a receiver in limine, to take charge of the securities assigned until the final deter- mination of the cause upon its merits.^^ So in an action brought by creditors of a pretended banking corporation aver- ring that the bank was never incorporated, but transacted busi- ness under a corporate name under the management of its principal promoter, its supposed assets being in fact his, and averring his death and that his representative is wasting his assets, the bill seeking to set aside certain judgments and to recover the assets and for an accounting, a proper case is presented for the appointment of a receiver pendente lite.^^ And where, after the death of one of a board of three direct- ors, who was also president of the corporation and a share- holder and large creditor, the two remaining directors are un- able to agree upon a president or third director, and the busi- ness of the corporation is suspended and is being seriously im- paired, a receiver pendente lite is properly appointed. ^^ And where there are dissensions among the directors of a corpora- tion which have resulted in a deadlock in the management of the business, a receiver pendente lite may be appointed.^^ § 294. Receiver of unauthorized issue of stock, when refused ; shareholder who has parted with his interest not entitled to relief. While receivers are thus allowed for the 30 Lawrence v. Greenwich Fire 33 Sheridan Brick Works v. Ma- Insurance Co., 1 Paige, 587. rion Trust Co., 157 Ind., 292, 61 N. 31 Leavitt v. Yates, 4 Edw. Ch., E., 666, 87 Am. St. Rep., 207. 173, 175. 34 Sternberg v. Wolff, 56 N. J. 32 Dobson V. Simontcn, 78 N. C, Eq.. 389. 39 Atl.. 397, 39 L. R. A., 63. 762, 67 Am. St. Rep., 494. 352 RECEIVERS. [chap. X. protection of shareholders in certain classes of cases, the courts proceed with much caution in the exercise of the jurisdiction. And in an action brought by a shareholder for the purpose of canceling- certain shares of stock, alleged to have been illegally issued by the corporation, and to restrain the holders of such shares from assigning or incumbering them, the appointment of a receiver of the shares in controversy is unauthorized and improper, upon an ex parte application, before answer, and when it is not shown that defendants are irresponsible, or that there is any danger of loss from the transfer of the stock. ^^ Nor is a former shareholder entitled to a receiver as against trustees or officers of the corporation, upon the ground of mis- management of their trust, when he has sold and parted with his entire interest in the corporation and in its effects. ^^ § 295. Long acquiescence of shareholder a bar to relief ; receiver of rents and tolls refused; effect of shareholder's participation in fraud. It is also to be observed, with ref- erence to this species of relief when sought in behalf of share- holders of a corporation, that the acquiescence or consent of a shareholder for a long period of years in any given state of facts or conduct on the part of the corporate authorities, which he afterward seeks to make the foundation for the appoint- ment of a receiver, will generally prove a bar to the relief sought.^'^ For example, when the authorities of a corporation have made an agreement in the nature of a lease, for letting the tolls of the company for a longer period than they are authorized to do under the act of incorporation, but such agree- ment is acquiesced in by the shareholders for a period of forty- seven years without objection or complaint, during which time the lessee and his successors have remained in undisturbed pos- session and receipt of the tolls, equity will not appoint a receiver of the rents and tolls in limine, in an action by a shareholder to 35 People v. Albany & Susque- 37 Gray v. Chaplin, 2 Russ., 126; hanna R. Co., 7 Ab. Pr., N. S., 290. Hager v. Stevens, 2 Halst. Ch., 374. 36 Smith V. Wells, 20 How. Pr., 158. CHAP. X.] CORPORATIONS. 353 set aside the agreement or leasees So when a shareholder files a bill for a receiver to take charge of certain real estate in another state, alleged to have been purchased with the funds of the corporation and the title taken in the name of another person, when the situation of the title has remained unchanged for a number of years, during all which time the plaintiff has been a shareholder, and no greater danger is shown to the title than has existed during all this period, and it is not shown that the person holding the legal title is insolvent, no sufficient cause is presented for the extraordinary aid of the court by a re- ceiver. Especially will the court be justified in refusing to in- terfere in such case, when it is apparent from the bill that the property over which the receiver is sought was accumulated by fraud, of which the plaintiff shareholder was himself cogni- zant.39 And a shareholder seeking a receiver over a corpora- tion, upon the ground of misconduct or breach of trust on the part of its officers, must himself be free from participation in such misconduct.^^ § 295a. Bill by minority shareholders; when receiver not appointed. A minority of the stockholders of a cor- poration is not entitled to a receiver because of dissatisfaction with the policy and management of a majority of the officers and directors in the absence of any showing of fraud or of in- solvency. ■*! And especially will the appointment of a receiver 38 Gray v. Chaplin, 2 Russ., 126. & M. Assn. v. Storrow, 34 C. C. A., 39 Hager v. Stevens, 2 Halst. Ch., 182, 92 Fed., 5 ; North America 374. Land & T. Co. v. Watkins, 48 C. 40 Hyde Park Gas Co. v. Kerber, C. A., 254, 109 Fed., 101 ; Worth 5 Bradw., 132. Manufacturing Co. v. Bingham, 54 41 Fluker v. Emporia City R. Co., C. C. A., 119, 116 Fed., 785. And 48 Kan., 577, 30 Pac, 18; Bartow see Jacobs v. Jacobs M. Co., 37 Lumber Co. v. Enwright, 131 Ga., Mont., 321, 96 Atl., 723; Stokes v. 329, 62 S. E., 233 ; Callaway v. Pow- Knickerbocker Investment Co., 70 hattan Improvement Co., 95 Md., N. J. Eq., 518, 61 Atl., 736; Downing 177. 52 Atl., 916; Hill v. Gould, 129 v. Dunlap Coal, I. & R. Co., 93 Mo., 106, 30 S. W., 181 ; Edison v. Tenn., 221, 24 S. W., 122. In Mor- Edison U. P. Co., 52 N. J. Eq., 620, ris v. Elyton Land Co., 125 Ala., 29 At!., 195; Texas Consolidated C. 263, 28 So., 513, it was held proper, Receivers — 23. 354 RECEIVERS. [chap. X. be denied where the corporation is solvent and its business prosperous and it is not sought to have it wound up, since, in such case, the wrongs complained of may be remedied under the ordinary powers of a court of equity and without the ap- pointment of a receiver.42 Nor will the relief be granted in liynine and before answer upon a bill by a minority of share- holders charging misconduct by the president, the management being satisfactory to a majority of the shareholders and the corporation being solvent.'*^ Nor will a receiver be appointed at the instance of the minority stockholders upon the ground that the affairs of the corporation are not managed for the best interests of the stockholders and that a different policy should be adopted. ^^ Nor should a receiver be appointed at the in- stance of a minority shareholder where the corporate property is in no way endangered and there is no mismanagement of the business of the company, the only charge being the refusal to allow the plaintiff to inspect the books of the company on ac- count of his failure to pay his subscription to the capital stock."*^ Nor are the minority stockholders entitled to a receiver upon the ground that another stockholder has obtained control of the management of the corporation and that there are no meet- ings of the directors and no reports of the condition of the company have been filed, where it does not appear that the corporation is insolvent or that other stockholders are dissat- isfied with the management.^^ Nor is the loss of the property of the corporation or its failure to continue business sufficient upon the facts, to appoint a receiver 44 Peatman v. Centerville L., H. over the property of a corporation & P. Co., 100 Iowa, 245, 69 N. W., upon a bill filed by a minority stock- 541. holder to set aside an ultra vires ^5 Ridpath v. S. P. & C. R. F. & sale and conveyance of all the cor- T. Co., 26 Wash., 427, 67 Pac, 229. porate property to another corpora- ^6 Rumney v. Detroit & Montana tion. Cattle Co., 116 Mich., 640, 74 N. W., 42 Miller v. Kitchen, 73 Neb., 711, 1043. 103 N. W., 297. 43 Ranger v. Champion C. P. Co., 52 Fed., 609. CHAP. X.] CORPORATIONS. 355 ground for a receiver at the instance of the minority stock- holders in the absence of a showing of mismanagement, nor will general averments of negligence and mismanagement sup- ply the deficiency, nor the belief of the plaintiff that frauds have been committed, where it is not clearly shown of what such frauds consist.^'^ Nor can a minority stockholder main- tain a bill for a receiver, where there is no contest concerning the corporate property and no dispute of any kind between the parties, and the only object of the bill is to have the court take the property of the corporation under its management during the pendency of a writ of error to be sued out by the corpora- tion with respect to judgments obtained in another court, which the corporation, by reason of its insolvency, would be unable to supersede.48 Nor will the relief be granted upon the ground that there is a difference of opinion as to the best method of carrying on the business of the corporation ; 49 nor upon the ground that the officers and directors are fraudulently misap- propriating the assets of the corporation, where it appears that the defendants are all perfectly solvent ; 50 nor to enable a stockholder, who has deposited his stock as collateral for a debt, to have an account of the corporate assets.^i Nor will a receiver be appointed without notice at the instance of the minority stockholders upon the ground that the business of the corporation is being mismanaged and that it is being car- ried on by the officers in violation of a resolution of the stock- holders calling for a winding-up and dissolution of the cor- poration.52 Nor will a receiver be appointed over a foreign corporation upon behalf of the minority stockholders, where no receiver has been appointed in the state of its domicile and where no creditors appear and there is no showing that the 47 Clark v. National Linseed Oil 50 Hayes v. Jasper Land Co., 147 Co., 45 C. C. A., S3, 105 Fed., 787. Ala., 340, 41 So., 909. 48 Becker v. Hoke, 26 C. C. A., 51 Huet v. Lumber Co., 138 N. C, 282, 80 Fed., 97Z, 53 U. S. App., 366. 443, 50 S. E., 846. 49 Edison v. Edison U. P. Co., 52 52 State v. District Court, 20 N. J. Eq., 620, 29 Atl., 195. Mont., 284, 50 Pac, 852. 356 RECEIVERS. [chap. X. corporation is insolvent. ^^ Nor will a receiver be appointed at the instance of a minority stockholder who acquired his stock with full knowledge of the conditions of which he complains.^* Even after the dissolution of a corporation a minority of its shareholders is not necessarily entitled to a receiver to wind up its affairs and to dispose of its assets ; especially when they are in the hands of a responsible trustee and no mismanage- ment or improper conduct in the discharge of his trust is shown. ^^ And where a receiver has been appointed at the in- stance of the minority stockholders of a corporation which is shown to be entirely solvent and conducting a prosperous busi- ness, it is proper for the reviewing court, upon an appeal by the defendant from such order of appointment, to order a stay and restitution of the property by the receiver to the corpora- tion pending such appeal. ^^ § 295b. The same; when receiver appointed; action against directors ; when demand on receiver to sue unnec- essary. Where, however, it appears that the officers and a majority of the stockholders of a corporation are grossly mis- managing its affairs in their own interests and are fraudulent- ly and wrongfully misappropriating the corporate property for their individual profit, a proper case is presented for the ap- pointment of a receiver at the instance of the minority stock- holders.^"^ And the relief may be granted where the bill dis- closes a scheme upon the part of the majority of the directors to wreck the corporate property in the interest of a wrongful combination of a majority of the stockholders with a majority of the board of directors.^^ And the relief has been granted 53 Parks V. United States B. Cor- 57 Ponca Mill Co. v. Mikesell, 55 poration, 140 Fed., 160. Neb., 98, 75 N. W., 46; Hampton 54 Von Schlemmer v. Keystone v. Buchanan, 51 Wash., 155, 98 Pac, Life Ins. Co., 121 La., 987, 46 So., 374. 991. 58 Cantwell v. Columbia Lead Co., 53 Baltimore & O. R. Co. v. Can- 198 Mo., 1, 95 S. W., 856. And in non, 72 Md., 493, 20 Atl., 123. State v. District Court, 15 Mont.,. 56 Forrester v. B. & M. C. C. & 324, 39 Pac, 316, 27 L. R. A., 392, S. M. Co., 22 Mont., 430, 56 Pac, 48 Am. St. Rep., 682, a receiver was 868. appointed upon behalf of the mi- CHAP. X.] CORPORATIONS. 357 although it appeared that the corporation was quite solvent. Thus, a receiver has been held properly appointed at the in- stance of a minority of the stockholders of a solvent corpora- tion where it is shown that there are two sets of persons, each claiming to be the board of directors, and where, as the re- sult of the conflict between them, the affairs of the corporation are being seriously jeopardized.^^ So where the board of di- rectors are a majority of the stockholders and are grossly mis- managing the affairs of the corporation and are conducting the business for their own individual gain, the minority stockhold- ers are entitled to the appointment of a receiver although it appeared that the corporation was solvent. ^^ a^^j where an insolvent corporation has been placed in the hands of one of its directors as receiver, a minority of the stockholders may insti- tute an action against the receiver and the other directors for the purpose of enforcing their individual liability for mis- conducting the affairs of the corporation ; and in such case it is unnecessary to allege any demand upon the receiver to bring the action, since he can not sue himself, nor is he the proper person to prosecute an action against his fellow wrong-doers. The receivers should, nevertheless, be made a party defendant in order that he may defend the action, and the corporation should be joined as plaintiff or defendant in order to be bound by any decree which may be entered. ^^ And where the re- ceiver of a corporation has failed or refused to bring an action necessary for the protection of the interests of the corporation and of its stockholders and creditors and it is apparent from his conduct that a demand upon him would be unavailing, a stock- holder of the corporation may maintain a bill in his own name against the corporation and the receiver without any previous demand upon the receiver to institute such proceeding.^2 g^t nority stockholders upon similar ing Co. v. Washed B. S. D. Co., 136 facts. And see Hall v. Nieukirk, Fed., 710. 12 Idaho, 33, 85 Pac, 485. 61 Weslosky v. Quarterman, 123 59 Jasper Land Co. v. Wallis, 123 Ga., 312, 51 S. E., 426. Ala., 652, 26 So., 659. 62 Farwell v. Great Western Tel. 60 Columbia National Sand Dredg- Co./ 161 111, 522, 44 N. E., 891. 358 RECEIVERS. [chap. X. a stockholder in a corporation which is in the hands of a receiv- er can not maintain a suit upon a cause of action due to the cor- poration which the receiver refuses to enforce, in the absence of a showing that he has apphed to the court for an order upon the receiver to institute the necessary proceedings.^^ But a stockholder of an insolvent bank may maintain a bill for an accounting against the directors for their negligent manage- ment, and, in such case, it is unnecessary that the action should be brought by the receiver of the bank where he is also one of the di rectors. ^^ § 295c, The same; demand upon ojEficers and directors to proceed. In order to entitle a minority of the stock- holders to a receiver over the corporation, it must appear that the complaining stockholders have made all reasonable efforts to procure the directors or other stockholders to redress their grievances, or to obtain authority to prosecute the action in the name of the company, or else to show why this could not have been done.^^ But when the directors and officers of the cor- poration, who are defendants to the action, are themselves charged with fraudulent mismanagement of the affairs of the corporation and misappropriation of its assets as a ground for the relief, upon a bill by a shareholder for a receiver and an accounting, a previous demand upon such directors and officers to bring suit is unnecessary to sustain the action. In such case, it being apparent that a demand would be unavail- ing, equity will not require a useless or fruitless thing as a condition to bringing the action. ^^ Nor is the demand neces- 63 Swope V. Villard, 61 Fed., 417. 65 West Va., 721, — S. E., — . See, 64 Flynn v. Third National Bank, also, Bacon v. Irvine, 70 Cal., 221, 122 Mich., 642, 81 N. W., 572. 11 Pac, 646. 65 Roman v. Woolfolk, 98 Ala., 66 Wayne Pike Co. v. Hammons, 219, 13 So., 212; Wenzel v. Palmetto 129 Ind., 368, 27 N. E., 487; Iron B. Co., 48 S. C, 80, 26 S. E., 1 ; Hall v. Baker, 134 Ind., 293, 33 N. Becker v. Hoke, 26 C. C. A., 282, E., 1128; Bridgeport Development 80 Fed., 973, 53 U. S. App., 366; Co. v. Tritsch, 110 Ala., 274, 20 So., Worth Manufacturing Co. v. Bing- 16; Jasper Land Co. v. Wallis, 123 ham, 54 C. C. A., 119, 116 Fed., Ala., 652, 26 So., 659; Ponca Mill 785; Ward v. Hotel Randolph Co., Co. v. Mikesell, 55 Neb., 98, 75 N. CHAP. X.] CORPORATIONS 359 sary where there is no directory or other governing body upon which it may be made.^'^ § 296. Legislation and decisions of other states, when considered in refusing receiver over new issue of stock. The propriety of the reHef as against corporations is some- times determined by the legislation or decisions of other states, in which the association was incorporated, upon the matter urged as a ground for a receiver. Thus, in an action brought by holders of the original stock of a corporation created by and under the laws of other states, to set aside a new issue of stock made by the corporation, it is not proper to grant an in- junction against the action of the corporate officers and to appoint a receiver of the new issue, when the states in which the company was incorporated have, by legislative action and by the decision of a court of last resort, ratified the acts of the corporation in issuing the new stock, and have declared it to be legal.68 § 297. Sequestration for benefit of creditors; rights of attaching creditors subordinate; transfer to nev/ corpora- tion. When the statutes of a state authorize and provide for appointing receivers in proceedings against corporations whose charters have expired, the courts being vested with full jurisdiction in equity for that purpose, and being fully empow- ered by statute to make all orders necessary for the enforcement of the trust, and the statute requiring the receiver to divide the fund collected among the creditors pro rata, the remedy thus provided is regarded, in effect, as a method of sequestration for the benefit of all the creditors of the corporation. In such case, attaching creditors of the property of the corporation can not acquire valid liens, so as to prevent the receivers from sell- ing the property and applying the proceeds in payment of all the creditors. And the mode of sequestration thus afforded W., 46; Columbia National Sand rion Trust Co., 157 Ind., 292, 61 N. Dredging Co. v. Washed B. S. D. E., 666, 87 Am. St. Rep., 207. Co., 136 Fed., 710. 68 O'Brien v. Chicago, Rock Is- 67 Sheridan Brick Works v. Ma- land & Pacific R. Co., 53 Barb., 568. 360 RECEIVERS. [chap. X. by the statute will be held to take effect as against attaching creditors, even though they may have attached before the re- ceivers were actually appointed, but after the filing of the bill and the issuing of an injunction restraining the corporation from further conducting its affairs. ^^ But when a corporation becomes extinct by virtue of an act of legislature, its assets and powers being transferred to a new corporation, the courts are powerless, upon an ex parte application, to appoint a receiver over the former corporation, it having ceased to exist, and there being no person competent to represent it, the new cor- poration not being made a party to the action. "^^ § 298. Right of judgment creditors to receiver over cor- poration, conferred by statute. The right of judgment creditors of a corporation to a sequestration of the corporate effects and to a receiver, in aid of their judgments at law after execution returned unsatisfied, is a right which is given by stat- ute in many if not in most of the states ; and it may be regarded as an extension or enlargement of the general jurisdiction of courts of equity, which, as already shown, does not extend to sequestrating the property and winding up the business of the corporation.'''^ It is inconsistent with the purpose and scope of this work to attempt any discussion of these various stat- utes, and it is believed that each practitioner is sufficiently fa- miliar with the legislation and practice of his own state to render any such discussion unnecessary in the present treatise. And it will be sufficient, for the purposes of the present work, to present the principles deduced from the decisions in the va- rious states, without attempting to discuss or to analyze the stat- utes, which are undergoing constant modification and change. § 299. Officers and shareholders required to account to receiver to pay judgment creditors. It is held in Wiscon- sin, that a creditor of a corporation who has established his de- 69 Atlas Bank v. Nahant Bank, 23 laws of New Jersey, when the corn- Pick., 480. pany has ceased to do business, see 70 Young t;. Rollins, 85 N. C, 485. Streit v. Citizens Fire Insurance As to the right to a receiver over Co., 29 N. J. Eq., 21. an insurance company under the 71 See § 288, ante, and cases cited. CHAP. X.] CORPORATIONS. 361 mand by judgment at law, may, after execution returned un- satisfied in whole or in part, file a bill in behalf of himself and such other creditors of the corporation as may elect to become parties thereto, against both the corporation and its delinquent or withdrawing shareholders, whereupon he may have a decree for an account of the assets and liabilities of the corporation, and for a receiver. And the officers and shareholders will be required to pay in and account to the receiver for so much of the capital stock as will be sufficient to pay plaintiff's judgment, and the debts of such other creditors as may choose to come in under the decree. In such case, the maxim of the law that "equality is equity" applies, and the creditors must all share alike in the funds realized, in proportion to the amount of their respective claims.'^^ § 300. Judgment creditor allowed receiver over rents and tolls of bridge company. The question of the extent to which equity will interfere with the tolls and franchises of a corporation, such as a bridge company, in aid of judgment creditors, when the chief value consists in such tolls or fran- chise, is not altogether free from difficulty. But it is held by the Supreme Court of the United States, that when the rents and profits of the company for a given period are sold under execution, and purchased by the judgment creditor, he, with other judgment creditors, may, upon a bill in equity, have a re- ceiver to collect the tolls and pay them into court, to the end of 72 Adler v. Milwaukee Patent corporation, and appointing a re- Brick Manufacturing Co., 13 Wis., ceiver to wind up its concerns, 57. The jurisdiction of equity, in exists at common law and inde- this class of cases, is said by Dixon, pendent of statute is certainly un- C. J., delivering the opinion, to supported by the weight of author- exist at common law and inde- ity, as already shown. See § 288, pendent of statutory authority, "as ante, and cases cited. Nor does the a sort of distinct exercise of equi- assertion of this doctrine seem to table jurisprudence." As regards have been necessary to the decision the remedy against delinquent of the case, as regards the appoint- shareholders, the statement is ment of a receiver, since the power doubtless true. But the assertion of appointment in this class of cases that the jurisdiction of equity by was expressly conferred by statute. sequestrating the property of the 362 RECEIVERS. [chap. X. discharging- the judgment indebtedness. And the relief is ex- tended, in such case, upon the ground of the inadequacy of the remedy at law and the difficulty of obtaining complete satis- faction of the judgments without the aid of equity. "^^ § 301. Creditor not entitled to receiver before judg- ment ; nor when there is a remedy at law. In New York, it is held that a creditor at large, i. e., before judgment, of a manufacturing corporation, is not entitled to a receiver in an action brought by him for a dissolution of the corporation and a sequestration of its effects, upon the ground of insolvency 73 Covington Drawbridge Co. v. Shepherd, 21 How., 112. In this case, the corporation was created by act of legislature of the state of Indiana, and built a drawbridge over the Wabash river in that state, pursuant to its charter. Judgments were had against the corporation in the United States circuit court for the district of Indiana, under which execution was levied upon the bridge as real property, and the marshal sold the rents and profits of the bridge under the execution for the term of one year, the exe- cution creditor becoming the pur- chaser. He, with other judgment creditors, then filed a bill in the United States circuit court and ob- tained a decree appointing a re- ceiver, with directions to take pos- session of the bridge, receive its tolls and pay them into court, to be applied in satisfaction of the judg- ments pro rata. Upon appeal, the decree was sustained, the court, Catron, J., using the following lan- guage, p. 124: ". . . By the laws of Indiana, lands and tene- ments can not be sold under execu- tion until the rents and profits thereof for a term not exceeding seven years shall have been first of- fered for sale at public auction ; and if that term, or a less one, will not satisfy the execution, then the debt- or's interest or estate in the land may be sold, provided it brings two- thirds of its appraised vahie. The tolls, under the idea that they were rents and profits of the bridge, were sold for one year, according to the forms of this law. The tolls of the bridge being a franchise, and sole right in the corporation, and the bridge a mere easement, the corpor- ation not owning the fee in the land at either bank of the river, or un- der the water, it is difficult to say how an execution could attach to either the franchise or the struc- ture of the bridge as real or person- al property. This is a question that this court may well leave to the tribunals of Indiana to decide on their own laws, should it become necessary. One thing, however, is plainly manifest, that the remedy at law of these execution creditors is exceedingly embarrassed, and we do not see how they can obtain sat- isfaction of their judgments from this corporation (owning no cor- porate property but this bridge), un- less equity can aflford relief. . . . All that we are called on to decide CHAP. X.] CORPORATIONS. 363 and suffering other creditors to obtain a preference."^^ So a simple contract creditor of a mining corporation can not have a receiver to prevent the corporation from fraudulently dis- posing of its property and from placing beyond its power the ability to respond in damages.'^^ And it may be stated as a general proposition, founded upon established principles of equity, that a creditor of a corporation is not entitled to the ex- traordinary aid of equity in the enforcement of his demand, when he can obtain full and adequate relief at law. When, therefore, proceedings are instituted by a creditor of a banking corporation for the appointment of a receiver to wind up its affairs, but it is apparent from his bill that whatever rights he may have are cognizable at law, and may be remedied by fol- lowing the mode pointed out by law for that purpose, the appli- cation for a receiver will be denied, and the creditor will be left to pursue his legal remedy. "^^ § 302. Prior lien of judgment creditor not divested or affected by receivership; title to real estate not divested. As regards the effect of appointing a receiver over a corporation, upon the lien previously acquired by a judg- ment creditor, the rule in Indiana is, that the appoint- ment does not operate to divest or affect the judgment lien. And when a judgment creditor may enforce his in this case is that the court below New York, under a statute of the had power to cause possession to state, to appoint a receiver over a be taken of the bridge, to appoint corporation which had been dis- a receiver to collect tolls and pay solved, upon the ground of delay them into court, to the end of dis- on the part of the trustees ap- charging the judgments at law; pointed to wind up its affairs, see and our opinion is that the power In re Pontius, 26 Hun, 232. And to do so exists, and that it was see, for this subject generally, § properly exercised. It is, therefore, 406, post. ordered that the decree below be '^^ International Trust Co. v. affirmed, and the circuit court is di- United Coal Co., 27 Colo., 246, 60 rected to proceed to execute its de- Pac, 621, 83 Am. St. Rep., 59, and cree." note. 74 Galway v. United States Steam 76 Parmly v. Tenth Ward Bank, 3 Sugar Refining Co., 13 Ab. Pr., 211. Edw. Ch., 395. And see, post, § As to the power of the courts of 403. 364 RECEIVERS. [CIIAP. X. judgment in the ordinary way, by levy upon and sale of the real estate of the corporation on which his judgment is a lien, the court may properly refuse to grant an order upon the re- ceiver to pay the judgment out of moneys in his hands, when it is not shown that such moneys are the proceeds of a sale of the property upon which the judgment was a lien.'^'^ A somewhat similar doctrine prevails in Michigan, and it is there held that a receivership of a corporation pendente lite, and before a final decree of forfeiture, is merely conditional and inchoate, the right of the receiver being only a possessory right for the purposes of the suit. His appointment, therefore, does not divest the title of the corporation to its real estate, and when no conveyance of such title is made by the corpora- tion to the receiver, who afterward becomes functus officio, the real estate of the corporation is subject to the lien of a judg- ment and execution, as if there had never been a receiver.'^^ § 303. Title divested by appointment of receiver on final dissolution; departure from common-law rule. While, as is thus seen, the appointment of a receiver pendente lite, and before a final dissolution of the corporation, does not have the effect of divesting the title to its real property, a different ef- fect results from the appointment when made upon final dis- solution of the corporate body. At the common law, upon the dissolution or civil death of a corporation, all its real property remaining unsold at the time of such dissolution reverted to the original grantors or to their heirs, the reversion being a condi- tion annexed by law and resulting from the failure of the cause for which the grant was made."^^ The common-law rule, however, is now almost entirely obsolete, and in this country the disposition to be made of the corporate property upon dis- 77 Southern Bank of Kentucky v. title to its real estate vests in the Ohio Insurance Co., 22 Ind., 181. receiver, see Attorney-General v. 78 Montgomery v. Merrill, 18 Atlantic M. L. I. Co., 100 N. Y., Mich., 338. As to the effect of a re- 279. ceivership over an insolvent in- "9 Angell & Ames on Corpora- surancc company under the statutes tions, § 779, and cases cited, of New York and as to whether the CHAP. X.] CORPORATIONS. 365 solution is usually regulated by legislative enactments, having for their object the protection of creditors and shareholders. And the general tendency of the legislation and judicial deci- sions upon this subject is to regard all the property of a cor- poration, upon its dissolution, as a trust fund pledged to the payment of the demands of creditors and shareholders.^^ Thus, in New York, the common-law rule, that upon dissolu- tion of the corporate body the title to its realty reverts to the original proprietors or grantors, or to their heirs, is entirely obsolete, and under the laws of that state, the title to all the property, real or personal, vests in the receiver of the corpora- tion appointed upon its dissolution, for the benefit of the cred- itors and shareholders.^^ § 304. Waste of trust fund by officers of insurance and loan association ground for receiver; insolvency and as- signment; building and loan association; foreign life in- surance company. When creditors of a corporation have a charge upon a particular fund in the nature of a trust fund, for the satisfaction of their demands, the mismanagement and waste of such fund by the corporate officers intrusted with its control may warrant the court in appointing a receiver for the preservation of the property pendente lite. For example, upon a bill filed by persons insured in an insurance and loan associa- tion, against the directors and managers, showing gross mis- management upon the part of defendants, and that a large por- tion of the trust funds out of which the assured were to be paid had been lost by the negligence of defendants, and its appear- ing that the secretary of the association had absconded with a large amount of its funds, and that there was great danger of the remainder being wasted, the case was regarded as a plain one for an injunction and a receiver. And the aid of equity, in such a case, is founded upon the necessity of interfering to pre- vent waste of the funds in question, and also upon the breach of trust of the defendants charged with the management of the 80 Angell & Ames on Corpora- 81 Owen v. Smith, 31 Barb., 641. tions, § 779a. 366 RECEIVERS. [chap. X. trust fund.S2 j^ federal court may also entertain jurisdiction of a bill by a shareholder of a building and loan association for a receiver, the requisite conditions of citizenship existing", and may appoint a receiver, the corporation being shown to be insolvent, and its officers being charged with gross misman- agement of its affairs, and with fraudulent misappropriation 82 Evans v. Coventry, 5 DeG., M. & G., 911, reversing S. C., 3 Drew., 75. The motion for an injunction and receiver having been refused by the vice-chancellor, his decision was reversed by the lords justices upon appeal, and a receiver and an injunction were allowed. The grounds upon which the interfer- ence was based were stated by Lord Justice Knight Bruce, as follows, p. 916 : ". . . The application be- fore the court is founded on the common right of persons who are interested in property which is in danger to apply for its protection. Upon the bill and answer it appears that the plaintiffs are interested in the funds of that which was an association, under whatsoever cir- cumstances of honesty or dishon- esty constituted or carried on, but the affairs of which have ceased to be, and probably can never again be, in a state of activity. It was intimately connected with another society or alleged society, of a sub- sidiary nature. The defendants are persons, or include persons, who owed duties to those represented by the plaintiffs in respect of the funds of the society, for the pur- pose of care and protection. Those duties appear to have been aban- doned in a manner deserving, as it would at present appear, the strongest observation. This has led to a grievous loss, which has been sustained by persons of small means and in humble circumstances, who are ill able to bear it. These same defendants have now under their control, or in their power, a poor remnant of the property which they have so ill cared for. Whatever may be the specific allegations or want of specific allegations in the bill, the true and necessary result of the entire pleadings as they stand is, that this remnant of property is in danger. In my judgment, the objections which have been argued against this application, at the exist- ing stage of the cause, might be urged with as much reason, as much force, and as much effect, if this were an application to restrain the felling of timber or the destruction of a house. It is a case of waste, partly perpetrated and obviously imminent. But for the judgment which has been given, and for which I feel the most unaffected respect, I should have said, from my ex- perience of the practice of the court in Lord Eldon's time, that this was a plain case for that injunction, and that receiver, which I think ought now to be granted." And Lord Justice Turner adds : "Whatever else may be said of this motion, it can not be said that any argument has been omitted which could be urged against it. What the court has to look at is the position of the parties on the record. According CHAP. X.] CORPORATIONS. 367 and waste of its assets.^^ So the insolvency of a life insurance company and its assignment of all its property to a trustee for its creditors, without the authority of its stockholders, being an abandonment of the franchises of the company, constitute suffi- cient ground for a receiver in behalf of creditors.^^ But a re- ceiver should not be appointed over a foreign life insurance company where there are no assets within the state which could come into the possession of the receiver except assess- ments to become thereafter due from policy-holders resident in the state.85 § 305. Receivers in behalf of creditors of foreign cor- porations. Under the New York code of procedure, courts of equity jurisdiction are empowered to appoint receivers over to the allegation of the bill, verified by affidavit or admitted by the an- swer, the plaintiffs are in the posi- tion of parties who have a charge on the funds of what I may for the present purpose call the original association. The defendants are in the position of trustees of the asso- ciation. It appears that funds of that association have been lost by the act of the treasurer, whose con- duct it was the duty of the other de- fendants to superintend. Prima facie, therefore, there appears a clear case for the interference of the court; for I certainly can not accede to Mr. Selwyn's argument, that a breach of trust is not a suffi- cient ground for the interference of the court by the appointment of a receiver. Whether the plaintiffs will ultimately establish the commission of a breach of trust is not the ques- tion now before the court. It is ad- mitted that funds have been lost, of which it was the duty of the de- fendants to take care. That loss is prima facie evidence of a breach of the duty of the defendants, sufficient to authorize the interference of the court by the appointment of a re- ceiver." 83 Towle V. American B., L. & I. Society, 60 Fed., 131. And see Strauss v. Inter-State B. & L. Assn., 117 N. C, 308, 23 S. E., 450, 30 L. R. A., 693, 53 Am. St. Rep., 585; S. C, 118 N. C, 556, 24 S. E., 116. As to the power of the court, under the statute of Missouri, to appoint a receiver of a building and loan association during vacation, see State V. Phoenix Loan Assn., 159 Mo., 102, 60 S. W., 74; State v. Woodson, 161 Mo., 444, 61 S. W., 252. See Sjoberg v. Security S. & L. Assn., 73 Minn., 203, 75 N. W., 1116, 72 Am. St. Rep., 616, where the facts were held insufficient to justify the appointment of a re- ceiver of a building and loan asso- ciation upon a bill filed by a minor- ity of the shareholders. 84 Buck V. Piedmont & Arlington Life Insurance Co., 4 Fed., 849, 4 Hughes, 415. 85 Blackwell v. Life Association, 141 N. C, 117, 53 S. E., 833. 36S RECEIVERS. [chap. X. the effects of foreign corporations, upon the apphcation of judg- ment creditors, and are fully authorized to take charge of the property of such corporations in order to preserve it for the benefit of creditors and shareholders.^^ And the courts of a state may appoint a receiver over a foreign corporation having assets within the jurisdiction of the appointing court, although the courts of the domicile of the corporation or of some other state may already have placed its affairs in the hands of a receiver, the foreign receivership, in such case, being re- garded as ancillary to the original receivership. But a state court will not appoint a receiver over a foreign corporation, where it has no property in the state of appointment and has not appeared or been served with process and has no officers or other agents to control or represent it in the state of appoint- ment.^'^ And when a creditor of a foreign corporation has ob- tained judgment against the company in the state where it is incorporated, and in aid of his judgment has procured the ap- pointment of a sequestrator of the property of the corporation in that state, but the defendant transfers its property and assets to a new corporation in New York, upon no other consideration than shares of stock in the new company, the judgment creditor may enforce his judgment against the new company in New York, and may have a receiver in aid of such proceedings.^^ But when an association, incorporated in a foreign country, has been dissolved by a decree or order of the government of that country, but the decree of dissolution is not absolute and still leaves the corporation in existence for certain specified pur- poses, and it has property within the limits of this country un- der control of its officers resident here, the courts of this coun- try will not appoint a receiver of the assets here, upon grounds which would not have availed for that purpose in the foreign 86DeBemer v. Drew, 57 Barb., 88 Barclay v. Quicksilver Mining 438; Murray z*. Vanderbilt, 39 Barb., Co., 9 Ab. Pr., N. S., 283. See, 140. also, S. C, 6 Lans., 25. STHolbrook v. Ford, 153 111., 633, 39 N. E., 1091, 27 L. R. A., 324, 46 Am. St. Rep., 917. CHAP. X.] CORPORATIONS. 369 country.^9 And a receiver will not be appointed over a for- eign corporation upon behalf of local creditors unless it can be shown that he will be able to exercise the powers of a receiver.^^ § 306. Receiver appointed in one state over assets of corporation organized in another state. It is held in New York that when a corporation is created in another state and is in process of voluntary dissolution there, but a portion of its assets is in New York, in possession of some of its officers resi- dent there and subject to the jurisdiction of the New York courts, and not amenable to the courts of the state under whose laws the corporation was created and exists, upon a bill by shareholders in New York for an accounting and distribution, the court may appoint a receiver when it is shown that the cor- porate officers in New York are insolvent, and that the funds are in jeopardy. Under such circumstances, the courts of New York, having undoubted jurisdiction over the officers of the corporation resident in that state, as well as over the property there located, may properly interfere to preserve a fund which is endangered by the insolvency or improper conduct of de- fendants.^1 89 Hamilton v. Accessory Transit Co., 26 Barb., 46. And see Murray V. Vanderbilt, 39 Barb., 140. 90Stock]ey v. Thomas, 89 Md., 663, 43 Atl, 766. 91 Redmond v. Hoge, 3 Hnn, 171. The grounds of the jurisdiction, in such a case, are very clearly set forth by Davis, P. J., as follows, p. 175 : "The whole scope and story of this action may be stated almost in a sentence. The officers who have complete control of a foreign corporation, now in process of voluntary dissolution, being all residents of this city and having in their possession here certain funds of the corporation, which their own insolvency has put in jeopardy, and Receivers — 24. neither they nor the funds being amenable to the jurisdiction of the state under whose laws the corpora- tion was created and exists, refuse to make application of such funds to the creditors and stockholders in conformity to the proceedings for dissolution, or to put the same in a place of safety. They possess, be- ing all the executive and a majority of the administrative officers of the corporation, such power of control, that no suit can be commenced by the corporation itself to protect the fund. Is a court of equity of the state powerless, at the suit of a minority of the officers who are stockholders and personally inter- ested in the application and dislribu- 370 RECEIVERS. [chap. X. § 306a. Domiciliary receiver of mutual benefit associa- tion, when entitled to possession of assets in another state ; ancillary receiver. Where a mutual benefit association having a reserve fund held by subordinate lodges in various states, but owned and controlled by the supreme body, has be- come insolvent and a statutory assignee or a receiver in the na- ture of an assignee has been appointed by a court of the domicile of the corporation with power to collect the assets wherever found, or with the powers usually conferred upon receivers in such cases, such receiver or assignee may have ancillary receiv- ers appointed in other states who will be ordered to collect tion of the fund, to appoint a re- ceivership of the particular fund, and apply it, first, to the creditors of the corporation, and secondly, to the stockholders, in accordance with the proceedings for dissolution in the home state of the corporation? We have clearly jurisdiction of the persons of the officers in the state. We have jurisdiction of the prop- erty because it is within our terri- tory. The plaintiffs are also citizens of our state and show themselves to be remediless both in Connecticut and in the federal courts. We are not prepared to say, until some higher tribunal shall admonish us to the contrary, that this court has not, under such circumstances, power to intervene, so far as re- lates to the property actually within the state. The court is not power- less, in such a case, to enforce any judgment it may render, so long as it is limited to the particular fund which it finds here and takes from the hands of persons over whom its jurisdiction is complete and puts it into the safe keeping of its own of- ficers ; and we are aware of no au- thority which denies to us jurisdic- tion in a case containing all the ele- ments of that before us. It is idle to answer that the courts of Con- necticut have jurisdiction over the corporation; for such jurisdiction, so far as it affects the questions and remedies here, is futile. Its impotency was illustrated in the proceeding commenced in the supe- rior court of that state in which Eaton was appointed receiver, and in which he was forced, in sub- stance, to report that all the assets of the corporation were detained in the city of New York, and that 'he never has had, nor permitted to have, possession of any of the assets of the said corporation.* A receiver, if appointed there, must resort to our courts to reach the appellants and the fund in their hands, by an action similar to the present, and become substantially the receiver of this court, in order to acquire possession of the fund. But while no such officer exists in Connecticut, there seems to us no sound reason why the jurisdiction of this court may not be invoked to preserve a fund now in the hands of persons in our jurisdiction and in danger of being lost by their insolvency or improper use." CHAP. X.] CORPORATIONS. 371 and transmit the local assets to the domiciliary receiver, or, if a receiver has already been appointed in the foreign state, the domiciliary receiver may intervene in such pro- ceeding and the receiver there appointed will be required to turn over the local assets to the domiciliary receiver. Such a case differs from one in which there is a contest between gen- eral creditors for the possession of assets, since the members of such an association are held to have contracted with refer- ence to an equal and ratable distribution of the assets among all members wherever located without regard to their domicile, and to have impliedly agreed that such distribution shall be made by a court of the domicile of the corporation which is the only court by which it may be effectively done.^^ And in such case the application to have the local receiver surrender the local assets to the domiciliary receiver may be maintained by a certificate-holder and member of the association.^^ But it is important to observe that the local court, in directing its receiver to surrender the local assets to the principal re- ceiver, will see that the necessary steps are taken to presei-ve equality and to secure to the local members their proportionate share of the assets upon the final distribution.^^ And where 92 Buswell V. Supreme Sitting, 161 Mass., 224, 36 N. E., 1065, 23 L. R. A., 846 ; Ware v. Supreme Sit- ting, (N. J.) 28 Atl., 1041; Bald- win V. Hosmer, 101 Mich., 119, 59 N. W., 432, 25 L. R. A., 739; Dur- ward V. Jewett, 46 La. An., 559, 15 So., 386; Smith v. Taggart, 30 C. C A., 563, 87 Fed., 94, 57 U. S., App., 493 ; Wheeler v. Dime Savings Bank, 116 Mich., 271, 74 N. W., 496, 72 Am. St. Rep., 521. In Fawcett V. Supreme Sitting, 64 Conn.. 170, 29 Atl., 614, 24 L. R. A., 815, it was held that the certificate-holders in Connecticut had the right to treat their contracts with the order as rescinded upon the insolvency of the corporation and thereupon to demand the return of what they had paid in, and that their claims then became in the nature of those of general creditors, and the court accordingly denied the application of the domiciliary receiver to have the local receiver surrender the as- sets collected by him. And in Failey v. Fee, 83 Md., 83, 34 Atl., 839, it was held that the holders of matured certificates were to be con- sidered and treated as general cred- itors and that their prior attach- ment liens should therefore be given a preference over the claim of the domiciliary receiver. 93 Ware v. Supreme Sitting, (N, J.) 28 Atl, 1041. 94 Buswell V. Supreme Sitting, 372 RECEIVERS. [chap. X. the court of original appointment had ordered that all funds of the local branches be turned over to the domiciliary receiver and that, in default thereof, the local receivers should be barred from receiving any distribution upon the claims represented by them until all others who had accounted should be fully paid, it was held that members of the association who were within the jurisdiction of a foreign court which refused to comply with such order but directed the local funds to be distributed among the local creditors and who were thereby prevented from com- plying with the order of the domiciliary court, might intervene in the original proceeding and prove their claims therein for the balance remaining due after the payment of the amounts re- ceived under the distribution made by the foreign court.^^ And upon the appointment of a receiver to wind up the affairs of an insolvent life insurance company in the state of its incorpora- tion, in accordance with the laws of that state, policy-holders residing in another state will not be allowed a receiver over the property of the company in the latter state, as against the receivers of the state in which the company was incorporated. In such case the policy-holders are treated as having contract- ed with reference to the laws of the state of incorporation, and are bound thereby. And the receivers thus originally appointed may have an ancillary receiver appointed in such foreign state to convert the assets of the company there located into money, and to remit the proceeds for distribution in the original suit.^^ § 306&. Ancillary receiverships. It has already been shown that a receiver has no extraterritorial right of action and that it is only upon considerations of comity that he will be permitted to maintain actions in the courts of a foreign state, and that such comity has never been carried to the extent of permitting a foreign receiver to deprive local creditors of their 161 Mass., 224, 36 N. E., 1065, 23 96 Parsons v. Charter O. L. I. L. R. A., 846; Baldwin v. Hosmer, Co., 31 Fed., 305. See, further, as 101 Mich., 119, 59 N. W., 432, 25 L. to ancillary receiverships, Williams R. A., 739. V. Hintermeister, 26 Fed., 889. 93 Cowan v. Failey, 149 Ind., 382, 49 N. E., 270. CHAP. X.] CORPORATIONS. 373 rights in local assets to which the receiver lays claim. ^'^ In accordance with this principle, it is held that where a receiver appointed by the court of one state over an insolvent corpora- tion goes into another state and procures the appointment of an ancillary receiver, attachment liens obtained upon local assets by local creditors prior to the appointment of the ancil- lary receiver will be given preference over the claims of the latter, and such ancillary receiver will accordingly not be per- mitted to transmit the local assets to the court of original appointment until the claims of such local creditors have been satisfied. ^^ Upon the other hand, where a receiver has been appointed over an insolvent corporation by the court of the state of its domicile and an ancillary receiver is afterward ap- pointed in another state to take possession of assets there lo- cated, the latter may be required tO' turn over such assets to the domiciliary receiver where no creditors of the foreign state have acquired any priority of lien upon such assets.^^ And where the original order of appointment of a receiver over an in- solvent corporation gives him power to institute actions to re- cover property or money due the corporation, and he after- ward receives an ancillary appointment in another district with the same powers as were given by the original order of ap- pointment, he may maintain an action in the federal court of the latter district.^ Ai;id upon the presentation of the proceed- ings of a court of a foreign state appointing a receiver over an insolvent corppration of that state, a federal court in another state may appoint an ancillary receiver to take possession of the property and assets of the corporation in the latter state and may authorize him to sell and dispose of them.^ But the 97 Ante, § 47. 99 Sands v. Greeley & Co., 31 C. 98 Second National Bank v. C. A., 424, 88 Fed., 130, 59 U. S. Lappe T. Co., 198 Mass., 159, 84 App., 610. N. E., 301 ; Thornley v. Walsh Co., 1 Bay State Gas Co. v. Rogers, 200 Mass., 179, 86 N. E., 355. See 147 Fed., 557. Irwin V. Granite S. P. Assn., 56 N. 2 Scaife v. Scammon I. & S. J. Eq., 244, 38 Atl., 680, as to the Assn., 71 Kan., 402, 80 Pac, 957. practice in New Jersey in ancillary receiverships. 374 RECEIVERS. [chap. X. receiver of an insolvent foreign corporation appointed by a court of the state of its domicile in a proceeding for the wind- ing-up of the corporation, with power to demand, sue for and collect all the property and effects of the corporation can not maintain an action in another state against the corporation as sole defendant for the sole purpose of procuring the appoint- ment of an ancillary receiver.^ § 307. In proceedings by quo warranto against corpora- tion, receiver not appointed before judgment of forfeiture ; nor upon involuntary dissolution by expiration of charter. It is held, under the code of procedure in New York, upon pro- ceedings by the attorney-general in the nature of a quo zvar- ranto, for the dissolution of a corporation and the forfeiture of its franchises, that the court has no power to appoint a re- ceiver before judgment of forfeiture, although an injunction may properly issue to prevent the corporation from doing any illegal act, or from disposing of its funds."* And in proceed- ings in quo luarranto for the forfeiture of the charter and fran- chises of a corporation, under the code of procedure of Califor- nia, pending an appeal from a judgment of forfeiture, the court has no jurisdiction to appoint a receiver of the property of the corporation.^ And it is held that the involuntary dissolution of a corporation resulting from the expiration of its charter by limitation of time constitutes no ground for a receiver upon behalf of shareholders, where its property and assets and the management of its affairs are in the hands of the persons des- ignated by statute.^ 3 Mabon v. Ongley Electric Co., with the business and property of 156 N. Y., 196, 50 N. E., 805. the corporation in such case, after 4 People V. Washington Ice Co., the issuing of a writ of prohibition 18 Ab. Pr., 382. And see Eel River to the court below, Havemeyer v. R. Co. V. State, 155 Ind., 433, 57 Superior Court, 87 Cal., 267, 25 N. E., 388. Pac, 433. 5 Havemeyer v. Superior Court, 6 Anderson v. Buckley, 126 Ala., 84 Cal., 327, 24 Pac, 121. And see. 623, 28 So., 729. But see Buckley as to proceedings against such a re- v. Anderson, 137 Ala., 325, 34 So., ceiver for contempt in interfering 238, where, upon the facts, it was CHAP. X.] CORPORATIONS. 375 § 308. Corporation allowed to give bond to judgment creditor in lieu of receiver; case retained for accounting. In the case of a corporation transacting a large business and where large interests are involved, upon application for a re- ceiver in behalf of a judgment creditor seeking the enforce- ment of his judgment against the corporation, the court may give the defendant an opportunity of preventing the interfer- ence of a receiver by giving security in lieu thereof. And for this purpose a reasonable time may be allowed the defendant corporation, within which to file a bond with sufficient sureties, to secure the plaintiff in any recovery which may be had in his action.'^ And although the facts may not warrant a receiver in behalf of mortgage bondholders of a corporation, as of a canal company, the court may yet retain the cause for the pur- pose of requiring the company to render accounts from time to time of its receipts and disbursements, for the information and protection of such bondholders.^ § 309. Appointment of receiver no defense to action against shareholder for unpaid subscription. When an ac- tion has been instituted by a corporation against one of its shareholders, to recover the amount of his unpaid subscription to the capital stock of the company, it constitutes no defense to such action, that a receiver is afterward appointed over the corporation, and the action will not be defeated because of such appointment ; especially when the receiver has taken no steps to possess himself of the cause of action, or to collect the amount due from defendant.^ And the appointment of a temporary receiver over a foreign corporation by a federal court in an- other state will not prevent the corporation from maintaining held that plaintiff was entitled to a 8 Stewart v. Chesapeake & Ohio receiver over the corporate property Canal Co., 5 Fed., 149, 4 Hughes, after the dissolution of the corpora- 47. tion by expiration of its charter by 9 Glenville Woolen Co. v. Ripley, limitation of time. 43 N. Y., 206. 7 Barclay v. Quicksilver Mining Co., 9 Ab. Pr., N. S., 283. And see, ante, §§ 9, 124, post, § 478. 376 RECEIVERS. [CIIAP. X. an action against a shareholder for the recovery of his unpaid stock subscription.^^ § 310. Registration of shares in receiver's hands. Where certain shares of stock in an incorporated company are in the hands of its receiver, the certificates having been duly issued to him, and the certificates are entitled to be registered by the registering agent of the company, and to be certified as repre- senting shares duly registered, such registration being a val- uable privilege appurtenant to the shares, one who prevents them from being so registered, and who converts the privilege to his own use, by procuring it to be conferred upon an equal number of shares of his own stock, may be compelled by the court to make good the stock in the hands of the receiver by restoring such privilege.^l § 311. Receiver not granted over dividends due from college fellowship. It has been held in England, in a case where the defendant, holding a fellowship in a college corpora- tion, had assigned the profits thereof to the plaintiff, that the latter could not have a receiver of the dividends and moneys due from such fellowship. 12 § 312. One corporation may be appointed receiver over another. The principles governing courts of equity in the selection of receivers over corporations are sufficiently treated elsewhere in this volume.^^ It may be here observed, how- ever, that the receiver of a corporation need not necessarily be an individual person, and a corporate body may itself be ap- pointed receiver of another corporation, upon the insolvency of the latter.l4 § 312a. Duty of officers to deliver assets to receiver. When a receiver is appointed over a corporation, with the usual 10 Sigua Iron Co. v. Brown, 171 14 Jn ye Knickerbocker Bank, 19 N. Y., 488, 64 N. E., 194. Barb., 602. And see as to consid- 11 Erie R. Co. v. Heath, BBlatchf. erations governing the court in se- 536. lecting a receiver of a large bank- 12 Berkeley v. Kings College, 10 ing corporation, whose assets are Beav., 602. of great value. In re Empire City 13 See chapter III, ant,. Bank, 10 How. Pr., 498. CHAP. X.] CORPORATIONS. 377 powers of receivers, and specially empowered by the order of the court to receive all the effects and choses in action of the corporation, such order involves a correlative duty upon the part of the corporate officers to deliver the assets to the receiv- er, even though such delivery is not specifically directed by the court. A failure, therefore, by the officers of the corporation to deliver its assets to the receiver, and their sale by such offi- cers, constitute a contempt of court and will be punished as such.i^ § 312b. Receiver's certificates. The question of the power of a court of equity which has undertaken to administer the assets of an insolvent corporation, other than a railway company, by the appointment of a receiver, to create indebted- ness for the management and operation of the property, and to charge the same as a lien upon the property, or upon the pro- ceeds of its sale, prior to mortgage indebtedness, and to issue receiver's certificates of indebtedness therefor, has given rise to some conflict of authority.^^ It has been held in the case of a water-works company that the court might, in the distri- bution of the proceeds of sale, allow priority over mortgage bondholders to receiver's certificates issued for the maintenance and operation of the property, for expenses of administration and for the costs of litigation.^"^ Receiver's certificates have also been issued to raise funds for the completion of a ship canal when such completion within a given time was necessary to prevent the lapsing of a valuable land grant.^^ The result, 15 Young V. Rollins, 90 N. C, 125. Rep., 650. As to the effect of an 16 As to the power to issue such order appointing a receiver over an certificates in cases of railway re- insolvent corporation and requiring ceiverships see Chapter XI, post, him to carry out existing contracts Subdivision VI, entitled "Receiver's with third persons, and as to the Certificates." rights of creditors under such con- 1'^ Ellis V. Vernon I., L. & W. Co., tracts for the purchase and sale of 86 Tex., 109, 23 S. W., 858. materials, as against mortgage 18 See, for a discussion of such bondholders, see Olyphant v. St. certificates, Jerome v. McCarter, 94 Louis O. & S. Co., 28 Fed., 729. As U. S., 734; Kent v. Lake Superior to the right of general creditors for Canal Co., 144 U. S., 75, 12 Sup. Ct. labor, materials and supplies fur- 27S RECEIVERS. [chap. X. however, of the later decisions has been to set the question at rest, and it may now be stated as a general rule supported by the overwhelming weight of authority that, in the case of a purely private as distinguished from a quasi-public corporation, the court will not, as against the objection of a minority of the bondholders, issue receiver's certificates and make them a prior lien upon the mortgaged property, for the purpose of procur- ing funds to continue the management and operation of the business, the power of the court to incur liabilities being lim- ited strictly to the necessary care and preservation of the prop- erty during the receivership. Such cases are held to be dis- tinguishable from receiverships over railways, where, from the peculiar character of the property and its relations to the public, such certificates are sometimes issued.^^ Thus, in an nished to a corporation before the appointment of a receiver to pref- erence over mortgage bondholders, under the statutes of Virginia and independent of statute, see Seventh National Bank v. Shenandoah Iron Co., 35 Fed., 436; Fidelity I. & S. D. Co. V. Shenandoah Co., 42 Fed., 372, where such preference was de- nied, the cases being distinguished from receiverships over railways where such claims have been pre- ferred. And see American Pig Iron S. W. Co. V. German, 126 Ala., 194, 28 So., 603, 85 Am. St. Rep., 21; Smiley v. Sioux B. S. Co., 71 Neb., 581, 101 N. W., 253, 99 N. W., 263 ; Fisher v. Trust Co., 138 N. C, 90, SO S. E., 592; Nisbet v. Great Northern C. Co., 41 Wash., 107, 83 Pac, 15. 19 Farmers' Loan & Trust Co. v. Grape Creek Coal Co., 50 Fed., 481, 16 L. R. A., 603; International Trust Co. V. United Coal Co., 27 Colo., 246, 60 Pac, 621, 82 Am. St. Rep., 59, and note; Standley v. Hen- drie & B. M. Co., 27 Colo., 331, 61 Pac, 600; Belknap Savings Bank v. Lamar L. & C. Co., 28 Colo., 326, 64 Pac, 212; Hooper v. Central Trust Co., 81 Md., 559, 32 Atl., 505, 29 L. R. A., 262; Merriam v. Victory Mining Co., 37 Ore., 321, 56 Pac, 75, 58 Pac, 37, 60 Pac, 997; United States Investment Cor- poration V. Portland Hospital, 40 Ore., 523, 64 Pac, 644, 67 Pac, 194, 56 L. R. A., 627; Hanna v. State Trust Co., 16 C. C. A.. 586, 70 Fed., 2, 36 U. S. App., 61, 30 L. R. A., 201 ; Baltimore B. & L. Assn. v. Alderson, 32 C. C. A., 542, 90 Fed., 142, 61 U. S. App., 636; Interna- tional Trust Co. V. Decker Bros., 81 C. C. A., 302, 152 Fed., 78; Bern- ard V. Union Trust Co., 86 C. C. A., 610, 159 Fed., 620; Laughlin v. United States Rolling Stock Co., 64 Fed., 25 ; Fidelity Insurance, T. & S.-D. Co. V. Roanoke Iron Co., 68 Fed., 623 ; Newton v. Eagle & P. Mfg. Co., 76 Fed., 418; Doe v. Northwestern C. & T. Co., 78 Fed., 62. And see Farmers' Loan & Trust Co. V. Bankers & M. T. Co., CHAP. X.] CORPORATIONS. 379 action by a shareholder to dissolve and wind up the affairs of an insolvent hotel company, the court should not, by an ex parte order, issue receiver's certificates for the payment of v^^ages and make such certificates a lien upon the property prior to its mort- gage bonds, the bondholders not being parties to the cause and having no notice of the application for such order. Nor may such priority be justified upon the ground that the laborers whose wages are to be thus paid are in desperate circum- stances and have become riotous and threaten the destruction of the property, since such facts do not make the debt one which is necessary to the preservation of the property, and it will not be assumed that the ordinary agencies of the law are inadequate to furnish the necessary protection.20 So upon a bill filed by a shareholder and simple contract creditor of a hotel company praying for the appointment of a receiver over the property of the corporation and for the issuing of receiver's certificates to complete and furnish the hotel, it is improper to authorize the issuing of such certificates without the consent of the creditors whose liens against the property would be thereby affected.^i 148 N. Y., 315, 42 N. E., 707, 31 tion, and with the proper parties L. R. A., 403, 51 Am. St. Rep., 690. present, through the instrumen- In International Trust Co. v. Unit- tality of a receiver carry on the ed Coal Co., 27 Colo., 246, 60 Pac, business of private corporations 621, 83 Am. St. Rep., 59, supra, or individuals temporarily, and Campbell, C. J., uses the following incur obligations therefor that language: "After a careful con- may be made a paramount lien sideration of all the authorities on the corpus of the property, such cited, we are of opinion that, in obligations must have been con- administering the affairs of an or- tracted for, and must relate strictly dinary insolvent private business tc, the preservation of the status of corporation for which a receiver the property at the time of the ap- has been appointed, a court of equity pointment of the receiver. We are has not the power to authorize the not disposed to extend the doctrine receiver to incur indebtedness for established by the federal courts in carrying on the business and to administering upon insolvent rail- make the same a first and para- way corporations to those of or- mount lien upon the corpus of the dinary business corporations." property superior to that of prior 20Raht v. Attrill, 106 N. Y., 423, lien holders without their consent. 13 N. E., 282. While it may, in the proper ac- 2lBaltimore B. & L. Assn. v. 380 RECEIVERS. [chap. X. And where the holders of certificates which have been issued by the receiver of a private corporation and which have been given a preference over other claims upon the property in the possession of the receiver are voluntarily surrendered by the holders thereof, who, in their place, take a later issue of cer- tificates which have not been given a preference by the order authorizing them, such certificates are entitled to no preference over the other claims against the estate.22 § 312c. Conflict of authority as to preference for labor and supply claims incurred before receivership. As to the right of the holders of labor and supply claims, incurred a short time prior to the appointment of a receiver over a purely private corporation, to be preferred over the mortgage bond- holders and general creditors in the payment of their claims, there is a conflict of authority. The supreme court of Alabama has held that the principle upon which a preference is allowed in such cases is one of equity, and, recognizing the undoubted right to a preference in the case of receiverships over railway and other quasi-public corporations, they hold that the equity in favor of the allowance is the same in the case of a private corporation, and they have accordingly allowed a preference over the mortgage debt in favor of the claims of laborers for wages incurred a short time prior to the appoint- ment of the receiver. The right to the preference is also based upon the theory that the claims in question have resulted in the betterment of the property. ^3 And the doctrine as thus laid down has been applied in Mississippi. ^^ And in Massachu- setts it is held, upon a bill for a receiver over an insolvent Alderson, 32 C. C. A., 542, 90 Fed., son v. Saunders, 63 C. C. A., 666, 142, 61 U. S. App., 636. 129 Fed., 16, where a preference 22 Lewis V. Lindeen Steel Co., 183 seems to have been allowed by con- Pa. St., 248, 38 Atl., 606. sent of the parties. As to the al- 23 Drennen v. Mercantile T. & D. lowance of such claims in cases of Co., 115 Ala., 592, 23 So., 164, 39 railway receiverships, see Chapter L. R. A., 623, 67 Am. St. Rep., 72. XI, post, Subdivision IV, entitled 24LeHote v. Boyet, 85 Miss., "Preferred Debts." 636, 38 So., 1. And see Dickin- CHAP. X.] CORPORATIONS. 381 private corporation filed by creditors, that unpaid wages due to operatives, clerks and servants of the corporation to an amount not exceeding one hundred dollars for labor performed within one year prior to the appointment of the receiver should re- ceive a preference in the settlement of the receiver's accounts.^^ § 312d. Weight of authority is opposed to preference. The weight of authority, however, sustains the opposite view, which limits the right to a preference to receiverships over rail- way or other quasi-public corporations and will not recognize it in the case of a purely private corporation. Thus, in Oregon it is held that claims for labor and supplies furnished shortly before the appointment of a receiver over a private corporation should not be allowed a preference over the mortgage indebt- edness. ^6 So, also, where a railway company, although or- ganized for the purpose of operating a railway, was in fact en- gaged in a private business and claims for labor and supplies furnished within ninety days prior to the appointment of a re- ceiver were incurred in connection with such business, a pref- erence over the lien of the mortgage was refused.^"^ As is 25 Jones v. Arena Publishing Co., of estates by receivers, be entitled 171 Mass., 22, 50 N. E., 15. In this to priority in the order named : case the court base the decision up- . . . Second, Wages to an on the ground that since the wage- amount of not more than one hun- earners would have been allowed a dred dollars due to an operative, preference at law under an assign- clerk or servant for labor, either ment for the benefit of creditors, performed within one year last the creditor can not deprive them of preceding the appointment of the this preference by resorting to receiver or for the payment for equity for the appointment of a re- which a suit, which was commenced ceiver, although Chief Justice Field, within one year after the perform- in his dissenting opinion, points out ance of the labor, is pending or was that there was no statute in force terminated within one year after when the suit was commenced such appointment." which gave priority of one unse- 26 Merriam v. Victory Mining cured debt over another, which, in Co., 37 Ore., 321, 56 Pac, 75, 58 terms, applied to the proceeding. Pac, 37, 60 Pac, 997. This case was decided in 1898. By 27 Security Trust Co. v. Goble R. the Revised Laws of 1902, c. 150, Co., 44 Ore., 370, 74 Pac, 919, 75 § 29, it is provided : "The follow- Pac, 697. ing claims shall, in the settlement 382 RECEIVERS. [chap. X. elsewhere pointed out, the allowance of such claims in any case is indefensible upon sound principle, and, while the right to the preference is too firmly established to admit of doubt in the case of railway receiverships, it is confidently believed that, with- out the aid of statutory enactment, the doctrine will not be gen- erally extended to the case of purely private corporations. § 312^. Abuse of corporate franchise as ground for re- ceiver in quo warranto proceeding for forfeiture of charter. It has been held, w^iere a corporation was engaged in violating the laws of the state and was misusing its corporate powers and franchise by holding and conducting prize-fights in viola- tion of the statutes of the state, that the state, upon the relation of her law officers, might maintain a proceeding brought for the dissolution of the corporation and the forfeiture of its franchise, and could have an injunction against the holding of such prize-fights, and, as an incident thereto, could procure the appointment of a receiver to take possession of the proper- ty and premises in which such events were being carried on. 28 So a receiver of the property of a non-resident corporation do- ing business in Kansas was held properly appointed in an or- iginal proceeding in the supreme court by quo warranto to oust the corporation from doing business in the state upon the ground that it was sellins: intoxicating liquors in violation of the laws of the state.29 28 Columbian Athletic Club v. 29 State v. Anheuser-Busch B. State, 143 Ind., 98, 40 N. E., 914, Assn., 76 Kan., 184, 90 Pac, 777. 28 L. R. A., 727, 52 Am. St. Rep., 407. CHAP. X.] CORPORATIONS. 383 II. Functions, Duties and Rights of Action of the Receiver. i 313. Want of harmony in the decisions. 314. Receiver of insolvent corporation a trustee for creditors and shareholders. 315. Receiver represents the corporation for purposes of litigation; may recover funds in another state. 315o. May purchase at mortgage sale; may prosecute or defend suits. 316. Succeeds to all rights of action of the corporation; trover for conversion of note; suit on note for policy of insurance; suit for money due, or improperly disposed of. 317. Rights of action of receiver of insolvent bank, 317a. Right to enforce individual or additional liability of stock- holders. 317&. Right to enforce such liability in foreign state. 317c. The same; receiver as quasi-assignee. 318. Appointment does not change rights of action or contract rela- tions; same defenses allowed; mutual insurance company; change of corporate name. 319. Receiver cannot disaffirm settlement made by corporation; can not sue on canceled note of insurance company. 320. May disaffirm act of corporation in fraud of creditors; illegal transfer of securities; fraudulent disposal of money and notes; illegal mortgage; fraudulent judgment and transfers. 321. Right of action to recover illegal dividends declared by in- solvent corporation. 322. When powers derived wholly from statute. 323. Presumption as to receiver's right to divide assets among creditors. 324. Receiver's right of action to recover of shareholders unpaid subscriptions to capital stock. 324a. Defenses to such actions; transfer of shares. 325. Shareholder can not enjoin receiver from collecting unpaid subscription; defense of fraud not admissible when all parties participated. 326. Receivers of mutual insurance companies may recover assess- ments due on premium notes; action in foreign state. 327. What receiver must allege to maintain this class of actions. 328. Liability of makers of premium notes not increased by ap- pointment of receiver; assessment must be alleged and proven. 329. Receiver takes place of directors in making assessment, sub- ject to sanction of court. 384 RECEIVERS. [chap. X. § 330. Acts in a ministerial and not a judicial capacity; may re-assess for unpaid balances. 331. When may assess all notes; what proof required as to losses. 332. Receiver may allow equitable claims for losses. 333. Principles governing set-offs in actions by receivers of corporations. 334. Discretion as to compromising demands against the corpo- ration; may decline to ratify contract; may not waive ex- press stipulations of insurance policy. 335. Limited to allowance of claims recoverable against the corpo- ration. 336. Court may authorize receiver to compromise doubtful claims; receiver may allow salaries of ofiicers pro rata; when such salaries not allowed. 337. Receiver may exercise option of company as to deposit of collaterals. 338. May assign chose in action; sale not set aside because applied for by creditor who was also a judge of the court. 339. When defendant entitled to costs out of fund in receiver's hands. 340. Judgment against receiver for taxes, enforced only against funds in his hands as receiver. 341. Enforcement of demand by receiver against debtor, not a taking under legal process. 342. Receiver should not himself apply money in payment of judg- ments; distribution made by court. 342a. Ancillary bill by receiver to determine claims to property in his possession; injunction. § 313. Want of harmony in the decisions. It has already been shown, that in most of the states of this country, the gen- eral jurisdiction of courts of equity over corporations has been enlarged by legislation to the extent of authorizing the ap- pointment of receivers in behalf of creditors and shareholders. The general purpose of these legislative enactments has been to provide adequate protection, in case of insolvency of the cor- porate body or of misconduct on the part of its officers, to those who might otherwise be without remedy in the usual course of proceedings at law. The question of the status or relation oc- cupied by receivers thus appointed, and of their duties and functions, is one of much importance; and while a want of har- mony is sometimes apparent in the decisions upon these points, it is believed that they are generally susceptible of being har- CHAP. X.] CORPORATIONS. 385 monized, and that they are not inconsistent with established principles of equity. § 314. Receiver of insolvent corporation a trustee for creditors and shareholders. As regards the relation occu- pied by the receiver of an insolvent corporation towards the parties in interest, the better doctrine undoubtedly is that he stands as the representative, both of the creditors of the cor- poration and of its shareholders. He is not, therefore, the agent or representative of the corporation exclusively, but is to be regarded rather as a trustee for both creditors and share- holders. ^^ Thus, under the laws of New York authorizing the appointment of a receiver of the effects of a corporation, upon the application of a judgment creditor after return of execution unsatisfied, it is held that the receiver, by virtue of his appoint- ment, becomes a trustee, not only for the creditor on whose ap- plication he was appointed, but for all other creditors of the corporation, and also. a trustee for the shareholders, in which capacity he is as much bound to guard and subserve their in- terests as those of the creditors.^^ And while a receiver rep- 30 Gillet V. Moody, 3 N. Y., 479; banking corporation, under the laws Talmage v. Pell, 7 N. Y., 347; Libby of Ohio, Lafayette Bank v. Buck- V. Rosekrans, 55 Barb., 217; In re ingham, 12 Ohio St., 419; State v. Coleman, 174 N. Y., 373, 66 N. E., Claypool, 13 Ohio St., 14. 983; Alexander v. Relfe, 74 Mo., 31 Libby v. Rosekrans, 55 Barb., 495; Farwell v. Great Western Tel. 217, 220. But see Atchison v. Da- Co., 161 111., 522, 44 N. E., 891; vidson, 2 Pin. (Wis.), 48, where it Franklin National Bank v. White- is held that receivers of corpora- head, 149 Ind., 560, 49 N. E., 592, tions are appointed for the benefit 39 L. R. A., 725, 63 Am. St. Rep., of creditors, with power and author- 302; Hamor v. Taylor-Rice E. Co., ity to collect and pay over to them 84 Fed., 392. But see Atchison v. the assets. The choses in action Davidson, 2 Pin. (Wis.), 48. See, of the corporation, it is held, are in as to functions and powers of a re- the possession of the receivers for ceiver of a moneyed corporation un- the creditors, and are to all intents der the statutes of New York, ap- and purposes the property of the pointed in behalf of a judgment creditors, the receivers holding the creditor, after execution returned property and assets of the corpora- unsatisfied, Angell V. Silsbury, 19 tion in trust for the creditors, as How. Pr., 48. And see, as to func- the agents of the court, tions of a receiver over an insolvent Receivers— 2.'^ 386 RECEIVERS. [chap. X. resents the court in the sense that he derives his power from the court and acts for it, he represents all the parties entitled pri- marily or otherwise to the trust fund and in this sense is to be regarded as a trustee for all.^^ /^ii^j where an insolvent cor- poration has conveyed property to one of its creditors in pref- erence to the others, such a conveyance being declared by stat- ute to be for the equal benefit of all creditors, he is regarded as more than the representative of the corporation, but as repre- senting all the creditors, and he may consequently maintain an action to recover the property so conveyed, although the as- signment would have been valid as against the corporation it- self.^3 And the receiver of an insolvent corporation and not a creditor is the proper party to maintain an action to recover property and assets belonging to the corporation. ^^ § 315. Receiver represents the corporation for purposes of litigation; may recover funds in another state. While the receiver of an insolvent corporation is thus treated as the representative of both creditors and shareholders, so far as any beneficial interest is concerned, yet, for the purpose of deter- mining the nature and extent of his title, he is regarded as rep- resenting only the corporate body itself, and not its creditors or shareholders, being vested by law with the estate of the corporation, and deriving his own title under and through it. For purposes of litigation, therefore, he takes only the rights of the corporation, such as could be asserted in its own name, and upon that basis only can he litigate for the benefit of either shareholders or creditors, except when acts have been done in fraud of the rights of the latter, but which are valid as against 32 Harrigan ^'. Gilchrist, 121 Wis., 330; First National Bank v. Dove- 127, 249, 99 N. W., 909, 941. tail B. & G. Co., 143 Ind., 534, 42 33 Industrial Mutual D. Co.'s Re- N. E., 924; Big Creek Stone Co. ceiver v. Taylor, 118 Ky., 851, 82 v. Seward, 144 Ind., 205, 42 N. E., S. W., 574. And see, post, § 320. 464, 43 N. E., 5; Northwestern 34 National State Bank v. Vigo Mutual Life Ins. Co. v. Kidder, County National Bank, 141 Ind., 162 Ind., 382, 70 N. E., 489. 352, 40 N. E., 799, 50 Am. St. Rep., CHAP. X.] CORFORATIONS. 387 the corporation itself, in which case he holds adversely to the corporation. 35 And as regards the nature of the defense which he may interpose in an action brought against him in his offi- cial capacity, it would seem that he stands in no better posi- tion than the corporation would have done, and is to this ex- tent its representative. Thus, when the laws of the state pre- ss Curtis V. Leavitt, 15 N. Y., 44; Alexander v. Relfe, 74 Mo., 495, Voorhees v. Indianapolis C. & M. Co., 140 Ind., 220, 39 N. E., 738. The doctrine of the text is well stated by Mr. Justice Comstock, in Curtis V. Leavitt, 15 N. Y., 44, as follows : "The appellant, as re- ceiver (of an insolvent banking cor- poration), has no interest in or power over the property affected by the trusts in question, except such as he derives under the stat- utes which have been mentioned. It has been said in this, as in other cases, that he represents the credit- ors and the stockholders, but for all the purposes of inquiring into this title, he really represents the corporation. He is by law vested with the estate or the corporate body, and takes his title under and through it. It is true, indeed, that he is declared to be a trustee for creditors and stockholders ; but this only proves that they are the bene- ficiaries of the funds in his hands, without indicating the sources of his title or the extent of his powers. If, then, in a controversy between the receiver and thivd parties, in respect to the corporate estate, it is possible to form a conception of rights, legal or equitable, belonging to the shareholders as individuals, which the corporation itself could not assert in its own name, the re- ceiver does not represent those rights. So far as shareholders are concerned, he can litigate respect- ing the fund upon precisely the grounds which would be available to the corporation, if it were still in existence, solvent, and no receiver- ship had been constituted. In re- gard to creditors, I should certainly incline to take the same view of his rights and powers under the stat- utes referred to. It has, however, been uniformly assumed, and was not denied on the argument, that he succeeds to the rights of credit- ors, and takes his title under them, where conveyances have been made in fraud of their rights, but other- wise valid. In such cases, he held adversely to the debtor corporation. For all the purposes of the present controversy, I shall proceed upon this assumption. In general, then, a receiver of this description takes merely the rights of the corpora- tion, such as could be asserted in its own name, and on that basis only can he litigate for the benefit of either stockholders or creditors, except when acts have been done in fraud of the rights of the latter, but valid as to the corporation itself." See, also, Pittsburg Carbon Co. V. McMillin, 119 N. Y., 46. 23 N. E., 530; Smith v. Johnson, 57 Ohio St., 486, 49 N. E., 693. But see, contra, Republic Life Insurance Co. V. Swigert, 135 111., 150, 25 N. E., 680. where it is held that a re- 388 RECEIVERS. [chap. X. hibit a corporation from interposing the defense of usury to any action brought against it, it would seem that the receiver is affected by the prohibition to the same extent as the corpora- tion itself would have been.^'^ g^t when a court of competent jurisdiction has appointed a receiver over an insolvent corpora- tion of that state, and has undertaken the administration of its assets, such receiver may maintain an action against representa- tives of the corporation in another state to recover funds of the corporation in their possession. ^'^ ceiver of an insolvent life in- surance companj-, under the stat- ute of Illinois for the winding up of such companies, may enforce no rights of action which the company itself might not have enforced. And the company having surren- dered their certificates of stock to stockholders who had paid but twenty per cent, of their subscrip- tions, and having issued to them new certificates for the number of shares at par represented by the twenty per cent, so paid, it was held that the receiver could not maintain an action against such shareholders to recover for the ben- efit of creditors the amount of their original unpaid subscriptions, the transaction being binding as between the shareholders and the corporation, and one which the lat- ter could not have set aside. In Young V. Stevenson, 180 111., 608, 54 N. E., 562, 72 Am. St. Rep., 236, it was held that the receiver of a building and loan association ac- quired no right of action which the association itself could not assert; and it was accordingly held that where defendant, a stockholder and officer of the association, with knowledge of its insolvency, had surrendered his shares at their with- drawal value, any right of action which might accrue to recover back such withdrawal value was in the other stockholders and not in the corporation, and that the receiver of the corporation could therefore not maintain an action to recover such withdrawal value. And in Rickert v. Suddard, 184 111., 149, 56 N. E., 344, the same principle was applied in a similar case, and it was held that where the shares had been surrendered and the withdrawal completed by the corporation giv- ing its check for the amount of the surrender value, the stockholder ceased to be a member of the cor- poration and, since the receiver suc- ceeded to no greater rights than the association, he had no right to open up for readjustment the settlement which had thus been made between the association and the stockholder. 36 Curtis V. Leavitt, 15 N. Y., 85, 86, per Comstock, J. 37 Failey v. Talbee, 55 Fed., 892. But in Kansas it is held that the fact that a receiver has been ap- pointed over a corporation of an- other state, in such state, will not prevent the corporation from main- taining an action in Kansas to re- cover upon a promissory note. Wi- nans v. Gibbs & S. M. Co., 48 Kan., m, 30 Pac, 163, CHAP. X.] CORPORATIONS. 389 § 315a. May purchase at mortgage sale; may prosecute or defend suits. Since the receiver succeeds to the title and rights of action of the corporation itself, he may purchase property at a mortgage sale in satisfaction of a debt due to the corporation, having the same powers in this regard that the corporation might have exercised. ^^ And a receiver appointed over a corporation, under the statutes of North Carolina, for the purpose of winding up its affairs, may prosecute an action to recover its property after the corporation has ceased to exist by reason of the expiration of its charter.^^ So a receiver of an insolvent insurance company, under the laws of Pennsylvania, being empowered by statute to defend suits in the name of the corporation or otherwise, and to do all other acts necessary to the settlement of its affairs, may be substituted in an action of attachment which had been begun against the corporation prior to his appointment.^^ But, under the New York code of pro- cedure, when a receiver of a corporation has brought an action against its directors to recover for their neglect of duty, the stockholders have no such ownership of, or interest in the cause of action as to entitle them to be admitted as a matter of right as parties plaintiff with the receiver.^1 § 316. Succeeds to all rights of action of the corpora- tion ; trover for conversion of note ; suit on note for policy of insurance ; suit for money due, or improperly disposed of. As regards the rights of action vested in the receiver of a corporation by virtue of his appointment, the general rule is that he takes all rights of action which the corporation itself originally had, and may enforce them by the same legal reme- dies.^2 He may, therefore, maintain an action of trover to re- 38 Jacobs V Turpin, 83 111., 424. good v. Laytin, 48 Barb., 464. And 39 Asheville Division No. 15 v. see Shaughnessy v. The Rensselaer Aston, 92 N. C, 578. Insurance Co., 21 Barb., 605 ; Stark 40 pickersgill z;. Myers, 99 Pa. St., v. Burke, 5 La. An., 740; New Or- 602. leans Gas Light Co. v. Bennett, 6 41 Kimball v. Ives, 30 Hun, 568. La. An., 457; Gas Light & Banking 42 Brouwer v. Hill, 1 Sandf., 629; Co. v. Haynes, 7 La. An., 114; Hyde White V. Haight, 16 N. Y., 310; Os- v. Lynde, 4 N. Y., 387; Atlantic 390 RECEIVERS. [chap. X. cover the value of a promissory note due to the corporation and converted by defendant, the right of action accruing be- fore his appointment.^^ So he may maintain an action of trover for the wrongful conversion of property of the corpora- tion.'*^ And the receiver of an insolvent corporation is en- titled to enforce all the securities belonging to the corporation for the purpose of paying its debts. A receiver of an insolvent insurance company may, therefore, maintain an action to col- lect a note given for a policy of insurance by the assured."*^ And in New York, receivers of insolvent corporations are held to be fully authorized, both by statute and by virtue of their general powers, to sue for all money due to the corporation, and for all property improperly disposed of in violation of either the rights of creditors or of shareholders, for the purpose of paying the debts of the corporation, and dividing the sur- plus, if any, among the shareholders.'*^ § 317. Rights of action of receiver of insolvent bank. The same general doctrine prevails in Rhode Island, where it is lield that the receiver of an insolvent banking corporation, appointed under a statute authorizing the proceeding, is clothed with all the powers and rights of the corporation itself, with respect to the collection of its debts and the enforcement of obligations in its favor. His principal duty being to protect the creditors of the bank, he may take advantage of any fraud in derogation of the rights of creditors to which the insolvent Trust Co. V. Dana, 62 C. C. A., 657, it held that a receiver succeeds to 128 Fed., 209. all the rights of action of a corpora- 43 Brouwer v. Hill, 1 Sandf., 629. tion over which he is appointed, and 44 Terry v. Bamberger, 14 that the right of the corporation to Blatchf., 234. sue is suspended pending the re- 45 White V. Haight, 16 N. Y., 310. ceivership. Davis v. Ladoga 46 Osgood V. Laytin, 48 Barb., Creamery Co., 128 Ind., 222, 27 N. 464. And see, as to right of action E., 494; Davis v. Talbot, 137 Ind., of the receiver of an insolvent in- 235, 36 N. E., 1098. And the same surance company under the laws of doctrine has been announced in New York, upon premium notes Montana. Boston & M. C. C. & S. due the company, Lawrence v. Mc- M. Co. v. Montana O. P. Co., 24 Cready, 6 Bosw., 329; Berry v. Mont., 142, 60 Pac, 990. Brett, id., 627. And in Indiana it CHAP. X.] CORPORATIONS. 391 corporation was a party, and may maintain an action to re- cover money of which the corporation has been defrauded. When, therefore, an officer of the bank, in breach of his trust, has wrongfully appropriated funds of the bank to his own use, the receiver may maintain an action for money had and re- ceiver against such officer. And in such action it is not neces- sary that the receiver, as a condition precedent to his recovery, should prove a special injury resulting from the wrong com- plained of to some creditor or shareholder of the bank. Nor need the receiver, in order to entitle him to a recovery, tender to the defendant his shares of capital stock in the bank, with which he had parted in consideration of the securities for the conversion of which the action is brought.^? So it is held in Missouri that a receiver of an insolvent savings bank may, un- der the direction of the court, maintain an action against direc- tors of the bank for losses sustained by reason of loaning money without security, contrary to the provisions of a statute reg- ulating such banks. ^8 § 317a. Right to enforce individual or additional liabil- ity of stockholders. The authorities are not wholly recon- cilable as to the right of a receiver of a corporation to maintain an action in behalf of its creditors, to recover of shareholders an individual or additional liability, imposed by charter or statute upon shareholders for the protection of creditors. Re- garding the receiver as limited to such rights of action as might have been enforced by the corporation itself, under a bank charter making stockholders liable for double the amount of their stock, it has been held that a receiver of the bank could not enforce such liability, since it is construed to exist in favor of the creditors and not of the corporation.^^ /^j-,^^ the rule thus laid down has been applied under the statutes of Utah and Iowa creating the liability of stockholders in state banks.50 So it was held, under a former statute of Minnesota 4T Hayes v. Kenyon, 7 R. I, 136. 40 jacobson v. Allen, 20 Blatchf., 48 Thompson v. Greeley, 107 Mo., 525. 577, 17 S. W., 962. 50 McLaughlin v. Kimball, 20 392 RECEIVERS. [chap. X. creating the additional liability of stockholders of corporations of that state, that the liability under the statute was to the cred- itors and not to the corporation and that the receiver of the cor- poration could therefore not maintain an action for its enforce- ment.^i And under a statute which provided that the stock- holders of a corporation should be individually liable to pay all contracts made by the corporation which were not paid by it, it w^as held that the liability was created in favor of the cred- itors and not of the corporation and that the receiver of the latter could therefore not enforce it.^^ And in an action brought by the receiver of an insolvent corporation under the statute of Kansas to enforce the additional liability of the stock- holders, it is held that the proceeding must be brought against all the stockholders within the jurisdiction and that the re- ceiver could not maintain an action against a single stock- holder.^^ So when stockholders are made liable by statute to the creditors of the corporation, to an amount equal to their stock, for all debts and contracts made until the whole amount of capital stock is paid in, the liability being regarded as neither in favor of the corporation itself, nor of all its creditors, but only for the benefit of such creditors as fall within the pre- scribed conditions, the receiver can not maintain an action to enforce such liability.^'* And wdien, by the charter of a bank, its shareholders are made severally and individually liable, to Utah, 254, 58 Pac, 685, 11 Am. St. which affirmed S. C, 102 Fed., 790; Rep., 908; Steinke v. Loofbourow, Hale v. Coffin, 114 Fed., 567. And 17 Utah, 252, 54 Pac, 120. The case see Hale v. Tyler, 104 Fed., 757. last cited fully sustains the rule as For the statute in question see Ch. announced in the text, although 76, of the General Statutes of Minn- the action was instituted by a re- esota, of 1878 and 1894. ceiver in a foreign court. 52 Hammond v. Cline, 170 Ind., 51 Palmer v. Bank, 65 Minn., 90, 452, 84 S. E., 827. 67 N. W., 893 ; Minneapolis Base- 53 Waller v. Hamer, 65 Kan., 168, ball Co. V. City Bank, 66 Minn., 69 Pac, 185; Evans v. Nellis, 187 441, 69 N. W., 331, 38 L. R. A., 415; U. S., 271, 23 Sup. Ct. Rep., 74, 47 Allen V. Walsh, 25 Minn., 543; Hale L. Ed., 173. V. Allison, 188 U. S., 56, 23 Sup. Ct. 54 Farnsworth v. Wood, 91 N. Y., Rep., 244, 47 L. Ed., 380, affirming 308. S. C, 45 C. C. A., 270, 106 Fed., 258, CHAP. X.] CORPORATIONS. 393 the amount of their stock, to depositors, the right of action is construed as being conferred directly upon the depositors, and it can not, therefore, be enforced by the receiver.^^ But under a statute making all persons composing the corporation liable to the extent of their respective shares of stock, for all debts due at the time of the dissolution of the corporation, a receiver appointed in an action brought in behalf of all creditors to wind up the corporation, may enforce such liability against the shareholders. ^6 And the same doctrine has been announced in Iowa under similar provisions of the code of that state.^'^ And when the additional stock liability is created by charter in favor of a certain class of creditors as an entirety, an action may be maintained by some of such creditors in behalf of all, the re- ceiver proceeding concurrently with them by petition in the same proceeding, to enforce such stock liability in equity for the benefit of the entire body of creditors interested therein. And in such action the court may enjoin individual creditors from pursuing their separate actions at law to enforce such lia- bility for their own benefit.^^ And it is held that the individual liability of the stockholders in an insolvent state bank under the statute of Nebraska is for the benefit of all creditors and that when an action is brought, it should be for the benefit of all, and when a receiver has been appointed, the action should be prosecuted in his name.^^ And under the statute of Wash- ington creating the additional liability of stockholders in state banks, it is held that the proper practice for the purpose of en- forcing such liability is by a proceeding in equity brought by the receiver of the bank against all the stockholders and upon 55 Wincock v. Turpin, 96 III, 135. 58 Eames v. Doris, 102 111., 350. 56 Story v. Furman, 25 N. Y., 59 Farmers' Loan & Trust Co. v. 214. See, also, McDonald v. Ross- Funk, 49 Neb., 353, 68 N. W., 520; Lewin, 29 Hun, 87; Foster v. Row, German National Bank v. Farmers 120 Mich., 1, 79 N. W., 696, 11 Am. & M. Bank, 54 Neb., 593, 74 N. W., St. Rep., 565. 1086 ; Brown v. Brink, 57 Neb., 606, 57 State V. Union Stock Yards 78 N. W., 280. State Bank, 103 Iowa, 549, 70 N. W.. 752, 72 N. W., 1076. 394 RECEIVERS. [chap, X. behalf of all the creditors.^*^ And this practice has been ap- proved and followed in North Carolina/^i And since the action should be brought by the receiver, it is held that it can not be maintained by a creditor against the stockholders ; nor will it avail that the receiver is joined as a party defendant to such action. ^2 ^nd in an action brought by the receiver of an in- solvent state bank to enforce the individual liability of the stockholders, it is only necessary to allege the order of the court authorizing the bringing of the action, and it is not necessary to show authority upon the part of the creditors to institute the proceedings, nor is it necessary that a copy of the bill or peti- tion under which the receiver was appointed should be attached as an exhibit to the declaration against the stockholders.*^^ § 31 7^. Right to enforce such liability in foreign state. The authorities display a still greater want of harmony as to the right of the receiver of an insolvent corporation to maintain an action to enforce the individual or additional liability of the shareholders in the courts of a foreign state. Much of this want of harmony is due to the varying nature of the provisions of the statutes of the different states by which the liability is created and the methods of its enforcement are prescribed. The right of the receiver to maintain the action has been denied un- der the general rule heretofore discussed that the powers of a receiver are co-extensive only with the court of his appoint- ment and that he has no extraterritorial right of action. ^^ Other courts have applied the general rule that where a statute creates a liability unknown to the common law and prescribes a method for its enforcement, the special remedy thus created is exclusive of all other remedies, and since from its nature it 60 Wilson V. Book, 13 Wash., 676, 63 Wheatley v. Glover, 125 Ga., 43 Pac, 939 ; New York N. E. Bank 710, 730. V. Metropolitan S. Bank, 28 Wash., 64 Hilliker v. Hale, 54 C. C. A., 553. 68 Pac, 905. 252, 117 Fed., 220, reversing S. C, 61 Smathers v. Bank, 135 N. C, 109 Fed., 273 ; Covell v. Fowler, 410, 47 S. E., 893. 144 Fed., 535. For a discussion of 62 Watterson v. Masterson, 15 the general rule referred to, see Wash., 511, 46 Pac, 1041. ante, § 239, ef seq. CHAP. X.] CORPORATIONS. 395 can not be applied outside of the courts of the state where it is created, the right of the receiver to maintain the action in the courts of a foreign state is denied. ^^ And where, under the law or statutes of the state creating the liability, the re- ceiver can not maintain an action against the stockholder to enforce his individual liability, or where he can do so only after the performance of certain conditions which have not been ful- filled, it follows that he can not maintain a similar action in the courts of a foreign state. Thus, where the liability is construed as being to the creditors and not to the corporation, it is held that, since the receiver can not maintain an action locally, he can not maintain it in a foreign court.^^ So, under the stat- ute of Kansas providing that upon the insolvency of a corpora- tion, a receiver shall be appointed to close up the affairs of the corporation, who shall immediately institute proceedings against all stockholders to enforce their liability, the statutory remedy thus provided is held to be a prerequisite to maintain- ing an action against a single stockholder in a foreign court.^"^ 65 Finney v. Guy, 106 Wis., 256, 82 N. W., 595, 49 L. R. A., 486, af- firmed in 189 U. S., 335. 23 Sup. Ct. Rep., 558, 47 L. Ed., 839; Hunt v. Whewell, 122 Wis., 33, 99 N. W., 599; Converse v. Hamilton, 136 Wis., 589, 118 N. W., 190. And see Murtey v. Allen, 71 Vt., 377, 45 Atl., 752, 76 Am. St. Rep., 779. For the application of the rule gen- erally, see Erickson v. Nesmith, 4 Allen, 233; New Haven H. N. Co. V. Linden Springs Co., 142 Mass., 349, 7 N. E., nZ; Bank v. Rindge, 154 Mass., 203, 27 N. E., 1015; Fow- ler V. Lamson, 146 111., 472, 34 N. E., 932; Tuttle v. National Bank, 161 111., 497, 44 N. E., 984 ; Marshall v. Sherman, 148 N. Y., 9, 42 N. E., 419; Nimick & Co. v. Iron Works Co., 25 West Va., 184; Russell v. Pacific Ry. Co., 113 Cal., 258, 45 Pac, 323. 66 Hale v. Allison, 188 U. S., 56, 23 Sup. Ct. Rep., 244, 47 L. Ed., 380, affirming S. C, 45 C. C. A., 270, 106 Fed., 258, which affirmed S. C, 102 Fed., 790; Steinke v. Loofbourow, 17 Utah, 252, 54 Pac, 120. And see Hale v. Tyler, 104 Fed., 757; Hale v. Coffin, 114 Fed., 567. But see, contra, Hale v. Har- don, 37 C. C. A., 240, 95 Fed., 747, reversing S. C, 89 Fed., 283. 67 Evans v. Nellis, 187 U. S., 271, 23 Sup. Ct. Rep., 74, 47 L. Ed., 173, following, as to the construction of the statute, Waller v. Hamer, 65 Kan., 168, 69 Pac, 185, which, how- ever, was not an action in a for- eign court. For the statute in ques- tion, see Laws of 1898, c. 10, sec- tions 14 and 15. 396 RECEIVERS. [chap. X. And in Vermont it is held that the receiver of an insolvent state bank organized under the laws of Nebraska can not main- tain an action to enforce the additional liability of a stock- holder, since, under the laws of that state, the liability is for the benefit of the creditors and the receiver has no such title as will enable him to maintain an action at law in his own name in a foreign state. "^^ And it is held that an individual creditor of an insolvent Kansas corporation can not hold a stockholder upon his statutory liability in a foreign court where the cor- poration is in the hands of a receiver under the statute, since the right to recover from the stockholders in such case is in the receiver for the common benefit of all creditors and not in a single creditor.69 Aj-kJ where a statute makes the liability of a stockholder of a state bank conditional upon the insolvency of the bank and upon there being insufficient assets to pay its debts and liabilities, a receiver appointed under the general chancery powers of the court can not maintain an action in a federal court in another state against a stockholder to enforce his statutory liability until there has been an ascertainment of such facts. '''^ § 317c. The same; receiver as quasi-assignee. Where the statute under which a receiver is appointed over an insolvent corporation makes him a quasi-assignee of the property and as- sets of the corporation and gives him full authority to maintain actions in his own name in other jurisdictions for the purpose of enforcing the statutory liability of the stockholders, the right of the receiver to maintain such actions in foreign courts has frequently been recognized. Thus, it is held that the receiver of an insolvent state bank of Washington appointed in that state under the statute, is to be regarded as a quasi-assignee and as being vested with the legal title to the assets of the bank, and that he may therefore maintain an action in his own name in the 68 Murtey v. Allen, 71 Vt., 377, 69 Gushing v. Perot. 175 Pa. St., 45 Atl., 752, 76 Am. St. Rep., 779, 66, 34 Atl., 447, 34 L. R. A., 72>7, followed by King v. Cochran, 72 and note, 52 Am. St. Rep., 835. Vt., 107, 47 Atl., 3S4. 70 Wigton v. Bosler, 102 Fed., 70. CHAP. X.] CORPORATIONS. 397 courts of a foreign state for the purpose of enforcing the statu- tory Hability of the stockholders. '^i And the action may be maintained aUhough the Habihty under the statute is to the cred- itors, since it is also to be regarded as a secondary asset of the bank, the title to which is in the receiver.'^^ ^j^^^ ^^g right of the receiver of an insolvent state bank of Washington to maintain such an action as a quasi-assignee has been recognized in New York, where it is held that the action may be maintained upon principles of comity if it works no detriment to citizens of the latter state and is not repugnant to its policy J^ Sq under the statute of Minnesota which provides for the appointment of a receiver of an insolvent corporation to enforce the additional liability of the stockholders upon behalf of the creditors and makes such receiver a quasi-assignee with power to institute proceedings in any state or country, it is held that the receiver is to be regarded as more than an ordinary chancery receiver, and that he may maintain such an action in a foreign stated** So, under the statute of Ohio which creates the additional lia- bility of stockholders and provides that the court may appoint a receiver to enforce such liability with power to maintain ac- tions in his own name in other jurisdictions, it is held that such a receiver may maintain an action against a stockholder in a federal court in another state for the purpose of enforcing the liability. "^5 And under the statute of Minnesota providing for the appointment of a receiver in an action brought for the pur- pose of enforcing the liability of stockholders in an insolvent state bank, the liability being for the common benefit of all creditors, it is held that a receiver appointed in such a proceed- 71 Howarth v. Lombard, 175 S., 516, 27 Sup. Ct. Rep., 755, 51 L. Mass., 570, 579, 56 N. E., 888, 891, Ed., 1163; Converse v. Hears, 162 49 L. R. A., 301; King v. Cochran, Fed., IdT ; Converse v. Ayer, 197 76 Vt, 141, 56 Atl., 667. Mass., 443, 84 N. E., 98. For the 72 King V. Cochran, 16 Vt., 141, statute in question see Laws of 1899, 56 Atl., 667. c. 272, p. 315. 73 Howarth v. Angle, 162 N. Y., 75 Burr v. Smith, 113 Fed., 858. 179, 56 N. E., 489, 47 L. R. A., 725. And see Zieverink v. Kemper, 50 74 Bemheimer z;. Converse, 206 U. Ohio St., 208, 34 N. E., 250. 398 RECEIVERS. [chap, X. ing in ]\Iinnesota may, upon principles of comity, maintain an action in another state for the purpose of enforcing the habihty of stockholders.'^'^ g 318. Appointment does not change rights of action or contract relations; same defenses allowed; mutual insur- ance company; change of corporate name. It follows nec- essarily from the principles already discussed and illustrated, that the appointment of a receiver over a corporation does not have the effect of changing any rights of action, or of changing the contract relations existing between the corporation and its debtors.'^'^ No question of right, as between these parties, being- affected by the appointment, any defense which the debtor might have urged in an action brought against him by the corporation itself, may still be made in an action brought against him by the receiver.'''^ And in the case of a mutual insurance company, where the obligation of the assured upon a premium note given for a policy of insurance depends upon an assessment and notice thereof, which assessment and notice have never been given by the company, so that it could maintain no action against the maker of the note, a receiver of the company stands in the same situation, and will not be allowed to maintain an action, without 76 Childs V. Cleaves, 95 Me., 498, plaintiff, as receiver of the Amer- 50 Atl., 714. As to the running of ican Mutual Insurance Company, the statute of limitations in an ac- takes its notes and assets subject tion brought by the receiver to en- to all the conditions and legal dis- force the statutory liability of a abilities with which they were tram- stockholder of an insolvent Min- meled in the hands of the corpora- nesota corporation, see Hale v. Cushman, 96 Me., 148, 51 Atl., 874, 77 Williams v. Babcock, 25 Barb. 109; Bell v. Shibley, 33 Barb., 610, And see Shaughnessy v. The Reus selaer Insurance Co., 21 Barb., 605 Savage v. Medbury, 19 N. Y., 32. 78 Moise V. Chapman, 24 Ga., 249 tion itself; he can not impeach or disaffirm its authorized acts, nor the authorized acts of its agents. If a note in the hands of the corpora- tion was void, or incapable of en- forcement, by reason of fraud or il- legality in its procurement or incep- tion, passing it into the hands of a Newport Cotton Mill Co. v. Mims, receiver does not purge it of these 103 Tenn., 465, 53 S. W., 736; Dev- defects." See, also, Pine Lake Iron endorf v. Beardsley, 23 Barb., 656. Co. v. La Fayette Car Works, S3 In the latter case, Mr. Justice James Fed., 853. cl serves, p. 659, as follows: " The CHAP. X.] CORPORATIONS. 399 having taken the necessary steps to fix the Hability of the de- fendant.'^^ And when a receiver of an insolvent corporation brings an action upon a note as part of the corporate assets, but the note is by its terms made payable to the order of a dif- ferently named corporation, a change of the corporate name having been effected, it is necessary for the receiver to show, by proper averments, that the note is part of the assets of the corporation over which he has been appointed.^0 jsj-qj- ^^m the receiver be permitted to litigate questions which have al- ready been determined adversely to the corporation. He can not, therefore, enjoin the collection of a tax assessed against the corporation which has already been determined to be valid in an action brought in behalf of the corporation, the receiver being as much concluded by such former litigation as the cor- poration itself.^l And an action pending against a corpora- tion at the date of a receivership may proceed to judgment against the corporation, and such judgment will be conclusive, as against the receiver, of the amount of plaintiff's demand.^^ And, in an action to enforce against the receiver a judgment previously obtained against the corporation, the receiver can not contest the amount of the indebtedness, or reopen questions which were litigated in the former action, or interpose any de- fense to the merits which might then have been interposed. It is, however, still reserved for the court appointing the receiver to determine the respective priorities among creditors as to pay- ment out of the fund in the receiver's hands.^^ § 319. Receiver can not disaffirm settlement made by corporation; can not sue on cancelled note of insurance company. Since the receiver of a corporation, as we have already seen, succeeds to the estate of and derives his title from the corporation, he is bound by all its lawful and authorized acts done before the receivership, and will not be allowed to 79 Williams v. Babcock, 25 Barb., 81 Hopkins v. Taylor, 87 111., 436. 109; Thomas v. Whallon, 31 Barb., 82 pjne Lake Iron Co. v. La Fay- 172. ette Car Works, 53 Fed., 853. 80 Hyatt V. McMahon, 25 Barb., 83 Pringle v. Woolworth, 90 N. 457. Y., 502. 400 RECEIVERS. [chap, X. disaffirm or set them aside. As to all such matters, he stands in precisely the same position as the corporation itself stood before his appointment; and he can not avoid a settlement which the corporation was duly authorized to make, and which was effected before his appointment. When, therefore, an in- surance company has surrendered and canceled a note given for insurance, upon the assured surrendering his policy, and no fraud upon the creditors of the company is shown, a re- ceiver subsequently appointed will not be allowed to maintain an action upon the note, since he can have no greater rights for this purpose than the company itself had.^^ § 320. May disaffirm act of corporation in fraud of cred- itors; illegal transfer of securities; fraudulent disposal of money and notes; illegal mortgage; fraudulent judgment and transfers. When, however, the act of the corporation which it is sought to disaffirm is illegal and in violation of the rights of creditors, a different rule prevails. And in such case, the receiver, being regarded for all beneficial interests connected with the receivership as the representative of the creditors and stockholders, will not be concluded by such act.^^ When, 84 Hyde v. Lynde, 4 N. Y., 387. mann, 50 N. J. Eq., 120, 24 Atl., 571 ; Bronson, C. J., observes, p. 392: Bennett v. Keen, 59 N. J. Eq., 634, "He (the receiver) is as much 43 Atl., 1070; Brockhurst v. Cox, bound by a settlement which the 71 N. J. Eq., 703, 64 Atl., 182 (a company was authorized to make, receivership for the dissolution of a as was the company itself. It partnership and an accounting) ; would be strange, indeed, if the Washington Mill Co. v. Sprague legal acts of a corporation did not Lumber Co., 19 Wash., 165, 52 Pac, bind the receiver of its effects. If 1067. And see Latta v. Catawba the rule were not so, no one would Electric Co., 146 N. C, 285, 59 S. E., dare to venture to deal with a cor- 1028. And see, ante, § 314. As to poration." the right of the receiver of an in- 85 Gillet V. Moody, 3 N. Y., 479 ; solvent corporation under the code Tuckerman v. Brown, 33 N. Y., of New York to maintain an ac- 297; Brouwer v. Appleby, 1 Sandf., tion to recover money paid to the 158; Brouwer z;. Hill, 1 Sandf., 629; defendant by the corporation for Attorney-General v. Guardian Mut- the purpose of giving an unlawful ual Life Insurance Co., 77 N. Y., preference and as to the necessity 272; Graham Button Co. v. Spiel- of joining the corporation as a par- CHAP. X.] CORPORATIONS. 401 therefore, the directors of a corporation have made an illegal transfer of securities, constituting a part of the corporate assets, to one of the shareholders in exchange for his stock, the trans- fer impairing the security of creditors and being void as to them, a receiver of the corporation subsequently appointed may maintain an action to set aside such transfer. Indeed, such an action is regarded as the most appropriate course on the part of the receiver to compel the restoration of the securities, for the benefit of all the creditors.^^ So the receiver of an insolvent corporation appointed in a general creditors suit may maintain an action against the directors of the corporation to recover as- sets which they have applied, by way of an unlawful preference, to debts for which they were personally liable.^"^ So when the president of a banking corporation has put into the bank ficti- tious notes, and has used them in lieu of a like amount of money of the bank, and has fraudulently disposed of the money, a receiver of the bank may maintain an action against the presi- dent for the recovery of the money. And in such case the possession of the notes by the receiver will be regarded as pre- sumptive evidence that the money has not beeij repaid, and as sufficient cause of action on his part.^^ So when a banking corporation, while in a condition of insolvency, acting through its cashier, has made an illegal and unauthorized transfer of notes held by the bank, to one of its directors who knew of its insolvency, a receiver subsequently appointed to wind up the affairs of the bank may, as the representative of the creditors, repudiate the transfer and maintain an action to recover back the value of the notes, or the amount realized on them by the defendant. And in such an action, the defendant will not be allowed, by way of counter-claim, the amount which he has ac- ty to such action, see Nealis v. 87 Williams v. Turner, 63 Neb., American T. & I. Co., 150 N. Y., 575, 88 N. W., 668. 42, 44 N. E., 944. 88 Butterworth v. O'Brien, 24 86 Gillet V. Moody, 3 N. Y., 479. How. Pr., 438. And see Morgan v. South M. L. V. Co., 100 Wis., 465, 76 N. W., 354. Receivers — 26. 402 RECEIVERS [chap. X. tually paid for the notes, since such defense arises out of his own illegal conduct. ^^ So the receiver of an insolvent cor- poration may maintain an action to set aside a mortgage and sale thereunder to the directors who were also creditors of the corporation.^^ So where the directors of an insolvent cor- poration who were also creditors have executed the corporate note to themselves as payees and afterward assign it for the purpose of having suit brought, and an action is instituted and judgment rendered against the corporation, the receiver may maintain a bill to set aside the judgment and cancel the note.^^ So in New York, a receiver of an insolvent corporation may maintain an action to set aside a mortgage executed by the corporation without the assent of the requisite number of its shareholders, as required by its charter.^^ Sq the receiver of an insolvent corporation is entitled to have a mortgage given by the corporation set aside which, although valid as against the corporation is void as to its creditors.^^ So the receiver of an insolvent corporation, being the representative of the creditors as well as of the corporation, may set aside a chattel mortgage which, under the laws of the state, is void as to creditors for want of filing, even though the mortgage is -good as against the corporation.^^ So, too, he may maintain an action to set aside fraudulent agreements and transfers of its property made by the corporation, being to this extent regarded as the repre- sentative of creditors. And the court by which the receiver is appointed, having jurisdiction of the proceedings for winding up the corporation, may, upon application of the receiver, en- join creditors from prosecuting like actions, even though be- 89 Gillet V. Phillips, 13 N. Y., mann, 50 N. J. Eq., 120, 24 Atl., 571 ; 114. Curtis V. Lewis, 74 Conn.. 367, 50 90 Taylor v. Mitchell, 80 Minn., Atl., 878. And see Stephens v. Mer- 492, 83 N. W., 418. iden B. Co., 160 N. Y., 178. 54 N. K, 91 Taylor v. Fanning, 87 Minn., 781, 1Z Am. St. Rep., 678; Brun- 52. 91 N. W., 269. nemer v. Cook & B. Co., 180 N. Y., 92 Vail V. Hamilton, 85 N. Y., 453, 188. And see, post, § 454. affirming S. C, 20 Hun, 355. 94 Bayne v. Brewer Pottery Co., 93 Graham Button Co. v. Spiel- 90 Fed., 754. CHAP. X.] CORPORATIONS. 403 gun prior to the receiver's appointment. In such a case, the decree dissolving the corporation and appointing the receiver being regarded as in the nature of a judgment for all the credit-, ors, they are subject to the summary jurisdiction of the court in matters pertaining to the administration of the estate. It is proper, therefore, to enjoin them from proceeding with their actions, upon petition or motion by the receiver in the cause in which he was appointed, without bringing a new suit for this purpose.^^ And since the capital stock of a corporation is re- garded as a trust fund for the payment of its indebtedness, a receiver appointed upon its insolvency may recover from share- holders money paid to them by the corporation for the purchase of their stock after the impairment of its capital; and this, wholly independent of any actual fraud on the part of the shareholders making such sales.^^ So where a collusive judg- ment has been rendered by default against an insolvent cor- poration upon a claim against which the corporation had a good defense, the receiver of the corporation is not bound by its act in allowing the judgment, and he may accordingly appear for the protection of the corporation and its creditors and move to reopen the judgment and allow a defense to be made to the claim upon which it was rendered.^"^ And the receiver of an insolvent corporation may move to set aside a judgment which has been rendered by confession against the corporation upon a warrant of attorney which has been signed by the president but which he had no authority to make.^^ And the receiver of a corporation may maintain an action to set aside a judg- ment which has been rendered against the corporation by fraud and collusion and to interpose a defense to the alleged claim upon which it was based. ^^ 95 Attorney-General v. Guardian Co., 184 111., 625, 56 N. E., 957, 75 Mutual Life Insurance Co., 77 N. Am. St. Rep., 195. Y., 272. 98 Stokes v. New Jersey P. Co., 96 Crandall v. Lincoln, 52 Conn., 46 N. J. Law, 237. 73. 99 Whittlesey v. Delaney, 73 N. 97 Peabody v. New England W. Y., 571. 404 RECEIVERS. [chap. X. § 321. Right of action to recover illegal dividends de- clared by insolvent corporation. The right of action of a receiver of an insolvent corporation, to recover back dividends which have been improperly paid, may be based upon the prin- ciples which have been discussed in the preceding section. And where the law of the state, regulating the incorporation of in- surance companies, provides that no dividend shall be made by any company incorporated under the act when its cap- ital stock is impaired, or when the making of such dividend will have the effect of impairing the capital stock, a dividend paid to shareholders of the corporation, while it was in a condi- tion of insolvency, may be recovered back by its receivers. In such case, the shareholders being made liable by statute to the creditors of the corporation to the extent of such illegal divi- dends, the action to enforce this liability is properly brought by the receivers, who are, to this extent and for this purpose, re- garded as trustees for the benefit of all the creditors.^ And in 1 Osgood V. Laytin, 3 Keyes, 521, affirming S. C, 48 Barb., 464; Os- good V. Ogden, 4 Keyes, 70. And see Minnesota T. M. Co. v. Lang- don, 44 Minn., 37, 46 N. W., 310. But see, contra, Butterworth v. O'Brien, 24 How. Pr., 438, where it was held that the right of action to recover such dividends was in the creditors themselves. Osgood v. Laytin, 3 Keyes, 521, in which the doctrine of the text was very clearly enunciated, was an action by re- ceivers of an insolvent insurance company to recover illegal dividends paid to shareholders, and to enjoin certain creditors of the corporation, who were made defendants, from prosecuting similar actions. The statute under which the company was incorporated provided that no dividend should ever be made when the capital stock was impaired, or when the effect of such dividend would be to impair it, and that any shareholder receiving such a divi- dend should be individually liable to the creditors of the corporation to the extent of the dividend re- ceived. Judgment for plaintiffs on demurrer, from which defendants appealed. The court of appeals affirmed the judgment, Grover, J., for the court, holding as follows, p. 523: "The design, plainly ex- pressed by the language of the sec- tion, was to prohibit a dividend of the capital among the stockholders, but to preserve the same intact as a fund for the payment of creditors and the security of dealers. It fol- lows that the dividend in the pres- ent case was illegal, and that the stockholders receiving the same are liable to the creditors for the amount by them respectively re- ceived. The next question is, how is this to be recovered from the CHAP. X.] CORPORATIONS. 405 such case, it is the duty of the court to protect the shareholders from being harassed by other actions instituted for the same purpose by individual creditors of the corporation, and it may, therefore, enjoin such creditors from prosecuting their actions.^ And when a state court has appointed a receiver over an in- stockholders? Their liability is to the creditors of the company. It is clear that no one creditor of the company can maintain an action against an individual stockholder, for the reason that the liability created by statute is to the creditors generally, and not to individual creditors, thus creating a liability to the creditors jointly. Again, a creditor, if permitted individually to sue the separate stockholders, might institute actions against each, although his demand amounted to far less than the aggregate liability, and he would continue a creditor until he had obtained satisfaction of his debt, and could obtain judg- ment in all the actions. Again, in equity, this liability inures to the creditors in proportion to the amount of their debts respectively. The maxim, that equality among creditors is equity, is applicable to the case. A court of law can not, in a joint action by all the cred- itors, vi'ork out this equity and do justice between the parties. This confers jurisdiction in equity, upon the ground that there is no ade- quate remedy at law. The plain- tiffs, as receivers, are trustees for all the creditors, and the appropriate parties to prosecute in their behalf, thus avoiding the troublesome in- quiry as to who are creditors in the proceeding to collect from the stock- holders the several amounts each is liable to pay. All the stockholders who are liable may and should be included as defendants in the same action. There is no difficulty in de- termining the amount each is to pay, upon the trial of the cause; and in case the whole amount of the lia- bility is not required for the pay- ment of the debts of the company, the precise amount each is to pay can be determined in the action. This course of proceeding is also necessary to prevent multiplicity of actions, as there are several hun- dreds of stockholders. The above views dispose of the case as to the stockholders. The creditors insist that they are not proper parties to the action against the stockholders, and that, upon this ground, they are entitled to judgment upon the de- murrer. Equity having the power to enforce payment from the stock- holders, and an action having been instituted in the proper mode for that purpose, which, in its result, will place the fund in the possession of the court for distribution among the creditors, it is the duty of the court to protect the stockholders from being harassed by other ac- tions instituted to enforce the same liability. This can only be done by restraining such actions. To enable the court effectually to do this, those creditors who have instituted such suits, and those who threaten so to do, are proper parties to the action. The judgment appealed from should be affirmed." 2 Osgood V. Laytin, 3 Keyes, 521. 406 RECEIVERS. [chap. X. solvent corporation and is winding up its affairs, the entire as- sets of the corporation, inckiding its choses in action, are re- garded as subject to the exclusive jurisdiction of that court. A federal court, therefore, will not, pending such proceedings, entertain a bill by shareholders of the corporation against its officers to recover for fraudulent misappropriations of its prop- erty, since this would be an interference with the administra- tion of the estate by the state court; and this is true, even though the state court has refused to direct its receiver to en- force such cause of action.^ § 322. When povirers derived wholly from statute. When receivers over corporations are appointed under a stat- ute which regulates their functions and prescribes their pow- ers and duties, it is held that they derive their powers wholly from the statute under which they are appointed, and have no authority other than such as is thus conferred. But to warrant them in the exercise of a power, it need not be expressly conferred, and if it can be fairly implied, either from the general scope and purpose of the statute, or as an incident to a power expressly given, there is sufficient warrant for its exercise.^ § 323. Presumption as to receiver's right to divide as- sets among creditors. It is held in Wisconsin, that in a collateral action, in the absence of any proof as to the authority of receivers of a corporation to dispose of its assets, they are fully empowered to dispose of and divide them among the creditors. When, therefore, receivers of a banking corporation transfer to a third person a negotiable note, part of the assets of the bank, in payment and satisfaction of a demand held by him against the bank, in an action upon such note, the court will indulge the presumption that the receivers have properly discharged their duties ; and, in the absence of any proof of 3 Porter v. Sabin, 149 U. S., 473, 4 Runyon v. Farmers & Mechan- 13 Slip. Ct. Rep., 1008, affirming S. ics Bank of New Brunswick, 3 C, 36 Fed., 475. And see Werner Green Ch., 480. V. Murphy, 60 Fed., 769. CHAP. X.] CORPORATIONS. 407 fraud, the legal title to the note will be held to have passed by the action of the receivers to the assignee, so that he may re- cover upon it against the makers.^ § 324. Receiver's right of action to recover of share- holders unpaid subscriptions to capital stock. Under the laws and practice of many of the states, the right of action to recover of shareholders the amounts due upon their subscrip- tions to the capital stock of a corporation, vests in the receiver appointed in behalf of creditors, upon the insolvency of the company. Thus, in New York, receivers of insolvent corpora- tions are vested with this power, and may maintain actions to recover of delinquent stockholders their unpaid subscriptions,^ and to enjoin the creditors of the corporation from proceeding with separate actions for the recovery of their individual de- mands.*^ And it was formerly held in New York, that such actions must be instituted against the shareholders individually, and that they could not be maintained against them collective- ly ; ^ but the later doctrine recognizes the right of the receiver to bring the action against all shareholders collectively, or to sue them individually. ^ So in Rhode Island, receivers of mu- tual insurance companies are authorized by law to make assess- ments upon the shareholders for paying the indebtedness of the corporation. 10 And in Louisiana, on the appointment of a receiver over a corporation upon its insolvency, the right of ac- tion against delinquent shareholders for arrearages of their subscriptions to the capital stock, for the purpose of paying the debts of the corporation, is distinctly recognized as being in the hands of the receiver and not in the corporation or its individual members. ^^ And it would seem that the remedy 5 Atchison v. Davidson, 2 Pin. 12; Rankine v. Elliott, 16 N. Y., (Wis.), 48. 377. 6 Pentz V. Hawley, 1 Barb. Ch., 8 Calkins v. Atkinson, 2 Lans., 122; Farmers & Mechanics Bank 12. V. Jenks, 7 Met., 592; Calkins v. 9 Van Wagenen z;. Clark, 22 Hun,' Atkinson, 2 Lans., 12; Rankine v. 497. Elliott, 16 N. Y., 377. 10 Tobey v. Russell, 9 R. I., 58. 7 Calkins v. Atkinson, 2 Lans., H Stark v. Burke, 5 La. An., 408 RECEIVERS. [chap. X, of creditors, in this class of cases, is to apply to the court for an order on the receiver to make calls upon the stockholders for the purpose of meeting the indebtedness of the corporation.^^ Indeed, where the receiver of an insolvent corporation has the right to maintain actions against the shareholders for their un- paid stock subscriptions, the individual creditors w^ho have had their claims allowed in the receivership proceeding have no right to maintain such actions against the shareholders. In such case, their remedy, upon the refusal of the receiver to in- stitute the actions, is to proceed in the receivership cause for the removal of the receiver or for such other appropriate re- lief as the court may grant in that proceeding.^^ And in Maryland, a receiver under a statute for the dissolution of cor- porations may maintain an action to recover a balance due from a shareholder upon his unpaid subscription. i* And the right of the receiver to enforce such subscriptions by actions against the shareholders is also recognized in Ohio,^^ in lowa,^^ in Illinois,!^ in Minnesota,^^ in Washington,!^ and in Missouri.2<> And while an action will not lie upon behalf of the receiver of 740; New Orleans Gas Light Co. v. Minn., 361, 51 N. W., 119. See, Bennett, 6 La. An., 457; Gas Light also, Minnesota T. M. Co. v. Lang- & Banking Co. v. Haynes, 7 La. An., don, 44 Minn., 37, 46 N. W., 310. 114. 19 Elderkin v. Peterson, 8 Wash., 12 New Orleans Gas Light Co. v. 67A, 36 Pac, 1089; Cole v. Satsop Bennett, 6 La. An., 457. And see R. Co., 9 Wash., 487, 37 Pac, 700, Wyman v. Williams, 52 Neb., 833, 43 Am. St. Rep., 858; Cox v. Dickie, 72, N. W., 285. 48 Wash., 264, 93 Pac, 523. And in 13 Links V. Connecticut River B. the case last cited it was held that Co., 66 Conn., 277, 33 Atl., 1003. the receiver could proceed by an ac- And see, post, § 352. tion against the individual stock- 14 Stillman v. Dougherty, 44 Md., holders or that he might join all 380 ; Frank v. Morrison, 58 Md., stockholders in the action to recover 423. their subscriptions. And in the 15 Clarke v. Thomas, 34 Ohio St., same case it was also held that it 46. constitutes no defense that the stock 16 Stewart v. Lay, 45 Iowa, 604. was purchased by the stockholder as 17 Great Western T. Co. v. Gray, being fully paid for. 122 111., 630, 14 N. E., 214. 20 Berry v. Wood, 168 Mo., 3*6, 18 Merchants National Bank v. 67 S. W., 644. Northwestern M. & C. Co., 48 CHAP. X.] CORPORATIONS. 409 an insolvent corporation to recover unpaid stock subscriptions w^ithout first exhausting the other corporate property, yet v\/^here the board of directors have made a call upon the stock- holders, such assessment becomes an asset of the corporation and it is held that the action will lie without showing- that the other corporate assets have been exhausted. 21 And it is held that the receiver of an Oregon corporation has the power to make assessments against the stockholders upon their subscrip- tions where the board of directors was vested with the power of levying and collecting such assessments but had failed or re- fused to do so. 22 But [j^ New York, a receiver of a corporation appointed on a creditors' bill, and vested with only the ordinary powers of receivers in creditors' suits, can not maintain a bill in equity to enforce an unpaid balance due from a shareholder upon his subscription.23 Nor can a receiver of an insolvent cor- poration recover unpaid subscriptions when the corporation it- self could not have maintained the action.24 But if an action for the recovery of unpaid subscriptions has been brought by the corporation before the appointment of a receiver, it may be continued in the name of the original plaintiff for the benefit of the receiver.25 But a receiver appointed by a foreign court over a non-resident fire insurance company can not maintain an action in another state to hold the defendants liable upon their stock subscriptions.26 § 324a. Defenses to such actions; transfer of shares. No errors which may have been committed by the court in ap- pointing the receiver, or in directing and controlling his action, will avail in defense of a suit by the receiver to enforce unpaid subscriptions to capital stock ; nor do the fraudulent acts of the receiver, or of the officers of the corporation, constitute a de- 21 Wyman v. Williams, 53 Neb., Mims, 103 Tenn., 465, 53 S. W., 736. 670, 74 N. W., 48. 25 Phoenix Warehousing Co. v. 22 Maxwell v. Akin, 89 Fed., 178. Badger, 67 N. Y., 294. 23 Mann v. Pentz, 3 N. Y., 415. ^GWyman v. Eaton, 107 Iowa, 24 Billings V. Robinson, 28 Hun, 214, 77 N. W., 865, 43 L. R. A., 122; Newport Cotton Mill Co. v. 695, 70 Am. St. Rep., 193. 410 RECEIVERS. [CIIAP. X. fensc^"^ Nor can the stockholder defend such action upon any ground whicli questions the action of the court in appointing the receiver and in ordering the assessment, such as fraud in procuring the receiver, or that the corporation is not indebted, or that the action is prosecuted to harass the defendant, and all such defenses should be interposed in the proceeding in which the receiver is appointed and the assessment ordered.^s To conclude a stockholder by a proceeding under the Illinois stat- ute to wind up an insolvent corporation and to recover unpaid subscriptions, when a receiver appointed in such proceeding sues for the subscription, the stockholder should have been made a party to the original proceeding, and the receiver should show his appointment by a decree which is conclusive against the defendant.2^ But the rule is otherwise when the proceed- ing is brought independent of statute to wind up an insolvent corporation and to distribute its assets for the benefit of its creditors. In such case a shareholder can not defeat an action brought by the receiver for the recovery of a stock subscrip- tion upon the ground that he was not a party to the suit in which the receiver was appointed. ^^ And the fact that the entire capital stock had not been subscribed is no bar to the action, if the defendant, with knowledge of that fact, partici- pated in the affairs of the company in a manner which could 27 Stewart v. Lay, 45 Iowa, 604. 28 Schoonover v. Hinckley, 48 And see this case for a general dis- Iowa, 82. cussion of the defenses which may 29 Lamar Insurance Co. v. Gulick, and may not be interposed in such 102 111., 41 ; Chandler v. Brown, 77 an action. In an action by the re- 111., 333 ; S. C, 8 Chicago Legal ceiver of an insolvent corporation News, 123. And in the latter case against the president of the corpora- the decree was also held objection- tion to recover a balance due upon able in that it assumed to confer his stock subscription, the latter is upon the receiver discretionary pow- entitled to credit for an amount ad- ers to compromise with stockholders vanced by him for the employment as to payment of subscriptions, since of counsel to represent the corpora- each stockholder had a vested right tion in threatened litigation before in the contract for subscription of the appointment of the receiver. every other stockholder. Graebner v. Post, 119 Wis., 392, 96 SO Great Western T. Co. v. Gray, N. W., 783. 122 III., 630, 14 N. E., 214. CHAP. X.] CORPORATIONS. 411 only be justified upon the assumption that the subscribers in- tended to proceed with the capital stock only partially sub- scribed.21 So in an action by a receiver to recover unpaid sub- scriptions to capital stock, the fact that the defendant acted as a director of the corporation estops him from denying its cor- porate existence, and from asserting that the amount of capital stock required to be paid in full in cash had not been paid, and that he subscribed upon the faith of representations that it had been fully paid, which representations were false.^^ And since, as has already been shown, ^^ the receiver succeeds, for the purposes of litigation, only to the rights of the corporation, ex- cept where acts have been done in fraud of the rights of stock- holders or creditors, it follows that in an action brought by the receiver against a stockholder to recover his unpaid stock subscription, the receiver must base his right to recover upon the title of the corporation, and it is accordingly held that the receiver can not maintain the action where the subscription was procured by fraud. ^'* Nor can the receiver recover where the subscription was to the capital stock of a corporation with a given amount of stock, whereas the corporation is organized with a materially greater amount of authorized capital. ^^ And when a shareholder transfers his shares in good faith before the appointment of the receiver, all assessments thereon hav- ing been fully paid to the time of such transfer, and it not ap- pearing that any of the present creditors of the corporation were creditors at the time of such sale, such shareholder is not liable to the receiver for the balance of the subscription.^^ § 325. Shareholder can not enjoin receiver from col- lecting unpaid subscription; defense of fraud not admis- sible when all parties participated. When a statute, au- 31 Stillman v. Dougherty, 44 Md., 35 Newport Cotton Mill Co. v. 380. Minis, 103 Tenn., 465, 53 S. W.. 736. 32 Ruggles V. Brock, 6 Hun, 164. 36 Billings v. Robinson, 28 Hun, ^^Ante, § 315. 122. 34 Marion Trust Co. v. Blish, 170 Ind., 686, 84 N. E., 814, 85 N. K, 344. 412 RECEIVERS. [CIIAP. X. thorizing the appointment of receivers to wind up the affairs of insolvent corporations, makes it the receiver's duty to collect from the shareholders of tlie corporation the sums remaining due on account of their unpaid subscriptions, and a receiver, in the performance of this duty, has obtained a decree against a shareholder for the payment of the balance due from him, such shareholder is not entitled to an injunction to restrain the receiver from collecting the amount until all the debts of the corporation may be ascertained, and the amount due from each shareholder be determined. Any equity upon which such share- holder might rely as the foundation for an injunction should have been urged in defense of the action brought by the receiv- er, and will not avail the shareholder after a decree against him in that action.^? And when a receiver is appointed to close up the affairs of an insolvent banking corporation for the benefit of its creditors, in an action brought by him upon a note given by a stockholder for his subscription to the capital stock of the bank, it constitutes no defense to the action that the note was given without consideration, and in aid of an illegal and fraud- ulent transaction, when all the parties participated in the fraud.^^ § 326. Receivers of mutual insurance companies may re- cover assessments due on premium notes ; action in foreign state. Under the practice prevailing in the states of New York and Indiana, receivers of insolvent mutual insurance companies are empowered to recover assessments due upon premium notes held by such companies for the purpose of ad- justing losses and settling the indebtedness of the corpora- tions. In New York, the power of the receiver to thus assess the premium notes is derived wholly from statute, as will be seen by an examination of the authorities in that state.'^ In 37Pentz v. Hawley, 1 Barb. Ch., Hams v. Babcock, 25 Barb., 109; 122. Thomas v. Whallon, 31 Barb., 172; 38 Farmers & Mechanics Bank v. Sands v. Sweet, 44 Barb., 108; Jenks, 7 Met., 592. Bangs v. Gray, 12 N. Y., 477, re- 39 Shaiighnessy v. The Rensselaer versing S. C, 15 Barb., 264; Sands Insurance Co., 21 Barb., 605; Wil- v. Sanders, 28 N. Y., 416; Jackson CHAP. X.] CORPORATIONS. . 413 Indiana, however, it is held, even in the absence of any state- ute conferring such authority upon the receiver of a mutual insurance company, that he is authorized to make assessments upon premium notes due to the company, for the purpose of meeting its obligations. The authority to make the assessments is impHed from the necessity of making them, since without such power it would not be possible for the receiver to manage and adjust the affairs of the corporation. ^^ In both these states, the receiver is regarded, for the purpose of making such assessments, as standing in the position and succeeding to the powers of the directors of the corporation. "^^ And the re- ceiver, being empowered in the state of his appointment to in- stitute and defend all suits in the name of the corporation, or otherwise, may sue in another state to recover assessments upon premium notes, no creditor in the latter state having interfered to prevent the prosecution of the suit, or to assert any claim to its proceeds. "^^ But since the right of the foreign receiver to maintain the action in such case rests upon principles of comity, it is subject to such restrictions and limitations as the state may see fit to impose. Thus, where the statute of the state in which the action is brought prescribes a period within which such pro- ceedings shall be begun, the failure of the receiver to institute the suit within the time limited is a bar to the action.^^ And where the statute authorizing the directors to levy such as- sessments upon premium notes, limits the power to cases V. Roberts, 31 N. Y., 304 ; Lawrence 40 Embree v. Shideler, 36 Ind., V. McCready, 6 Bosw., 329; Berry 423, sustained in Tippecanoe Town- V. Brett, id., 627. See, also, Mc- ship v. Manlove, 39 Ind., 249. Donald v. Ross-Lewin, 29 Hun, 87. 41 Thomas v. Whallon, 31 Barb., And in Wisconsin it is held that the 172; Embree v. Shideler, 36 Ind., receiver of a mutual fire insurance 423. company, in making an assessment 42 Lycoming Insurance Co. v. on premium notes, should include a Wright, 55 Vt., 526; Parker v. reasonable amount for his compen- Stonghton Mill Co., 91 Wis., 174, sation and for the expenses of the 64 N. W., 751, 51 Am. St. Rep., 881. receivership. Davis v. Shearer, 90 43 Wyman v. Kimberly-Clark Co., Wis.. 250, 62 N. W., 1050 ; Seamans 93 Wis.', 554, 67 N. W., 932. V. Millers' M. I. Co., 90 Wis., 490, 63 N. W., 1059. 414 RECEIVERS. [chap. X. where it is necessary for the payment of "just claims on the corporation," and it is apparent that neither the receiver, nor the court appointing him and to which he reported his action, and from which he obtained an order to make the assessment, has examined or passed upon the vahdity of the claims or de- mands against the corporation for which the assessment was made, the receiver can not maintain an action to collect such assessment upon a premium note.^* And in Rhode Island it is held that the receiver of a mutual insurance company, in making an assessment, should not include in it claims for losses which have occurred since his appointment, since such appointment operated as a dissolution of the company and the contracts of insurance were thereby terminated by operation of law.^^ § 327. What receiver must allege to maintain this class of actions. The rule in Indiana, as to the pleadings re- quired in actions brought by receivers of insolvent insurance companies to recover assessments upon premium notes, is that all the facts necessary to show a liability upon the note must be pleaded by the receiver. For, while the court appointing him may properly pass upon the question of the necessity for a re- ceiver, it can not in that proceeding settle the question of the liability of the maker of a premium note to pay, either in whole or in part."*^ And the receiver must, therefore, allege and prove that the court has examined and determined the validity of the demands, for the payment of which the assessment is made.^"^ But it is not necessary that he should present with his pleadings a transcript of the decree of the court by which he was ap- 44 Embree v. Shideler, 36 Ind., mutual fire insurance company 423; Downs v. Hammond, 47 Ind., under the laws of Michigan ta 131. make assessments upon policy-hold- 45 Insurance Commissioner v. C. ers to pay the liabilities of the com- M. Ins. Co., 20 R. I., 7, 36 Atl., 930. pany and the expenses of the re- 46 Manlove 7^. Burger, 38 Ind., 211. ceivership, and as to his right ta See, also, Embree v. Shideler, 36 maintain an action upon such as- Ind., 423, sustained in Tippecanoe sessment, see Wardle v. Townsend, Township v. Manlove, 39 Ind., 249; 75 Mich., 385, 42 N. W., 950. Manlove v. Naw, 39 Ind., 289. As 47 Downs v. Hammond, 47 Ind,, to the right of the receiver of a 131. CHAP. X.] CORPORATIONS. 415 pointed receiver of the company, and by which the assessment was made upon the premium notes, since the evidence of his right of action, although essential to a recovery, is not the foundation of the action, and rests only in averment.'*^ § 328. Liability of makers of premium notes not in- creased by appointment of receiver; assessment must be alleged and proven. In New York, the doctrine is well established, in the class of cases under consideration, that the liability of the members of mutual insurance companies upon their premium notes is not increased by reason of the insolvency of the corporation and the appointment of a re- ceiver, since the receiver is merely substituted in place of the directors of the company, and vested with their rights and pow- ers and nothing more.'^^ The liability of the makers of pre- mium notes being contingent upon certain conditions, such as loss by the company, assessment upon the notes and notice to the makers, such contingent or conditional liability is not changed into an absolute one by the insolvency of the company and the appointment of a receiver; since the courts can not change the terms of the agreement, nor make that an absolute promise which was before a conditional one. And the appoint- ment of the receiver merely clothes him with the power, under the statutes, of determining the amount of indebtedness due upon the notes by proceeding to make the necessary assess- ments, and by taking such other steps as are required by law to fix the liability of the makers of the notes, the appointment itself in no manner fixing such liability.^^ The statutes, there- fore, requiring an assessment in order to fix the liability of makers of premium notes, an assessment by the receiver is an indispensable condition to his right of action. ^1 And such an assessment and apportionment of losses by the receiver, being 48 Boland v. Whitman, 33 Ind., 64. 50 Williams v. Babcock, 25 Barb., 49 Shaughnessy v. The Rensselaer 109. Insurance Co., 21 Barb., 605; Wil- 51 Shaughnessy 7/. The Rensselaer liams V. Babcock, 25 Barb., 109; Insurance Co., 21 Barb., 605. See, Savage v. Medbury, 19 N. Y., 32. also, Williams v. Babcock, 25 Barb., And see Devendorf v. Beardsley, 23 109. Barb., 656. 416 RECEIVERS. [CIIAP. X. a condition precedent to his recovery upon the notes, must be pleaded in the action and proved upon the trial. ^^ When, therefore, the complaint of the receiver contained no averment as to the liabilities of the company, and, therefore, laid no foundation for the introduction of proof upon that point, and there was no proof of the existence of any liabilities for the payment of which an assessment was necessary, the receiver was held not entitled to recover. ^^ § 329. Receiver takes place of directors in making as- sessment, subject to sanction of court. It is also the doc- trine of the New York courts, in this class of cases, that the receiver takes the place of the directors in ascertaining the amount of demands against the insurance company, and in determining the necessity for an assessment, as well as its amount, with this limitation upon his authority, that he can not act without the sanction of the court. The court, however, does not make the assessment, the receiver being himself the actor for that purpose, and his authority depending, not upon the order of the court, but upon the existence of the facts ren- dering an assessment necessary and proper. The requirement of the sanction and approval of the court is an additional re- striction and limitation upon the receiver's authority, but does not dispense with the other and more important conditions. The court, therefore, neither adjudicates upon the liability of the company, nor the amount for which assessments shall be made, nor the ratio of assessment, but merely sanctions the acts of the receiver in doing these things. ^^ § 330. Acts in a ministerial and not a judicial capacity; may re-assess for unpaid balances. In thus making assess- 52Devendorf v. Beardsley, 23 v. Sanders, 28 N. Y., 416; Jackson Barb., 656; Thomas v. Whallon, 31 v. Roberts, 31 N. Y., 304. Barb., 172. And see, as to degree 53 Thomas v. Whallon, 31 Barb., of particularity required of the re- 172. ceiver in making the assessment and 54 Thomas v. Whallon, 31 Barb., giving notice, as a condition prec- 172. See, also, McDonald v. Ross- edent to his right of action, Bangs Lewin, 29 Hun, 87. V. Mcintosh, 23 Barb., 591; Sands CHAP. X.] CORPORATIONS. 417 ments upon the makers of premium notes under the laws of New York, the receiver acts under the statute in a ministerial and not in a judicial capacity.^^ And his action being minis- terial in distinction from judicial, the fact that a former re- ceiver has made an assessment upon the same notes, which still remains unenforced, will not prevent his successor from making a new assessment for the same purposes, since it is merely re- peating the performance of a condition precedent to a right of action upon the notes by the receiver, and is by no means a ju- dicial determination of the matter. ^^ Nor is the approval of the assessment by the court regarded as a judicial decision, or as conclusive upon the maker of the note as to the particulars of the assessment, in an action brought by the receiver upon the note ; such approval by the court only serving to place the act of the receiver in making the assessment, in the same position as the act of the directors, had the assessment been made by them.^'' And the receiver in levying assessments upon such notes, may properly include as a portion of the amount to be raised an unpaid balance of former assessments, which ought to have been paid by delinquent members, but which, owing to the inability or insolvency of such members, have not been paid.^^ § 331. When may assess all notes; what proof required as to losses. As regards the form of the assessment made by a receiver in this class of cases in New York, it is held that when he is satisfied from the liabilities of the company, and from an examination of all classes of its notes, that there is no note which is not chargeable to its full amount for lia- bilities justly attaching, he may make a general assessment upon all the notes to their full amount, without regard to classes, and without specifying the name of the party bound to 55 Thomas v. Whallon, 31 Barb., 116, note a, overruling Campbell v. 172; Sands v. Sweet, 44 Barb., 108. Adams, 38 Barb., 132. And see Bangs v. Duckinficld, 18 ^1 Bangs v. Duckinfield, 18 N. Y., N. Y., 592. 592. 56 Sands v. Sweet, 44 Barb, 108; 58 Bangs v. Gray, 12 N. Y., 477, Tackson v. Van Slyke, 44 Barb., reversing S. C, 15 Barb., 264. Receivers — 27. 418 RECEIVERS. [chap. X. contribute, or the amount of the note.^^ And the receiver is not required to prove all the facts upon which he or the company- allowed the losses for v.^hich the assessment was made. All he is required to show, in this respect, is that sufficient claims for losses were presented to the company, or to him, and which he allowed, to make up the sum for which the assessment was levied.60 § 332. Receiver may allow equitable claims for losses. It is also held that a receiver of an insolvent mutual insurance company, under the laws of New York, may properly allow equitable claims for losses against the company, although no actions to recover the same could be maintained, by reason of the neglect of the claimants to bring them within the time fixed by the charter or by-laws of the corporation, or by statute. And when such claims have been allowed, the receiver is bound to pay them, if there be funds for that purpose ; or, if there are no funds, it is his duty to collect enough from the makers of the premium notes to satisfy such demands. And the maker of such a note can not defeat an action thereon by a receiver, brought for the collection of such an assessment, upon the ground that the receiver might have avoided allowance of the claims upon merely technical grounds, such as that they were not brought within the time prescribed by law for that pur- pose.^l § 333. Principles governing set-offs in actions by receiv- ers of corporations. As regards the right or power of a re- ceiver of a corporation to allow set-offs claimed by debtors to the corporation, against the indebtedness which he is seeking to enforce, it would seem that the right of set-off is dependent upon and governed by the same equitable principles which regu- late the law of set-off in general, as between creditors and debtors. And when the debts are due to and from the same persons respectively, and in the same capacity, the right of the 59 Sands v. Sanders, 28 N. Y., 416. 61 Sands v. Hill, 42 Barb., 651. 60 Sands v. Hill, 42 Barb., 651; Jackson v. Roberts, 31 N. Y., 504. CHAP. X.] CORPORATIONS. 419 receiver to allow one to be set off against the other may be re- garded as clear; but if otherwise, he will not be justified in al- lowing the set-off. And in cases of this nature, when there is doubt in the mind of the receiver as to what course he should pursue, it is proper and fitting that he should apply to the court for instructions. ^2 And when the court appointing receivers over an insolvent corporation, is empowered by statute with a general direction and control over them in the discharge of their duties, it may, upon a summary application, direct them to allow a set-off against a demand which they are seeking to enforce, if satisfied that such set-off is just and equitable. ^^ But in an action by receivers of an insolvent corporation against a shareholder, to recover illegal dividends declared by the com- pany, in violation of a statute prohibiting any dividends which might impair the capital stock of the corporation, a defendant shareholder will not be allowed to set off an indebtedness due to himself from the corporation ; since, for the purposes of such action, the receivers do not represent the corporation, but its creditors, for whose benefit the suit is brought. The dividends thus illegally paid being a fraud upon the creditors of the in- solvent corporation, and the reparation sought being the res- toration of the funds for the benefit of the creditors, whom alone the receivers represent for the purposes of the action, claims growing out of independent matters between the defendant and the corporation itself are not a proper subject of set-off. ^^ § 334. Discretion as to compromising demands against the corporation; may decline to ratify contract; may not waive express stipulations of insurance policy. The first duty of receivers of insolvent corporations is to faithfully col- lect and justly disburse the assets of the corporation, which con- stitute a trust fund for its creditors. In the discharge of this duty, they are properly vested with a certain degree of discre- 62 In re Van Allen, 37 Barb., 225. 64 Osgood v. Ogden, 4 Keyes, 70. 63 Holbrook z^. Receivers of Amer- See, also, Gillet v. Phillips, 13 N. ican Fire Insurance Co., 6 Paige, Y., 114. 220. 420 RECEIVERS. [chap. X. tion in the compromising and settlement of demands against the corporation ; but, in the exercise of their discretionary powers they should keep constantly in view the interest of those whom they represent, and for whom they act. As illus- trating this discretionary power, it is held that receivers of an insolvent banking corporation may properly decline to ratify a contract made by the corporation after its insolvency, when they are satisfied that the ratification of the contract would result in the loss of the fund intrusted to their charge.^^ But a receiver of an insurance company would seem to be limited, as to his powers in the adjustment of losses, to such powers as might have been lawfully exercised by the officers of the com- pany. He is not, therefore, empowered by virtue of his ap- pointment, in adjusting proofs of loss against the company, to dispense with or to waive express stipulations of the policy which relate to the substance of the contract.^^ § 335. Limited to allowance of claims recoverable against the corporation. When receivers, who have been appointed in conformity with the laws of the state for winding up the affairs of an insolvent corporation, are authorized by statute to settle all claims against the corporation, and to allow all demands of whose justice they are satisfied, they are limited to the allowance of such claims as might be recovered against the corporation, either at law or in equity, if suit be brought. And they have no authority to allow a demand, which is not a proper charge upon the fund in their hands, without the consent of all persons interested in having the claim rejected, the receivers in this respect being considered as guardians of the rights of all persons in interest. And when such receivers have disallowed demands against the corporation, and the matter has been referred to referees for adjustment, it is the duty of the receivers to resist the allowance of the demands before the referees, and to continue their defense so long as it may, in 65 Suydam v. Receivers of Bank 66 Evans v. Trimountain Mutual of New Brunswick, 2 Green Ch., 114. Fire Insurance Co., 9 Allen, 329. See, also, Same v. Same, id., 276. CHAP. X,] CORPORATIONS. 421 their opinion, be rendered effectual. ^"^ So when claims are pre- sented to the receiver of a corporation after the expiration of the time fixed by the court for such purpose, the receiver is not justified in allowing them, and if special circumstances exist which in his opinion render it just that they should still be received, application should be made to the court for the neces- sary authority.^^ § 336. Court may authorize receiver to compromise doubtful claims ; receiver may allow salaries of officers pro rata; when such salaries not allowed. It is competent for the court appointing a receiver over an insolvent corporation to authorize him to compromise disputed and doubtful claims by the allowance of such an amount as he may deem just and equitable ; or to authorize him to submit such claims to arbitra- tion when this method of settlement is provided by statute.^^ The court may also empower him, generally, in any case where he may deem it expedient and for the interest of the creditors and shareholders, to compromise with debtors of the corpora- tion who are unable to pay in full. And the receiver of such a corporation may allow its officers the amounts due to them for salaries, up to the time of his appointment, as debts to be paid ratably with other demands, no preference being given to the officers. "^0 And where a receiver has been appointed over a corporation, and all its property has come into his possession and he has assumed the entire management of its affairs, such appointment has the effect of suspending the functions of all the officers, and there are no further duties which they can per- form, and it is accordingly held in such case that they are not entitled to draw their salaries for the period during which the affairs of the corporaticHi were in the hands of the receiver. "^^ 67 Attorney-General v. Life & Fire 70 /« re Croton Insurance Co., 3 Insurance Co., 4 Paige, 224. Barb. Ch., 642. 68 Fogg V. Supreme Lodge, 159 71 Lenoir v. Linville I. Co., 126 Mass., 9, 33 N. E., 692. N. C, 922, 36 S. E., 185. 69 Insurance Commissioner v. C. M. Ins. Co., 20 R. I., 7, 36 Atl., 930. And see, ante, § 177. 422 RECEIVERS. [chap. X. § 337. Receiver may exercise option of company as to deposit of collaterals. When an incorporated company de- posits certain securities with its creditor, as collateral to an in- debtedness due from the corporation, but reserves the right or option of having such securities considered as an absolute pay- ment upon notifying the creditor to that effect, and the corpora- tion subsequently passes into the hands of a receiver, the op- tion reserved to the company may be legally exercised or assert- ed by the receiver, who is for this purpose regarded as the legal representative of the corporation. And when the requisite no- tice is given by the receiver, it has the effect of making the deposit of collaterals an absolute payment, and thus releasing the indebtedness.'^^ § 338. May assign chose in action; sale not set aside be- cause applied for by creditor v^^ho was also a judge of the court. Receivers of an insolvent corporation, appointed under a statute authorizing such mode of winding up the af- fairs of insolvent companies, may make an assignment of a chose in action due to the corporation, without using the cor- porate seal, since the sale or assignment by the receivers is not the act of the corporate body itself, but rather the act of the receivers operating under the statute. And a sale by the receivers, under a power given them by statute for that purpose, is as effectual to convey the title as if the right of property was vested in them, and such sale need not, therefore, be authen- ticated by the corporate seal."^^ Nor is it a sufficient ground for setting aside a sale of the property of a corporation, made by its receiver, that the application for the order of sale was made by a judgment creditor of the corporation, who was also a jus- tice of the court to which the appHcation was made, or that it is alleged that he was able, by means of his official position, to exercise an improper influence upon the proceedings in the court in which they were taken, when it does not appear that 72 Phoenix Iron Co. v. New York 73 Hoyt v. Thompson, 5 N. Y., Wrought Iron Railroad Chair Co., 320, reversing S. C, 3 Sandf., 416. 3 Dutch., 484. CHAP. X.] CORPORATIONS. 423 his official position resulted in producing any different order from that authorized by the settled practice of the court, or from that which would have been given upon the application of any other person. '^^ § 339. When defendant entitled to costs out of fund in receiver's hands. When receivers of a corporation insti- tute an action for the collection of money demands alleged to be due, the proceeding being carried on for the enhancement of the fund in the receivers' hands and for the benefit of those who may be finally determined to be entitled thereto, if they are unsuccessful in such suit, the defendant is entitled to costs out of the fund in the receivers' hands. And in such case, the defendant will not be required to await the final distribution of the assets of the corporation, and then share with other cred- itors or parties in interest pro rata, but is entitled to an imme- diate order for payment of the costs out of any funds in the re- ceivers' hands. "^5 74 Libby v. Rosekrans, 55 Barb., 218. "^5 Columbian Insurance Co. v. Stevens, 37 N. Y., 536. "The right of the defendants," says Woodruff, J., p. 537, "to have judgment for their costs in such an action as the present, brought against them for the recovery of money only, is ab- solute as well by the law before as since the code of procedure. There is no claim nor ground of claim that the allowance of costs in the action was discretionary. The lia- bility of the receiver in whom the alleged cause of action became vested after the summons herein was served, and by whom the action was prosecuted, is made by section 321 of the code, the same as if he had caused himself to be made a party. The questions her^ are, therefore : 1. In an action prosecuted by receivers for the col- lection of alleged money demands, instituted or carried on for the en- hancement of the fund, for the benefit of those to whom it is ulti- mately to be paid, is the defendant entitled to costs to be paid to him immediately, or must he stand as a general creditor to await the final administration, and receive only (as the case may be) his distributive share of the fund pro rata, with those for whose benefit he has been subjected to a groundless litigation? 2. Is the question stated, addressed to the discretion of the court, in such sense that no appeal lies to this tribunal from the decision made below? It was conceded on the argument that the costs in question are chargeable upon and are to be collected out of the fund. This could not well be denied, and yet in a case in which it does not appear by anything stated in the 424 RECEIVERS. [chap. X. § 340. Judgment against receiver for taxes, enforced only against funds in his hands as receiver. Where an ac- tion is brought by the state against receivers of a corporation, for the purpose of enforcing the collection of taxes due from the corporation, and judgment is recovered against the receiv- ers, the judgment should be so entered as to be enforced only against the funds that are or should be in the hands of defend- ants as receivers."^^ § 341. Enforcement of demand by receiver against debt- or, not a taking under legal process. When a corporation is dissolved under proceedings in a state court, and a receiver is appointed to close up its affairs, the enforcement and collection by the receiver of a demand against a debtor of the corporation is not a "taking under legal process," within the meaning of the national bankrupt act of 1867, so as to constitute an act of bankruptcy.'^''' § 342. Receiver should not himself apply money in pay- ment of judgments; distribution made by court. When a receiver is appointed over an insolvent insurance company, papers that there are other claims opinion, upon clear and just rules, on that fund, of any sort, except governing the subject, impair the the interests of the stockholders of defendants' right to be paid in full, the company, it would seem to fol- the fund being confessedly suffi- low, as of course, that the receiver cient. The receiver is pro hac vice should have been directed to pay the representative of the company, those costs. Such an order is the its creditors and stockholders. The appropriate mode of reaching funds action is prosecuted for the increase in the receiver's hands. Not being of a fund which is to be paid to in form a party to the action, no them. It is not according to any execution could reach the proper- rule of justice or equity toward ty he holds, and being the custo- third parties that actions like the dian of the funds as an officer of present should be prosecuted by the court, he is subject to immedi- the company or such representa- ate direction to pay it to a party tive, otherwise than at the expense entitled. If it be assumed that the and risk of the fund which it is company was insolvent, and that sought thereby to increase." the funds which the receiver holds '^^ Commonwealth v. Runk. 26 Pa. or may collect may not prove suf- St., 235. ficient to satisfy all the creditors of '^'^ In re New Amsterdam Fire In- the company, this does not, in my surance Co., 6 Benedict, 368. CHAP. X.] CORPORATIONS. 425 with authority to collect debts and to pay liabilities, upon a bill by judgment creditors of the corporation against the receiver, to compel him to bring suits for the recovery of its assets, it is not proper for the court to decree that the receiver should apply the money in payment of the judgments; but he should be directed to bring it into court, in order that the court itself may distribute it to the parties entitled.'^^ § 342a. Ancillary bill by receiver to determine claims to property in his possession; injunction. Where third per- sons are asserting rights and making claims which cast a cloud upon the title to the property of an insolvent corporation which is in the possession of a receiver and is being administered by him and which consists largely of franchises and other assets of an intangible nature, the receiver may, under the direction of the court, proceed by ancillary bill to protect the jurisdiction and right to administer such property and to determine and ad- judicate the validity of the rights and claims of the parties in the estate in his possession ; and in such case it is proper to grant an injunction until the rights of the parties are determinedJ^ 78 Benneson v. Bill, 62 III., 408. SO L. Ed., 801, reversing S. C, 132 79 Blair v. City of Chicago, 201 Fed., 84& U. S., 400, 26 Sup. Ct Rep., 427, 426 RECEIVERS. [chap. X. III. Receivers of Insolvent Corporations. § 343. Statutes authorizing receivers on insolvency of corporation; power of appointment may be conferred upon executive officer. 344. Object to preserve assets for benefit of creditors; when corpo- ration allowed to resume management; shareholders may have relief; effect of assignment. 344a. Receiver not appointed over insolvent corporation upon its own petition. 344b. Corporation not dissolved by appointment of receiver; actions against the corporation do not abate; otherwise on dis- solution. 345. In proceedings to forfeit charter, appointment of receiver does not revive corporate existence. 346. Allegations as to insolvency; when affidavit on information in- sufficient; notice and rule to show cause. 346a. Shareholders entitled to relief; fraudulent transfers; discretion- ary powers of court. 347. Injunction against directors and officers in aid of receivership; when management left in hands of officers. 348. Appointment of receiver does not impair lien already acquired by creditors; attaching creditors. 349. Lien of judgment creditors on real estate, limited to interest of corporation at time of appointment; court not concluded by judgment in another state. 350. Creditors may be prohibited by statute from proceeding against corporation after receivership; creditors may come in under decree. 351. Appointment operates as transfer of corporate property to re- ceiver; right to rents before and after sale by receiver; legal services. 352. Liability of shareholders for unpaid subscriptions may not be enforced by creditors, but only by receiver. 353. Statutory proceedings by attorney-general against insolvent bank. 354. Eligibility of corporate officers as receivers. 355. Answer of corporation can not determine litigation between claimant and receiver. 356. Purchaser at receiver's sale acquires no right of action against former officer; when shareholder estopped from ques- tioning order of sale. 357. When receiver may be discharged. CHAP, X.] CORPORATIONS. 427 § 343. Statutes authorizing receivers on insolvency of corporation ; power of appointment may be conferred upon executive officer. Under the laws and practice of many of the states, the jurisdiction of equity over corporate bodies has been enlarged to the extent of authorizing the appointment of receivers upon the insolvency of the corporation, for the pro- tection of creditors and shareholders ; and the statutory power thus conferred is in some of the states sufficiently broad to au- thorize the court to dissolve the corporate organization, and to forfeit its franchises.^^ Usually the power of appointing re- SO In New York, the appointment of receivers over insolvent insur- ance companies, and the functions and duties of such receivers, are largely regulated by legislation. As to the power of the court under such legislation to adjudicate upon claims against the company and to pay dividends, and as to the right of appeal from such orders, and the right of other creditors to intervene and be heard concerning such mat- ters, and as to costs upon such in- tervention, see People v. Security Life Insurance Co., 71 N. Y., 222. As to the proper method of distri- bution of the assets of an insolvent insurance company among its cred- itors, when a receiver has been ap- pointed under the New York stat- ute, the method of computing amounts due to policy-holders as a basis for payment of dividends, priorities among different classes of creditors, allowances for death losses, and set-offs of premium notes due from policy-holders, see People V. Security Life Insurance Co., 78 N. Y., 114; Attorney-General v. North America Life Insurance Co., 82 N. Y., 172; Attorney-General v. Guardian Mutual Life Insurance Co., 82 N. Y., 336. As to proof of claims of creditors and policy-hold- ers in such cases, and extension of time for such proofs and notice to creditors, see People v. Security Life Insurance Co., 79 N. Y., 267. As to the right of such a receiver to a mandamus to compel the superin- tendent of the insurance department to pay to the receiver the proceeds of securities deposited by the com- pany with the superintendent, see Attorney-General v. North America Life Insurance Co., 80 N. Y., 152. As to the compensation of such re- ceivers, and the basis upon which it will be allowed upon receipts and disbursements, see Attorney-General V. North America Life Insurance Co., 89 N. Y., 94. As to the right of a surety of an insolvent corpora- tion to the appointment of a receiver to manage and dispose of its assets and to pay its indebtedness, under the statutes of Ohio, see Barbour v. National Exchange Bank, 45 Ohio St., 133, 12 N. K, 5. As to facts held insufficient to justify the ap- pointment of a receiver over an al- leged insolvent corporation upon be- half of a judgment creditor under the statute of Idaho, see Cronan v. District Court, 15 Idaho, 184, 96 Pac, 768. 428 RECEIVERS. [chap. X. ceivers over corporations is conferred by legislative enactment upon the courts themselves ; but in some instances it is vested in executive officers of the government, as in the case of re- ceivers of national banks, appointed by the comptroller of the currency, under the provisions of the national banking act of June 3, 1864.^1 And since the appointment of a receiver in limine is not regarded as a strictly judicial act, in the sense of being a decree or judgment affecting title to property, or final- ly determining the rights of the parties, it is competent for the legislature to authorize the executive department of the govern- ment to appoint receivers, with authority to take charge of and wind up the affairs of insolvent corporations, such as banking institutions. Nor does such legislation in any manner impair the obligation of the original contract with the corporation, by taking from it the right secured by its charter to sue and be sued in its corporate name, the appointment of the receiver being for the purpose of preserving and not destroying rights. ^2 § 344. Object to preserve assets for benefit of creditors ; when corporation allow^ed to resume management; share- holders may have relief; effect of assignment. The primary object, however, of proceedings in chancery against insolvent and failing corporations, when such proceedings are authorized by statute, is not so much a dissolution of the charter, which is the appropriate duty of a court of law, as to protect and pre- serve the corporate assets for the benefit of creditors. And it may, therefore, be regarded as discretionary with the court whether to continue the possession of the receiver, or to allow the corporation to resume the management of its own affairs, if satisfied that the interest of all parties will be best subserved in this way.^2 So under a statute authorizing the appointment 81 13 U. S. Statutes at Large, 82 Carey v. Giles, 9 Ga., 253. p. 99. See § 50; U. S. Revised Stat- 83 Fay v. Erie & Kalamazoo Rail- utes, § 5234; 3 U. S. Comp. Stat. road Bank, Harring. (Mich.), 194. 1901, p. 3507; 5 Fed. Stat. Ann., p. 170. CHAP. X.] CORPORATIONS. 429 of receivers over insolvent corporations, the court v^ill decline to appoint, although the corporation is insolvent, if its direc- tors, who are trustworthy persons, are closing up its affairs, and if all the creditors and all stockholders save complainant, are satisfied with the management of the directors. ^'^ But un- der a statute authorizing the appointment of a receiver over a corporation when it becomes insolvent, or in immediate danger of insolvency, the relief is not confined to cases instituted by creditors, but may be granted upon a bill by a shareholder al- leging the insolvency of the corporation and gross mismanage- ment of its affairs by its ofiicers.^^ And upon a bill for a re- ceiver over an insolvent corporation, the court having juris- diction of the subject-matter, and jurisdiction of the parties by service of process, the execution by the corporation after such service of an assignment of its property to a trustee for the benefit of creditors will not deprive the court of jurisdic- tion, and it may grant the relief notwithstanding such assign- ment.^^ § S44fl. Receiver not appointed over insolvent corpora- tion upon its own petition. A court of equity has no juris- diction to appoint a receiver over a corporation upon its own petition alleging its insolvency and inability to continue its business and seeking a ratable distribution of its assets among its creditors, no adverse parties being joined as defendants to such petition and no action being pending.^'^ Nor will a re- ceiver be appointed upon a bill by a banking corporation against its judgment creditors, alleging its insolvency and that the de- fendants are seeking by the enforcement of their judgments to obtain an undue preference over its other creditors, since equity 84 City Pottery Co. v. Yates, 37 Colo., 464, 17 Pac, 272. And see N. J. Eq., 543. State v. J., P. & M. R. Co., 15 Fla., 85 Iron Hall v. Baker, 134 Ind., 201. And see, ante, § 39c. See, 293, ZZ N. E., 1128. contra, Petition of Kittanning In- 86 Belmont Nail Co. v. Columbia surance Co., 146 Pa. St., 102, 23 I. & S. Co., 46 Fed., 8. Atl., IZd. 87 Jones v. Bank of Leadville, 10 430 RECEIVERS. [chap, X. has no jurisdiction to assume the administration of a debtor's estate upon the mere gTound of insolvency. ^^ § 344^. Corporation not dissolved by appointment of re- ceiver ; actions against the corporation do not abate ; other- wise on dissolution. It is important to observe that, in the absence of statute, the appointment of a receiver over an in- solvent corporation does not work the dissolution of the cor- poration or in any way affect its corporate existence.^^ Ex- cept so far as the control of its affairs is placed in the hands of the receiver, it continues to exist for all purposes, and its officers, except as enjoined by the court appointing the receiver, continue to exercise their functions as if no receiver had been appointed.^^ It follows that actions which are pending against the corporation at the time of the appointment of a receiver do not abate as the result of the appointment but may be continued to final judgment, so long as there is no attempt to interfere with property in the possession of the receiver,^! although it is proper in such case for the receiver to intervene in the ac- tion, if necessary, and answer and defend upon behalf of the corporation. ^2 j^^^id where there has been no dissolution of the corporation and no injunction against the institution of ac- 88 Hugh V. McRae, Chase's Deci- Fed., 693, 47 U. S. App., 339. And sions, 466. see, post, § 358, for the application 89 Pringle v. Woolworth, 90 N. of the same doctrine in receiverships Y., 502 ; Venner v. U. W. Co., 40 of insolvent national banks, and Colo., 212, 90 Pac, 623, 122 Am. St. § 370& for its application in railway Rep., 1036 ; Moseby v. Burrow, 52 receiverships. Tex., 396 ; City Water Co. v. State, 90 Venner v. U. W. Co., 40 Colo., 88 Tex., 600, 32 S. W., 1033 ; Pinch- 212. 90 Pac, 623, 122 Am. St. Rep., back V. Mining Co., 137 N. C, 171, 1036. 49 S. E., 106; Allen v. Olympia L. 91 Kittredge v. Osgood, 161 Mass., & P. Co., 13 Wash., 307, 43 Pac, 384, 37 N. R, 369; St. Louis, C. G. 55 ; Stolze v. Manitowoc T. Co., 100 & F. S. Ry. Co. v. Holladay, 131 Wis., 208, 75 N. W., 987 ; Johnson Mo., 440, 33 S. W., 49 ; Andrews v. V. Southern B. & L. Assn., 99 Fed., Steele City Bank, 57 Neb., 173, 77 646; Hall v. Nieukirk, 12 Idaho, 33, N. W., 342; Stolze v. Manitowoc 85 Pac, 485 ; Durward v. Jewett, 46 T. Co., 100 Wis., 208, 75 N. W., 987. La. An., 559, 15 So., 386; Peirce v. 92 Andrews v. Steele City Bank, Van Dusen, 24 C C. A., 280, 78 57 Neb., 173, 77 N. W., 342. CHAP. X.] CORPORATIONS. 431 tions against it, persons having claims against the corporation may maintain actions against it for the enforcement of their demands and may prosecute them to final judgment.^^ And in the enforcement of their judgments, resort may be had to all the property of the corporation which does not come within the scope of the receivership.^^ And since the appointment of a receiver over an insolvent corporation does not ordinarily dis- solve or discontinue the existence of the corporation, it is en- titled, being a party to the receivership proceeding, to be rep- resented by counsel, although this must be at its own expense.^^ But where a statutory proceeding is instituted to dissolve an insolvent corporation and wind up its business and a judgment of dissolution is entered and a receiver appointed, it works an abatement of all actions pending against the corporation, and, unless revived under some statutory provision, all subsequent proceedings against the corporation are void. Hence, when an action is pending in another state at the time of the appointment of the receiver, and a judgment is subsequently rendered therein against the corporation, such judgment is not valid or binding upon the receiver.^^ § 345. In proceedings to forfeit charter, appointment of receiver does not revive corporate existence. In Louisi- ana, the right of the courts to appoint a receiver for the protec- tion of all parties in interest, pending proceedings for the liqui- dation and settlement of the affairs of an insolvent corporation, is treated as too well established to admit of question. ^'^ And when proceedings are pending for the forfeiture of the charter of an insolvent corporation and for the settlement of its af- 93 Weigen v. Council Bluffs Ins. 94 city Water Co. v. State, 88 Co., 104 Iowa, 410, IZ N. W., 862; Tex., 600, 32 S. W., 1033. Warner v. Imbeau, 63 Kan., 415, 65 95 Johnson v. Southern B. & L. Pac, 648; Allen v. Olympia L. & P. Assn., 99 Fed., 646. Co., 13 Wash., 307, 43 Pac, 55; City reinsurance Commissioner v. Water Co. v. State, 88 Tex., 600, 32 United F. Ins. Co., 22 R. I., 377, 48 S. W., 1033; Pinchback v. Mining Atl., 202. And see, post, § 349. Co., 137 N. C, 171, 49 S. E.. 106. 97 Stark v. Burke, 5 La. An., 740. And see, ante, § 258. 432 RECEIVERS. [chap. X. fairs, the appointment of a receiver does not have the effect of reviving the corporate body, it being merely a necessary meas- ure for protecting the property and preserving the rights of creditors.^S § 346. Allegations as to insolvency; when affidavit on information insufficient; notice and rule to show cause. W^here the statutes of a state provide that a receiver may be appointed when a corporation has been dissolved, or when it "is in imminent danger of insolvency, or has forfeited its cor- porate rights," in proceedings against an insurance company for the appointment of a receiver under the statute, it is suffi- cient ground for the relief to allege that the company is in- solvent and unable to meet its liabilities, and that its officers have misapplied the funds and are rapidly wasting the only means of the company for the payment of losses. Such a state of facts, if it does not show an absolute condition of insolvency, shows at least that there is such "imminent danger of insol- vency" as to warrant the appointment of a receiver under the statute. And the facts alleged being sufficient to give the court jurisdiction of the subject-matter, and authority to appoint a receiver, its proceedings in making such appointment, even if erroneous, can not be called in question in a collateral action. ^^ But an affidavit alleging the insolvency of a banking corpora- tion, upon information and belief, will not warrant the court in interposing its extraordinary aid by appointing a receiver, when such affidavit is contradicted by the regular official re- ports of the bank, made under oath and published by direction of law, since such reports are presumed to be entitled to at least as much weight, judicially, as the affidavit.^ And under a statute making insolvency of a corporation ground for a re- ceiver, the fact of insolvency is regarded as jurisdictional, and 98 Stark v. Burke, 5 La. An., 740. \t is otherwise, however, when such S9 Howard v. Whitman, 29 Ind., affidavit is not thus contradicted. 557. Attorney-General v. Bank oi Co- 1 Livingston v. Bank of New lumbia, 1 Paige, 511. York, 26 Barb., 304, 5 Ab. Pr., 338. CHAP. X.] CORPORATIONS. 433 the proof must be clear and convincing before the court will interfere.2 And in addition to the insolvency of the corpora- tion, it must appear that there is no reasonable prospect that the corporation, if let alone, will soon be placed by its man- agers in a condition of solvency.^ And the courts will not ex- ercise their statutory power of appointing receivers over an insolvent corporation, upon an ex parte application, and with- out giving the defendant an opportunity to be heard. But upon filing a petition duly verified, setting forth the grounds on which the application is based, an order to show cause should issue and a copy thereof should be served upon the officers of the corporation, directing them to show cause on a future day why the application should not be granted.'* And where a state statute provides that whenever any corporation shall become insolvent, any creditor or stockholder may apply for the issu- ance of an injunction and the appointment of a receiver, •« federal court sitting in that state may properly appoint a re- ceiver over the corporation upon a bill filed by mortgage bond- holders and stockholders in which the corporation is alleged to be insolvent and its affairs are charged to have been grossly mismanaged by its officers and directors. And in such case the jurisdiction exists independently of the statute and under the general chancery powers of the court. ^ § 346(7. Shareholders entitled to relief; fraudulent trans- fers; discretionary powers of court. Shareholders are en- titled to a receiver over a corporation upon a bill for relief 2 Atlantic Trust Co. v. ConsoH- 4 Devoe v. Ithaca & Owego R. dated E. S. Co., 49 N. J. Eq., 402, Co., 5 Paige, 521. As to the suffi- 23 Atl., 934; Edison v. Edison U. ciency of the allegations necessary P. Co., 52 N. J. Eq., 620, 29 Atl., to procure a receiver of an insolvent 195 ; Stokes v. Knickerbocker In- corporation under the statutes of vestment Co., 70 N. J. Eq., 518, 61 Wisconsin, and as to the functions Atl., 736. And see Parsons v. Mon- and powers of such a receiver when roe Manufacturing Co., 3 Green Ch., appointed, see Powers v. Hamilton 187. Paper Co.. 60 Wis., 23, 18 N. W., 20. 3 Fort Wayne Electric Corpora- 5 United States Shipbuilding Co. tion V. Franklin E. L. Co., 57 N. J. v. Conklin, 60 C. C. A., 680, 126 Eq., 7, 41 Atl., 666. Fed., 132. Receivers — 28. 434 RECEIVERS. [chap. X. against a note and mortgage executed by the officers of the cor- poration fraudulently and without adequate consideration, their conduct having been such as to render it unfit that they should retain control of the affairs of the corporation pending the litigation.^ But, after the appointment of a receiver under a statute for v^inding up insolvent corporations, it is still com- petent for the court to entertain an independent action by a judgment creditor to set aside an alleged fraudulent transfer of the corporate property, the receiver having taken no steps to set aside such transfer. And such an action is, in effect, an application to the court to direct the receiver in the discharge of his duty and may be maintained as such.'^ So when the property of an insolvent corporation has passed into the hands of a receiver, and the corporation is managed and its business conducted through the receiver, questions pertaining to the ad- ministration of the business must be left largely to the discre- tion of the court having the receivership in charge. And a court of appellate jurisdiction will be reluctant to disturb the action of the court below upon such questions, unless in cases of flagrant error and injustice.^ § 347. Injunction against directors and officers in aid of receivership; when management left in hands of officers. Upon the appointment of a receiver of all the assets and effects of a corporation, for the purpose of sequestrating its property and closing up its affairs, it is proper for the court, in con- nection with such appointment and as a part of the order, to enjoin the directors and officers of the corporation from collect- ing any debts or demands, and from delivering or incumbering any of the corporate property to any other person, such an in- junction being regarded as an appropriate adjunct of the re- ceivership.9 It by no means follows, however, because an in- junction has been granted against a corporation, restraining it 6 Avery v. Blees Manufacturing 8 Wilmington Star Mining Co. V. Co., 27 N. J. Eq., 412. Allen, 95 111., 288. 7 Monitor Furnace Co. v. Peters, ^ Morj^^an v. New York & Albany 40 Ohio St., 575. R. Co., 10 Paige, 290. CHAP. X.] CORPORATIONS. 435 from continuing in business because of its insolvency, that a receiver will necessarily be appointed to wind up its affairs, even though by the statute authorizing the proceeding the court is fully empowered to appoint a receiver. And when, in such case, it is apparent to the court that a receiver is not necessary for the protection of the interests either of creditors or of stock- holders, and that a stranger to the affairs of the company can not wind up its business as advantageously as its directors, a receiver will be refused and the management will be left in the hands of the directors, who may be required to act under the immediate control and direction of the court. ^^ But the court will not leave the management of the affairs of a corporation in the hands of its directors or officers, after declaring the cor- poration itself insolvent, unless it is shown to be for the in- terest of the creditors and shareholders that this course should be pursued. And when fraudulent and improper conduct is shown against the officers of the corporation, in making ille- gal sales of its property and effects after its insolvency, it is the clear duty of the court to take the management out of the hands of such officers, and to place it in the hands of a receiver, and the court has no discretion in the premises. ^^ § 348. Appointment of receiver does not impair lien al- ready acquired by creditors; attaching creditors. As re- gards the effect of appointing a receiver of an insolvent cor- poration upon the rights of creditors, the decisions are not al- together harmonious, owing, doubtless, to the difference in the various statutes in force in the several states, under which the courts are empowered to appoint receivers over corporate bod- ies. It may, however, be regarded as an established rule, that such appointment does not affect or impair a lien already ac- quired by the creditor upon assets of the corporation. When, therefore, under the statutes of the state for the winding up of 10 Rawnsley v. Trentofi Mutual Nichols v. Perry Patent Arm Co., Life & Fire Insurance Co., 1 3 Stockt., 126. Stockt., 347. See, also, Oakley v. n Nichols v. Perry Patent Arm Paterson Bank, 1 Green Ch., 173; Co., 3 Stockt., 126. 436 RECEIVERS. [chap. X. insolvent corpotations, a receiver of such a body is appointed and an injunction is granted against the corporation, such pro- ceedings do not have the effect of dissolving an attachment of the assets of the corporation previously made by a creditor, and a creditor who has been thus diligent in acquiring a lien by at- tachment will be allowed to retain it, notwithstanding the sub- sequent proceedings. 12 g^t when a receiver is appointed to take charge of the assets of a banking corporation for the bene- fit of creditors, and he has filed his bond with security, which has been approved by the court, the assets of the corporation, although not yet reduced to possession by the receiver, are re- garded as in custody of the law, m gremio legis, and not liable to levy under an attachment in favor of a creditor of the bank.^^ § 349. Lien of judgment creditors on real estate, lim- ited to interest of corporation at time of appointment; court not concluded by judgment in another state. When receivers are appointed to take charge of the affairs of an in- solvent corporation pendente lite, it is held that such proceed- ing does not prevent the general creditors from enforcing their demands by suit, when it does not appear that the appointment was made with a view to a settlement and an equal distribution of the corporate funds to all the creditors, but only to provide for the safety of the assets pending the litigation And, in such a case, the lien acquired by a judgment creditor upon the real estate of the corporation will be upheld, notwithstanding the appointment and possession of the receivers, and even though the judgment was obtained after such appointment and possession. 14 But the lien acquired by the judgment creditor, under such circumstances, is only a lien upon such interest in the real estate of the corporation as was held by it at the time of the appointment of the receivers, and it will not be extended 12 Hubbard v. Hamilton Bank, 7 14 EIHcott v. United States Insur- Met, 340. ance Co., 7 Gill, 307. But see At- 13 Hagedon v. Bank of Wisconsin, torney-General v. Continental Life 1 Pin. (Wis.), 61. And see com- Insurance Co., 28 Hun, 360. ments upon this case in Atchison V. Davidson, 2 Pin. (Wis.), 48. CHAP. X.] CORPORATIONS. 437 to the increased value of the property resulting from payments of purchase-money made thereon by the receivers.i^ And a court appointing a receiver over an insolvent corporation in a proceeding to wind up its affairs and to administer its assets is not bound or concluded as to the assets in its possession by a judgment recovered in another state against the corporation after the receivership and after the dissolution of the corpora- tion. ^^ Nor, in such case, does the fact that the receiver has employed counsel and has been heard upon a writ of error under which a former judgment in the same cause in the foreign state has been reversed alter the rule or conclude the court appointing the receiver as to the effect of the final judgment in the foreign state. 1*^ § 350. Creditors may be prohibited by statute from pro- ceeding against corporation after receivership; creditors may come in under decree. When the statute of a state, regulating the winding up of banking corporations by receivers, provides that no action shall be maintained against a bank after the appointment of a receiver, but that all creditors shall have their remedy under the provisions of the statute, the courts will not entertain an action brought against the bank by one of its creditors, such an enactment being regarded as constitu- tional and within the power of the legislative branch of the government.!^ /^^(^ when, under the laws of the state, a re- ceiver for winding up the affairs of an insolvent corporation, upon the final order for his appointment, becomes absolutely en- titled to all the property and effects of the corporation, for the purpose of distributing them among its creditors and 15 Ellicott V. United States Insnr- 17 Pendleton v. Russell, 144 U. S., ance Co., 7 Gill, 307. 640, 12 Sup. Ct. Rep., 743, 36 L. Ed., 16 Pendleton v. Russell, 144 U. S., 574, affirming S. C. suh nom. Peo- 640, 12 Sup. Ct. Rep., 743, 36 L. Ed., pie v. Knickerbocker Life Insurance 574, affirming S. C. sub nom. Peo- Co., 106 N. Y., 619, 13 N. E., 447. pie V. Knickerbocker Life Insurance 18 Leathers v. Shipbuilders Bank, Co., 106 N. Y., 619, 13 N. E., 447; 40 Me., 386. Rodgers v. Adriatic Fire Ins. Co., 148 N. Y., 34, 42 N. E., 515. And see, ante, § MAb. 438 RECEIVERS. [chap. X. shareholders, such final order is in the nature of a decree in an ordinary creditors' suit, against executors or others who are trustees of a fund upon which several creditors have claims for the payment of their debts ratably, or according to a specified order of priorities. And in such case, any creditors, who are not nominal parties to the suit, may make themselves such par- ties in fact by coming in and presenting their claims under the decree, and by submitting themselves to the jurisdiction of the court for the adjustment of their demands; and a creditor thus coming in as a quasi party to the action is entitled to the full benefit of the decree. ^^ § 351. Appointment operates as transfer of corporate property to receiver ; right to rents before and after sale by receiver; legal services. It is held in New Jersey, that the appointment of a receiver over an insolvent corporation, under the statute conferring such jurisdiction, operates as a convey- ance or transfer of all the property of the corporation to the receiver for the benefit of creditors, to be distributed in accord- ance with the statute.20 It is, therefore, held that rents of the corporate property, accruing after its sale by the receivers, belong to the purchaser of the property, while rents accruing after the appointment of the receivers, but before a sale of the premises by them, belong to the receivers for the benefit of creditors. 21 But an action will not lie against the receiver to 19 /m re City Bank of Buffalo, 10 and that such appointment did not Paige, 378. And see, as to the time necessarily put an end to the exist- when plaintiff, in an action pend- ence of the corporate body, the re- ing against an insolvent corporation, ceivers being substituted in place may prove up his claim and share of the managers and directors of in a dividend declared by the re- the corporation for the purpose of ceiver, Smith v. Manhattan Insur- closing up its affairs, and that the ance Co., 4 Hun, 127. title to its property did not change, 20 Corrigan v. Trenton Delaware the power only being delegated to Falls Co., 3 Halst. Ch., 489. It was the receivers to take charge of and held, however, in an earlier case sell it. Willink v. Morris Canal & in New Jersey, that the corporate Banking Co., 3 Green Ch., 377. property did not vest in the receiv- 21 Corrigan v. Trenton Delaware ers by virtue of their appointment, Falls Co., 3 Halst. Ch., 489. See, CHAP. X.] CORPORATIONS. 439 recover for legal services rendered to the corporation after the appointment of the receiver, although such services rendered before the receivership may be recovered against him. And the question of what allowance should be made out of the funds of the receivership for counsel fees and legal services rendered to the corporation in resisting the appointment of a receiver would seem to be wholly within the discretion of the court. 22 § 352. Liability of shareholders for unpaid subscriptions may not be enforced by creditors, but only by receiver. When the affairs of an insolvent corporation have passed into the hands of a receiver, in an action instituted in behalf of all its creditors, and the court is authorized and required by the statute conferring the jurisdiction to cause the property and as- sets of the corporation to be distributed among its creditors pro rata, it will not permit actions to be prosecuted against shareholders for their unpaid subscriptions by creditors of the corporation, whereby they might obtain a preference over other creditors. The receiver being appointed for the benefit of the creditors, and the property and choses in action of the corpora- tion being vested in him for their benefit, by virtue of his ap- pointment, if the shareholders are liable to the corporation for unpaid balances on account of their subscriptions to the capital stock, such liability may be enforced by the receiver only, and not by individual creditors. 23 § 353. Statutory proceedings by attorney-general against insolvent bank. Under a statute making it the duty of the attorney-general of the state, whenever any incor- porated bank becomes insolvent and unable to pay its debts, to apply to a court of equity for an injunction and a receiver, and for the winding up of the corporation, when the fact of the insolvency of the bank is satisfactorily established, the court to which the application is addressed has no discretion left as to also, Fish V. Potts, 4 Halst. Ch., 277, Alliance L. I. Co., 148 N. Y., 563, aflfirmed on appeal to the court of 42 N. E., 1044. errors and appeals, id., 909. -'^ Rankine v. Elliott, 16 N. Y., 22 Barnes v. Newcomh, 89 N. Y., Z77. And see, ante, § 324. 108. And see People v. Commercial 440 RECEIVERS. [chap. X. the appointment, and a receiver will be granted as of course.24 And it is not necessary that the information filed by the attor- ney-general should be verified by a positive affidavit as t© the insolvency of the bank, but it is sufficient that it is alleged on information and belief, since no person but the officers of the bank may swear positively as to its insolvency.^^ § 354. Eligibility of corporate officers as receivers. Up- on compulsory proceedings, under a statute, for the appoint- ment of a receiver to wind up an insolvent banking corpora- tion, it is regarded as improper to appoint an officer of the bank as receiver, since if the officers as such are unfit for the management of the bank in that capacity, the court will not in- trust its management to them as receivers, the rule of exclu- sion, in such case, being based upon principles of sound public policy.26 It is otherwise, however, when the proceedings are instituted voluntarily by the corporation for a dissolution, and when the statute regulating them authorizes the appointment of officers or shareholders as receivers. And under such cir- cumstances, it is proper to appoint the president and book-keep- er, when it is not shown that their conduct or management of the business has in any manner tended to produce the insolvency of the corporation. 2"^ § 355. Answer of corporation can not determine litiga- tion between claimant and receiver. When, under the laws of a state, the appointment of a receiver over an insolvent cor- poration operates as a virtual dissolution of the corporate body, substituting the receiver in lieu thereof as to all its property and effects, in a contest concerning the right to certain property 24 Attorney-General v. Bank of be appointed. Livingston v. Bank Columbia, 1 Paige, 511. of New York, 26 Barb., 304, 5 Ab. 25 Attorney-General v. Bank of Pr., 338. Columbia, 1 Paige, 511. When, 26 Attorney-General v. Bank of however, the allegations as to in- Columbia, 1 Paige, 511. And see, solvency rest on information and ante, § 72. belief, and are contradicted by the 27 /n re Eagle Iron Works, 8 regular official reports of the bank, Paige, 385, affirming S. C, 3 Edw. made under oath and published ac- Ch., 385. cording to law, a receiver will not CHAP. X,] CORPORATIONS. 441 of the corporation in the hands of its receiver, the answer of the corporation itself under the corporate seal can have no effect in determining the controversy, since the litigation is between the claimant and the receiver alone. ^8 § 356. Purchaser at receiver's sale acquires no right of action against former officer; when shareholder estopped from questioning order of sale. While a purchaser of the assets of an insolvent corporation, sold at a receiver's sale, ob- tains by his purchase such title as the receiver himself had, he can not by such purchase from the receiver acquire any right of action against a former officer of the corporation to compel him to account for assets and effects of the corporation in his hands in the capacity of trustee. ^^ But a shareholder who has joined in proceedings for the dissolution of an insolvent cor- poration and for a receiver is estopped from questioning the appointment, and from questioning an order of court directing the receiver to sell the corporate assets.^^ § 357. When receiver may be discharged. When a re- ceiver has been appointed of the effects of a corporation, under a statute authorizing receivers in cases of insolvency, it is proper for the court to discharge him upon motion of the de- fendant corporation, upon its satisfying the court that it is in solvent circumstances and able to resume business, and that the best interests of its creditors will thereby be secured. ^^ The interests of the creditors are in all cases to be kept in view in determining whether the receiver shall be continued or dis- charged. And a creditor who has, upon his own bill, obtained the appointment of a receiver, is not entitled as of right, upon the settlement of his own debt, to have the receiver discharged, when the rights of other creditors have intervened. In such a case, it is the right and duty of the court to protect the interests of all the creditors who may have presented their demands. ^^ 28 Davenport t;. City Bank of Buf- 31 Ferry v. Bank of Central New falo, 9 Paige, 12. York, IS How. Pr., 445. 29 Mann v. Fairchild, 2 Keyes, 106. 32 Pay v. Erie & Kalamazoo Rail- 30Battershall v. Davis, 31 Barb., road Bank, Harring. (Mich.), 194. 323. 442 RECEIVERS. [chap. X. IV. Receivers of National Banks. § 35S. Appointment under National Banking Act; effect of appointment; corporation still exists and may be sued. 359. Receiver holds only such title as bank had; can not avoid pledge of assets as collateral made by bank; exemption from taxation. 360. Receiver the agent of the comptroller; his functions and rights of action; claim allowed against bank should be certified to comptroller for payment. 360a. May enforce individual liability of shareholders. 360b. Receiver's right of action against directors for mismanaging affairs of bank. 361. Allegations and proof of his appointment in suits by the re- ceiver, 362. Power of comptroller not exclusive of jurisdiction of equity; when courts may appoint receiver. 363. Jurisdiction of state and federal courts in actions by or against the receiver. 364. Property of bank can not be sold by creditor as against re- ceiver. 364a. Receiver subject to same set-offs as bank. § 358. Appointment under National Banking Act; effect of appointment; corporation still exists and may be sued. The subject of the appointment of receivers over national banks incorporated under the act of congress of June 3, 1864, and of the functions and powers of such receivers, is one of consider- able importance, and has been presented to the courts in sev- eral different aspects. Under the fiftieth section of the act in question, commonly known as the National Banking Act, au- thority is conferred upon the comptroller of the currency to appoint receivers over national banks, upon their refusal to pay their circulating notes, and the general duties of receivers thus appointed are defined by the statute.^^ It would seem 33 Act of June 3, 1864, c. 106, 13 lating notes as therein mentioned, Statutes at Large, 99. Section 50 and is in default, the Comptroller contains the following provision : of the Currency may forthwith ap- "That on becoming satisfied, as spe- point a receiver, and require of him cified in this act, that any associa- such bond and security as he shall tion has refused to pay its circu- deem proper, who, under the direc- CHAP. X.] CORPORATIONS. 443 that the appointment of a receiver under this section has the effect of superseding the authority of the directors to exercise the incidental powers necessary to carry on the business of banking, although the corporate franchise is not destroyed, and the bank as a legal entity still continues to exist.^'* And since the bank still has an existence, it is proper to institute an action against it in its corporate capacity, in which capacity it should tion of the Comptroller, shall take possession of the books, records and assets of every description of such association, collect all debts, dues and claims belonging to such asso- ciation, and upon the order of a court of record of competent juris- diction, may sell or compound all bad or doubtful debts, and on a like order, sell all the real and per- sonal property of such association, on such terms as the court shall di- rect; and may, if necessary to pay the debts of such association, en- force the individual liability of the stockholders provided for by the twelfth section of this act; and such receiver shall pay over all money so made to the Treasurer of the United States, subject to the order of the Comptroller of the Currency, and also make report to the Comp- troller of all his acts and proceed- ings." Section 50 of the original act, as above quoted, is substan- tially re-enacted in section 5234 of the Revised Statutes of the United States, as follows : "On becoming satisfied, as specified in sections 5226 and 5227, that any association has refused to pay its circulating notes as therein mentioned, and is in default, the Comptroller of the Currency may forthwith appoint a receiver, and require of him such bond and security as he deems proper. Such receiver, under the direction of the Comptroller, shall take possession of the books, rec- ords, and assets of every descrip- tion of such association, collect all debts, dues, and claims belonging to it, and, upon the order of a court of record of competent jurisdiction, may sell or compound all bad or doubtful debts, and, on a like order, may sell all the real and personal property of such association, on such terms as the court shall di- rect; and may, if necessary to pay the debts of such association, en- force the individual liability of the stockholders. Such receiver, shall pay over all money so made to the Treasurer of the United States, sub- ject to the order of the Comptroller, and also make report to the Comp- troller of all his acts and proceed- ings." 3 U. S. Comp. Stat. 1901, p. 3507; 5 Fed. Stat. Ann., p. 170. Under the provisions of the statute quoted it is held that the receiver of a national bank appointed by the Comptroller of the Currency may apply to a court of competent juris- diction for leave to sell the assets of the insolvent bank, without ob- taining the formal consent of the Comptroller to make such applica- tion. Richardson v. Turner, 52 La. An., 1613, 28 So., 158. 34 Bank of Bethel v. Pahquioque 444 RECEIVERS. [CIIAP. X. be defended. "^^ And where a judgment is obtained against the bank in such a case, it is binding upon the receiver unless ren- dered void by reason of fraud or collusion. ^^^ § 359. Receiver holds only such title as bank had; can not avoid pledge of assets as collateral made by bank ; ex- emption from taxation. As regards the title acquired by a receiver of a national bank thus appointed, the rule is that he holds only such estate and title as the bank itself had in its as- sets, his title being similar in this respect to that of an assignee in bankruptcy. He is not a third person in the sense of com- mercial transactions, and can not avoid a pledge of assets of the bank which could not be avoided by the corporation itself. When, therefore, the bank has deposited notes constituting a part of its assets with a creditor as security for advances, the bank itself being concluded by the deposit or pledge, the re- ceiver is not entitled to such notes, and can not maintain an action therefor until the creditor or pledgee is made whole for his advances.^"^ Nor does he acquire title to property of which the bank is merely custodian, and the owner of such property may recover it in an action against the receiver.^^ And the personal property and assets of the bank are still exempt from taxation under state laws, notwithstanding the appointment of Bank, 14 Wal., 383 ; Chemical Na- recover from the directors because tional Bank v. Hartford Deposit of fraudulent and negligent man- Co., 156 111., 522, 41 N. E., 225; agement of the bank, see Brincker- Hutchinson v. Crutcher, 98 Tenn., hoff v. Bostwick, 88 N. Y., 52. As 421, 39 S. W., 725, 37 L. R. A., 89. to the liability of the receiver of a See, also, Security Bank v. National state or national bank for taxes, see Bank of the Commonwealth, 2 Hun, Baker v. County of King, 17 Wash., 287 ; Green v. Walkill National 622, 50 Pac, 481 ; Hewitt v. Traders' Bank, 7 Hun, 63. And see, ante, Bank, 18 Wash., 326, 51 Pac, 468. § 344&, and, post, § 370^. 36 Denton v. Baker, 24 C. C. A., 35 Security Bank v. National Bank 476, 79 Fed., 189, 48 U. S. App., 235. of the Commonwealth, 2 Hun, 287. 37 Casey v. La Societe de Credit See, also, Green v. Walkill National Mobilier, 7 Chicago Legal News, Bank, 7 Hun, 63. As to the effect 313; S. C, 2 Woods, 77. of appointing a receiver upon the 38 Corn Exchange Bank v. Blye, right of action of shareholders to 101 N. Y., 303, 4 N. E., 635. CHAP. X.] CORPORATIONS. 445 a receiver, being regarded in legal contemplation as still be- longing to the bank, to be administered according to law.^'^ § 360. Receiver the agent of the comptroller; his func- tions and rights of actions; claim allowed against bank should be certified to comptroller for payment. A receiver of a national bank appointed by the comptroller, under this section of the act, is limited as to his functions by the object of the receivership and the duties which it involves.'*^ Practically such a receiver is the mere agent of the comptroller of the cur- rency, for the purpose of bringing the residue of the assets in- to the United States treasury."*! And while, for the full accom- plishment of the object of the statute, and the due performance of his duties, all necessary authority is conferred upon him, yet this authority does not extend to the control of bonds deposited by the bank with the treasurer of the United States to secure the currency of the bank. The receiver, therefore, has no con- cern with and is not a proper party defendant to a suit brought to establish title to such bonds by one claiming them by assignment from the bank.^2 ^^d being the mere agent of the comptroller or of the government, the fact that the receiver applies to a court for leave to sell assets of the bank which are in his possession does not have the effect of making him an officer of the court or of placing such assets within the control of the court in the sense in which control is acquired where the re- ceiver is appointed by the court."*^ And for the same reason, a decree establishing the claim of a creditor of the bank should not require the receiver to declare a dividend to pay the amount 39 Rosenblatt v. Johnston, 104 U. Blatchf., 282. As to the status of an S., 462. agent appointed by the shareholders 40 Van Antwerp v. Hulburd, 8 of an insolvent national bank to suc- Blatchf., 282; Ellis v. Little, 27 ceed the receiver appointed by the Kan., 707. Comptroller of the Currency, see 41 In re Chetwood, 165 U. S., 443, Chetwood v. California National 17 Sup. Ct. Rep., 385, 41 L. Ed., Bank, 113 Cal., 649, 45 Pac, 854. 782; Van Antwerp v. Hulburd, 8 43 /^ re Chetwood, 165 U. S., 443, Blatchf., 282. 17 Sup. Ct. Rep., 385, 41 L. Ed., 782. 42 Van Antwerp v. Hulburd, 8 446 RECEIVERS. [chap. X. of the claim, but it should merely direct him to certify the amount of the claim to the comptroller of the currency to be paid by him in due course of administration.'** He has, how- ever, undoubted authority to bring suits to enforce demands due to the bank,"*^ and such actions may be instituted, either in his own name or in the name of the bank.*^ And it is not necessary that he should first obtain the consent of the comp- troller, before beginning such an action, the case being clearly distinguishable from that of an action against shareholders to enforce their personal liability.*'^ Thus, the receiver may main- tain an action in equity against the shareholders of the bank for the purpose of recovering dividends which had been unlawfully paid to them out of the capital of the bank at a time when the institution had earned no profits and was in fact insolvent.*^ The authority to bring such actions for the enforcement of de- mands due to the bank, in addition to being expressed by the act of congress, is regarded as a necessary incident to the prop- er discharge of the receiver's functions.'*^ But the receiver can not render himself liable, or charge the estate in his hands 44 Merrill v. First National Bank, 47 Bank v. Kennedy, 17 Wal., 19; 21 C. C. A., 282, 75 Fed., 148, 41 Hayden v. Thompson, 17 C. C. A., U. S. App., 529, affirmed in 173 U. 592, 71 Fed., 60, 36 U. S. App., 361, S., 131, 19 Sup. Ct. Rep., 360, 43 reversing S. C, 67 Fed., 273. In L. Ed., 640; Wolf v. National Bank Bank v. Kennedy, supra, the court, of Illinois, 178 111., 85, 52 N. E., 896. Bradley, J., say, p. 22: "His very 45 Bank v. Kennedy, 17 Wal., 19; appointment makes it his duty to Piatt V. Crawford, 8 Ab. Fr., N. S., collect the assets and debts of the 297. See, also, Kennedy v. Gibson, association. With regard to ordi- 8 Wal., 498; Bank of Bethel v. nary assets and debts no special di- Pahquioque Bank, 14 Wal., 383. rection is needed ; no unusual ex- 46 Bank v. Kennedy, 17 Wal., 19. ercise of judgment is required. See, also, Kennedy v. G'\hson, supra; They are to be collected of course; Bank of Bethel v. Pahquioque Bank, that is what the receiver is ap- 14 Wal., 383. But the bank may pointed to do." bring an action in its own name 48 Hayden v. Thompson. 17 C. C. upon a promissory note and may A., 592, 71 Fed., 60, 36 U. S. App., recover judgment, notwithstanding 361, reversing S. C, 67 Fed., 273. the appointment of a receiver. Chi- 49 piatt v. Crawford, 8 Ab. Pr., cago F. P. Co.. V. Park National N. S., 297. Bank, 145 111., 481, 32 N. E., 534. CHAP. X.] CORPORATIONS. ' 447 by any executory contract, unless authorized so to do by the provisions of the national banking act and by the order of a court of competent jurisdiction obtained under the terms of that act. So under an order authorizing him to sell the property of the bank, he can not make a binding contract to exchange or barter it for other property, and can not be held liable in an ac- tion for damages resulting from his refusal or inability to com- ply with such a contract, which he is without power to make. And his powers being limited, one who deals with him in his official capacity is chargeable with knowledge of his authority and contracts at his own peril. ^0 And he has no power to con- tract with an attorney to give him a contingent interest in the proceeds to be recovered under a mortgage held by the bank as a part of its assets.^i Nor can he maintain a bill in equity against the bank's lessor to impeach a lease made by the lat- ter to the bank under the provisions of which the bank had undertaken and completed the construction of a bank build- ing, upon the alleged ground that the lease was ultra vires and that the construction of the building would result in an excessive expenditure of the funds of the bank.^^ B^t t|-ie receiver has authority to grant an extension of time for the payment of demands due the bank, where it appears that he may thereby gain additional security which, in his judgment, strengthens the claim. ^^ § 360a. May enforce individual liability of shareholders. The receiver may maintain an action in his own name to en- force the individual liability of shareholders, such power being expressly conferred by the statute. And he is not required 50 Ellis V. Little, 27 Kan., 707. ices in his official and not in his per- 51 Barrett v. Henrietta National sonal capacity. Gibson v. Peters, Bank, 78 Tex., 222, 14 S. W., 569. 150 U. S.. 342, 14 Sup. Ct. Rep., For services rendered by a United 134, affirming S. C, 36 Fed., 487, States district attorney to a re- and overruling S. C, 35 Fed., 721. ceiver of a national bank appointed 52 Brown v. Schleier, 55 C. C. A., by the Comptroller of the Currency, 475, 118 Fed., 981, affirming S. C, he is not entitled to any compensa- 112 Fed.. 577. tion beyond that expressly allowed 53 People's State Bank v. Francis, by law, since he performs such serv- 8 N. Dak., 369, 79 N. W., 853. 44S RECEIVERS. [chap. X. to proceed by bill in equity against all the shareholders to col- lect an assessment made by the comptroller of the currency, but may proceed by separate actions at law against individual share- holders.^^ And such an action may be maintained by the re- ceiver in a state court.^^ He may also maintain a bill in equity to set aside a transfer of his stock made by a shareholder for the purpose of evading his individual liability.^^ And a letter from the comptroller of the currency, directing the receiver to institute legal proceedings to enforce the liability of share- holders under the act of congress, is sufficient evidence that the comptroller has determined it to be necessary to enforce such liability.^'^ Being regarded, however, merely as the in- strument of the comptroller, he may not institute proceedings against the stockholders of the bank to enforce their personal liability, without the consent and direction of the comptroller ; since it is for the latter to decide when it is necessary to insti- tute such proceedings, and whether the whole or a part, and if only a part how much, shall be collected. ^^ And the deter- mination of the comptroller as to the necessity for and the amount of the assessment is conclusive in an action by the re- ceiver against a shareholder to recover such assessment. ^^ And where the full amount of the liability is sought to be enforced, it must be by an action at law.'^o If, however, the individual liability of shareholders is sought to be enforced by a general 54 U. S. Revised Statutes, § 5234; 402, 36 U. S. App., 462, affirmed in 3 U. S. Comp. Stat. 1901, p. 3507; 169 U. S., 1, 18 Sup. Ct. Rep., 274, 5 Fed. Stat. Ann., p. 170. See King 42 L. Ed., 639, which is modified V. Armstrong, 50 Ohio St., 222, 34 on rehearing in 42 L. Ed., 1204. N. E., 163. And in such an action 57 Bowden v. Johnson, 107 U. S., it is no defense that the receiver 251, 2 Sup. Ct. Rep., 246. may make an improper disposition 5S Kennedy v. Gibson, 8 Wal., of the funds after collecting them. 498. Schaberg v. McDonald, 60 Neb., 59 Kennedy v. Gibson, 8 WaU 493. 83 N. W.. 737. 498; Casey v. Galli, 94 U. S., 673; 53 Fish V. Olin, 76 Vt., 120, 56 Strong v. Southworth, 8 Ben., 331; Atl., 533. Young v. Wempe, 46 Fed., 354. 56 Bowden v. Johnson, 107 U. S., 60 Kennedy v. Gibson, 8 Wal., 251, 2 Sup. Ct. Rep., 246; Stuart v. 498; Casey v. Galli, 94 U. S., 673; Hayden, 18 C. C. A., 618, 72 Fed., Young v. Wempe, 46 Fed., 354. CHAP. X.] CORPORATIONS. 449 creditors' bill, pursuant to the act of congress of June 30, 1876,^^ amendatory of the national banking act, the pendency of such suit constitutes a good plea in abatement to an action brought by a receiver of the bank subsequently appointed by the comptroller to enforce the same liability.^^ ^nd the ex- penses of a receivership over an insolvent national bank insti- tuted upon a judgment creditors' bill will not be charged against the shareholders in a proceeding by the creditors in the same cause to enforce the individual liability of the shareholders. The receivership being unnecessary for the purpose of enforcing such liability, which is being enforced by the creditors them- selves, such expenses should be borne by the creditors in whose behalf the receiver is appointed. ^^ And since the liability of the officers and directors of a national bank for a violation of the act^4 is an asset of the bank belonging to all creditors in proportion to their claims, a single creditor can not maintain an action to enforce such liability, but the proceeding must be brought by the receiver for the benefit of all creditors.^^ § 360b. Receiver's right of action against directors for mismanaging affairs of bank. As to the right of the re- ceiver of an insolvent national bank to enforce the liability of the directors, it is held that the receiver may maintain an action in equity in his own name against the directors to hold them liable for losses which have occurred as the result of an unlaw- ful and fraudulent increase in the capital stock of the bank made by the directors. ^^ So the receiver may maintain an action in equity to hold the directors liable for negligence in the manage- ment of the affairs of the bank.^"^ And such a procedure has 61 Act of June 30, 1876, c. 156, Stat., 116; 3 U. S. Comp. Stat. 1901, § 2, 19 Stat., 63 ; 3 U. S. Comp. Stat. p. 3515, 5 Fed. Stat. Ann., p. 180. 1901, p. 3509, 5 Fed. Stat. Ann., p. 65 Bailey v. Mosher, 11 C. C. A., 106. 304, 63 Fed., 488, 27 U. S. App., 62 Harvey v. Lord, 11 Biss., 144. 339. 63 Richmond v. Irons, 121 U. S., 66 Cockrill v. Abeles, 30 C. C. A., 27, 7 Sup. Ct. Rep., 788, 30 L. Ed., 223, 86 Fed., 505, 58 U. S. App., 864. 648. WU. S. Revised Statutes, § 5239; 67 Emerson v. Gailher, 103 Md., act of June 3, 1864, c. 106, § 53, 13 564, 64 Atl., 26. Receivers — 29. 450 RECEIVERS. [CIIAP. X. beeii held proper in the case of a receivership of a state bank.^^ But the opposite view has been taken in New York, where it is held that the action is one at law and that something more is required to warrant the intervention of a court of equity than mere allegations showing that the acts complained of are nu- merous and complicated and that they are difficult of ascertain- ment without discovery and that a multiplicity of suits would result.^^ § 361. Allegations and proof of his appointment in suits by the receiver. In an action brought by such a receiver to recover an indebtedness due to the bank, the debtor can not in- quire into the legality of the receiver's appointment, and it is sufficient for the purposes of such suit that he is appointed and is receiver in fact ; since the action of the comptroller in making the appointment is conclusive, until set aside upon the applica- tion of the bank itself. It is not, therefore, necessary in such action that the receiver should specifically aver the existence of all the conditions necessary to satisfy the comptroller that a receiver should be appointed.*^^ And a general allegation of the receiver's appointment by the comptroller, and of his taking possession of the assets, is sufficient, without setting forth in detail the circumstances leading to such action. "^^ As regards the proof required upon the trial as to the receiver's appoint- ment and authority to sue, it would seem to be sufficient to pro- duce a certificate from the comptroller of the currency, ap- proved and concurred in by the secretary of the treasury, re- citing the existence of all the facts necessary to authorize the appointment, and the fact of the appointment with the concur- rence of the secretary of the treasury.'^^ § 362. Power of comptroller not exclusive of jurisdic- tion of equity ; when courts may appoint receiver. It is im- portant to observe that the power exercised by the comptroller 68 Murphy v. Penniman, 105 Md., 70 Cadle v. Baker, 20 Wal., 650. 452, 66 Atl., 282. 71 pjatt v. Crawford, 8 Ab. Pr., 69 Dykman v. Keeney, 154 N. Y., N. S., 297. 483, 48 N. E., 894. 72 pjatt v. Beebe, 57 N. Y., 339. CHAP. X.] CORPORATIONS. 451 of the currency, in appointing receivers over national banks, under section 50 of the act of congress of June 3, 1864, is not exclusive of the jurisdiction of equity to appoint receivers over such banks, in cases where the courts would otherwise be au- thorized to interfere against insolvent corporations.'^^ And a judgment creditor oi a national bank, who has exhausted his remedy at law, and who is entitled to a receiver under the law and practice of the state, may have a receiver of such a bank, upon a bill in the federal court charging that its officers have made fraudulent payments and preferences, and that there is no property of the corporation subject to seizure or execution, which plaintiff can obtain by any proceeding at law, the comp- troller having declined to appoint a receiver for want of author- ity.*^^ And in the absence of any action by the comptroller of 73 Irons V. Manufacturers Na- tional Bank, 6 Biss., 301; Wright V. Merchants National Bank, 1 Flippin, 568; Elwood v. First Na- tional Bank, 41 Kan., 475, 21 Pac, 673 ; Cogswell v. Second National Bank, 76 Conn., 252, 56 Atl., 574. "^^ Irons V. Manufacturers Na- tional Bank, 6 Biss., 301. This was an ordinary creditors' bill, alleging the recovery of judgment against defendant, the return of execution unsatisfied, and also charging the officers of the defendant corporation with having made fraudulent pref- erences and payments. It appeared from an exhibit annexed to the bill, that certain creditors of the bank had previously applied to the comp- troller of the currency to appoint a receiver, which he declined to do on the ground that the relations be- tween the bank and his department having ceased, he had no authority to interfere. Upon demurrer to the bill, it was held that the court had full jurisdiction in the premises, and a receiver was accordingly appoint- ed. Blodgett, J., held as follows: "... It would seem from an ex- amination of the banking law, that the comptroller of the currency has no authority to appoint a receiv- er except in certain contingencies, such as the failure to make good a reserve, the failure to reduce cir- culating notes on demand, the fail- ure to make good the capital stock whenever the same becomes im- paired, and the failure to meet cer- tain other requirements of the bank- ing law. Now, neither of these con- tingencies is charged in this bill to have occurred, and it is only in the case of such contingencies that the comptroller acquires the right to appoint a receiver. It is claimed on the part of the defendant, and has been very strenuously and in- geniously argued, that there is no power in any court to appoint a receiver for this bank, because the delegation of the power \o the comptroller of the currency to ap- point a receiver in certain contin- gencies to wind up the affairs of 452 RECEIVERS. [chap. X. the currency toward the appointment of a receiver, a court of equity may grant the rehef upon an ordinary judgment credit- ors' Liil, notwithstanding the remedy provided by the act of con- the bank, excludes the authority of any tribunal or person to ap- point a receiver. I have carefully examined the banking law, and the decisions of the supreme court, and those of various states made since this banking law took effect, upon the various questions which have arisen, and do not find that this precise question has ever been made. But I can see nothing in the law itself, nor in the decisions of the courts upon the law, so far as they have gone, to exclude the idea that a corporation created as this is under an act of congress for certain specific purposes, does not come within the general provision of the law regulating the remedies of creditors as against this corpora- tion, as much as against any other corporation, except where there are specific provisions to meet those cases. For instance, a holder of the circulating notes of the bank, who had presented them for pay- ment, and payment had been re- fused, would undoubtedly find this remedy within the special provi- sions of the banking law itself, be- cause there is a specific provision meeting that case, and his remedy would undoubtedly be found in the action of the comptroller of the currency. But, in a large class of cases, when the defendant corpora- tion may not have infringed any of the specific provisions of the bank- ing law, which authorizes the comp- troller to appoint a receiver, there may be cases where they have at some time rendered themselves liable to be proceeded against as any other debtor for the failure to pay their debts. The allegations in this bill are very full that this bank was insolvent at the time it closed its doors, and has been ever since; that it failed to pay its debts; that a large amount of its debts are still unpaid ; and the question is, what remedy have the creditors of this bank if a court of equity can not take on itself the administra- tion of its affairs where the bank- ing law does not provide that it shall be done by the comptroller of the currency? It is true that in the case of Kennedy v. Gibson, 8 Wallace, the supreme court state that the provision of the banking law making the stockholders liable for the debts of the corporation to the amount of the stock held by them respectively, could not be enforced except under the action of the comptroller through a receiver ap- pointed by him. Whether that opinion will be found to entirely express the full meaning and inten- tion of the supreme court whenever they come to examine it in the light of future cases and facts which might be brought before it, is doubted by myself, at least. I do not feel sure that the supreme court will adhere to quite as broad a statement as is made in that case; but still they may. But even that does not oust the jurisdiction of a court of equity to take hold of whatever assets the bank may have, aside from the personal liability of the stockholders, and administer CHAP. X.] CORPORATIONS. 453 75 gress.'*' So when a national bank has become insolvent and is in process of voluntary liquidation, mismanagement of its af- fairs by its officers and the giving of preferences to some of its those as it would the affairs of any insolvent corporation. The law is well settled in this state, and the courts of the United States, that the proper remedy of a creditor against a corporation, when the assets are of such a nature that they can not be levied upon and sold on execu- tion, is by a proceeding in equity to marshal and distribute the assets. It is unnecessary to cite authorities upon that question. The law, I think, is as well settled as any branch of the law can be consid- ered as settled in this country." 75 Wright v. Merchants National Bank, 1 Flippin, 568. In King v. Pomeroy, 58 C. C. A., 209, 121 Fed., 287, it appeared that a national bank doing business in the state of Kan- sas had gone into voluntary liquida- tion under § 5220 et seq. of the Re- vised Statutes. ( Act of June 3, 1864, c. 106, 13 Stat., 112; 3 U. S. Comp. Stat. 1901, p. 3503; 5 Fed. Stat. Ann., p. 166). The bank was insolvent and the comptroller of the currency had been requested to ap- point a receiver but had declined to do so upon the ground that he had no jurisdiction over the affairs of a bank in voluntary liquidation. Thereupon a creditor of the bank, a citizen of the state of Missouri, filed a bill against it in the United States circuit court for the District of Kansas, praying for the appoint- ment of a receiver to collect its as- sets and pay its debts. The bank appeared and consented to the ap- pointment of a receiver and one was thereupon appointed and entered upon the discharge of his duties. After collecting and distributing certain assets, he sought directions regarding the enforcement of the liability of the shareholders. There- upon another creditor who had proven his claim against the bank intervened in the suit, set forth his claim, the indebtedness of the bank and the names and addresses of the shareholders, and prayed that the court would ascertain the necessity of the enforcement of the liability of the shareholders, and that it would make an assessment upon them and appoint a receiver to enforce such assessment. There- upon the court made an interlocu- tory order finding the facts set forth in the intervening petition to be true; that the amount of the as- sessment necessary to pay the debts of the bank was 38.84 per cent, of the par value of the shares, and that an assessment of this amount should be made and should be paid by the shareholders to the receiver al- ready appointed within sixty days from the date of the order. Upon this state of facts the receiver thus appointed had brought this action against an individual shareholder for the purpose of collecting the assessment made against him. The court held that the receiver was properly appointed by the circuit court under its general equity pow- ers and that such receiver had power to maintain this action against the individual shareholder to enforce his individual liability. The court. 454 RECEIVERS. [CIIAP. X. creditors over others will justify the appointment of a receiver by a state court, at the suit of a shareholder."^ But a receiver will be refused when the bank is in process of voluntary liqui- dation and when its affairs are being properly administered by its directors and officers, no fraud or misconduct being shown."'' Sanborn, J., say: "Conceding now that in all these cases in which the power to appoint a receiver and to enforce the liability of the share- holders was vested in the comp- troller by the act of 1864, that au- thority was thereby withdrawn from the courts under the familiar rule that, where the same act creates the right and prescribes the remedy for its enforcement, that remedy is exclusive, still the fact remains that in all the cases in which no such power was vested in the comptroller the jurisdiction and authority of the courts re- mained unimpaired and plenary. Thus, full jurisdiction still remained in the courts of equity to appoint a receiver to liquidate the debts of an insolvent bank and to enforce the liability of its shareholders where the transfers of notes or other evi- dences of debt, assignments of mortgages or other securities, de- posits of money, bullion, or other valuable things, and payments of money were made by the national banks with a view to give pref- erences in contemplation of insol- vency in violation of section 5242, Rev. St. (Act of June 3, 1864, c. 106, § 52, 13 Stat, 115; 3 U. S. Comp. Stat. 1901, p. 3517; 5 Fed. Stat. Ann., p. 188), as well as where a bank had gone into voluntary liquidation under sections 5220 and 5221, and its funds were being fraudulently diverted from the ces- tiiis que tnistent. . . . The con- clusion is irresistible that, if it did go into liquidation, and if it did not fall into any of the other classes of cases in which the comptroller was authorized to appoint a re- ceiver, he was without such author- ity, and the jurisdiction of the courts over national banks in volun- tary liquidation remained as com- plete as it was over the ordinary insolvent corporation. The argu- ment that, although a court of equi- ty might have had the authority to appoint a receiver to liquidate the debts of this bank, yet it had no power to enforce the liability of the shareholders, is not persuasive. . . . The conclusion is that, because there was no other adequate remedy to enforce the liability of share- holders of an insolvent national bank in voluntary liquidation under the act of 1864, and because that liability was a trust fund, or the pledge of a trust fund for the bene- fit of the creditors of the bank, a court of equity had plenary power to appoint a receiver, and to author- ize him to enforce that liability by actions at law." 76 Elwood V. First National Bank, 41 Kan., 475, 21 Pac, 673. 77 Watkins v. National Bank of Lawrence, 51 Kan., 254, 32 Fac., 914. CHAP. X.] CORPORATIONS. 455 § 363. Jurisdiction of state and federal courts in actions by or against the receiver. A receiver of a national bank appointed by the comptroller of the currency is regarded as an officer of the United States, in the sense that he is entitled to maintain an action to recover an indebtedness due to the bank, or to recover assessments made by the comptroller of the cur- rency upon shareholders in the federal court of the district in which the bank vi^as located,'^^ and such actions may be main- tained, either in the district court of the place where the bank was located, or in a federal court in another state, and this re- gardless of the citizenship of the receiver or of the amount in controversy. "^^ So an action brought against the receiver of a national bank appointed by the comptroller under the act of congress is one arising under the laws of the United States and may therefore properly be instituted in the federal courts. ^0 78 Frelinghuysen v. Baldwin, 12 Fed., 395; Price v. Abbott, 17 Fed., 506; Piatt V. Beach, 2 Ben., 303; Murrey v. Chambers, 151 Fed., 142. Section 1001 of the Revised Stat- utes provides that : "Whenever a writ of error, appeal, or other pro- cess in law, admiralty, or equity, issues from or is brought up to the Supreme Court, or a circuit court, either by the United States or by di- rection of any Department of the Government, no bond, obligation, or security shall be required from the United States, or from any party acting under the direction aforesaid, either to prosecute said suit, or to answer in damages or costs. In case of an adverse decision, such costs as by law are taxable against the United States, or against the party acting by direction as aforesaid, shall be paid oat of the contingent fund of the Department under whose directions the proceedings were iristituted." 1 U. S. Comp. Stat. 1901, p. 713; 4 Fed. Stat. Ann., p. 615. Under this statute it is held that where an action is brought by a non-resident receiver of a nation- al bank appointed by the comptroller of the currency, he should give the proper undertaking for costs, unless he files, within a time fixed by the court, a certificate of the comptrol- ler to the effect that process in the action is taken out by express direc- tion of the treasury department. Piatt V. Adriance, 90 Fed., 772; Schofield V. Palmer, 134 Fed., 753. But see Pepper v. Fidelity & C. Co., 125 Fed., 822. 79 Armstrong v. Troutman, 36 Fed., 275; Armstrong v. Ettlesohn, 36 Fed., 209; Schofield v. Palmer, 134 Fed., 753; Murray v. Chambers, 151 Fed., 142. 80 McDonald v. State, 41 C. C. A., 278, 101 Fed., 171, and cases cited. But in Hallam v. Tillinghast, 75 Fed., 849, it was held that when an action was brought in a state court 456 RECEIVERS. [chap. X. And where one of the parties defendant to an action is the re- ceiver of a national bank appointed by the comptroller, such re- ceiver being an officer of the United States, the action is one arising under the laws of the United States as distinguished from one dependent upon diversity of citizenship, and an ap- peal will accordingly lie from the court of appeals to the su- preme court.^^ So the jurisdiction which the district courts of the United States formerly exercised under the act of congress over all suits by or against national banks,^^ -^^s held suffi- cient to authorize such courts to appoint a receiver over a rail- way company at the suit of a national bank.^^ The receiver may also maintain an action in a circuit court of the United States, against a defendant residing within the district, to en- join such defendant from prosecuting a suit in a foreign juris- diction to deprive the receiver of property of the bank, since in such case he sues as an officer of the United States, and as such may properly bring his action in the federal court.^* But while such receivers are thus regarded as officers of the United States to the extent of permitting them to sue in the federal court of the district where the bank is located, the jurisdiction of the federal courts in such cases is not exclusive of, but con- current with that of the state courts. Such a receiver may, therefore, maintain an action in his official capacity in a state court.^^ against the receiver of a national 84 Hendee v. Connecticut & P. R. bank appointed by the comptroller R. Co., 23 Blatchf., 453. of the currency upon a claim for 85 Thompson v. Schaetzel, 2 S. less than two thousand dollars, the Dak., 395, 50 N. W., 631. But see, receiver could not remove the cause contra, Cadle v. Tracy, 11 Blatchf., to the federal court. 101, where it was held that the 81 Auten f. United States Nation- jurisdiction of the federal courts al Bank, 174 U. S., 125, 19 Sup. Ct. over actions against national banks Rep., 628, 43 L. Ed., 920, affirming under the then existing legislation Cockrill V. United States National of congress was exclusive of that of Bank, 27 C. C. A., 678, 82 Fed., the state courts. And a receiver of 1000, 49 U. S. App., 774. a national bank was, therefore, ^- U. S. Revised Statutes, § 563. granted an injunction to restrain 83 Fifth National Bank v. P. & C. the enforcement of a judgment in S. R. Co., 1 Fed., 190. attachment recovered in a state CHAP. X.] CORPORATIONS. 457 § 364. Property of bank can not be sold by creditor a& against receiver. Although, as has been already shown, an action may be instituted against a national bank in its corporate capacity, notwithstanding the appointment of a receiver by the comptroller of the currency,^^ yet the property of the bank, which is attached at the suit of an individual creditor, can not be subjected to sale in satisfaction of his demand as against the receiver. And it is the receiver's duty, in such a case, to apply to the court to dissolve the attachments'^ So the object of the court against the assets of the bank, the action in the state court having been brought after the appointment of the receiver. The jurisdiction of the courts of the United States under existing legislation over ac- tions by or against national banks, is as follows : By section 4 of the act of congress of July 12, 1882, it is enacted. . . . "that the juris- diction for suits hereafter brought by or against any association es- tablished under any law providing for national-banking associations, except suits between them and the United States, or its officers and agents, shall be the same as, and not other than, the jurisdiction for suits by or against banks not organ- ized under any law of the United States which do or might do bank- ing business where such national- banking association may be doing business when such suits may be be- gun: And all laws and parts of laws of the United States incon- sistent with this proviso be, and the same are hereby, repealed." Act of July 12, 1882, c. 290, § 4, 22 Stat., 163; 3 U. S. Comp. Stat. 1901, p. 3458; 5 Fed. Stat. Ann., p. 194. And section 4 of the act of congress de- fining the jurisdiction of the circuit courts of the United States, ap- proved March 3, 1887, as revised and corrected by the act of Au- gust 13, 1888, provides as follows : "Sec. 4. That all national banking associations established under the laws of the United States shall, for the purposes of all actions by or against them, real, personal, or mixed, and all suits in equity, be deemed citizens of the States in which they are respectively located ; and in such cases the circuit and district courts shall not have juris- diction other than such as they would have in cases between in- dividual citizens of the same State. The provisions of this section shall not be held to affect the jurisdic- tion of the courts of the United States in cases commenced by the United States or by direction of any officer thereof, or cases for winding up the affairs of any such bank." Act of March 3, 1887, c. 373, 24 Stat., 554, as amended by act of August 13, 1888, c. 866, 25 Stat., 436; 1 U. S. Comp. Stat. 1901, p. 514; 5 Fed. Stat. Ann., p. 193. 86 Security Bank v. National Bank of the Commonwealth, 2 Hun, 287. 87 National Bank v. Colby, 21 Wal., 609. 458 RECEIVERS. [CIIAP. X. national banking act being to secure to the United States a preference or priority of lien upon the assets of the bank, for any deficiency in redeeming- its notes, and then to secure the as- sets for ratable distribution among its general creditors, this object will not be allowed to be defeated by attachment suits against the bank after its insolvency.88 And if the receiver promptly brings suit to recover funds of the bank which have been attached after its insolvency, joining all parties in interest as defendants, he is entitled to recover such assets, notwith- standing a judgment in the state court in favor of the attach- ing creditors, under which the money is actually received by them before judgment in the receiver's suit.^^ Sq when the property of a bank is levied upon by state authorities in satis- faction of a tax levied after the bank became insolvent, it is proper to enjoin a sale of such property upon the application of the receiver.9^ § 364a. Receiver subject to same set-offs as bank. A receiver of a national bank, appointed by the comptroller of the currency in accordance with the act of congress, acquires its assets and choses in action subject to all defenses which might have been interposed in an action brought by the corporation itself. And when there are mutual obligations between the bank and a debtor which would have justified a set-of¥ in behalf of the debtor as against the demand of the bank in the event of its insolvency, or which the debtor might have enforced against the bank prior to the receivership, such set-off will be sustained in behalf of the debtor as against the receiver.^l Thus, when a bank becomes insolvent, holding a note against a customer who has also a deposit in the bank to his credit, such deposit may be 88 National Bank v. Colby, 21 91 Scott v. Armstrong, 146 U. S., Wal., 609; Harvey v. Allen, 16 499, 13 Sup. Ct. Rep., 148, revers- Blatchf., 29. ing S. C, 36 Fed., 63 ; Armstrong v. 89 Harvey v. Allen, 16 Blatchf., Warner, 49 Ohio Sl, 376, 31 N. E., 29. 877. 90 Woodward v. Ellsworth, 4 Colo., 580. CHAP. X.] CORPORATIONS. 459 set off in an action brought by the receiver upon the note, even though it does not mature until after the receiver's ap- pointment.^^ 92 Scott V. Armstrong, 146 U. S., 499, 13 Sup. Ct. Rep., 148, reversing S. C, Zd Fed., 63. And see this case for a discussion as to the jurisdiction of the circuit courts of the United States in equity in such cases. See as to the right of set-off or counter-claim by a defendant in an action brought by a receiver of a national bank to recover an as- sessment levied by the comptroller of the currency upon shareholders, Welles V. Stout, 38 Fed., 807. CHAPTER XI. OF RECEIVERS OVER RAILWAYS. I. Principles Governing the Jurisdiction § 365 II. Receivers in Aid of Mortgagees and Bondholders 376 III. Functions and Duties of the Receiver 390 IV. Preferred Debts 394o V. Actions Against the Receiver 395 VI. Receivers' Certificates 398c I. Principles Governing the Jurisdiction. § 365. Courts of equity averse to placing railways in the hands of re- ceivers; relief refused when ordinary remedies are available. 366. Receiver appointed on bill by shareholder to set aside un- authorized lease. 367. Granted for protection of vendor's lien upon insolvency of the company. 368. Granted for protection of common easement; right of passage through a tunnel; injunction refused. 369. When receiver refused on bill to recover back money paid for stock illegally issued. 370. When United States court in bankruptcy will refuse to inter- fere with receiver previously appointed in state court; juris- diction as between state and federal courts. 370a. Two receivers not desirable; contract made by one binding on other. 3706. Receivership does not dissolve corporation; injunction; taxes; condemnation suit. 371. When appointed before default; failure of company to operate road; receiver not relieved until exigency ceases; receiver to prevent forfeiture of franchise. 372. Vendor's right to distrain notwithstanding rent charge; can not distrain upon trust property or locomotives. 373. Receiver may enjoin state officers from disposing of land grant; stockholders' meeting. 374. United States court will not entertain bill for account against receiver of railway appointed by state court; mandamus re- fused. 460 CHAP. XI.] RAILWAYS. 461 § 375. On vacating appointment receiver should restore management and control of road to owners; application of surplus funds. 375a. Ancillary receiverships. § 365. Courts of equity averse to placing railways in the hands of receivers ; relief refused when ordinary reme- dies are available. While the jurisdiction of equity over raihvay corporations, as enlarged by the statutes and practice of the various states, is based upon and exercised in accord- ance with substantially the same principles which govern its jurisdiction over other corporations, the courts are more re- luctant to lend their extraordinary aid by the appointment of receivers over railways than over other corporate bodies. The importance of these corporations, as being quasi public bodies, and the peculiar nature of their property and franchises, suffi- ciently explain the reluctance with which equity interferes with their management, and in general the courts proceed with extreme caution in placing them in the hands of receivers.^ And whenever the ordinary remedies provided by law are open 1 Milwaukee & Minnesota R. Co. being embraced in the errors as- V. Soutter, 2 Wall., 510; S. C, signed. As to the constitutionality Woolworth's C. C, 49; Stevens v. of acts of the legislature of Texas Davison, ' 18 Grat., 819 ; Ruggles v. authorizing the appointment of re- Southern Minnesota Railroad, U. S. ceivers over corporations upon their Circuit Court, District of Minne- dissolution or insolvency, and as to sota, 5 Chicago Legal News, 110; the circumstances which will jus- Overton v. M. & L. R. Co., 10 Fed., tify a receivership over a railway 866 ; S. C, 3 McCrary, 436 ; Meyer in such cases, see East Line & R. R. V. Johnston, 53 Ala., 237; Kelly v. R. Co. v. Texas, 75 Tex., 434, 12 Trustees, 58 Ala., 489; State v. J., S. W., 690; Texas Trunk R. Co. v. P. & M. R. Co., 15 Fla., 201 ; Wabash State, 83 Tex., 1, 18 S. W., 199. As R. Co. V. Dykeman, 133 Ind., 56, 32 to the jurisdiction of the courts of N. E., 823. And see American Loan New York, under the statutes and & Trust Co. V. Toledo, C. & S. R. code of procedure of that state, to Co., 29 Fed., 416; Merriam v. St. appoint temporary and final receiv- Louis, C. G. & F. S. Ry. Co., 136 ers over railway companies, as to Mo., 145, 36 S. W., 630. In Mcll- the powers and functions of such henny v. Binz, 80 Tex., 1, the pro- receivers, and as to the conclusive priety of appointing a receiver at effect of such proceedings as re- the suit of a railway company al- gards the title to property of a rail- Icging its insolvency is criticised way company sold in such proceed- but not decided, the question not ings, when questioned by creditors 4oJ RECEIVERS. [CHAP. XI. to the creditors of such corporations for the enforcement of their demands, the appointment and continuance of a receiver in office for a long period of years is the exercise of a judicial power which can only be justified by the pressure of an ab- solute necessity. Thus, when a judgment creditor of a rail- way company, which is in the receipt of large earnings and op- erating an extended line of railway, has the ordinary means open to him of enforcing his judgment, the court will not coun- tenance the taking of the railroad property from its rightful possession, and placing it in the hands of a receiver ; especially when the judgment is for a small amount, as compared with the receipts of the company, and when its lien is seriously con- troverted. ^ Nor does the alleged violation by stockholders of a railway company of an injunction restraining the consolida- tion of two companies warrant the appointment of a receiver, when it is not shown that the company or any of its directors intend to surrender or transfer its property in violation of such injunction. Nor should a receiver be appointed over a railway without notice to the company, when neither fraud nor insol- vency is charged against the defendants, end when it does not appear that the property of the company is in danger of re- moval beyond the jurisdiction of the court, the controversy be- ing solely as to the effect of an alleged illegal consolidation with another railway company.^ And the relief will not be of the company, not parties thereto, ing the appointment of receivers who seek to recover such property, and the sale of its property for the see Herring v. New York, L. E. & benefit of all concerned. In this W. R. Co., 105 N. Y., 340, 12 N. E., case, the railway system in question 763. was made up by the consolidation 2 Milwaukee & Minnesota Rail- of numerous lines of road, which road Co. v. Soutter, 2 Wall., 510. had been separately mortgaged 3 Railway Company v. Jewett, 37 prior to such consolidation, the bill Ohio St., 649. But receivers have averring that if the system was been appointed over a railway upon broken up as an entirety, and if the application of the company it- separate receivers were appointed self, the bill averring its insolvency over the several lines thus sepa- and inability to meet its mortgage rately mortgaged, irreparable in- and floating indebtedness, and pray- jury would result to all persons in CHAP. XI.] RAILWAYS. 463 granted upon an ex parte application unless jn cases of the gravest emergency, and the mere apprehensions and fears of the plaintiff, which are not shown to be supported by actual facts as to the danger apprehended, will not justify the court in acting without notice to the defendant.^ So it is not the province of a court of equity to conduct the business of a rail- way for the mere convenience of the parties, or except where the exercise of its extraordinary jurisdiction is indispensable for the protection of some clear right of the suitor. And when a receiver has been appointed by collusion between the parties, in order to protect the road from adverse proceedings by credi- tors, and to enable the parties, through the receiver, to apply the entire income to the improvement of the property and not to the payment of its debts, the court, upon being apprised of the facts, may of its own motion discharge the receiver.^ § 366. Receiver appointed on bill by shareholder to set aside unauthorized lease. While, as is thus seen, courts of equity are extremely averse to the appointment of receivers to take charge of and manage railway corporations, yet the relief will be granted when the aid of equity is indispensable to se- cure the rights of the legitimate shareholders, and to prevent a failure of justice. For example, when the board of directors of a railway company, without authority of law and without the sanction of a lawful meeting of the shareholders, by whom alone such action could be authorized, have made a lease for years of the road and property of the corporation, the lease being absolutely null and void, upon a bill filed by a share- holder, in behalf of himself and such other shareholders as may elect to join in the proceedings, to set aside the lease, the court may appoint a receiver to take charge of and manage the road, until it can be ascertained by proper inquiry who are the interest. Wabash, St. L. & P. R. Southeastern R. Co. v. Cason, 133 Co. V. Central Trust Co., 22 Fed., Ind., 49, 32 N. E., 827. 272. 5 Sage v. M. & L. R. Co., 5 Mc- 4 Wabash R. Co. v. Dykeman, 133 Crary, 643. Ind., 56, 32 N. K, 823; Chicago & 464 RECEIVERS. [chap. XI. legitimate shareholders, and to whom the custody and man- agement of the road shall be committed.'^ § 367. Granted for protection of vendor's lien upon in- solvency of the company. In England, a receiver may be allowed for the protection of a vendor's lien for real estate sold to a railway, upon failure to pay the purchase-money and insolvency of the company. Thus, when a land-owner con- tracts with a railway company to convey to it certain lands for the construction of its road, and upon its failure to complete the purchase, he obtains a decree for the specific performance of the contract, and declaring his vendor's lien upon the premises for the balance of unpaid purchase-money, upon the insolvency of the company, the vendor may have a receiver, although not entitled to an injunction to restrain the company from operat- ing its cars over and using the land. In such case, the railway corporation is treated precisely as any other insolvent purchas- er, and the receiver is appointed for the preservation of the property, and to render it profitable for all parties in interest."^ But in such case, a receiver will not be appointed before a final decree for the specific performance of the contract.^ 6 Stevens v. Davison, 18 Grat., a receiver over a railway, Lord 819. Justice Cairns says, p. 212: "But 7 Munns v. Isle of Wight R. Co., in addition to the general principle L. R., 5 Ch., 414. that the Court of Chancery will not 8 Latimer v. A. & B. R. Co., 9 Ch. in any case assume the permanent D., 385. It is worthy of note that management of a business or un- the English Court of Chancery was dertaking, there is that peculiarity extremely averse to appointing a in the undertaking of a railway receiver over a railway with power which would, in my opinion, make to manage and operate the road, it improper for the Court of Chan- upon the ground that it would not eery to assume the management of assume the permanent manage- it at all. When parliament, acting ment of a business or undertaking, for the public interest, authorizes especially when, as in the case of the construction and maintenance a railway, such management had of a railway, both as a highway for been delegated by parliament to the public, and as a road on which the company itself. Thus, in Gard- the company may themselves be- ner v. London, C. & D. R. Co., L. come carriers of passengers and R., 2 Ch., 201, which was an ap- goods, it confers powers and im- plication by debenture holders for poses duties and responsibilities of CHAP, XI.] RAILWAYS. 465 § 368. Granted for protection of common easement; right of passage through a tunnel ; injunction refused. The jurisdiction of equity over railway corporations, in the manage- ment of a common easement or right to which different com- panies are entitled, is regarded as well settled to the extent, if necessary, of appointing a receiver to hold and manage the the largest and most important kind, and it confers and imposes them upon the company which par- liament has before it, and upon no other body of persons. These pow- ers must be executed and these du- ties discharged by the company. They can not be delegated or trans- ferred. The company will, of course, act by its servants, for a corpora- tion can not act otherwise, but the responsibility will be that of the company. The company can not, by agreement, hand over the man- agement of the road to the debent- ure holders. It is impossible to sup- pose that the Court of Chancery can make itself, or its officer, with- out any parliamentary authority, the hand to execute these powers, and all the more impossible when it is obvious that there can be no real and correlative responsibility for the consequences of any imper- fect management. It is said that the railway company do not object to the order for the manager. This may well be so. But in the view I take of the case, the order would be improper, even if made on the ex- press agreement and request of the company." But by the Railway Companies Act of 1867, 30th and 31st Victoria, chapter 127, section 4, it was pro- vided as follows : "The engines, tenders, carriages, trucks, machin- ery, tools, fittings, materials and Receivers — 30. effects, constituting the rolling stock and plant used or provided by a company for the purposes of the traffic on their railway, or of their stations or workshops, shall not, after their railway or any part thereof is open for public traffic, be liable to be taken in execution at law or in equity at any time after the passing of this act, and before the 1st day of September, 1868, where the judgment on which ex- ecution issues is recovered in an action on a contract entered into after the passing of this act, or in an action not on a contract com- menced after the passing of this act ; but the person who has recov- ered any such judgment may ob- tain the appointment of a receiver, and, if necessary, a manager, of the undertaking of the company, on application by petition in a sum- mary way to the Court of Chan- cery in England or in Ireland, ac- cording to the situation of the rail- way of the company; and all money received by such receiver or manager shall, after due provision for the working expenses of the railway and other proper outgoings in respect to the undertaking, be applied and distributed under the direction of the court in payment of the debts of the company or other- wise, according to the rights and priorities of the persons for the time being interested therein ; and on 466 RECEIVERS. [chap. XI. easement should occasion require. And where several rail- way companies are tenants in common of an easement, or right of passage through a tunnel, a court of equity will entertain a bill for an injunction and a receiver, upon a question of con- flict between two of the companies as to their relative rights in the tunnel ; but the court will not appoint a receiver of the tun- nel, if, from all the circumstances of the case, it \s satisfied that the rights of the parties may be preserved and protected without such appointment.^ § 369. When receiver refused on bill to recover back money paid for stock illegally issued. Upon a bill filed against a railway company by the holder of certain shares of stock, which are alleged to have been issued in violation of the charter and contrary to law, the bill praying an injunction and a receiver, and that the company may be decreed to pay to the receiver a sufficient sum to enable him to repay to plaintiff the amount advanced for the stock, no sufficient cause is present- ed to justify the appointment of a receiver, when the moneys re- ceived for the stock have passed into the general funds of the corporation, and can no longer be traced or identified.^^ § 370. When United States court in bankruptcy will re- fuse to interfere with receiver previously appointed in state court; jurisdiction as between state and federal courts. It is held, when receivers over a railroad have been appointed under proceedings in the state courts, and have taken posses- tion of the property of the road and entered upon their duties, payment of the amount due to every officers of the company as such such judgment creditor as aforesaid, manager and receiver, see In re the court may, if it think fit, dis- Manchester & Milford R. Co., 14 charge such receiver or such receiv- Ch. D., 645. See, also, In re Birm- er and manager." And this section ingham & L. J. R. Co., 18 Ch. D., was made perpetual in 1875, 38th 155; In re Southern Railway Co., and 39th Victoria, chapter 31. For 5 L. R., Jr., 165. a full discussion of the effect of ^ Delaware, Lackawanna & West- this act, and of the circumstances ern R. Co. v. Erie R. Co., 6 C. E. justifying the appointment of a Green, 298. manager as well as receiver, and of 10 Whelpley v. Erie Railway Co., the eligibility of the directors or 6 Blatchf., 271. CHAP. XI.] RAILWAYS. 467 before the instituting of proceedings in bankruptcy in the United States courts against the company, that the bankrupt court will not interfere with the possession and control of the receivers under the state courts, unless for some cause for which the title of the receivers might be impeached under the bank- rupt act. And until their title is thus impeached, the manage- ment and control of the road and of the property in the hands of the receivers will be left to the state courts. ^^ So when a railway company is in the hands of a receiver appointed by a federal court, no rights can be acquired under condemnation proceedings instituted in a state court by a telegraph company against the railway company to obtain a right of way over the property of the latter, if such proceedings are brought without leave of the court appointing the receiver, ^2 § 370(3. Two receivers not desirable; contract made by one binding on other. The practice has been adopted in some instances of appointing two receivers over a railway, but this course is ordinarily regarded as unnecessary and embar- rassing, a single receiver being preferred, both upon considera- tions of economy and of harmonious action. And when two receivers have been appointed in the first instance, by consent of the parties, as the representatives of different interests, and they prove unable to harmonize in the management of the re- ceivership, it is proper to remove them and to appoint a single receiver; and such receiver should be wholly uninterested in the affairs of the company, and a resident within the jurisdic- tion of the court appointing him and in which the affairs of the road are to be administered. ^^ And where two receivers have been appointed over a railway company and work has been done under a contract made with one of them and has re- ceived the approval and sanction of the court, it is immaterial 11 Alden v. B., H. & E. R. Co., 5 13 Meier v. Kansas Pacific R. Co., Bank. Reg., 230. 5 Dill., 476. 12 Western Union Telegraph Co. V. Atlantic & Pacific Telegraph Co., 7 Biss., 367. 468 RECEIVERS. [chap. XI. that the other receiver did not join in the making of the con- tract. Indeed, where there are two or more receivers of a railway system residing at considerable distance from each other, it may frequently happen that a contract must be made by one receiver without the assent of the other which will be binding upon the estate.^'* § 370/\ Receivership does not dissolve corporation; in- junction; taxes; condemnation suit. It is to be observed that the appointment of a receiver over a railway does not op- erate as a dissolution of the corporation itself.^^ Such appoint- ment, therefore, and the sale of the entire property of the com- pany do not afford ground for judgment of ouster against the directors of the company elected after the appointment of the receivers.^^ And the fact that a railway has passed into the hands of receivers, pending proceedings by the company for mandamus to compel the delivery of municipal-aid bonds, af- fords no ground for abating the mandamus proceedings, or for refusing to comply with the mandamus, since the corpora- tion still remains in being and capable of suing and of being sued.^'^ So an injunction, granted by a state court, restrain- ing a railway company from obstructing certain streets in a city, is held to be operative upon receivers of the company afterward appointed by a federal court, and they may be pun- ished as for contempt in disregarding such injunction, al- though they have been removed from their receivership when proceedings for contempt are instituted against them. Nor can one of the two receivers, in such case, escape liability by having remained inactive in the matter, since it was his duty to prevent disobedience of the injunction, and he can not avoid !•* Girard Insurance & Trust Co. ers of both receivers in the other V. Cooper, 162 U. S., 529, 16 Sup. during the time named. Ct. Rep., 879, 40 L. Ed., 1062. affirm- 15 State v. Merchant, 37 Ohio St., ing S. C, 2 C. C. A., 245, 51 Fed., 251 ; People v. Barnett, 91 111., 422. 332, 4 U. S. App., 631. In this case And see, ante, §§ 344& and 358. an order had been entered giving 16 State v. Merchant, 37 Ohio St., one of the receivers leave of absence 251. for a year and vesting all the pow- 17 People v. Barnett, 91 111., 422 CHAP. XI.] RAILWAYS. 469 liability by mere inaction. ^^ So the fact that a railway has passed into the hands of receivers, who are operating the road and receiving its earnings, constitutes no bar to a judgment in favor of the state against the company for taxes due to the state upon the gross earnings of the road while operated by the receivers.^^ And the appointment of a receiver over a rail- way company does not divest it of its power to maintain con- demnation proceedings or have the effect of suspending the exercise of that power while the property of the company is in the custody of the court. ^0 § 371. When appointed before default; failure of com- pany to operate road ; receiver not relieved until exigency ceases ; receiver to prevent forfeiture of franchise. While receivers over railways are usually appointed in aid of fore- closure proceedings, after default in paym.ent of the mortgage indebtedness, the relief has been allowed before default when the company was insolvent and unable to pay either mortgage or floating indebtedness, and unable to pay amounts due to con- necting lines, and in danger of the absolute destruction of its business and about to default in payment of interest upon its mortgages.2l And where a statute of a state authorizes and provides for the appointment of receivers, to take charge of and operate any railway which shall discontinue its operations for a given length of time, the object of the statute being the re- lief of citizens residing along the line of the suspended road, and a receiver is accordingly appointed over a railway com- pany which has failed to operate its road for the prescribed 18 Safford v. People, 85 III, 558. v. Campbell, 140 Mich., 384, 103 N. 19 Philadelphia & Reading R. Co. W., 856. V. Commonwealth, 104 Pa. St., 80. 21 Brassey v. N. Y. & N. E. R. As to the right to levy upon and Co., 19 Fed., 663, 22 Blatch., 72, fol- sell the property of a railway which lowed by Farmers' Loan & Trnst is in the hands of a receiver of a Co. v. Meridian Waterworks, 139 federal court, to satisfy unpaid taxes Fed., 661, where a receiver was ap- due to the state under the laws of pointed over the property of a water Georgia, see State v. A. & G. R. Co., company although there was no de- 3 Woods, 434. fault either in the interest or prin- 20 Detroit & Toledo S. L. R. Co. cipal of its bonds. 470 RECEIVERS. [chap. XI. time, while the courts may and will restore the property to the company or to its rightful owners, upon being satisfied of their ability and willingness to operate and manage the road, it will not stay the operation of the receivership for the pur- pose of inquiring as to the causes which have led to the fail- ure to operate the road. In such a case, the public necessity will be regarded as of paramount importance, and the receiver will not be relieved until the court is satisfied that the exigency has ceased which called for the appointment. ^2 And where a city is about to enforce a forfeiture of the franchise of a street railway company because of its failure to comply with the conditions of the ordinance under which it is operating and the appointment of a receiver will prevent such forfeiture, a. receiver is properly appointed. ^3 § 372. Vendor's right to distrain notwithstanding rent charge; can not distrain upon trust property or locomo- tives. When the owner of lands has conveyed them to a railway, in consideration of an annual rent charge, reserving by his conveyance the right to enter upon the lands conveyed, and to distrain for rent whenever it may be in arrear, the subsequent appointment of a receiver over the railway will not be allowed to disturb the vendor's rights. And upon ap- plication to the court he will be given leave to distrain, not- withstanding the receiver's possession, such a case being sim- ilar to that of an application by a stranger for leave to bring an action of ejectment.24 But the court will not, under such circumstances, grant permission to distrain upon property of the railway company which had been conveyed to trustees for 22 In re Long Branch & Sea Shore holders, see Ex parte Dunn, 8 S. C, R. Co., 9 C. E. Green, 398. As to 207. the right of a state to take posses- 23 Union Street-Ry. Co. v. City of sion of a railway, under an act of Saginaw, 115 Mich., 300, 7i N. W., legislature, in the event of the in- 243. solvency of the company and its 24 Eyton v. Denbigh, Ruthin & failure to pay its bonds guaranteed Corwen R. Co., L. R., 6 Eq., 14. by the state, after the appointment See, also, S. C, id., 488. of a receiver in behalf of its bond- CHAP. XI.] RAILWAYS. 471 the benefit of creditors, nor upon locomotives passing over the land for the purpose of working the line. 25 § 373. Receiver may enjoin state ofEcers from dispos- ing of land grant; stockholders' meeting. A receiver over a railway company, who is authorized by the order of his ap- pointment to secure and protect the assets, franchises and rights of the company, as well as a land grant and reservation due the company from the state, may maintain a bill in equity for an injunction against officers of the state to prevent them from granting to other persons the same lands which have been previously granted to the railway, and which the state has attempted to forfeit. Such a suit by the receiver is re- garded as auxiliary to the original action, and is analogous to a petition by a receiver to the court to protect his possession from disturbance, or the property in his charge from destruc- tion.26 But the primary object of the receivership being to preserve the railway for the benefit of its creditors, the court will not extend its jurisdiction beyond the necessity for such preservation. It will not, therefore, upon the petition of the company, assume jurisdiction over the question of postponing a stockholders' meeting called for the election of officers, the exercise of such jurisdiction not being pertinent to the pur- poses of the receivership.27 § 374. United States court will not entertain bill for ac- count against receiver of railway appointed by state court ; mandamus refused. When a receiver has been appointed in a state court over a railway company, and its franchises are declared forfeited, and its property is placed in the receiver's hands, a United States court will not entertain a bill for an ac- counting against the receiver and the corporation, but will leave the party aggrieved to pursue his remedy by applying to the court which appointed the receiver, and under whose con- 25Eyton V. Denbigh, Ruthin Sz 27 Taylor v. P. & R. R. Co., 7 Corwen R. Co., L. R., 6 Eq., 488. Fed., 381. 26 Davis V. Gray. 16 Wall., 203, affirming S. C, 1 Woods, 420. 472 RECEIVERS. [chap. XI. trol he acts.28 So when a railway is being operated by a re- ceiver, appointed by a court of competent jurisdiction, man- damus will not lie against the company and its receiver to direct or control the operations of the road, the court appoint- ing the receiver being fully empowered to determine all ques- tions in controversy.^^ § 375. On vacating appointment receiver should restore management and control of road to owners ; application of surplus funds. When a receiver is appointed over a rail- way company, and defendant afterward moves and plaintiff consents that the order of his appointment be vacated, the mo- tion, being concurred in by all parties in interest, should be granted so far as to restore the possession, management and control of the road to the owner; and such control should manifestly include the receipt and disbursement of its future earnings. It is, therefore, error for the court to require the receiver to restore the railroad and its appurtenances and management to the company, but to still require him to receive and disburse its earnings and income. ^^ And a receiver of a railway, who enters into a fraudulent combination with third parties for the purchase of the road at a foreclosure sale, fur- nishing information for this purpose in violation of his trust, can not maintain a bill against such purchasers for an acount- ing and for the recovery of a share of the profits arising from such fraudulent transaction.^^ And when a receiver is ap- pointed over a railway upon a bill by a judgment creditor, and the court afterward directs the receiver to surrender the prop- erty to the company, the surplus earnings remaining in his hands, after payment of all expenditures, should be paid to such creditor to be applied in satisfaction of his judgment, rather than to trustees for mortgage bondholders who have 28Conkling v. Butler, 4 Biss., 22. 31 Farley v. St. P., M. & M. R. 29 State V. M. & C. R. Co., 35 Co., 4 McCrary, 138. Ohio St., 154. SOL'Engle v. Florida Central R. Co., 14 Fla., 266. CHAP. XI.] RAILWAYS. 473 • neglected, during the receivership, to intervene in the cause and claim such earnings, their only claim thereto being as mortgage trustees not in possession. ^2 § 375a. Ancillary receiverships. In cases where a line of railway extends through several states, it has been a com- mon practice to institute the receivership by an original bill, usually for foreclosure, in the federal court in one of such states, and by ancillary proceedings in the federal courts of the other states to extend the receivership to the remaining portions of the road. This practice has, however, been dis- approved in a vigorous and well-considered opinion, in which it is held that such an ancillary proceeding will not be main- tained, or a receiver be appointed, in another federal court when the sole purpose of such action is to procure an ancillary receivership as an adjunct of the principal receivership in an- other jurisdiction, the bill seeking no other independent or affirmative relief.^^ Substantially the same result is, however, obtained by filing original and independent bills for foreclosure in the federal courts of the various states through which the line of railway extends, procuring the appointment of a re- ceiver upon such a bill in one district and having the same re- ceiver appointed under the various original bills filed in the other districts. In such cases, by comity among the several courts which have thus appointed the same receiver, the gen- eral administration of the estate is had in the court in which the receiver was first appointed. And in such cases, one who claims a lien upon the fund in the receiver's hands growing out of a judgment for personal injuries prior to the receiver- ship, like any other claimant, may be required to present his application to the court in which the receiver was originally 32 Sage V. Memphis & L. R. R. Co., 54 Fed., 569; Clyde v. Rich- Co., 125 U. S., 361, 8 Sup. Ct. Rep., mond & D. R. Co., 56 Fed., 539; 887. Parsons v. Charter Oak L. I. Co., 33 Mercantile Trust Co. v. Kana- 31 Fed., 305; Williams v. Hinter- wha & O. R. Co., 39 Fed., 337. But meister, 26 Fed., 889. see Piatt v. Philadelphia & K R. 474 RECEIVERS. [CHAP. XI. appointed, and under whose orders the fund is being adminis- tered.*^"^ 34 Central Trust Co. v. East T., general direction and control of the V. & G. R. Co., 30 Fed., 895. See, court in which the receivership was further, as to the administration of initiated, Ames v. Union Pacific R. the assets in such cases under the Co., 60 Fed., 966. CHAP. XI.] RAILWAYS. 475 11. Receivers in aid of Mortgagees and Bondholders. § 376. Relief granted upon principles governing applications for re- ceivers in foreclosure suits; insolvency of company and in- adequacy of security. 377. When receiver refused, although railway company in default in payment of interest. 378. Proceedings regarded as in rem; receiver's right extends only to mortgaged property; may lease other lines. 379. Right to take possession upon default. 380. Mortgagee of tolls of railway entitled to receiver. 381. The same; judgment at law not necessary; judgment creditor not entitled to priority over mortgages of earlier date. 382. Relative rights as between different mortgagees of tolls. 383. As between different mortgagees of railway without priority, equity will not permit a preference. 384. When state entitled to receiver over railway; road running through different states. 385. Receiver of tolls of turnpike company in behalf of mortgagee. 386. Receiver in behalf of bondholders to prevent land grant from lapsing. 387. On application for receiver in aid of bondholders, court will not determine validity of bonds. 388. Relative jurisdiction of state and federal courts on applications for receivers over railways. 388a. Jurisdiction of United States court over consolidated road in different states. 388&. When president and directors regarded as receivers. 389. Right of company to discharge receiver on payment of debt. 389a. Liability of plaintiff in foreclosure for wages of receiver's em- ployees. § 376. Relief granted upon principles governing appli- cations for receivers in foreclosure suits; insolvency of company and inadequacy of security. The most frequent ground for invoking the extraordinary aid of equity by the appointment of receivers over railway corporations is for the protection of mortgagees and bondholders, whose securities are a Hen upon the road, upon the faihu-e of the corporation to pay the principal or interest upon its ob- ligations thus secured. And in actions for the foreclosure of railway mortgages, given to secure bonds issued by railway companies for purposes of construction and equipment, the 476 RECEIVERS [chap. XI. courts, upon an application for a receiver in behalf of the mort- gagees, proceed upon the usual principles governing applica- tions for receivers in aid of the foreclosure of mortgages; and in conformity with such principles, inadequacy of the mortgage security, coupled with insolvency of the mortgagor, may be re- garded as sufficient ground for the relief.^^ And while the courts are reluctant to exercise their jurisdiction in this class of cases, except upon a strong showing, yet if the road and its ap- purtenances are manifestly an inadequate security for the mort- gage indebtedness, and the corporation is shown to be insolv- ent, a receiver will be appointed and the company and its agents will be enjoined from any interference with him or with the property.2^ And when, upon a bill to foreclose mortgages given by a railway company to secure its bonds, the insolvency of the company and inadequacy of the security are shown, and the company has neglected to apply its earnings, which are the only fund for that purpose, in payment of the bonded indebtedness secured by the mortgages, such neglect, in connection with the other circumstances shown, constitutes sufficient ground to justify the interference of equity by a re- ceiver.^"^ So it is proper to appoint a receiver over a railway 35 Ruggles V. Southern Minnesota the same railway in a foreclosure Railroad, U. S. Circuit Court, Dis- suit, see Whitney v. N. Y, & A. R. trict of Minnesota, 5 Chicago Legal Co., 32 Hun, 164. News, 110; Keep v. Michigan Lake 36 Ruggles v. Southern Minnesota Shore R. Co., U. S. Circuit Court, Railroad, U. S. Circuit Court, Dis- Western District of Michigan, 6 trict of Minnesota, 5 Chicago Legal Chicago Legal News, 101; Kelly v. News, 110. Trustees, 58 Ala., 489 ; Pennsylvania 37 Keep v. Michigan Lake Shore Co. V. American Construction Co., R. Co., U. S. Circuit Court, Western 5 C. C. A., 53, 55 Fed., 131, 2 U. S. District of Michigan, 6 Chicago App., 606. As to the appointment Legal News, 101. This was a bill of a receiver in behalf of judgment for foreclosure by trustees named creditors of a railway in an action in certain railway mortgages, exe- to sequestrate its property under the cuted to secure the bonded indebt- statutes of New York, as to the edness of the road, the bill also practice in such cases, as to the praying that a receiver might be powers and duties of such a receiver, appointed. The court, Withey, J., and as to his relative rights com- say, p. 402 : "The rule asserted is pared with those of a receiver over that a receiver will not be appointed CHAP. XI.] RAILWAYS. 477 company in behalf of mortgage bondholders, when the inter- est upon the mortgages has been long unpaid, and when it is apparent that the mortgaged property will not bring sufficient to satisfy the indebtedness. ^8 And the fact that large amounts of interest upon mortgage bonds are in default, that the in- come of the road can be secured only through a receivership, its diminishing business and decreasing revenues and serious disagreement among the various parties in interest in its man- agement, coupled with its insolvency and inadequacy of the security, afford sufficient ground for the relief.^^ So a re- unless there has been abuse, or is danger of abuse, on the part of the mortgagor or party in possession. Receivers are not appointed as a matter of course, but it rests in the sound discretion of the court. Whether the power will be exercised depends always upon the facts and rights as they appear before the court. There is a multitude of cases showing where the power has and where it has not been exercised, each case depending on its particu- lar facts and circumstances. From the decided cases, the general rule which should govern is abundantly illustrated. One ingredient to jus- tify the appointment of a receiver, in a case of foreclosure of mort- gaged premises, is that the security is inadequate. This the bill avers; another, that the party to the suit is in possession by himself or his tenant, and the proper parties are before the court; such is this case; again, the mortgagor, or party per- sonally liable for the debt, must be shown to be irresponsible for any deficiency on sale of the mortgaged premises ; this the bill shows. A large amount of interest is overdue and unpaid. From the case before the court it would seem that the in- terest must be met from the earn- ings of the road, and yet the net earnings are not applied. Is it not an abuse on the part of the mort- gagors, if insolvent, that the net earnings are not applied to the in- terest? What excuse exists for the omission? The obligation of the mortgagor is common to all mort- gagors, viz. : to meet its accrued in- debtedness, and if its only means with which to meet the interest are not thus applied, such neglect of a paramount obligation is little less than an abuse which will justify the appointment of a receiver, in con- nection with all the facts in this case. The mortgage provides that in case of default in payment of any interest or principal of the secured debt, the trustees may take posses- sion of the road and property in person, or by a receiver, and operate the road. The court is of opinion that a receiver should be appointed with the usual powers in such cases. The order may be drawn and sub- mitted to the court for approval." 38 Pullan V. Cincinnati & Chicago R. Co., 4 Biss., 35. 39 Mercantile Trust Co. v. Mis- souri, K. & T. R. Co., Z6 Fed.^ 221. 478 RECEIVERS. [chap. XI. ceiver is properly appointed over the property of a street rail- way company, where it appears that the atTairs of the com- pany are in extremely chaotic condition and that it is without a president, vice-president or treasurer to carry on its affairs and that the interest upon its bonds is past due and unpaid. ^^ § 377. When receiver refused, although railway com- pany in default in payment of interest. But the appoint- ment of a receiver is not a matter of course in aid of the foreclosure of a mortgage given by a railway cor- poration, upon default in the payment of any portion of the interest of the indebtedness.'^^ And when, by the terms of a mortgage or deed of trust executed by a railway company to secure its bonds, it is provided that the trustee, on default of payment either of principal or interest, may take possession of the mortgaged property, but the trustee upon default does not elect to take possession, and institutes an action for the appointment of a receiver, in the absence of any facts showing an abuse in the management of the company the court will exercise an equitable discretion in the matter, and will refuse to allow a receiver when it would cause irreparable injury to the company. '*2 And in the exer- cise of the discretion vested in courts of equity touching the appointment of receivers, a receiver will not be appointed in aid of the foreclosure of a railroad mortgage when much great- er injury would result to all parties in interest by such ap- pointment than by permitting the road to be operated by the company pending the foreclosure proceedings.^^ Nor should a receiver be appointed over an entire railway system upon behalf of bondholders whose mortgage covers but a part of the road.44 40 Ralph V. Wisner, 100 Mich., v. St. L., I. M. & S. R. Co., 4 Dill., 164, 58 N. W., 837. 114. 41 Williamson v. New Albany R. 43 Tysen v. Wabash R. Co., 8 Co.. 1 Biss., 198: Tysen v. Wabash Biss., 247. R. Co., 8 Biss., 247. 44 Merriam v. St. Louis, C. G. & 42 Williamson v. New Albany R. F. S-. Ry. Co., 136 Mo., 145, 36 S. Co., 1 Biss., 198; Union Trust Co. W., 630. CHAP, XI.] RAILWAYS. 479 § 378. Proceedings regarded as in rem; receiver's right extends only to mortgaged property; may lease other lines. Proceedings for the appointment of receivers, in actions for the foreclosure of railway mortgages, are regarded as in rem, to the extent that they seek to reach such property of the corporation as was mortgaged to secure the bondholders. And the right of the receiver to the possession of the corporate property, being subject to the same limitations governing the rights of the mortgage bondholders in whose behalf he was appointed, extends only to the specific property which is the subject of the litigation and covered by the mortgage.^^ But a court of equity, having appointed a receiver over a railway in an action for the foreclosure of a mortgage, may exercise all necessary powers with reference to the protection and pres- ervation of the property for the benefit of its creditors which are not in excess of the powers of the corporation itself. It may, therefore, authorize the receiver to lease other lines of railway to be operated in connection with, and as a part of, the road over which he is appointed, when such course is neces- sary for the interests of the creditors.^^ § 379. Right to take possession upon default. Railway mortgages, or deeds of trust in the nature of mortgages, fre- quently contain a provision authorizing the trustee or mort- gagee, in case of default, to take possession of and manage the railway and to receive and apply its income. In such cases, if the trustees have a complete remedy at law to recover posses- sion, the court may properly refuse to appoint a receiver when it does not appear that the trustees have made any efifort to ob- tain possession, or that the mortgaged premises are an inade- quate security.'*'^ If, however, the trustees neglect and refuse to take possession after default and a request from the bond- holders, upon a bill by the bondholders to enforce the trust, 45Noyes v. Rich, 52 Me., 115. 47 Rice v. St. Paul & Pacific R. 46 Gibert v. W. C, V. M. & G. S. Co., 24 Minn., 464. But see Allen R. Co., 33 Grat., 586, v. D. & W. R. Co., 3 Woods, 316. 480 RECEIVERS. [chap. XI. a receiver may be appointed, the right to the rehef, in such case, not being dependent upon inadequacy of the mortgage security.^^ Nor is the right to rehef, in such cases, confined to actions for the foreclosure of the mortgage, since a receiver may be appointed upon a bill seeking to obtain possession after default, the railway company being insolvent and the security inadequate.^^ So a receiver may be appointed, after default, in an action brought by a surviving trustee in the deed of trust to enforce the trust and to obtain possession of the property.^^ In such case it is proper to appoint the surviving trustee as re- ceivers^ And it has been held, when the deed of trust author- ized the trustees to take possession upon default, that the de- fault itself constituted sufficient ground for a receiver, without showing the inadequacy of the mortgage security. ^^ And a receiver has been appointed after a decree of foreclosure, in behalf of bondholders entitled to the net income of the road, when, under the laws of the state, no sale could be had until the expiration of six months from the date of the decree.^^ 48 Wilmer v. A. & R. A. L. R. 50 Sacramento & P. R. Co. v. Su- Co., 2 Woods, 409. perior Court, 55 Cal., 453; McLane 49 Dow V. M. & L. R. Co., 20 v. Placerville & S. V. R. Co., 66 Fed., 260. In this case, the court Cal., 606. 6 Pac, 748. required plaintiffs, as a condition 51 McLane v. Placerville & S. V. to the appointment of a receiver, R. Co., 66 Cal., 606, 6 Pac, 748. to consent that all debts due to 52 Allen v. D. & W. R. Co., 3 other companies for freight and Woods, 316. But in this case, ad- ticket balances, all debts for labor, ditional grounds for the relief were supplies and materials used in found in the fact that the com- equipping, repairing or operating pany was actually insolvent, that the road, and all obligations in- the contractor for building the curred in transporting freight or road had failed and abandoned his passengers, or for injuries to per- contract, and that the charter and sons or property, which had ac- a valuable land grant were about crued within six months prior to to lapse by the non-completion of the appointment, should be paid by a small remaining portion of the the receiver out of the earnings of road within the time required by the road, or, if not so paid, should law. constitute a lien upon the road 5.3 Benedict v. St, J. & W. R. Co., paramount to that of the mortgage 19 Fed., 173. indebtedness. CHAP. XI.] RAILWAYS. 481 § 380. Mortgagee of tolls of railway entitled to receiv- er. It was the doctrine of the English Court of Chancery, that when a company, incorporated by act of parhament as a common carrier, is authorized by its act of incorporation to borrow money by mortgaging its tolls, and in pursuance of such authority has mortgaged its tolls to secure advances and loans obtained for carrying on the undertaking, the mortgagee is entitled to the aid of equity by a receiver upon non-payment of his principal when due.^^ And the receiver thus appointed will be ordered to pay the costs of the proceeding, and then to keep down the interest on the mortgages and pay the balance into court.^^ It is held, in such cases, that the power of mort- gaging the corporate tolls and rents necessarily carries with it as an incident all the appropriate and necessary remedies to compel payment. Equity may, therefore, appoint a receiver of the tolls in an action to foreclose the mortgage, even though the power is not conferred in express terms by the act of par- liament, the remedy being a necessary incident of the powers expressly granted. ^^ And it is no objection to the appointment of a receiver of the tolls, rates, duties and other property of a railway, upon the application of a mortgagee, that the court can not prescribe everything which is necessary to be done for the proper management of the affairs of the corporation, and that it is liable to indictment in case the receiver does not per- form the duties required of the company by its act of incor- poration.^''' § 381. The same; judgment at law not necessary; judg- ment creditor not entitled to priority over mortgages of earlier date. It is held, in the Irish Chancery, that railway bondholders are entitled to a receiver over the tolls and traffic 54 Hopkins v. Worcester & Birm- 56 De Winton v. Mayor of Brecon, ingham Canal Proprietors, L. R., 6 26 Beav., 533. Eq., 437; De Winton v. Mayor of "'7 Fripp v. The Chard R. Co., 11 Brecon, 26 Beav., 533. Hare, 241 ; S. C. 17 Jur., 887; S. C, 55 Hopkins V. Worcester & Birm- 22 L. J., N. S., 1084. ingham Canal Proprietors, L. R., 6 Eq., 437. Receivers — 31. 482 RECEIVERS. [chap, XI. of the road, when their bonds are an equitable charge upon such tolls, and when the inconvenience of proceeding at law for the enforcement of their demands is so great as to render the legal remedy practically useless. And it is not necessary, to entitle them to the relief, that the bondholders should have first re- covered judgment at law and issued execution, when the right to be paid out of the tolls is attached to the bonds themselves, and a receiver previously appointed over the tolls of the com- pany will be extended to the payment of the demands of such bondholders.^^ But a judgment creditor of a railway com- pany, whose judgment is only a lien or charge upon its lands, to the extent of such estate or interest as the corporation it- self has in them, is not entitled, upon obtaining a receiver of the railway, to be paid the profits received by the receiver in priority to interest due on mortgages of the company which antedate his judgment. ^^ § 382. Relative rights as between different mortgagees of tolls. The jurisdiction of the English Court of Chan- cery, in this class of cases, was sometimes invoked when there were different mortgagees of the tolls, who were entitled to have them applied for the payment of their advances. And when the trustees of an incorporated turnpike company are authorized by the act of incorporation to mortgage its tolls, the mortgagee may have a receiver of the tolls if there are other mortgages thereon, and he will not be required to take pro- ceedings at law to obtain possession under his mortgage. In- deed, such a case would seem to be a stronger one for the in- terposition of equity by a receiver than the case of an ordinary mortgage of lands.^^ And when a railway company, incor- 58 Imperial Mercantile Credit As- "that the rights under a mortgage sociation v. Newry & Armagh R. of this description differ materially Co.. Ir. Rep., 2 Eq., 1. from the rights under an ordinary 59 Holland v. Cork & Kinsale R. mortgage of land. Under an ordi- Co.. Ir. Rep., 2 Eq., 417. nary mortgage the mortgagee, when 60 Crewe v. Edleston, 1 De G. & he enters into possession, holds for J., 93. "It is to be observed, too," his own benefit. Under a mortgage says Lord Justice Turner, p. 109, of this description he becomes, CHAP. XI.] RAILWAYS. 483 porated by act of parliament, is authorized to obtain loans by mortgaging its rates, tolls, duties and other property, a second mortgagee, who has advanced money to the company upon this security, is entitled to a receiver in an action to es- tablish his mortgage, when it is shown that the property is un- productive as to the second mortgagees, and their interest has been unpaid for a series of years. And the relief may be al- lowed in such a case, even though, by the act of incorporation, special provision is made for the appointment of a receiver in behalf of a mortgagee on application to justices of the peace for that purpose, the act providing that this special remedy shall be without prejudice to any remedies, either at law or in equity, which the mortgagee may have. In such a case, it constitutes no sufficient objection to granting the relief sought that the mortgagee has not joined as defendants to the action other mortgagees secured by the same mortgage with himself.^^ § 383. As between different mortgagees of railway with- out priority, equity will not permit a preference. As be- between different mortgage creditors of a railway company, whose mortgages are a charge upon the property of the com- pany, to be paid pari passu, and without priority or preference, equity will not permit one of the mortgagees to obtain a prefer- ence over others. And where some of the mortgagees have filed a bill for an account of the principal and interest due upon their mortgages, and have obtained a receiver of the railway and its tolls, the court will not allow another of the mortgagees, who has obtained judgment upon his demand, to issue execu- tion against the property of the company, otherwise than as when he enters into possession, lia- the tolls, and if this court can be ble to the other mortgagees, to the called upon to appoint a receiver extent of their interests. This lia- immediately after the possession re- bility, I apprehend, would entitle covered at law, it can hardly be him, immediately upon possession necessary that the proceedings at taken, to come to this court to have law should first be taken." it ascertained what is due upon the 61 Fripp v. The Chard R. Co., 11 other mortgages, and for a receiver Hare, 241; S. C, 17 Jur., 887; 22 to aid him in the due application of L. J., N. S., 1084. 484 RECEIVERS. [chap. XI. trustee for himself and all other mortgage creditors of the company. But the court may, in such case, direct an inquiry as to whether it will be for the benefit of the mortgage cred- itors generally that any proceedings should be taken for the purpose of making the judgment available for their benefit.^" § 384. When state entitled to receiver over railway; road running through different states. Where a railway company, chartered by two different states, and whose line of road lies in both of the states, executes a mortgage of the en- tire line of its road to one of the states to secure the payment of an annuity due from the company, and the state occupies the relation of a second and third incumbrancer, it is entitled to the aid of a receiver, upon a bill showing that the tolls and revenues of the road are being diverted to the payment of junior obligations and liens, in violation of the duty incum- bent upon the corporation. And although the courts of the state in which the relief is granted have jurisdiction of the matter only within the limits of that state, they will yet inter- fere to the extent of their jurisdiction; and the fact that their authority does not extend beyond the territorial limits of the state will not deter them from acting, in a proper case, to the extent of such limits. In such a case the defendant, as to that portion of its property and franchises within the limits of the state where the relief is sought, will be treated as a domestic corporation and will be dealt with accordingly.^^ § 385. Receiver of tolls of turnpike company in behalf of mortgagee. When the mortgagee of the tolls of a turn- pike company, under an act of parliament providing that none of the mortgagees of such tolls should have preference over others, had taken possession of the turnpike gates without any legal proceedings, and was in receipt of the tolls and retained the entire amount in discharge of his own demand, instead of applying it for the benefit of all the mortgagees pari passu, as required by the act of parliament, an injunction was granted 62 Bowen v. Brecon R. Co., L. R., 63 State of Maryland v. Northern 3 Eq., 541. Central R. Co., 18 Md^ 193. CHAP. XI.] RAILWAYS. 485 against him and a receiver of the tolls was appointed, upon the appHcation of another mortgagee.^* § 386. Receiver in behalf of bondholders to prevent land grant from lapsing. When a railway company is endowed with a valuable land grant, which constitutes the principal se- curity of its bondholders, and there is danger of the grant lapsing before the completion of the road, which is required to be completed within a specified time, a receiver may be appointed on application of the bondholders, the exigencies of the case being regarded as sufficient to warrant a court of equity in interfering. And such receiver may be authorized to borrow money sufficient to complete the line within the time specified, and to issue his obligations for that purpose, which may be made a lien upon the road.^^ § 387. On application for receiver in aid of bondholders, court will not determine validity of bonds. In an action for the foreclosure of a mortgage given by a railway company to secure its bonds, it affords no sufficient objection to appoint- ing a receiver in behalf of the bondholders, that the proceed- ings of the corporation in issuing the bonds and mortgage are impeached by mere negative testimony, as by an affidavit of the secretary of the company stating that he is not able to find any record of authority, given by the stockholders to the di- rectors or officers of the company, to execute the bonds and mortgage in question ; since, upon a preliminary application for the appointment of a receiver, the court will not pass upon or determine the validity of the bonds, but will leave that ques- tion to the final hearing.^*^ § 388. Relative jurisdiction of state and federal courts on applications for receivers over railways. Questions of difficulty have occurred in determining the relative jurisdiction 64 Dumville v. Ashbrooke, 3 Rnss., receiver under such circumstances. 99 note c. ^^^' ^'^°' ^- ^■' ^ Dill., 519. 66 Keep v. Michigan Lake Shore 65 Kennedy v. St. Paul & Pacific j._ q^ ^ ^ g. Circuit Court, West- R. Co., 2 Dill., 448. And see this ern District of Michigan, 6 Chicago case for form of order appointing a Legal News, 101. 486 RECEIVERS. [chap. XI. of the state and federal courts, upon applications for receivers in aid of the foreclosure of railway mortgages. The true rule upiMi this subject undoubtedly is, that the court first acquiring jurisdiction of the subject-matter, or of the res, will retain ju- risdiction to the end of the litigation, and will, if necessary, take possession or control of the property by a receiver, to the exclusion of all interference from other courts of concurrent jurisdiction.67 Accordingly, when a trustee in a deed of trust, given by a railway company to secure its bonds, files his bill in the United States court for a foreclosure, which thus ob- tains jurisdiction of the subject-matter, and pending this ac- tion, and without leave of the federal court, the trustee insti- tutes proceedings in a state court to foreclose the same trust deed, upon which a receiver is appointed, a foreclosure ordered and the property sold, the United States court retains its juris- diction. It may, therefore, upon a proper showing of the ne- cessity for a receiver, make such appointment on the applica- tion of one of the bondholders secured by the mortgage, and the interference of the state court will be treated as unauthor- ized, and as not affecting the previously acquired jurisdiction of the federal tribunal. ^^ Nor is it necessary, in the applica- 67 Bill V. New Albany R. Co., 2 they seem to have had the opinion Biss., 390; Union Trust Co. v. The of a state court to justify their ac- Rockford, Rock Island & St. Louis tion, but as this court was the one R. Co., 6 Biss., 197 ; S. C, 7 Chicago in which the controversy was orig- Legal News, 33. See, also, to the inally commenced, and in which, same effect, Gaylord v. The Fort for certain purposes, it was yet Wayne. M. & C. R. Co.. 6 Biss., 286. pending, it is the only tribunal 68 Bill V. New Albany R. Co., 2 whose decision was binding upon Biss., 390. The principles govern- the parties in this court. Before ing in such case are well stated by he adopted so grave a measure, Drummond, J., p. 400, as follows: therefore, and one calculated so "It could hardly be said then to be much to complicate and embarrass fair dealing, while the case was matters in dispute, he should have thus proceeding here, for the trustee come to this court for directions and some of the bondholders to and relief. One litigation should turn over to another jurisdiction have been disposed of before an- rights which had been partially ad- other on the same subject-matter judicated, thus ignoring everything was begun. The fact appears to be, that occurred here. It is true that that the trustee and the first bond- CHAP. XI.] RAILWAYS. 487 tion of the general rule as above stated, that the court which first acquires jurisdiction of the case shall also first take by its officers possession of the property in controversy, since this would only lead to unseemly haste on the part of receivers to reduce the property to manual possession ; and while the court first appealed to was investigating the rights of the respective parties, another court, acting with greater haste, might, by seizing the property, render the first suit wholly unavailing. And when a bill in the United States court, in behalf of hold- ers of railway bonds, seeking the aid of a receiver for the pro- tection of their security, was dismissed upon demurrer, but afterward, and at the same term, this judgment was set aside and the bill reinstated, and plaintiffs were allowed to amend, holders thought that the last bond- holders had ceased to have any interest in the road, because of the inadequacy of the property to re- spond to inferior liens, and acted accordingly — a conclusion which could only be reached under ihe authority of this court. Inasmuch, therefore, as the case was still here, as for certain purposes the property was subject to the control of the court, in the interests of the parties before it, to appeal to another court to foreclose the mortgages and sell the road was unwarranted, and not consistent with the obligations due to all. The trustee was responsible just as much to others as he was to those who demanded he should foreclose, and whose instructions he obeyed. If, then, it was a bren'-h of duty for Williamson to proceed in the court of common pleas of White county, as I think it was, what is the effect upon the right of this court to retain jurisdiction of the cause and of the subject-mat- ter? There can be no doubt it has created great confusion in the posi- tion of those claiming under the mortgages, and embarrassment in the court to deal properly with their interests. It has thus brought about an apparent conflict between courts, state and federal, which should always be avoided. But the conflict arises from acts done after this court had obtained jurisdiction of the cause, and for which, there- fore, it can not be justly held accountable; and when a party affected by an order or decree en- tered in a pending cause asks for relief, it is no answer to say that another jurisdiction has attempted to seize the property, and thus place it beyond the power of the court to give relief. The question always must be, is it competent for the court to act? If so, its duty is plain, and it necessarily follows from what has been said, that, in my opinion, the property is still within the control of this court to adjudicate upon the equitable rights of all who have ever been before it." 488 RECEIVERS. [chap. XI. a receiver was appointed to take charge of the railway for the protection of the bondholders, notwithstanding another cred- itor of the company, in the interval between the dismissal of the bill and its reinstatement in the federal court, had filed a bill in the state court and procured a receiver thereon. "^^ § 388a. Jurisdiction of United States court over consoli- dated road in different states. When two different rail- ways, incorporated in different states, have been legally con- solidated into one corporation, which is operating the road as an entire and indivisible property through both such states, having mortgaged its entire line thus consolidated, a federal court in one of the states may appoint a receiver over the en- tire property. And in such case, the trustees being authorized by the mortgage to take possession of and to operate the road upon default, and having refused so to do after request by the bondholders, the relief may be granted upon a bill by the bond- holders to enforce the trust and to foreclose the mortgage.*^^ But when a consolidated railway system is composed of many different lines extending through several states and receivers are appointed, upon a bill filed by the company itself alleging its insolvency, in a federal court in one of such states, and by ancillary proceedings the same receivers are appointed in a federal court of another state over the lines in that state, which are covered by separate mortgages, the latter court may, at the suit of mortgage bondholders, remove such receivers and appoint a new receiver over the lines within its jurisdiction.'''^ 69 Union Trust Co. v. Rockford, session before the appointment of Rock Island & St. Louis R. Co., a receiver by the federal court, 6 Biss., 197; S. C, 7 Chicago Legal such possession would not be dis- News, 33. But see, contra, Wilmer turbed by the latter court, although V. A. & R. A. L. R. Co., 2 Woods, it had first acquired jurisdiction by 409, where it was held that the the filing of the bill and by service priority of jurisdiction between the of process. federal and state court should be "^O Wilmer v. A. & R. A. L. R. determined, not by prior jurisdic- Co., 2 Woods, 409. tion of the person or service of 71 Atkins v. Wabash, St. L. & P. process, but by prior seizure of the R. Co., 29 Fed., 16L And see Cen- property; and that, the receiver of tral Trust Co. v. Wabash, St. L. & the state court having taken pos- P. R. Co., 29 Fed., 618 ; Chattanooga CHAP. XI.] RAILWAYS. 489 § 388&. When president and directors regarded as re- ceivers. When in an action brought for the foreclosure of a railway mortgage, and seeking the appointment of a receiver, an order is made authorizing the president and directors of the company to continue in the possession and management of the road, under and subject to the orders of the court, to which they are required to report from time to time the condi- tion of the road and its earnings and expenses, such order is to be construed as appointing them receivers of the property, and they will be regarded as operating the road as officers of the court and not of the railway company.'^^ § 389. Right of company to discharge receiver on pay- ment of debt. When a receiver is appointed upon a bill to foreclose a mortgage executed by a railway company to secure its bonds, the right to a discharge of the receiver and a restoration of the property, upon payment of the mortgage in- debtedness, is a clear, legal right, in no sense discretionary with the court, and a refusal to grant such right is judicial error. ''^2 § 289a. Liability of plaintiff in foreclosure for wages of receiver's employees. The appointment of a receiver of a railway in aid of mortgage bondholders is not a matter of strict right but rests in the sound discretion of the court subject to such conditions as the court may see fit to impose. While, therefore, it is proper to make such appointment upon the con- dition that the plaintiff shall undertake to secure to employees of the receiver the payment of their wages in case the net earn- ings of the receivership are insufficient to meet such demands, yet where no such condition has been imposed, no liability at- taches to the plaintiff who has procured the appointment, where the net earnings are insufficient to meet the demands for wages of employees.'''^ Terminal Ry. Co. v. Fclton, 69 Fed., v. Soutter, 2 Wal., 510. See S. C, 273. Wool worth's C. C, 49. 72 7n re Fifty- four First Mort- 74 Farmers' Loan & Trust Co. v. gage Bonds, 15 S. C, 304; Ex parte Oregon Pac. R. Co., 31 Ore., 237, 48 Brown, 15 S. C, 518. Pac, 706, 38 L. R. A., 424, 65 Am. 73 Milwaukee & Minnesota R. Co. St. Rep., 822. 490 RECEIVERS. [chap. XI. III. Functions and Duties of the Receiver. § 390. Receiver's functions and duties usually fixed by order; when authorized to complete road. 390j. Contracts subject to control of court; construction of rival line; unjust discrimination; pooling contracts. 391. To payment of what debts earnings applied. 392. Discretion allowed as to expenditures; what may be allowed in receiver's accounts. 393. Injunction against diverting earnings or divesting receiver of control. 393a. Strikers punished for contempt. 393b. Revision of wages by court. 393c. Receiver not bound by contract of company; joint traffic agreement; contract to carry passengers. 394. Rights of action vested in receiver. § 390. Receiver's functions and duties usually fixed by order ; when authorized to complete road. The usual prac- tice of courts of equity, in appointing receivers over railway corporations, is to prescribe in the order of appointment the functions and duties of the receiver, which may be modified or extended from time to time by further order of court, as the exigencies of the case may require. In general, these du- ties comprise the operation and management of the road, the payment of current expenses, and the application of the residue of the earnings and receipts to the extinguishment of the in- debtedness, to secure which the receiver was appointed.'^^ The receiver is seldom authorized to enlarge the operations of the company, or to extend its line of road, his functions being usu- 75 Brown v. New York & Erie ton v. New Jersey West Line R. Railroad, 19 How. Pr., 84. Ken- Co., 10 C. E. Green. 306. As to the nedy v. St. Paul & Pacific R. Co., functions and liabilities of statutory 2 Dill., 448; Vermont & Canada R. receivers of railways appointed by Co. V. Vermont Central R. Co., 46 the governor of the state pursuant Vt., 792. See, as to the power of to statute, in Tennessee, see State v. the receiver of a railway company, E. & K. R. Co., 6 Lea, 353; State v. under the laws of New Jersey, to McM. & M. R. Co., 6 Lea, 369. As sell the property, rights and fran- to the effect of a consent decree ter- chises of the company, free from minating a receivership over a rail- all liens and incumbrances. Middle- way, the receivers still continuing CHAP. XI.] RAILWAYS. 491 ally limited to the management of the property in its existing condition for the protection of creditors, and subject always to the supervision of the court. And the better doctrine un- doubtedly is, that the power of the court extends only to the custody and preservation of the property, and that it has no power to extend or to complete a railway enterprise, and for this purpose to raise money by charging the railway and its appurtenances with liens which shall supersede prior mort- gages, without the consent of the holders of such mortgages. "^^ in possession of and operating the road as managers, see Vermont & Canada R. Co. v. Vermont Central R. Co., 50 Vt., 500. See, also, Lang- don V. Vermont & Canada R. Co., 53 Vt., 228; S. C, 54 Vt., 593. As to the liability of such managers to an accounting in a subsequent ac- tion brought by mortgage bond- holders in a federal court, and as to the effect of a plea to such action of the pendency of the former pro- ceedings in the state court, see Andrews v. Smith, 5 Fed., 833. As to the proper orders to be entered concerning the operation and man- agement by receivers of a system of railway extending through several states, made up of various consoli- dated and leased lines, the entire system being covered by one gen- eral mortgage and the various sub- ordinate lines by underlying mort- gages, some of the lines being prof- itable and others unprofitable, and as to the method of accounting be- tween such lines and the right of lessor companies to reclaim leased lines, see Central Trust Co. v. Wa- bash, St. L. & P. R. Co., 23 Fed., 863. For mandamus against the re- ceiver of a railway company to compel him to comply with the pro- visions of a statute providing that where a street has been raised or lowered for railroad purposes, it shall be placed in as good repair as it originally was, see City of Fort Dodge v. M. & St. L. Ry. Co., 87 Iowa, 389, 54 N. W., 243. As to the right of the court to prevent the unwarranted discharge of an em- ployee of a railway company by its receiver, see Farmers' Loan & Trust Co. V. Central R. & B. Co., 166 Fed., 333. 76 Meyer v. Johnston, 53 Ala., 237. Manning, J., delivering the opinion of the court, says, p. 337: "It is in the exercise of the judicial function only that a court obtains jurisdiction between litigant parties of the cause in which it is author- ized to take such control for the preservation of the property in- volved. And we are not aware of any principle of law or element of wise policy which would justify such court, after so getting posses- sion, in laying aside its judicial character and engaging, however hopeful the scheme, in the comple- tion of unfinished undertakings, and in raising money for this purpose, as the parties themselves could not, namely, by setting up liens which shall displace other and older liens, without the consent of the persons 492 RECEIVERS. [CIIAP. XI. In extreme cases, however, the courts have authorized the ex- tension or completion of a road by a receiver, when necessary to its successful maintenance and operation,'^'^ or to prevent the forfeiture of valuable land grants and franchises which would result from the non-completion of the road within the time fixed by law."^^ And in such cases, the receivers have been authorized to issue debentures or certificates, to meet the expenses of construction, which were made a first lien upon the railway."^ And in such case the court may authorize its receiver to institute and prosecute condemnation proceedings to acquire land for the completion of the road.^^ In general, to whom they belong. ... If, therefore, the action of the chan- cellor, in this case, goes to the ex- tent of taking the property of the defendant corporation in its hands for the purpose, through its ap- pointees, of completing an unfin- ished work, or of enlarging or improving a finished one, beyond what is necessary for its preserva- tion, and, to that end, of raising money by charging the railway and its appurtenances with liens which are to supersede older ones, with- out the consent of the holders of these, he has inadvertently passed beyond the boundaries of a chan- cellor's jurisdiction. In our opin- ion, no such power is vested or re- sides in any judicial tribunal." 'i'7 Miltenberger v. Logansport R. Co., 106 U. S., 286, 1 Sup. Ct. Rep., 140; Bank of Montreal v. C, C. & W. R. Co., 48 Iowa, 578. "8 Kennedy v. St. Paul & Pacific IL Co., 2 Dill., 448; S. C, 5 Dill., 519. Dillon, J., says, 5 Dill., p. 525 : "I assent in the fullest manner to the proposition that a court of equity ought not to enter upon the work of either operating or build- ing a railway, if this can possibly be avoided without the certain and great sacrifice of the rights and se- curities of the parties in interest. The original order in this case was made upon this principle, and upon the exceptional case which the rec- ord presented (Kennedy v. St. Paul & Pacific Railroad Co., 2 Dill., 448). It is not to be inferred from the re- port of that case that authority even to complete the building of an un- finished line of railway, and to issue debentures for that purpose, is to be conferred without an overwhelm- ing and irresistible necessity. When such authority is conferred it ought to be guarded with the utmost care." And see the form of order in this case, 2 Dill., 448; 5 Dill., 527, and the subsequent proceedings in the case, 5 Dill., 530. As to the power of receivers of an insolvent railway in New York, to complete the construction of the road, and as to the right of abutting property owners to enjoin such construction when their damages have not been paid, see Moran v. SchaefTer, 27 Hun, 582. "^9 See cases cited supra. 80 Morrison v. Forman, 177 111., 427, 53 N. E., 73. CHAP. XI.] RAILWAYS. 493 however, the courts look with extreme jealousy upon any proposition for the extension of railway projects by their re- ceivers, and, ordinarily, before such an expenditure is author- ized by the court, there should be a reference to a master to determine the necessity for the contemplated improvement.^^ And the court has refused to authorize receiver's certificates for an extension of a mile in a street railway system under an ordinance providing that the company should add during each calendar year at least one mile of additional track until a speci- fied mileage was reached, and that in default thereof they should forfeit all further rights to the streets granted under the ordinance. ^2 § 390a. Contracts subject to control of court ; construc- tion of rival line ; unjust discrimination ; pooling contracts. A receiver of a railway has no power, without the sanction of the court, to make contracts, as for the purchase of materials, which will bind the fund or estate which he represents. All contracts made by him are subject to modification by the court, and persons contracting with him are chargeable with notice of his limited powers in this regard, and deal with him at the risk of their contracts not being approved by the court.^-^ If, however, he is empowered by the court to purchase such ma- terials and supplies as he may deem necessary, completed con- tracts made by him for the purchase of necessary materials bind the estate or fund and not the receiver personally. Par- si Hand v. Railroad Co., 10 S. the companies before their insolv- C, 406, approved in Pueblo T. & E. ency for the use by one company of Co. V. Allison, 30 Colo., 337, 70 the tracks and terminal facilities Pac, 424. of the other. In re N. J. & N. Y. R. 82'pueblo T. & E. Co. V. Allison, Co., 29 N. J. Eq., 67. But the ex- 30 Colo., 337, 70 Pac, 424. ercise of such power may well be 83 Lehigh, C. & N. Co. v. Central challenged as impairing the obliga- R. Co., 35 N. J. Eq., 426. It is also tion of the contract. As to the held in New Jersey, that when two extent to which covenants of the insolvent railway companies are in receiver are binding upon subse- the hands of receivers appointed by quent purchasers of the railway, the same court, the court may, see Martin v. N. Y., S. & W. R. Co., upon the application of either re- 36 N. J. Eq., 109. ceiver, modify a contract made by 494 RECEIVERS. [CHAF. XI. ties claiming under such contracts, therefore, may have the same rehef against a successor of the original receiver after his death to which they would have been entitled against the original receiver. If, however, such contracts are ill-ad- vised and injudicious, as for an amount of materials largely in excess of the real necessities of the road, such successor will not be required to perform them, nor will damages, as such, be allowed for their non-performance. But if the par- ties so contracting to furnish materials have acted in good faith, and without fraud, they may be reimbursed any actual loss which they may have sustained in preparing to perform the contracts before their disaffirmance by the receiver, and for this amount may be compensated out of the fund in his hands.^"* It is not the duty of the receiver to interfere with or to prevent the construction of a rival line, even though such construction might result in diminishing the earnings of the road under his control. He will not, therefore, be allowed credit in his accounts for money expended in endeavoring to defeat a subsidy in aid of the construction of a parallel road.^'** Nor will he be allowed to give a preference for freights to one shipper over another, or to permit an unjust discrimination in rates in violation of the laws of the state in which the railway is located. ^^ And he may be directed to repay to a shipper amounts which have been exacted from him as the result of unjust discrimination and in excess of rates charged other shippers. ^"^ But if the receiver continues the operation of a pooling contract as to certain classes of freight, which was in force with other roads at the time of his appointment, he may be decreed to pay to such other companies the proportions due to them under the contract which come into his hands as re- 84 Vanderbilt v. Central R. Co., 85 Cowdrey v. G., H. & H. R. Co., 43 N. J. Eq., 669, reversing S. C, 93 U. S., 352. sub. nom. Lehigh C. & N. Co. v. 86 Missouri P. R. Co. v. Texas & Central Co., 41 N. J. Eq., 167, and P. R. Co., 30 Fed., 2; Cutting v. overruling in part Lehigh C. & N. Florida R. & N. Co., 43 Fed., 747. Co. V. Central R. Co., 35 N. J. Eq., 8' Cutting v. Florida R. & N. Co., 426. 43 Fed.. 747. CHAP. XI.] RAILWAYS. 495 ceiver, and this regardless of whether the contract was vahd in the first instance.^^ And a receiver appointed over the prop- erty of a railway system and ordered to continue the opera- tion of the system, has, within the scope of his authority, the same powers and is subjected to the same liabilities as the com- pany itself. And it is accordingly held that such a receiver has the power to contract for the transportation of goods be- yond the line of the company and to assume liability for the entire distance over the connecting lines.^^ And the court may authorize the receiver of a railway to lease the property of the company, although in such case the court should act with great care and not make a lease running for such a length of time as unnecessarily to prolong the receivership proceeding. And where, during the term of the lease, the property has been sold at foreclosure sale and the lessee ousted of his possession, the court should make him an allowance for the damages sus- tained by reason of the termination of the lease.^^ And the court may authorize its receiver to take a lease of another road.91 § 391. To payment of what debts earnings applied. When, upon a bill filed by bondholders for the foreclosure of a railway mortgage securing their bonds, receivers of the rail- road are appointed pendente lite, and hold the property of the road only provisionally and until the ultimate determination of the cause, they are not authorized to appropriate the property and assets of the corporation and its earnings to the payment of debts of the company previously incurred by contract. The contract obligation, although binding upon the railway com- pany, does not constitute a lien upon its property or franchises, 88 Central Trust Co. v. Ohio 90 Farmers' Loan & Trust Co. v. Central R. Co., 23 Fed., 306. Eaton, 51 C. C. A., 640, 114 Fed., 89 Farmers' Loan & Trust Co. v. 14. Northern Pac. R. Co., 57 C. C. A., 91 Mercantile Trust Co. v. M., K. 533, 120 Fed., 873, reversing S. C, & T. R. Co., 41 Fed., 8. 112 Fed., 829; Kansas Pacific Ry. Co. V. Bayles, 19 Colo., 348, 35 Pac, 744. 496 RECEIVERS. [chap. XI. and the appropriation by the receivers of funds of the company to the payment of such an obHgation would be, in effect, to give a preference to such indebtedness, and would be inconsistent with the purposes for which the receivers were appointed. ^^ So the receiver of a railway will not be permitted to adopt a contract which had been made prior to the receivership between the company and an injured employee, whereby the latter, in consideration of the settlement of his claim, was to be retained in the employ of the company under certain conditions. In such case the contract is an unsecured obligation of the com- pany the adoption of which would result in giving a prefer- ence over other unsecured obligations.^^ So when the mort- gage bondholders of a railroad have obtained a receiver, in an action for the foreclosure of their mortgages, and by his order of appointment the receiver is authorized to pay the amounts due and maturing for materials and supplies about the operation and for the use of the road, the court will incline to limit the construction of the order to the payment of such obligations as are necessary to keep the road in running order, and will not, therefore, extend it so far as to direct the receiv- er to pay old obligations incurred several years previous, such demands being regarded as secondary to the rights of the mortgagees.^'* § 392. Discretion allowed as to expenditures ; what may be allowed in receiver's accounts. The duties of the re- ^2 Ellis V. Boston, Hartford & such contracts are charged as in- Erie R. Co., 107 Mass., 1. And in cumbrances upon the property, or this case it is said by the court, are necessary to its proper preserva- Wells, J., p. 28: "They (the re- tion and security. They are en- ceivers) continue the operation of titled to repayment of their reason- the road and the conduct of its able expenses and charges, in pref- business, because this is essential erence to all other claims upon the to its proper preservation. They property of whatever nature." See, may fulfil the contracts of the cor- also, Brocklebank v. East London poration so far as beneficial. They Railway, 12 Ch. D., 839. will not pay its debts, nor fulfil 93 Whightsel v. Felton, 95 Fed., contracts which are burdensome or 923. tend to diminish the value of the ^4 Brown v. New York & Erie property in their control, unless Railroad, 19 How. Pr., 84. CHAP. XI.] RAILWAYS. • 497 ceiver of a railway, intrusted with the management and opera- tion of the road, being very different from and far more re- sponsible than those of a passive receiver, appointed merely to collect and hold money, a somewhat wider discretion is allowed him in the matter of expenditures necessary to operate the road. ^5 And it may be said in general that all outlays made by him in good faith, in the ordinary course of the business of the road, with a view to advance and promote its interests, and to render it profitable and successful, may be allowed him in passing his accounts. Such outlays may include not only keep- ing the road and its buildings and rolling stock in repair, but also providing such additional accommodations and stock as the necessities of the business may demand, always referring to the court or master for advice and authority when any con- siderable outlay is required. Thus, charges for rebate on freight; for horses and wagons for the delivery of freight; for drayage and wharfage; for the purchase of scales; for office room; for advertising the accommodations of the road ; and for interest paid to a bank for loans of money, have all been allowed. ^6 So money borrowed by the receiver for the 95 Morley v. Saginaw Circuit which he is invested, are very dif- Judge, 117 Mich., 246, 75 N. W., ferent from those of a passive re- 466, 41 L. R. A., 817. In this case ceiver, appointed merely to collect the receivership was of a street and hold moneys due on prior railway company. transactions, or rents accruing from OeCowdrey v. The Railroad Co., houses and lands. And to such out- 1 Woods, 331. "It may be laid lays in ordinary course may prop- down as a general proposition," erly be referred, not only the keep- says Mr. Justice Bradley, p. 336, ing of the road, buildings and roll- "that all outlays made by the re- ing stock, in repair, but also the ceiver in good faith, in the ordi- providing of such additional ac- nary course, with a view to advance commodations, stock and instru- and promote the business of the mentalities as the necessities of the road, and to render it profitable business may require, always re- and successful, are fairly within ferring to the court, or to the mas- the line of discretion which is nee- ter appointed in that behalf, for essarily allowed to a receiver in- advice and authority in any mat- trusted with the management and ter of importance, which may in- operation of a railroad in his hands. volve a considerable outlay of His duties, and the discretion with money in lump. And except in Receivers — 32. 498 RECEIVERS. [chap. XI. necessary maintenance and operation of the road, may be re- paid out of the income of the receivership-^*^ And rebates up- on freight allowed by the receiver, which are not inequitable or against public policy, may be allowed and paid out of the receiver's earnings. ^^ § 393. Injunction against diverting earnings or divest- ing receiver of control. It is the clear duty of the court ap- pointing a receiver over a railway to afford him all necessary protection in the performance of his official duties. And when the order of appointment directs him to operate and manage the road, subject to the decrees and orders made in the cause, and subject to the further direction of the court, since the suc- cessful management of the road depends upon the control of the receiver over its income and earnings, any attempt by other parties to divert such earnings, or to divest the receiver of his control over them, will be enjoined by the court, when the parties making such attempt are within its jurisdiction, even though they are proceeding to divert the earnings from the re- ceiver's control by suit in another state. In such a case, the court, in the protection of its receiver, does not operate by its injunction upon the court in the other state in which the ac- tion is pending, but merely operates in personam upon the par- ties within its own jurisdiction, and restrains them from inter- fering with or diverting the income and funds properly be- longing to the custody of the receiver.^^ And the court ap- pointing a receiver over a street railway will protect his pos- session by enjoining another company from entering upon and extraordinary cases, the submission involving a large outlay of money, by the receiver of his accounts to the receiver should always apply to the master at frequent intervals, the court in advance, and obtain whereby the latter may ascertain its authority for the purchase or from time to time the character of improvement proposed." the expenditures made, and dis- ^^ Ex parte Carolina National allow whatever may not meet his Bank, 18 S. C, 289. approval, will be regarded as a suf- ^^ Ex parte Benson, 18 S. C, 38. ficient reference to the court for its 99 Vermont & Canada R. Co. v. ratification of the receiver's pro- Vermont Central R. Co., 46 Vt., ceedings. In extraordinary cases, 792. CHAP. XI.] RAILWAYS. 499 taking possession of a portion of the right of way and road- bed of the former company without lawful authority.^ So an injunction will lie to protect the receiver of a railway company in the joint use of a portion of the line of another company under a valid lease for that purpose.^ § 393a. Strikers punished for contempt. Any unauthor- ized interference with the property in the hands of the receiver constitutes a contempt of court, and may be punished by at- tachment for contempt in the cause in which the receiver was appointed, the punishment being, as in cases of contempt gen- erally, by fine or imprisonment in the discretion of the court. Striking workmen, therefore, who interfere with or obstruct the management of trains or the operation of the road by the receiver, or who interfere with his employees in the discharge of their duties, whether such interference be by acts of phys- ical violence, or by intimidations and threats, are subject to attachment for contempt and to such punishment as the court, in its discretion, may impose.^ § 393&. Revision of wages by court. It is proper for the court which has appointed a receiver over a railway to enter- tain an application by an organized body of employees in the service of the receiver for an adjustment of difficulties between receiver and employees concerning wages.'* And in such a proceeding the court may properly direct its receiver to enter into an appropriate contract with such employees concerning 1 Fidelity T. & S. V. Co. v. Mo- way, and of the relative rights of bile S. R. Co., 53 Fed., 687. such employees and the receiver, 2 Metropolitan Trust Co. v. Co- see observations of Mr. Justice lumbus, S. & H. R. Co., 95 Fed., Brewer, in Frank v. Denver & R. G. 18. R. Co., 23 Fed., 757. And see In re 3 Secor v. T., P. & W. R. Co., 7 Acker, 66 Fed., 290. Biss., 513; King v. O. & M. R. Co., 4 Waterhouse v. Comer, 55 Fed., 7 Biss., 529; United States v. Kane, 149; Thomas v. Cincinnati, N. O. & 23 Fed., 748; In re Doolittle, 23 T. P. R. Co., 62 Fed., 669; United Fed., 544; In re Higgins, 27 Fed., States Trust Co. v. Omaha & St. 443; Thomas v. Cincinnati, N. O. & L. R. Co., 63 Fed., 7?>7 ; Guarantee T. P. R. Co., 62 Fed., 803. For a Trust & S. D. Co. v. P., R. & N. E. full discussion of the rights of em- R. Co., 69 Conn., 709, 38 Atl, 792, ployees of the receiver of a rail- 38 L. R. A., 804. 500 RECEIVERS. [chap. XI. their emplo}'Tnent, and upon such terms and conditions as to the court may seem just.^ And the court has the power to revise the wage schedule of the employees of the receiver even though it becomes necessary for the receiver to send such em- ployees, in the operation of the system, beyond the jurisdiction of the court, part of the system being in another state. And while the court of original appointment would ordinarily be the proper court to entertain a petition for the revision of such schedules, nevertheless it may be possible that the interests of the property may require and the nature of the proceedings in both courts justify, the direction of the court of ancillary juris- diction as to the wages of the employees. And when the court has ordered the receiver to restore a higher wage schedule which had existed at the time of his appointment, an appeal will lie from such order upon behalf of the receiver.^ While, however, the court will receive and entertain such an applica- tion, it will not ordinarily interfere with matters of detail in the administration of the estate which are properly intrusted to the receiver, no abuse of his discretion in such matters being shown. "^ § 393c. Receiver not bound by contract of company; joint traffic agreement; contract to carry passengers. It is elsewhere shown that a receiver is not ordinarily liable upo.i the contracts and covenants of the person over whose property he is appointed.^ Upon this principle it has been held that a receiver appointed over a railway company is not bound by a joint traffic agreement made by the company prior to the re- ceivership. And it is accordingly held that such receiver is not criminally liable under the provisions of the interstate com- «"» Waterhouse v. Comer, 55 Fed., may be exercised by the court over 149. the action of its receivers in chan- 6 Guarantee Trust & S. D. Co. v. ging schedules and regulations gov- P., R. & N. E. R. Co., 69 Conn., erning the employment and wages 709, 38 Atl., 792, 38 L. R. A., 804. of operatives and laborers, Ames v. 7 Continental Trust Co. v. To- Union Pacific R. Co., 60 Fed., ledo, St. L. & K. C. R. Co., 59 Fed., 674. 514. See, as to the control which 8 Ante, § 273; post, § 398a. CHAP. XI.] RAILWAYS. 501 merce law for departing from the rates named in the schedule filed with the agreement.^ And the receiver of a railway com- pany is not bound by a contract to carry passengers which had been made by the company prior to his appointment.^^ But it has been held, under the act of congress which requires that receivers appointed by a federal court shall manage the prop- erty under their control according to the valid laws of the state, that an indictment will lie against such a receiver for failure to comply with a statute which requires that water closets shall be maintained at stations.^i § 394. Rights of action vested in receiver. As regards rights of action vesting in a receiver of a railway corporation by virtue of his appointment, he must, in their enforcement, pursue the appropriate remedies provided by law for that pur- pose. And when he is authorized to take possession of the bills, bonds, notes and other evidences of indebtedness belong- ing to the company, with full power and authority to sue for and collect all money due thereon, if he seeks to enforce pay- ment of a subscription due from a subscriber to the capital stock of the company, he must bring an action at law, the right being of a legal nature, and he will not be allowed to maintain a bill in equity.12 And since proceedings for the foreclosure of a mortgage, given by a railway company to se- cure its bonds, are regarded as in rem, in that they seek to reach such property of the corporation as was mortgaged to 9 United States v. De Coursey, manager in possession of any prop- 82 Fed., 302. erty, such receiver or manager shall 10 Casey v. Northern Pac. R. Co., manage and operate such property 15 Wash., 450, 48 Pac, 53. according to the requirements of the 11 Commonwealth v. Felton, 107 valid laws of the State in which Ky., 330, 53 S. W., 1046. Section such property shall be situated, in 2, of the act of congress of March the same manner that the owner or 3, 1887, c. 2>72), 24 Stat., 554, as possessor thereof would be bound amended by the act of August 13, to do if in possession thereof." 1 1888, c. 866, 25 Stat., 436, provides: U. S. Comp. Stat. 1901, p. 582; 4 "that whenever in any cause pend- Fed Stat. Ann., 386. ing in any court of the United 12 Freeman v. Winchester, 18 States there shall be a receiver or Miss., 577. 502 RECEIVERS. [chap. XI. secure its bonds, the right of a receiver appointed therein ex- tends only to the specific property which is the subject of the Htigation and covered by the mortgage, being necessarily subject to the same limitations as the right of the bondholders themselves. The receiver, therefore, can not maintain an ac- tion against the superintendent of the railway company for the recovery of money held by him, which had accrued from the earnings of the road before the receiver was appointed, where the mortgage itself did not attach to such earnings.^^ 13 Noyes v. Rich, 52 Me., 115. CHAP. XI.] RAILWAYS. 503 IV. Preferred Debts. § 394fl. Unsecured debts preferred to mortgages; indefensible upon principle. 394b. Receiver's expenses a prior charge; extending line; damages; rentals; supplies; distribution; taxes; rolling stock. 394c. Diversion of current income ground of preference to current debts. 394d. Preference based upon necessity of preserving property, inde- pendent of diversion; salary of attorney; wages. 394^. Mortgagee seeking equitable relief must submit to conditions; preference to assignee of debt. 394/. Rolling stock; car-trust leases; sale of rolling stock under fore- closure; use of rolling stock by receiver; right of appeal. 394g. When judgment creditors allowed priority. 394/1. Claims of general creditors other than for operating expenses not preferred. 394i. Judgments and claims for personal injuries occurring prior to receivership not preferred. 394/. When payment allowed out of proceeds of sale. 294k. Statutory liens preserved; when interest disallowed. 394/. Claims for construction; board; groceries. 394m. Receiver not an assignee of term under lease; how far liable for rent. 394«. Paramount lien enforced by resale of road. § 394a. Unsecured debts preferred to mortgages; in- defensible upon principle. The most important and most difficult questions connected with railway receiverships are those which pertain to indebtedness incurred in the manage- ment and operation of the railway, and the extent to which certain classes of pre-existing debts may be preferred in pay- ment, either out of the income of the receivership, or out of the proceeds of foreclosure, as against the claims of mortgage bondholders and other creditors. That mere contract debts of a railway company, as for labor, materials and supplies, in- curred prior to the appointment of a receiver, and unsecured by any Hen upon the property, may, through the aid of a court of equity, be given priority over antecedent mortgages, would seem to be a proposition wholly indefensible upon sound legal reasoning. The allowance of such preference plainly impairs 504 RECEIVERS. [chap. XI. the obligation of the mortgage contract, and in practice fre- quently absorbs much of the mortgage security. Nevertheless the doctrine of the courts upon this subject, although fre- quently criticised by the profession and in vigorous and able dissenting opinions from the bench, is so strongly intrenched in authority that it may no longer be questioned. And it only remains to consider what may now be regarded as well estab- lished rules applicable to this class of questions, with the rea- soning of the courts upon which such rules are founded. § 394??. Receiver's expenses a prior charge; extending line ; damages ; rentals ; supplies ; distribution ; taxes ; roll- ino- stock. As reerards indebtedness incurred by the re- ceiver himself in the maintenance, operation, necessary repairs and betterments of the road while in his custody, but little difficulty is experienced in practice, and the power of a court of equity to create such debts through its receiver, and to give them preference over the lien of the mortgage indebtedness, is well established.!^ The exercise of this power rests upon the obvious principle, that the court having undertaken the man- agement of the railway at the request and for the benefit of the mortgage creditors, all necessary expenses incurred in such management are a prior charge upon the fund or property, and constitute, in effect, a part of the necessary costs of the litiga- tion. It is, therefore, customary in the order appointing the receiver, to direct him to pay, out of the earnings of the road, all necessary expenses of management and operation. Such subsequent orders with reference to this class of debts are from time to time made during the progress of the cause as the 14 Miltenberger v. Logansport R. affirmed in 170 U. S., 355, 18 Sup. Co, 106 U. S., 286, 1 Sup. Ct. Rep., Ct. Rep., 657, 42 L. Ed., 1068, siih 140; Union Trust Co. v. Illinois nom. Virginia & Alabama Coal Co. Midland R. Co., 117 U. S., 434, 6 v. Central R. & B. Co.; Savannah, Sup. Ct. Rep., 809; ^IcLane v. Plac- F. & W. R. Co. v. J., T. & K. W. erville & S. V. R. Co., 66 Cal., 606, R. Co., 24 C. C. A., 437, 79 Fed., 6 Pac, 748 ; Clark v. Central R. & 35, 52 U. S. App., 51 ; First National B. Co., 14 C. C. A., 112, 66 Fed., Bank v. Ewing, 43 C. C. A., 150, 103 803, 30 U. S. App., 263, which was Fed., 16a CHAP. XI.] RAILWAYS. 505 exigencies of the case may require, and if the receiver's income proves insufficient to satisfy his indebtedness, the residue is usually paid out of the proceeds of the foreclosure sale, before a distribution is made to the mortgage bondholders. Nor is such expenditure by the receiver limited to the actual operation and management of the property; and reasonable expenses in- curred by him in completing the road for operation, thereby preserving the property and rendering it productive for the benefit of the mortgage bondholders, have been allowed prior- ity over other claims against the company, including those of the bondholders. 15 And when, under authority of the court, the receiver has constructed a branch line of road out of the income of the receivership, thereby largely increasing the rev- enues and profits of the road, and no complaint is made by the parties in interest until more than two years after such action, the court will not entertain objections to such expenditure. ^^ So damages for goods lost in transportation, and for injury to property while the road is operated by the receiver, are a proper charge upon his earnings before the bondholders are entitled to share therein. ^^ So rentals due for a line or road operated by the company under lease, the operation of which the re- 15 Hale V. Nasliua & Lowell Rail- construction will not be paid in full road, 60 N. H., 333; First National out of the proceeds of sale, but will Bank v. Ewing, 43 C. C. A., 150, be prorated in the proportion which 103 Fed., 168. See, also, Milten- the value of the extension bears berger v. Logansport R. Co., 106 to the value of the entire road, U. S., 286, 6 Sup. Ct. Rep., 809. considered with reference to the 16 Gibert v. W. C, V. M. & G. S. purchase-money of the whole. R. Co., ii Grat., 586. But when Hand v. Savannah & Charleston R. the receiver is authorized by the Co., 17 S. C, 219. court to construct an additional 1" Cowdrey v. G., H. & H. R. Co., tract or extension, to be paid for 92 U. S., 352. In In re Wreyham, out of surplus income, the order re- ]\I. & C. Q. Ry. Co., (1900) 2 Ch. serving a lien upon such track as 436, it was held that a judgment for security for the persons furnishing injuries to plaintiff's property oc- material and money therefor, and curring through the negligence of a such branch is afterward sold with receiver is not entitled to priority the road as an entirety in the fore- under the provisions of the Railway closure proceedings, claims for its Companies Act. 506 RECEIVERS. [chap. XI. ceiver is authorized to continue under the lease, may be paid out of the receiver's income. ^^ And when the receiver contin- ues to use a line which had been leased to the company, with the full knowledge and acquiescence of the mortgage bond- holders, the payment of a fair rental for the use of such line and for supplies and materials in its operation may be en- forced out of the proceeds of foreclosure, prior to distribution among the bondholders. ^^ So a claim for the reasonable rental value of terminal facilities furnished to the receiver of an in- solvent railway company after his appointment is entitled to payment as a preferred claim.^^ So, also, a claim for coal which was on hand at the time of the appointment of a re- ceiver and for other coal which was furnished him after his appointment and used in the operation of the road is entitled to priority in payment. ^l But to warrant the payment of the receiver's operating expenses, as for money advanced, supplies and damages incurred, out of the corpus of the mortgaged property in preference to the bondholders, such priority must be specially authorized by the court, and it will not be allowed merely under an order authorizing him to pay operating ex- penses out of income.22 It is proper to allow the expenses of the receiver incurred in the discharge of his trust, such as counsel fees, costs of litigations in protecting the property, ex- penses of care and maintenance, as well as for necessary rolling stock and machinery the purchase of which has been author- is Woodruff V. Erie R. Co., 93 N. amount of rental, see Peoria & P. Y., 609. U. R. Co. V. Chicago, P. & S. W. 19 Miltenberger v. Logansport R. R. Co., 127 U. S., 200, 8 Sup. Ct. Co., 106 U. S., 286, 6 Sup. Ct. Rep., Rep., 1125. 809. 21 Clark v. Central R. & B. Co., 20 Savannah, F. & W. R. Co. v. 14 C. C. A., 112, 66 Fed., 803, 30 J., T. & K. W. R. Co., 24 C. C. A., U. S. App., 263, which was affirmed 437, 79 Fed., 35, 52 U. S. App., 51. in 170 U. S., 355, 18 Sup. Ct. Rep.. As to the liability of the receiver 657, 42 L. Ed. 1068, sub notn. Vir- for the use of terminal facilities of ginia & Alabama Coal Co. v. Cen- another company, continued by him tral R. & B. Co. durii^ his receivership, in the ab- 22 Hand v. Savannah & Charles- sence of any contract as to the ton R. Co., 17 S. C, 219. CHAP. XI.] RAILWAYS. 507 ized by the court.23 So supplies furnished the receiver, which are necessary to the continued operation of the road and which become a part of the mortgaged property sold under foreclos- ure, may be awarded priority of payment out of the proceeds of sale, there being no other fund available for their payment. And the road consisting of different divisions, which were operated by the receiver as an entirety and sold at different times under separate mortgages upon the respective divisions, in the absence of proof to the contrary it will be presumed upon appeal that the order of distribution of such indebtedness by the court below among the different divisions is correct.^^ In such case, supplies furnished under his original appointment upon a creditor's bill, subsequently extended in a foreclosure suit afterwards instituted, may be allowed priority, such sup- plies having contributed to the preservation of the property dur- ing the receivership. 25 And when an insolvent railway is operated by a receiver in a foreclosure suit, who has in his hands sufficient funds arising from gross earnings with which to pay taxes imposed under the laws of the state upon gross 23 McLane v. Placerville & S. V. nary taxable costs incurred in the R. Co., 66 Cal., 606, 6 Pac, 748. As proceeding. Farmers' Loan & to the allowance of the expenses of Trust Co. v. Green, 24 C. C. A., a reorganization committee, see 506, 79 Fed., 222, 52 U. S. App., 69. Clarke v. Central R. & B. Co., 54 24 Kneeland v. Bass Foundry & Fed., 556; Central Trust Co. v. Machine Works. 140 U. S., 592, 11 Cincinnati, J. & M. R. Co., 58 Fed., Sup. Ct. Rep., 857. 500. Where the purchaser at a 25 Kneeland v. Bass Foundry & foreclosure sale of a railroad after- Machine Works, 140 U. S., 592, 11 wards seeks to be released from his Sup. Ct. Rep., 857. But see, contra, purchase and is finally so released Kneeland v. American L. & T. Co., and his deposit is ordered returned 136 U. S., 89, 10 Sup. Ct. Rep., to him, the proceeding is to be re- 950, where rentals for rolling stock garded as a hostile one and not as used by the receiver in the same one brought for the benefit or pro- case were refused priority during tection of the subject-matter of the the period of the receivership under receivership, and it is consequently the judgment creditor's bill, but al- error to allow him counsel fees to lowed priority during the receiver- be paid out of the funds in the ship as extended in the foreclosure hands of the receiver. But in such proceedings, case he should be allowed the ordi- 508 RECEIVERS. [chap. XI. earnings, the Hen of the state for such taxes will be held para- mount, and the court may, upon the application of the attorney- general of the state, direct their payment by the receiver. 26 And in such case it is proper to allow interest, penalties and costs.^"^ So it is competent for the court in a receivership over a railway, under foreclosure proceedings, to authorize the re- ceiver to purchase necessary rolling stock for the use of the road, and to make such indebtedness a prior lien upon the mort- gaged premises, or upon their proceeds.^S § 394c. Diversion of current income ground of prefer- ence to current debts. With regard to indebtedness in- curred by a railway company for labor, materials, equipment and supplies before the appointment of a receiver, the right to priority of payment out of the income of the receivership has frequently, although not always, been based upon a diversion of current income from the payment of current indebtedness. The duty of the railway company being to apply its current income to the payment of obligations incurred in the daily operation and management of the road, before applying such income for the benefit of mortgage bondholders, a diversion of such income, as by payment of bonded indebtedness, or by permanent improvement of the property for the benefit of the bondholders, will justify the court in restoring to such unse- cured creditors from the receiver's income what has been im- properly diverted by the company for the benefit of bond- holders. The mortgagee, in accepting his security, is regarded as having impliedly agreed that the current debts of the com- pany incurred in the ordinary course of its business shall be paid out of its receipts before he has any claim upon the in- come. And the court, in directing such payment out of the receiver's income, only does in effect what the company itself 26 Central Trust Co. v. New 28 Vilas v. Page, 106 N. Y., 439, York City & N. R. Co., 110 N. Y., 13 N. K, 743. 250, 18 N. E., 92. 27 First National Bank v. Ewing, 43 C. C. A., 150, 103 Fed., 168. CHAP. XI.] RAILWAYS. 509 should have done had no receiver been appointed. Whenever, therefore, the current income of the road has been diverted by the company from the payment of debts for supphes, materials and labor, and has been appropriated for the benefit of mort- gage bondholders, either by the payment of interest or by the permanent betterment of the property, the labor and supply creditors may be allowed priority of payment out of the re- ceiver's income. 29 It is obvious that the allowance of such 29Fosdick V. Schall, 99 U. S., 235, 25 L. Ed., 339; Burnliam v. Bowen, 111 U. S., 776, 4 Sup. Ct. Rep., 675 ; Williamson's Adm'r v. VV. C, V. M. & G. S. R. Co., 33 Grat., 624 ; Turner v. I., B. & W. R. Co., 8 Biss., 315 ; Clark v. Central R. & B. Co., 14 C. C. A., 112, 66 Fed., 803, 30 U. S. App., 263, which was af- firmed in 170 U. S., 355, 18 Sup. Ct. Rep., 657, 42 L. Ed., 1068, sub nom. Virginia & Alabama Coal Co. v. Central R. & B. Co.; St. Louis Trust Co. V. Riley, 16 C. C. A., 610, 70 Fed., 32, 36 U. S. App., 100, 30 L. R. A., 456; Southern Ry. Co. v. Carnegie Steel Co., 22 C. C. A., 289, 76 Fed., 492, 42 U. S. App., 145, which was affirmed in 176 U. S., 257, 20 Sup. Ct. Rep., 347, 44 L. Ed., 458; Southern Ry. Co. v. American Brake Co., 22 C. C. A., 298, 76 Fed., 502, 42 U. S. App., 162; Southern Ry. Co. v. Adams, 22 C. C. A., 300, 76 Fed., 504, 42 U. S. App., 167; Central Trust Co. v. East T., V. & G. R. Co., 26 C. C. A., 30, 80 Fed., 624, 47 U. S. App., 663 ; Central Trust Co. v. Clark, 26 C, C A., 397, 81 Fed., 269, 49 U. S. App., 453; First National Bank v. Ewing, 43 C. C. A., 150, 103 Fed., 168; Illinois Trust & Savings Bank V. Doud, 44 C. C. A., 389, 105 Fed., 123. See, also. Union Trust Co. v. Illinois Midland R. Co., 117 U. S., 434, 6 Sup. Ct. Rep., 809, affirming in part and reversing in part S. C, 28 Fed., 169; Finance Co. v. Char- leston, C. & C. R. Co., 48 Fed., 188; Finance Co. v. Charleston, C. & C. R. Co., 49 Fed., 693. Fosdick V. Schall, 99 U. S., 235, 25 L. Ed., 339, is regarded as the leading case upon the subject, and although what is there said upon the question of diversion is obiter, the opinion of the court seems to have been in- tended to establish the rule for fu- ture cases, and has so been general- ly accepted. Two questions were presented: 1st, whether the lien of railway mortgages attached to af- ter-acquired cats; and, 2nd, whether the payment of rentals for such cars during the receivership, and for six months prior thereto, out of the fund in court, it not appearing that there were any funds except those resulting from the foreclosure sale, was warranted. From the case as reported, it does not appear that income had been diverted, either by the company or by the receiver, and the question of diversion does not appear to have been argued by counsel. Waite, C. J., says, p. 251 : "As to the second question, we have no doubt that when a court of chancery is asked by railroad mortgagees to appoint a receiver of railroad property pending pro- 510 RECEIVERS. [chap. XI. claims does not rest upon any lien in the technical sense, but rather upon the exercise of the equitable powers of the court in dealing with property of a peculiar character, and under cir- cumstances which, until recently, have been without precedent ceedings for foreclosure, the court, in the exercise of a sound judicial discretion, may, as a condition of issuing the necessary order, impose such terms in reference to the pay- ment from the income during the receivership of outstanding debts for labor, supplies, equipment or permanent improvement of the mortgaged property, as may, under the circumstances of the particular case, appear to be reasonable. . . . The income out of which the mort- gagee is to be paid is the net in- come obtained by deducting from the gross earnings what is required for necessary operating and man- aging expenses, proper equipment and useful improvements. Every railroad mortgagee, in accepting his security, impliedly agrees that the current debts made in the or- dinary course of business shall be paid from the current receipts be- fore he has any claim upon the in- come. If, for the convenience of the moment, something is taken from what "may not improperly be called the current debt fund, and put into that which belongs to the mortgage creditors, it certainly is not inequitable for the court, when asked by the mortgagees to take possession of the future income and hold it for their benefit, to require, as a condition of such an order, that what is due from the earnings to the current debt shall be paid by the court from the future current receipts before anything derived from that source goes to the mort- gagees. In this way the court will only do what, if a receiver should not be appointed, the company ought itself to do. . . . We think, also, that, if no such order is made when the receiver is appointed, and it appears in the progress of the cause that bonded interest has been paid, additional equipment pro- vided, or lasting and valuable im- provements made out of earnings which ought in equity to have been employed to keep down debts for labor, supplies, and the like, it is within the power of the court to use the income of the receivership to discharge obligations which, but for the diversion of funds, would have been paid in the ordinary course of business." It has generally been supposed that Fosdick v. Schall was the first reported case upon the question of diversion of income as the ground for awarding preference to labor and supply creditors. But the doc- trine had been previously recog- nized and followed in some of the circuits, and it is plainly indicated, in the earlier reported opinion of Drummond, J., in Turner v. I., B. & W. R. Co., 8 Biss., 315. Upon the question of diversion of cur- rent income by the receiver to the betterment of the mortgaged prop- erty, as entitling a claimant for personal injuries sustained while the road was operated by the re- ceiver to payment out of the pro- ceeds of such property, see Ryan v. Hays, 62 Tex., 42. CHAP. XI.] RAILWAYS. 511 in the history of litigation.^^ Nor is it necessary that the diversion of income should have occurred before the appoint- ment of the receiver; and if, during the receivership, current income is apphed for the benefit of the mortgagees, as in pay- ment for additional grounds and rolling stock which inure to their benefit, and which are sold as a part of the mortgaged property, debts of the company for supplies may be made a charge upon the property acquired under the foreclosure, which may be sold to satisfy such indebtedness.^^ But the allowance 30 Opinion of Drummond, J., in Turner v. I., B. & W. R. Co., 8 Biss., 315; Central Trust Co. v. Clark, 26 C. C. A., 397, 81 Fed., 269, 49 U. S. App., 453. 31 Union Trust Co. v. Souther, 107 U. S., 591, 2 Sup. Ct. Rep., 295; Burnham v. Bowen, 111 U. S., 776, 4 Sup. Ct. Rep., 675 ; Clark v. Cen- tral R. & B. Co., 14 C. C. A., 112, 66 Fed., 803, 30 U. S. App., 263, which was affirmed in 170 U. S., 355, 18 Sup. Ct. Rep., 657, 42 L. Ed., 1068, sub nom. Virginia & Alabama Coal Co. v. Central R. & B. Co.; Southern Ry. Co. v. Car- negie Steel Co., 22 C. C. A., 289, 76 Fed., 492, 42 U. S. App., 145, which was affirmed in 176 U. S., 257, 20 Sup. Ct. Rep., 347, 44 L. Ed., 458 ; Southern Ry. Co. v. Amer- ican Brake Co., 22 C. C. A., 298, 76 Fed., 502, 42 U. S. App., 162; Southern Ry. Co. v. Adams, 22 C. C. A., 300, 76 Fed., 504, 42 U. S. App., 167. See, also. Union Trust Co. V. Illinois Midland R. Co., 117 U. S., 434, 6 Sup. Ct. Rep., 809, affirming in part and reversing in part S. C, 28 Fed., 169. In Burn- ham V. Bowen, 111 U. S., 776, 4 Sup. Ct. Rep,, 675, Waite, C. J., says, p. 782: "But it is furtlier in- sisted that, even though the court did err in using the income of the receivership to pay the fixed prior charges on the mortgaged property, and thus increased the security of the bondholders, there is no power now to order a sale of the property in the hands of the trustees to pay back what has thus been diverted. In Fosdick v. Schall, p. 245, it was said that if in a decree of fore- closure a sale is ordered to pay the mortgage debt, provision may be made for a restoration from the proceeds of the sale of the fund which has been diverted, and this clearly because, in equity, the diver- sion created a charge on the prop- erty for whose benefit it had been made. Here the parties interested preferred a decree of strict foreclo- sure, which the court gave, but in giving it saved the rights of all in- tervenors, and continued the case for the final determination of all such questions. The present appeal is from a decree which grew out of this reservation. As the diversion of the fund created in equity a charge on the property as security for its restoration, it is clear that if the mortgagees prefer to take the prop- erty under a decree of strict fore- closure, they take it subject to the charge in favor of the current debt 512 RECEIVERS. [chap. XI. of such current debt claims, to be paid out of net income, does not necessarily entitle them to payment out of the corpus of the property, and such preference will not be allowed unless special equities are shown entitling the claimants to priority over the mortgage indebtedness.^^ g^t where it appears that there has been a diversion of income by the payment of interest on creditor whose money they have got, and that he can insist on a sale of the property for his benefit, if they fail to make the payment with- out." See, also, Langdon v. Ver- mont & Canada R. Co., 54 Vt., 593, to the point that debts incurred by managers of a railway, after their discharge as receivers proper, under a consent decree, constitute a lien upon the property in the nature of an equitable mortgage, which may be enforced by strict foreclosure. 32 Blair v. St. L., H. & K. R. Co., 22 Fed., 471. As to the length of time prior to the receivership within which current debt claims must have ciccrued to entitle them to priority of payment out of the receiver's in- come, no fixed rule has been deter- mined by the courts, and from the nature of the case none can be. In the United States circuit court for the seventh circuit, the time has frequently been fixed at six months, and this has been followed in other circuits. The only known reason for limiting the time to six months in the seventh circuit is by analogy to a statute of Illinois giving a stat- utory lien upon railways for labor, materials and supplies furnished, provided suit be brought within six months after completion of the con- tract. See, upon this point, opinion of Drummond, J., in Turner v. I., B. & W. R. Co., 8 Biss., 315. And the rule fixing the time at six months has been adopted in the sixth circuit. Central Trust Co. v. East T., V. & G. R. Co., 26 C. C. A., 30, SO Fed., 624, 47 U. S. App., 663, criticizing the rule which recog- nized a reasonable time; Interna- tional Trust Co. V. Townsend B. & C. Co., 37 C. C. A., 396, 95 Fed., 850. But this rule has been rejected in the eighth circuit. Northern Pac. R. Co. V. Lamont, 16 C. C. A., 364, 69 Fed., 23, 32 U. S. App., 480. And the circuit court for the north- ern district of Ohio, eastern divi- sion, also declined to be bound by it in Cleveland, C. & S. R. Co. v. Knickerbocker T. Co., 86 Fed., 7Z. And the rule has not been generally adopted, and such claims have been allowed priority, although accruing one or more years before the re- ceivership. The rule recognizing a reasonable time has been adopted in the fourth circuit, and also by the circuit court for the district of Mass- achusetts. Southern Ry. Co. v. Carnegie Steel Co., 22 C. C. A., 289, 76 Fed., 492, 42 U. S. App., 145, which was affirmed in 176 U. S., 257, 20 Sup. Ct. Rep., 347, 44 L. Ed., 458; Southern Ry. Co. v. American Brake Co., 22 C. C. A., 298, 76 Fed., 502, 42 U. S. App., 162; Southern Ry. Co. V. Adams, 22 C. C. A., 300, 76 Fed., 504, 42 U. S. App., 167; Wood V. N. Y. & N. E. R. Co., 70 Fed., 741. See the authorities as to time reviewed in note to Blair v. CHAP. XI.] RAILWAYS. 513 bonds prior to the appointment of the receiver and it also ap- pears that after his appointment, he has expended large sums out of income for permanent improvements, the creditor should be allowed payment of his claims from the corpus if the earn- ings in the hands of the receiver are not sufficient to pay them. ^2 And where an insolvent railway company had been operating a leased line as a part of its system and prior to the receivership had applied earnings of the system to improve- ments upon the leased road and to the payment of interest upon its bonds, a claim for repairs upon the leased line arising prior to the appointment of the receiver is entitled to priority over the mortgage bondholders and is entitled to payment as against the purchasers at the foreclosure sale.^* And an addi- tional reason for the allowance of preferred claims is found where the receiver has been appointed not in a proceeding brought for the foreclosure of a mortgage but in a suit insti- tuted by stockholders for the appointment of a receiver to manage the road until satisfactory arrangements can be made for a financial reorganization. ^5 And where, prior to the ap- pointment of the receiver, an action has been commenced against the company to recover the amount of the claim in ques- St. L., H. & K. R. Co., 22 Fed., 475. 34 Southern Ry. Co. v. Tillett, 22 See, also, Central Trust Co. v. C. C. A., 303, 76 Fed., 507, 42 U. S. Texas & St. Louis Railway, 22 Fed., App., 173. 135; Central Trust Co. v. Thurman, 35 New England R. Co. v. Car- 94 Ga., 735, 20 S. E., 141. As to negie Steel Co., 21 C. C. A., 219, 75 the extent to which the services of Fed., 54, 33 U. S. App., 491 ; South- counsel necessary in the manage- ern Ry. Co. v. Carnegie Steel Co., ment of the road are entitled to 22 C. C. A., 289, 76 Fed., 492, 42 priority out of the proceeds of fore- U. S. App., 145, which was affirmed closure, see Bayliss v. L., M. & B. in 176 U. S., 257, 20 Sup. Ct. Rep., R. Co., 9 Biss., 90. 347, 44 L. Ed., 458; Southern Ry. 33 Clark v. Central R. & B. Co., Co. v. American Brake Co., 22 C. 14 C. C. A.. 112, 66 Fed., 803, 30 C. A., 298, 76 Fed., 502, 42 U. S. U. S. App., 263, which was affirmed App., 162; Southern Ry. Co. v. in 170 U. S., 355, 18 Sup. Ct. Rep., Adams, 22 C. C. A., 300, 76 Fed.. 657, 42 L. Ed., 1068, sub nom. Vir- 504, 42 U. S. App., 167. ginia & Alabama Coal Co. v. Cen- tral R. & B. Co. Receivers — 33. 514 RECEIVERS. [chap. XI. tion, the prosecution of the action to judgment after the in- stitution of the receivership proceedings will not constitute a waiver of the preferential character of the claim. But the judgment in such case is not conclusive upon the receiver, and where it appears that the company interposed a counterclaim for damages resulting from a delay in the delivery of the goods in question and the record of the judgment affirmatively showed that the issue raised by such counter-claim had never been tried in that proceeding, it is proper to allow the receiver to recoup the damages alleged to have resulted from the delay. In such case the receiver is allowed to make the counter-claim upon the theory that the intervener, in seeking to have his claim allowed, is proceeding upon purely equitable grounds and must accordingly do equity himself in order to have a standing in court.^^ But when rails, which are necessary to the main- tenance of the road as a going concern, are furnished the com- pany upon such credit as indicates an expectation that interest upon the mortgage debts is to be paid, and current income is diverted by the company to the payment of interest to second- mortgage bondholders, at whose suit the receiver is appointed, such indebtedness is held not to be a prior charge upon the receiver's earnings as against such bondholders.^'^ § 394(/. Preference based upon necessity of preserving property, independent of diversion; salary of attorney; wages. The right to priority of payment, of the class of claims under consideration, has been recognized and the prefer- ence allowed independent of any question of diversion of in- come, and solely upon the necessity for preserving the property and continuing its operation. ^^ Thus, the receiver has been 36 Central Trust Co. v. Clark, 26 Co., 106 U. S., 286, 1 Sup. Ct. Rep., C. C. A., 397, 81 Fed., 269, 49 U. 140; Taylor v. P. & R. R. Co., 7 S. App., 453. Fed., Z77 ; Atkins v. Petersburg R. 37 Bound V. South Carolina R. Co., 3 Hughes, 307; Union Trust Co., 7 C. C. A., 322, 58 Fed., 473, Co. v. lUinois Midland R. Co., 117 8 U. S. App., 461, reversing, as to U. S., 434, 6 Sup. Ct. Rep. 809, such allowance, S. C, 47 Fed., 30. affirming in part and reversing in 38 Miltenberger v. Logansport R. part S. C, 28 Fed., 169; Finance Co. CHAP. XI.] RAILWAYS. 515 authorized to pay arrears due for operating expenses for a period of ninety days prior to his appointment, as well as amounts due to other railway companies for materials and re- pairs and for ticket and freight balances before the receiver- ship. And these allowances, together with sums due for rolling stock purchased by the receiver, and for completing an additional line and a bridge as part of the main line of road, have been given priority over the mortgage indebtedness, to be paid out of the earnings of the receiver, or, if necessary, out of the proceeds of foreclosure.^^ So when employees of the V. C, C. & C. R. Co., 10 C. C. A., 323, 62 Fed., 205, 8 U. S. App., 547; Northern Pacific R. Co. v. Lament, 16 C. C. A., 364, 69 Fed., 23, 32 U. S. App., 480; St. Louis Trust Co. v. Riley, 16 C. C. A., 610. 70 Fed., 32, 36 U. S. App., 100, 30 L. R. A., 456 ; Central Trust Co. v. East T., V. & G. R. Co., 26 C. C. A., 30, 80 Fed., 624, 47 U. S. App., 663; Guaranty Trust Co. V. Galveston C. R. Co., 46 C. C. A., 305, 107 Fed., 311; Wood V. N. Y. & N. E. R. Co., 70 Fed., 741 ; Cleveland, C. & S. R. Co. V. Knickerbocker T. Co., 86 Fed., 72i ; Cooper v. Preston, 105 Fed., 403; St. Louis, A. & S. R. Co. v. O'Hara, 177 111., 525, 52 N. E., 734, S3 N. E., 118. And see Central Trust Co. V. St. Louis, A. & T. R. Co., 41 Fed., 551. See, contra, Den- niston v. Chicago, Alton & St. Louis R. Co., 4 Biss., 414. And the rule laid down in the text has been ap- plied in the case of a receivership of an irrigation company which is held to be a quasi-public corpora- tion. Atlantic Trust Co. v. Wood- bridge C. & I. Co., 79 Fed., 39; Atlantic Trust Co. v. Woodbridge C. & I. Co., 86 Fed., 975. 30 Miltenberger v. Logansport R. Co., 106 U. S., 286, 1 Sup. Ct. Rep., 140. Mr. Justice Blatchford says, p. 311: " Many circumstances may exist which may make it necessary and indispensable to the business of the road and the preservation of the property, for the receiver to pay pre-existing debts of certain classes out of the earnings of the receiver- ship, or even the corpus of the prop- erty, under the order of the court, with a priority of lien. Yet the dis- cretion to do so should be exercised with very great care. The payment of such debts stands, prima facie, on a different basis from the pay- ment of claims arising under the receivership, while it may be brought within the principle of the latter by special circumstances. It is easy to see that the payment of unpaid debts for operating expenses, accrued within ninety days, due by a railroad company suddenly de- prived of the control of its prop- erty, due to operatives in its em- ploy, whose cessation from work simultaneously is to be deprecated in the interests both of the property and of the public, and the payment of limited amounts due to other and connecting lines of road for mate- rials and repairs and for unpaid ticket and freight balances, the out- 516 RECEIVERS. [chap. XI. company were threatening to strike because of non-payment of wages, and many of them had brought attachment suits and recovered judgments against the company, advances to the company to pay such wages, with an agreement for repayment out of the first net earnings, have been allowed priority out of receiver's income.^^ So claims for materials and supplies, such as car springs and spirals and supplies furnished to the ma- chinery department, before the appointment of the receiver, and used by him in the management and operation of the road, may be paid in full out of the net income of the receivership in preference to the demands of mortgage bondholders. Such claims are preferred upon the principle that the net earnings of a railway, while in the hands of a receiver appointed in be- half of mortgagees, are not necessarily or exclusively the prop- erty of the mortgagees, but are subject to the disposal of the court in the payment of claims having superior equities.'*^ So the regular annual salary of the attorney of the company im- mediately prior to the receivership has been given preference in payment.42 ^^d preferences have been allowed in the case come of indispensable business re- 40 Atkins v. Petersburg R. Co., 3 lations, where a stoppage of the Hughes, 307. In this case, the ad- continuance of such business rela- vances for wages were made nearly tions would be a probable result in two years before the receivership, case of non-payment, the general In Skiddy v. A., M. & O. R. Co., consequence involving largely also 3 Hughes, 320, the same court or- the interests and accommodation of dered payment by the receivers of travel and traffic, may well place wages due to employees for eight such payments in the category of months prior to the receivership, payments to preserve the mortgaged but refused payment of such claims property in a large sense, by main- which had been assigned to third taining the good will and integrity persons, and also refused payment of the enterprise and entitle them for rails and supplies furnished to to be made a first lien." To the the company. same effect, see Barton v. Barbour, 41 Hale v. Frost, 99 U. S., 389. 104 U. S., 126. And see New Eng- See, also. United States Trust Co. land R. Co. v. Carnegie Steel Co., v. New York, W. S. & B. R. Co., 21 C. C. A., 219, 75 Fed., 54, 33 25 Fed., 797. U. S. App., 491. And see the case 42 Blair v. St. Louis. H. & K R. last cited as to the allowance of Co., 23 Fed., 521. interest upon the claim. CHAP. XI.] RAILWAYS. 517 of the following claims, which have been held to be properly classed as current expenses incurred in the ordinary operation and maintenance of the road : an unpaid traffic balance ; ^^ balance due for rental of terminal facilities ; ^* claim for repair work done in placing a defective and unsafe railroad bridge in good condition ; "^^ claim for cross ties used to replace old, decayed ties ; ^^ claim for necessary coupling links, pins and tank steel ; ^'^ claim based upon judgment for providing, fur- nishing and maintaining passenger waiting rooms, office rooms for the company's agents and a convenient place for its em- ployees to board and lodge at reduced rates ; ^^ materials fur- nished for the construction of freight cars which were neces- sary to keep the road a live, going concern ; ^^ claim for dam- ages resulting to an abutting property owner from the con- struction of a railway in a public highway ; ^^ claim based upon the loss of cars which had been furnished by another railway company ; ^1 claim for rail joints and track bolts furnished a street railway company in such small quantities as to amount to nothing more than ordinary repairs.^2 ^^id wages of labor- ers and employees of a street railway company for a period of sixty days before the receivership have been allowed as a lien upon the mortgaged property prior to the lien of mortgage bondholders.^^ It is to be observed, however, as regards claims which are allowed priority of payment out of the pro- 43 Finance Co. v. C, C. & C. R. O'Hara, 177 111., 525, 52 N. E., 734, Co., 10 C. C. A., 323, 62 Fed., 205, 53 N. E., 118. 8 U. S. App., 547. 50 Fordyce v. Kansas City & N. 44 Manhattan Trust Co. v. Sioux C. R. Co., 145 Fed., 566. City & N. R. Co., 102 Fed., 710. 51 Grand Trunk Ry. Co. v. Ccn- 45 Cleveland, C. & S. R. Co. v. tral Vt. R. Co., 88 Fed., 636. Knickerbocker T. Co., 86 Fed., 73. 52 Cooper v. Preston, 105 Fed., 46 Gregg v. Mercantile Trust Co., 403. 48 C. C. A., 318, 109 Fed., 220. 53 Litzenberger v. Jarvis-Conklin 47 Wood V. N. Y. & N. E. R. Co., Trust Co., 8 Utah, 15, 28 Pac, 871. 70 Fed., 741. As to the right to priority of various 48 Northern Pac. R. Co. v. La- classes of claims out of the net mont, 16 C. C. A., 364, 69 Fed., 23, earnings of the receiver, or out of 32 U. S. App., 480. the proceeds of foreclosure, in pref- 49 St. Louis, A. & S. R. Co. v. erence to mortgage bondholders, as 518 RECEIVERS. [chap. XI. ceeds of foreclosure, in preference to mortgage bonds, whether represented by receivers' certificates or otherwise, that no pref- erence of one claim over another is allowed among the differ- ent classes of such demands, except as to indebtedness for taxes and receivers' certificates issued to pay taxes or to discharge tax liens, which are given priority over all other demands. ^^ And where the principal sum of a preferred claim for supplies furnished a railway company has been paid by the receiver and accepted by the claimant, the latter can not afterward recover interest upon the claim. ^^ § 394t'. Mortgagee seeking equitable relief must submit to conditions; preference to assignee of debt. Preference has also been given in the payment out of receiver's income of operating expenses incurred by the company, as for labor, sup- plies and equipment in the operation of the road, upon the ground that the mortgagee, having invoked the extraordinary aid of a court of equity by the appointment of a receiver in aid of the foreclosure, the court may impose such just and rea- sonable conditions to the relief sought as the exigencies of the case may require. The mortgagee usually having the right under the terms of his mortgage to take possession after de- fault, he may, if he sees fit, invoke the ordinary legal remedies to obtain such possession and to enforce his lien. If, instead of so doing, he seeks the extraordinary remedy of a receiver to manage the property, he must submit to such conditions as the court may see fit to impose with reference to the payment of operating expenses already incurred, out of the income of the receivership. And the fact that the mortgagee has suffered affected by legislation in Texas, see 54 Union Trust Co. v. Illinois Giles V. Stanton, 86 Tex., 620, 26 Midland R. Co., 117 U. S., 434. 6 S. W., 615. As to priority of "work- Sup. Ct. Rep., 809, affirming in part ing expenses" of a railway operated and reversing in part S. C, 28 Fed., by a receiver under the English 169; First National Bank v. Ewing, Railway Companies Act of 1867, 43 C. C. A., 150, 103 Fed., 168. and as to payment of instalments 55 Southern Ry. Co. v. Dunlop due upon conditional sales of rolling Mills, 22 C. C. A., 302, 76 Fed., 505, stock, see In re Eastern & Midlands 42 U. S. App., 169. Railway Company, 45 Ch. D., 367. CHAP. XI.] RAILWAYS. 519 the railway company to continue in the possession and manage- ment of the property for a considerable period of time after de- fault, thereby permitting new obligations to be incurred for operating expenses and for the maintenance of the property, affords additional ground for requiring such obligations to be discharged out of the income of the receiver as a condition to his appointment.^^ And in this class of cases, the right to preference is regarded as attaching to the debt or demand itself, and not to the person of the creditor. It therefore passes by assignment, and the same preference may be allowed to an as- signee of the original demand.^"^ § 394/. Rolling stock; car-trust leases; sale of rolling stock under foreclosure; use of rolling stock by receiver; right of appeal. Questions concerning the payment out of receiver's income of rentals due upon rolling stock leased by the company prior to the receivership are governed by substantially the same rules which have been discussed in the preceding sec- tions. These questions are usually presented in cases where the company had leased rolling stock under what are known as car-trust leases, or other evidences of conditional sale, the lessor or vendor retaining the title to or a lien upon the rolling stock, until the stipulated payments are fully made by the company. In such cases, the vendor's title or lien is unaffected by the ap- pointment of the receiver, that officer acquiring no better title to the rolling stock than that of the company. If the receiver continues to use such rolling stock, the owner or lessor is en- titled to just compensation for its use, to be paid out of the re- ceiver's earnings, such payment being, in effect, the application 56 Union Trust Co. v. Souther, Newport & Cincinnati Bridge Co. v. 107 U. S., 591, 2 Sup. Ct. Rep., 295 ; Douglass, 12 Bush, 673. Douglass V. Cline, 12 Bush, 608. 57 Union Trust Co. v. Walker, See, also, Fosdick v. Schall, 99 U. 107 U. S., 596, 2 Sup. Ct. Rep., 299; S., 235, 25 L. Ed., 339; Burnham v. Burnham v. Bowen, 111 U. S., 776, Bowen, 111 U. S., 776, 4 Sup. Ct. 4 Sup. Ct. Rep., 675; Mcllhenny v. Rep.. 675. As to the right to net Binz, 80 Tex., 1, 13 S. W., 655. earnings in such a case, as between See, contra, Skiddy v. A., M. & O. mortgage bondholders and various R. Co., 3 Hughes, 320. classes of unsecured creditors, see 520 RECEIVERS. [chap. XI. of ciiiTcnt income to the payment of current expenses. ^^ Whether, in the event of a deficiency of receiver's income, such car rentals, accruing either before or during the receivership, are entitled to payment in full out of the proceeds of fore- closure sale, has been said to be dependent upon whether there has been a diversion of current income from current expenses during the receivership.^^ Upon principle, however, it is im- possible to discriminate between claims of this character, and those for wages, materials and other operating expenses, which, as already shown, have been frequently allowed priority out of receiver's income, or have been paid out of the sale of the prop- erty, in the absence of any evidence of diversion of income, upon other equitable considerations addressing themselves to the discretionary powers of the court.<50 g^t if the receiver's income is sufficient to pay for additional rolling stock necessary to the operation of the road, the court will not permit him to make a loan by the creation of a car trust to procure such roll- ing stock, in order that current income may be applied to in- terest upon bonded indebtedness.^^ And if cars held by the company under conditional sales are used by the receiver and 58 Fosdick V. Schall, 99 U. S., 235, forth in the case as reported, and 25 L. Ed., 339; Myer v. Car Co., having purchased additional rolling 102 U. S., 1 ; Coe v. New Jersey stock, these allowances, with others, Midland R. Co., 27 N. J. Eq., 37; were awarded priority over the Piatt V. Philadelphia & R. R. Co., mortgage indebtedness, to be paid 28 C. C. A., 488, 84 Fed., 535, 55 out of the receiver's earnings, or, U. S. App., 452; Mercantile Trust if necessary, out of the proceeds of & Deposit Co. V. Southern I. C. foreclosure. In Coe v. New Jersey Line, 113 Ala., 543, 21 So., 373; Midland R. Co., 27 N. J. Eq., 37, Lane v. Macon & A. Ry. Co., 96 it was held that lessors of rolling Ga., 630, 24 S. E., 157. stock leased to a railway company 59 Fosdick v. Schall, 99 U. S., were not entitled to payment in full 235, 25 L. Ed., 339. of the rent reserved in the lease, at 60 Miltenberger v. Logansport R. the hands of the receivers, unless Co., 106 U. S., 286, 1 Sup. Ct. Rep., the court should find that such pay- 140. In this case, the receiver having ment was for the best interests of made an adjustment with the own- the trust represented by the re- ers of rolling stock held under con- ceivers. ditional sales to the company, the 61 Taylor v. P. & R. R. Co., 9 nature of which is not clearly set Fed., 1. CHAP. XI.] RAILWAYS. 521 sold under the foreclosure decree, the vendor may be paid in full out of the proceeds of such sale, his lien upon the cars being paramount to that of the mortgagees. ^2 go if rolling stock is purchased by the receiver out of the earnings of the road and sold under the foreclosure, the mortgage covering after-ac- quired property, the purchaser at the sale is entitled to such rolling stock as against the mortgagees.^'^ Rental for cars leased and used by the receiver is entitled to preference, as well as a reasonable sum expended for ordinary repairs to the cars so used, although interest upon such sums will not be al- lowed as against mortgage bondholders or purchasers. But car rentals incurred prior to the receivership will not be preferred, such indebtedness being distinguished from claims for labor and supplies which are necessary from day to day for the maintenance of the road.^^ So track rentals incurred sev- eral years prior to the receivership are not entitled to payment out of the proceeds of the foreclosure sale, especially where there is nothing to show that the claimant relied upon any- thing more than the general credit of the company and where there is no other special equity which it is the duty of the court to enforce.^^ Nor will such a claim be allowed upon the ground that the insolvent railroad has received income for the use of the leased cars upon other lines of road after the making of the lease and prior to the appointment of the re- ceiver.66 And the receiver of a railway company is not bound 62 Fosdick V. Car Company, 99 U. Stock T. Co. v. Anderson, 22 C. C. S., 256. A., 109, 76 Fed., 164, 46 U. S. App., 63 Strang v. M. & E. R. Co., 3 138; Pullman's Palace-Car Co. v. Woods, 613. But it is held in the American L. & T. Co., 28 C. C. A., same case, that the purchaser is not 263, 84 Fed., 18, 55 U. S. App., 170; entitled to a balance of income re- Grand Trunk Ry. Co. v. Central Vt. maining in the receiver's hands, R. Co., 90 Fed., 163. such income belonging to the cred- 65 Louisville & N. R. Co. v. Cen- itors of the company in the order tral Trust Co., 31 C. C. A., 89, 87 of their priorities. Fed., 500, 59 U. S. App., 694. 64 Thomas v. Western Car Co., 66 Mather Humane Stock T. Co. 149 U. S., 95, 13 Sup. Ct. Rep., 824, v. Anderson, 22 C. C. A., 109, 76 reversing in part and modifying S. Fed., 164, 46 U. S. App., 138. C, 36 Fed., 808; Mather Humane 522 RECEIVERS. [chap. XI. by such leases but is eutitled to a reasonable leng-th of time after his appointment in which to elect whether or not he will adopt them, and a mere temporary use under the order of his appointment does not constitute such an election, nor will an experimental arrangement by which the receiver retains pos- session of the cars with a view to determining whether or not their use will be profitable constitute such an adoption of the lease.^^'^ \\'hen a receiver appointed in a foreclosure suit, brought by the trustee in the mortgage, takes possession of and continues to use rolling stock wdiich had been leased to the company under car-trust leases, he thereby becomes liable for a reasonable rental. In such case it is proper to allow a fair monthly rental, instead of rental upon the basis of actual mileage, and if there are no net earnings by the receiver, such rental may be decreed to be paid in full out of the proceeds of foreclosure sale before distribution among mortgage bond- holders. Such priority, however, will not be allowed for the use of the cars during a prior receivership in a judgment creditor's suit, before the trustee in the mortgage had filed its bill for foreclosure and for a receiver. And the purchaser at the foreclosure sale, to whom is reserved by the decree the right to appeal from all orders allowing priorities, may appeal from an order fixing the amount of such rentals and giving them priority over mortgage indebtedness.^^ So an order made upon a petition of creditors, preferring their claims over 67 Piatt V. Philadelphia & R. R. cumstances of the case, entitle the Co., 28 C. C. A., 488, 84 Fed., 535, owner or lessor to rental under the 55 U. S. App., 452. leases at the hands of the receiver, 68 Kneeland v. American L. & T. or out of the corpus of the estate, Co., 136 U. S., 89, 10 Sup. Ct. Rep., but only to a return of the cars 950. In Farmers' Loan & Trust Co. within a reasonable time and to V. Chicago & A. R. Co., 42 Fed., rental upon a quantum meruit for 6, it was held that the retention and their use by the receiver. It was use by the receiver, with the knowl- further held that there was no con- edge of mortgage bondholders and version of the cars by the receiver without their disapproval, of cars because of his non-compliance with held by the company under car- a demand upon him by the owner trust leases, did not, under the cir- for their surrender. CHAP. XI,] RAILWAYS. 523 that of a mortgagee of rolling stock and directing its sale in satisfaction of their demands, is an appealable order, since it finally determines the title to the rolling stock as against the mortgagee. 6^ § 394^. When judgment creditors allowed priority. The income of a railroad while operated by receivers appointed in behalf of mortgage bondholders is regarded as part of the mortgaged property in the sense that it is to be applied to ex- penses of administration and management, and to the liens and trusts with which it is charged. And until such expenses and liens have been satisfied, judgment creditors of the rail- way company are not entitled to payment out of the income.*^^ But judgment creditors of the company, who are entitled to payment out of the funds in the hands of or due to the com- pany when the receiver is appointed, may, if such funds are otherwise appropriated by the receiver, be paid in full out of the receiver's income in preference to mortgage bondholders."^^ Whether a judgment against the receiver himself is payable out of the proceeds of foreclosure would seem to depend rather up- on the nature of the cause of action than upon the fact that the demand has been reduced to judgment. If the cause of action grows out of materials supplied for the necessary operation of the road for the benefit of the mortgagees, as for rental of and repairs to rolling stock used by the receiver, a judgment re- covered against him in a suit brought by leave of the court ap- pointing him, and in a court of competent jurisdiction, is con- clusive against the bondholders and may be paid out of the proceeds of foreclosure.'^^ g^t if the judgment is for personal injuries sustained by a passenger upon the road while oper- ated by the receiver, it is held not to be entitled to payment out of the fund arising from the foreclosure. Such a judg- ment, it is held, is no more entitled to be made a lien upon on Radebaugh v. Tacoma & P. R. 71 Gibert v. W. C, V. M. & G. S. Co.. 8 Wash., 570, 36 Pac, 460. R. Co., 33 Grat., 645. 70 North Carolina R. Co. v. Drew, 72 Turner v. I., B. & W. R. Co., 3 Woods, 692. 8 Biss., 527. 524 RECEIVERS. [chap. XI. the property or fund, as against the mortgagees, than if the injury had been sustained while the road was operated by the company, the creation of such hen not being necessary to the operation of the road for the benefit of the bondholders in whose behalf the receiver is appointed.'^^ Such a judgment may, however, be paid out of the net income of the receiver- ship in preference to the claims of the bondholders to such in- come7* § 394/?. Claims of general creditors other than for op- erating expenses not preferred. Claims of general cred- itors of a railway company, which have been incurred prior to the receivership, and which do not fall within the class of cur- rent expenses for the ordinary operation and maintenance of the road, such as necessary labor, supplies, materials or equip- ment, and which do not, therefore, have any special equities entitling them to payment out of current income, will not be preferred out of the earnings of the receiver, or out of the proceeds of the foreclosure sale. The allowance of claims, which results in the displacement of the priority of mortgage liens, is to be regarded as the exception and not as the rule, and such claims will not be given a preference unless they may fairly and reasonably be regarded as debts incurred in the or- dinary, daily operation and maintenance of the road. And where the expense is an extraordinary one, incurred outside the ordinary course of the business of the road, such as for original construction or reconstruction, or for extraordinary repairs, or for extensions or permanent improvements, the pref- erence W'ill not be granted. And while, from the illustrations given in the preceding sections, where preferences have been given, it will be seen that the courts have, in particular in- stances, gone to unwarranted extremes in the recognition of such claims, the decided tendency at the present time, as shown by the recent cases, is to restrict rather than to extend the al- 73 Davenport v. Receivers, 2 1'^ Ex parte Brown, 15 S. C, 518; Woods, 519. And see Hopkins v. Klein v. Jewett, 26 N. J. Eq., 474. Connel, 2 Tenn. Ch., 323. CHAP. XI.] RAILWAYS. 525 lowance. As Illustrating the rule it is held that a loan made to an electric street railway company upon the pledge of its current income to enable it to construct a substantial and bene- ficial addition to its plant, which was necessary to the main- tenance of the volume of its business, but was not indispensable to its continuance as a going concern, should not be allowed a preference. '^^ So a preference has been denied upon a claim for a plow car and ballast cars which were purchased by a railway company to be used in filling in the road."^^ So the court has refused a preference for claims for salaries of offi- cers of the company, money loaned to the company, claims of contractors for construction,'^'^ clocks furnished for the use of the company, ''^^ and money advanced to complete the construc- tion of the road, which will not be preferred when it is not shown that such advances were made at the request of or by reason of the promises of the bondholders.'^^ So a cause of ac- tion against a railway company, growing out of the destruc- tion of property caused by fire escaping from a locomotive, does not fall within that class of operating expenses which have been allowed priority, and can not be enforced against the re- ceiver.^o And when a locomotive had been sold to the com- pany on credit and had become subject to the lien of its mort- gage more than six months prior to the appointment of a receiver in a foreclosure suit, and the owner had recovered a considerable portion of the purchase price by pursuing his or- dinary legal remedies against the company, he was denied pref- erence in the payment of the balance of his claim out of the re- ceiver's net earnings.^l As further illustrating the rule under discussion, the following claims have been denied a, prefer- 75 Illinois Trust & Savings Bank New York, W. S. & B. R. Co., 25 V. Doud, 44 C. C. A., 389, 105 Fed., Fed., 800. 123. 79 /„ re Kelly, 5 Fed., 846; S. C, 76 Rodger Ballast Car Co. v. 10 Biss., 151. Omaha. K. C. & E. R. Co., 83 C. 80 Hiles v. Case, 14 Fed., 141. C. A., 403, 154 Fed., 629. 81 Manchester Locomotive Works 77 Addison v. Lewis, 75 Va., 701. v. Truesdale, 44 Minn., 115, 46 N. 78 United States Trust Co. v. W., 301. 526 RECEIVERS. [chap. XI. ence : a claim for twenty thousand tons of steel rails held to be material for work of original construction ; ^^ money loaned to a railway company upon its notes at various times from nine months to four years prior to the receivership for the purpose of placing the road in a safer condition and resulting in increased earnings and additional security to the bond- holders; ^^ claim for the use of terminal facilities under a per- petual lease which gave the lessor the right to terminate the lease and retake possession of the premises and all improve- ments made thereon by the lessee upon default in payment of the rent for thirty days ; ^^ balance due for locomotives where it does not appear that the expenditure was to keep the road a going concern, although it increased the earning capacity and enhanced the security of the bondholders ; ^^ claim for adver- tising matter ;^^ claims for labor, materials and supplies fur- nished for w^ork of original construction or reconstruction ; ^'^ claim for heaters, purifiers and condensers furnished a street 82 Lackawanna Iron & Coal Co. V. Farmers' L. & T. Co., 24 C. C. A., 487, 79 Fed., 202, 52 U. S. App., 91, affirmed in 176 U. S., 298, 20 Sup. Ct. Rep., 363, 44 L. Ed., 475. 83 Morgan's Louisiana & T. R. & S. S. Co. V. Farmers' L. & T. Co., 24 C. C. A., 495, 79 Fed., 210, 52 U. S. App., 107; Southern Develop- ment Co. V. Same, 24 C. C. A., 497, 79 Fed., 212, 52 U. S. App., 111. 84 Gregg V. Mercantile Trust Co., 48 C. C. A., 318, 109 Fed., 220; St. Louis Merchants' B. T. Ry. Co. z>. Continental Trust Co., 49 C. C. A., 529, 111 Fed., 669. 85 Rhode Island Locomotive Works 7'. Continental T. Co., 47 C. C. A., 147, 108 Fed., 5; Gregg v. Mercantile Trust Co., 48 C. C. A., 318, 109 Fed., 220. 86 Central Trust Co. v. East T., V. & G. R. Co., 26 C. C. A.. 30, 80 Fed., 624, 47 U. S. App., 663. And see Poland v. Railroad Co., 52 Vt., 144. 87 First National Bank v. Ewing, 43 C. C. A., 150, 103 Fed., 168; St. Louis Merchants' B. T. Ry. Co. v. Continental Trust Co., 49 C. C. A., 529, 111 Fed., 669; Farmers' Loan & Trust Co. V. Cape Fear & Y. V. R. Co., 73 Fed., 712; Atlantic Trust Co. V. Woodbridge C. & I. Co., 79 Fed., 39; Atlantic Trust Co. v. Woodbridge C. & I. Co., 86 Fed., 975. In Cleveland, C. & S. R. Co. V. Knickerbocker T. Co., 86 Fed., 73, the court define "original con- struction" as "that construction of bridges, grades, culverts, rails, ties, docks, etc., that is necessary to be done before the road can be opened, or before it can be occupied or used, not such structures as are intended to replace old and worn-out counter- parts." CHAP. XI.] RAILWAYS. 527 railway company ; ^^ claim of a surety company based upon its liability as surety upon a supersedeas bond given by a railway company upon appeals from judgments against it, the com- pany having, pending the appeal, become insolvent and a re- ceiver having been appointed. ^^ So claims for legal services rendered to the company more than a year before the receiver- ship have been refused priority as against mortgage bondhold- ers, such claims being distinguishable from those for labor and supplies necessary to maintain the road as a going concern.^^ And while legal services rendered and disbursements paid by the regular counsel of the company before the receivership may be paid out of the receiver's income in like manner and to the same extent as the services of other employees, under an order authorizing the receiver to pay all sums due to employees for ninety days before his appointment, they will not be allowed priority over mortgage bonds; but the attorney's lien upon papers and muniments of title of the company in his posses- sion will be recognized to the full extent of his entire claim. ^^ ^8 McCornack v. Salem Ry. Co., ment of the judgment, suits were 34 Ore., 543, 56 Pac, 1022. brought against the sureties upon 80 Whitely v. Central Trust Co., the bond. Thereupon the sureties 22 C. C. A., 67, 76 Fed., 74, 34 L. intervened in the receivership pro- R. A., 303; Pennsylvania Steel Co. ceeding to have the judgment paid V. New York C. Ry. Co., 165 Fed., out of net income. The court held 485. In Farmers' Loan & Trust Co. that the liability of the sureties did V. Northern Pac. R. Co., 71 Fed., not become fixed until default by 245, a judgment had been rendered the company after the appointment against a railway company for per- of the receiver and that the claim sonal injuries sustained through the was one for the ordinary operation negligent operation of the road. of the road and was therefore en- This judgment being affirmed by titled to a preference, the supreme court of the state, a 90 Blair v. St. Louis, H. & K. R. writ of error was sued out of the Co., 23 Fed., 521 ; Finance Co. v. supreme court of the United States, Charleston, C. & C. R. Co., 52 Fed., upon the filing of a supersedeas 678. bond with sureties. The latter 01 Finance Co. v. Charleston, C. court dismissed the proceeding for & C. R. Co., 52 Fed., 526. As to want of jurisdiction. In the mean- the allowance of counsel fees for time the road had gone into the services rendered in behalf of cred- hands of a receiver and, upon de- itors in procuring the allowance of fault of the company in the pay- claims against the receiver, see Cen- 52S RECEIVERS. [chap. XI. So a claim for legal services rendered to a former railway company, whose property has passed by foreclosure and sale to a new company, will not be enforced against a receiver in foreclosure proceedings against the new company. ^2 go claims for advances by an attorney to pay judgments against the com- pany for wages and for killing stock before the receivership will not be allowed priority. Nor will preference be given to the claim of an attorney for the amount of judgments recov- ered against the company and paid by him as surety upon ap- peal bonds, the judgments being upon demands which would not have been entitled to priority.^^ § 394/. Judgments and claims for personal injuries oc- curring prior to receivership not preferred. The rule is well established that judgments or claims for damages for personal injuries resulting from the negligence of the em- ployees of a railway company prior to the appointment of a receiver are not entitled to priority over the mortgage bond- holders and are therefore not payable as preferred debts either out of the surplus income or out of the corpus of the estate in the case of a sale. Such judgments or claims can in no sense be said to have been incurred for the improvement of the road or to be based upon considerations which in any way enure for the benefit of the mortgage security, and accordingly no equity exists in favor of their allowance,^^ Nor can such tral Trust Co. v. Valley R. Co., 55 vent a sale of its property under ex- Fed., 903. And see Evansville & ecution, to a lien upon the property St. Louis R. Co. V. Wilson, 138 U. of the company after its sale under S., 501, 11 Sup. Ct. Rep., 405, 34 foreclosure, see Union Trust Co. v. L. Ed., 1023 ; Gregg v. Mercantile Morrison, 125 U. S., 591, 8 Sup. Ct. Trust Co., 48 C. C. A., 318, 109 Rep., 1004. Fed., 220. 94 St. Louis Trust Co. v. Riley, 92 Bound V. South Carolina R. 16 C. C. A., 610, 70 Fed., 32, 36 Co., 51 Fed., 58. S. C, on appeal U. S. App.. 100, 30 L. R. A., 456; from final decree, 7 C. C. A., 322, Farmers' Loan & Trust Co. v. 58 Fed., 473, 8 U. S. App., 461. Northern Pac. R. Co., 24 C. C. A., 93 Blair v. St. Louis, H. & K. R. 511, 79 Fed., 227, 48 U. S. App,, Co., 23 Fed., 521. As to the right 324; Farmers' Loan & Trust Co. v. of a surety upon an injunction bond Nestelle, 25 C. C. A., 194, 79 Fed., given by a railway company to pre- 748, 48 U. S. App., 326; Veatch v. CHAP. XI.] RAILWAYS. 529 a judgment or claim be allowed upon the ground of diversion of income by the bondholders' receiver, where the trust deed provides that in case of default, the trustee may take posses- sion and may from time to time make such repairs and im- provments as may seem proper to promote the interests of the bondholders. But where, prior to the appointment of the re- ceiver for the mortgage bondholders, a receiver had been ap- pointed in a stockholders' suit, in whose hands income had ac- cumulated, to which the lien of the mortgage did not attach, such judgments or claims, whether arising in contract or tort, are entitled to participate in the distribution of such income which had thus accumulated while the road was being oper- ated by the receiver, at the instance of the stockholders, before the income had been impounded by the mortgage bondhold- ers.^^ But such judgments or claims are not payable out of net income which had been earned prior to the receivership and turned over to the receiver upon his appointment, where the claimant had delayed proceeding against the fund until the company had paid the money to the receiver.^^ § 394;'. When payment allowed out of proceeds of sale. Upon the question whether debts and obligations incurred in the ordinary operation and maintenance of a railroad prior to the appointment of a receiver are entitled to payment, as against the mortgage bondholders, out of the proceeds of the foreclosure sale where there is no sufficient income in the hands American L. & T. Co., 25 C. C. A., Northern Pac. R. Co., 74 Fed., 431 ; 39, 79 Fed., 471, 49 U. S. App., 191, Front Street Cable Ry. Co. v. affirmed on rehearing in 28 C. C. Drake, 84 Fed., 257; Pennsylvania A., 384, 84 Fed., 274, 55 U. S. App., Steel Co. v. New York C. Ry. Co., 191 ; Hampton v. Norfolk & W. R. 165 Fed., 457. Co., 62 C. C. A., 388, 127 Fed., 662; 95 Veatch v. American L. & T. Atlantic Trust Co. v. Dana, 62 C. Co., 25 C. C. A., 39, 79 Fed., 471, C. A., 657, 128 Fed., 209 ; Atchison, 49 U. S. App., 191, affirmed on re- T. & S. F. R. Co. V. Osborn, 78 hearing in 28 C. C. A.. 384, 84 Fed., C. C. A., 378, 148 Fed., 606; Far- 274, 55 U. S. App., 191. mers' Loan & Trust Co. v. Detroit, ^6 Farmers' Loan & Trust Co. v. B. C. & A. R. Co., 71 Fed., 29; Detroit, B. C. & A. R. Co., 71 Fed., Farmers' Loan & Trust Co. v. 29. Receivers — 34. 530 RECEIVERS [chap. XI. of the receiver to meet them, the authorities are somewhat un- settled. The tendency at the present time, however, is to make the solution of the question depend upon whether or not there has been a diversion of income prior to the appointment of the receiver. The supreme court of the United States has made the distinction between debts incurred for supplies which were necessary for the business of the road and those which were necessary merely for its preservation, holding that claims of the latter class are not entitled to payment out of the corpus of the estate in the hands of the receiver unless a prior diver- sion of income can be shown. ^"^ And the court of appeals of the sixth circuit in several well considered cases has held gen- erally that claims of the character under discussion are payable out of the corpus of the estate only when there has been a prior diversion of income and then only to the extent of such diversion. ^^ And the rule as thus laid down has been applied by the supreme court of Alabama. ^^ § 394A;. Statutory liens preserved; when interest dis- allowed. Statutory liens upon the property of a railway company, given to creditors furnishing labor and supplies, may be enforced and the rights of such creditors protected, not- withstanding the appointment of receivers in foreclosure pro- ceedings against the company. And when such creditors are entitled, by statute, to an attachment against the rolling stock and personal property of the railway, the rights of the mort- gagees being subordinated by the statute to those of the at- taching creditors, they may enforce their rights after the ap- pointment of receivers against such property, and if that shall prove insufficient they may be preferred in payment out of 97 Gregg V. Metropolitan Trust Townsend B. & C. Co., 37 C. C. A., Co., 197 U. S., 183, 25 Sup. Ct. Rep., 396, 95 Fed., 850; Rhode Island Lo- 415, affirming S. C, 59 C. C. A., comotive Works v. Continental T. 637. 124 Fed., 721. And see Rodger Co., 47 C. C. A., 147, 108 Fed., 5 ; Ballast Car Co. v. Omaha, K. C. & Gregg v. Mercantile Trust Co., 48 E. R. Co., 83 C. C. A., 403, 154 Fed., C. C. A., 318, 109 Fed., 220. 629. 99Hammerly v. Mercantile T. & 98 International Trust Co. v. D. Co., 123 Ala., 596, 26 So., 646. CHAP. XI.] RAILWAYS. 531 the net income of the receivers.^ So when the receiver has been appointed by a federal court, creditors claiming statutory- liens upon the property may be permitted to present their claims in the suit in which the receiver was appointed, with like effect as if filed in the courts of the state. And creditors claiming an equitable lien under demands arising in other states, where no statutory lien is given, may establish their claims in the same manner against the fund in the hands of the re- ceiver. ^ But whether interest shall be paid upon demands which are allowed by the court out of the funds of the receiver- ship is regarded as depending upon the nature of the cause of action itself, rather than upon the fact that it has been reduced to judgment. And when claims for damages resulting from the operation of the railway are reduced to judgment in ac- tions against the corporation, and are afterward allowed as claims against the receiver's fund, they are not entitled to in- terest, since as against the fund they are treated as divested of their character as judgments and rest upon the equities of the original cause of action, the damages in which were unliquidat- ed.3 And in general, where the property of an insolvent rail- way company passes into the hands of a receiver, interest on claims should not be allowed against the fund, since the delay in such case is the act of the law and is a necessary incident to the settlement of the estate."* § 394/. Claims for construction; board; groceries. As regards claims for construction prior to the receivership, when mortgages securing bonds of the company are executed upon 1 Poland V. Railroad Co., 52 Vt., parties in interest. Receivers v. 144. Wortendyke, 27 N. J. Eq., 658. 2 Blair v. St. L., H. & K. R. Co., 3 Ex parte Brown, 18 S. C, 87. 19 Fed., 861. But persons claiming And see, post, § 803. an equitable lien for advances upon 4 Thomas v. Western Car Co., rolling stock in use by the receiver 149 U. S., 95, 13 Sup. Ct. Rep., 824, should not be heard, or their rights reversing in part and modifying S. determined, in advance of a final C, 36 Fed., 808; Grand Trunk Ry. hearing as to all claims upon such Co. v. Central Vt. R. Co., 91 Fed., property, when conflicting claims 569. and liens are asserted by different 532 RECEIVERS. [chap. XI. its unfinished road, which show upon their face that the work of construction shall be carried to completion and that the mortgage lien shall attach to the road as completed, the new road thus constructed after the execution of the mortgages may be regarded as a "useful improvement" for the purpose of determining the right of creditors for such construction to priority over bondholders. If the road passes into the hands of a receiver before payment for such construction is made, and if the receiver's net income from operation is diverted to pay- ment of interest upon the mortgage bonds and to permanent betterments of the property, priority may be allowed for such construction as against the bondholders. Upon similar grounds claims for labor in construction, operation and maintenance, which are entitled to liens under the laws of the state, may be allowed priority, although incurred more than six months before the receivership. So claims of boarding-house keepers for boardiflg laborers and of grocers for furnishing supplies to such boarding houses, the wages of the laborers having been withheld for payment of such claims, but not applied for that purpose, are entitled to like priority. Nor does the taking of additional security, as the note of the company, for such claims deprive them of their right to priority.^ And where, prior to the appointment of a receiver over a railway com- pany, work had been commenced upon the construction of a building to be occupied as a hotel and for offices of the com- pany, and the building was afterward completed under a con- tract with the receiver, and it appeared that the work was for the benefit of the railroad and its receiver and was in other respects in furtherance of the interests of the road and that the building must be completed or the work already done would be a total loss, it was held that the balance due for the comple- tion of the structure was entitled to payment as a preferred claim. And it was further held that the fact that the building was not covered by the mortgage rendered it more equitable 5 Mcllhenny v. Binz, 80 Tex., 1, 13 S. W., 655. CHAP. XI.] RAILWAYS. 533 that the proceeds of any sale of the building should be applied to the payment of the cost of its construction. ^ § 394wi. Receiver not an assignee of term under lease; how far liable for rent. A receiver of a railway, by taking possession of leased lines which are embraced in the order ap- pointing him, does not thereby become an assignee of the term or liable for rent under the covenants of the leases. He is entitled to a reasonable time after taking possession to de- termine whether it is advantageous to retain such leased lines, and when within such time he reports to the court that a leased line is not profitable, and the court afterward surrenders it to the owners, rental for the use of such line by the receiver will not be decreed priority out of the proceeds of sale of the mortgaged premises.*^ Upon the other hand, where the court 6 Girard Insurance & Trust Co. V. Cooper, 162 U. S., 529, 16 Sup. Ct. Rep., 879, 40 L. Ed., 1062, af- firming S. C, 2 C. C. A., 245, 51 Fed., 332, 4 U. S. App., 631. TQuincy, M. & P. R- Co. v. Humphreys, 145 U. S., 82, 12 Sup. Ct. Rep., 787, affirming S. C, 34 Fed., 259; St. Joseph & St. L. R. Co. V. Humphreys, 145 U. S., 105, 12 Sup. Ct. Rep., 795, affirming S. C, 34 Fed., 259; United States Trust Co. V. Wabash W. R. Co., 150 U. S., 287, 14 Sup. Ct. Rep., 86; Seney v. Wabash W. R. Co., 150 U. S., 310, 14 Sup. Ct. Rep., 94; Ames V. Union Pacific R. Co., 60 Fed., 966; Carswell v. F. L. & T. Co., 20 C. C. A., 282, 74 Fed., 88, 43 U. S. App., 300; Mercantile Trust Co. v. Farmers' L. & T. Co., 26 C. C. A., 383, 81 Fed., 254, 49 U. S. App., 462, affirming ». C, 71 Fed., 601; Cen- tral Trust Co. V. Continental Trust Co., 30 C. C. A., 235, 86 Fed., 517, 58 U. S. App., 6.04. And see, ante, § 273. And see Sunflower Oil Co. V. Wilson, 142 U. S., 313, 12 Sup. Ct. Rep., 235; Savannah, F. & W. R. Co. V. J., T. & K W. R. Co., 24 C. C. A., 437, 79 Fed., 35, 52 U. S. App., 51 ; Park v. New York, L. E. & W. R. Co., 57 Fed., 799; New York, P. & O. R. Co. v. New York, L. E. & W. R. Co., 58 Fed., 268; Central Railroad & Banking Co. v. Farmers' L. & T. Co., 79 Fed., 158; Commonwealth v. Franklin Insur- ance Co., 115 Mass., 278; Gaither v. Stockbridge, 67 Md., 222, 9 Atl., 632, 10 Atl., 309 ; Seibert v. Minneapolis & St. L. Ry. Co., 58 Minn., 53, 59 N. W., 879. In Spencer v. Brooks, 97 Ga., 681, 25 S. E., 480, it was held that where an employee of a railway company had entered into a contract with the company agreeing to be bound by a rule prohibiting brakemen to go between cars to couple and uncouple them, such con- tract was inadmissible in evidence upon behalf of the receiver of the company in an action brought by a brakeman against the receiver for injuries suffered while uncoupling cars. 534 RECEIVERS. [chap. XI. determines that it is for the best interests of the parties con- cerned that the receiver should adopt the leases covering leased lines, the rents reserved by them become an integral part of the operating expenses of the receivership and as such are entitled to a preference over the mortgage indebtedness out of the earnings of the receivership or the proceeds of the sale. And in such case the determination of the question whether it is to the best interest of all concerned that the leases should be adopted or renounced is one of business and administrative policy resting largely in the discretion of the chancellor and his judgment in the matter, in the absence of a clear abuse of such discretion, will not be disturbed upon appeal.^ And when the company is operating leased lines prior to a receivership up- on a bill for foreclosure by mortgage bondholders, and immedi- ately upon the appointment of the receivers the lessor demands of them the adoption of the lease or the surrender of the leased lines, and against his protest a delay of several weeks occurs in determining whether the receivers will elect to surrender the property, which is then surrendered, for the period of such use by the receivers they may be decreed to pay full rental in ac- cordance with the terms of the lease. Nor, in such case, will the receivers be permitted to set off against such rental de- mands in favor of the lessee company and against the lessor which accrued prior to the receivership.^ If, however, the re- ceivers are ordered to take possession of, operate and manage all rolling-stock leases and other property of the company, and they take possession of sleeping-cars held under contract or lease by the company, and, with full knowledge of such con- tract and of its covenants, they continue to use such cars until the expiration of the term, they will be treated as assignees of 8 Mercantile Trust Co. v. Far- 9 Farmers' Loan & Trust Co. v. mers' L. & T. Co., 26 C. C. A., 383, Northern Pacific R. Co.,^ 58 Fed., 81 Fed., 254, 49 U. S. App., 462, 257. And see Charlotte, C. & A. affirming S. C, 71 Fed., 601; Cen- R. Co. v. C. & L. N. G. R. Co., tral Trust Co. v. Continental Trust 118 N. C, 1078, 24 S. E., 769; Clyde Co., 30 C. C. A., 235, 86 Fed., 517, v. R. & D. R. Co., 63 Fed., 21. 58 U. S. App., 604. CHAP. XI.] RAILWAYS. 535 the company and will be liable for necessary repairs to the cars upon their return to the lessor, to the same extent that the les- see would have been liable.^^ And where a railway company was operating part of its line under a lease from another com- pany, by which the lessee agreed to pay all taxes upon the leased line, and the receiver of the lessee railway company has adopted and affirmed the lease, a claim for prior taxes which have been paid by the lessor but for which the lessee was li- able under its agreement is entitled to. priority as a preferred claim. ^1 § 394w. Paramount lien enforced by resale of road. When an indebtedness is incurred by the receiver of a railway, under an order of the court, in discharging a paramount lien upon the mortgaged property, and a sale is had without satis- fying such indebtedness, the sale being made subject to such liens as the court may thereafter determine, the appropriate method of satisfying such demand, in default of payment by the purchaser, is by a resale of the property, or of so much as may be necessary for this purpose. And in such case, satis- faction should be had by a resale, rather than by setting aside the former sale after its confirmation and after the execution of a deed to the purchaser.^^ 10 Easton v. Houston & T. C. R. the receiver was not appointed until Co., 38 Fed., 784. 1894. 11 United States Trust Co. v. 12 Farmers' Loan & Trust Co. v. Mercantile Trust Co., 31 C. C. A., Newman, 127 U. S., 649, 8 Sup. Ct. 427, 88 Fed., 140, 59 U. S. App., Rep., 1364. This case in effect 330. It is to be observed in this overrules Farmers Loan & Trust case that the taxes in question were Co. v. Burlington & S. W, R. Co., for the years 1887 and 1888, while 32 Fed., 805. 536 RECEIVERS. [chap. XI. V. Actions Against the Receiver. § 395. Receivers answerable in official capacity for injuries sustained; judgment not personal; action need not be at receiver's domicile. 395a. Leave to sue receiver necessary; relief on petition. 395b. Rule changed by act of congress; construction of act. 395c. Removal of cause by receiver to federal court. 395d. New York decisions unsettled; liability for injuries; rental of leased lines. 396. Railway company in hands of receiver not responsible for negligence of his servants; liability of company for failure to comply with penal statute. 397. Statutory liability of company; judgment not enforceable by state court out of funds held by receiver of United States court. 397a. Suit against company after surrender of possession by receiver. 397b. Receiver's liability official, not personal; may be enforced against his successor. 398. Receivers liable to action for breach of duty as common car- riers. 398a. Right of way; contract with express company; personal con- tracts of company not binding on receiver. 398&. Receiver not liable after discharge; liability of purchasers of road. § 395. Receivers answerable in official capacity for in- juries sustained; judgment not personal; action need not be at receiver's domicile. It has elsewhere been shown, that, as to rights of action which may be maintained against receivers, they are, in general, the same which might have been maintained against the person to whose estate and rights the receiver succeeds. And in conformity with this general doc- trine, when the affairs of a railway company have passed into the hands of receivers, who are operating the road under the direction of the court, having exclusive charge of its manage- ment and of the employment of operatives and employees, the entire control of the company having passed to the receivers as fully as it was before exercised by the officers of the road, the receivers may be held answerable in their official capacity for injuries sustained, in the same manner that the corpora- CHAP. XI.] RAILWAYS. 537 tion would have been liable. An action will, therefore, lie against such receivers in their official capacity, leave of court being obtained, to recover for personal injuries sustained by reason of the negligent management of the road. And in de- termining the liability of the receivers, in such cases, upon such questions as negligence of principal and of agent, acts of co-employees, responsibility for defective machinery, and kin- dred questions, the same principles are applicable which gov- ern this class of actions when instituted against railways themselves.12 In such an action, the receivers can not exempt 13 Meara's Administrator v. Hol- brook, 20 Ohio St., 137; Potter v. Bunnell, id., 159; Klein v. Jewett, 26 N. J. Eq., 474; Erwin v. Daven- port, 9 Heisk., 44; Ex parte Brown, IS S. C, 518; Ex parte Johnson, 19 S. C, 492; Blumenthal v. Brain- erd, 38 Vt., 402; Lyman v. Central Vermont R. Co., 59 Vt., 167, 10 Atl., 346; Missouri Pacific R. Co. v. Texas Pacific R. Co., 30 Fed., 167; Missouri Pacific R. Co. v. Texas Pacific R. Co., 30 Fed., 169; Central Trust Co. V. Wabash, St. L. & P. R. Co., 26 Fed., 12; Hornsby v. Eddy, 56 Fed., 461 ; Rouse v. Harry, 55 Kan., 589, 40 Pac, 1007 ; Fuller- ton V. Fordyce, 121 Mo., 1, 25 S. W., 587, 42 Am. St. Rep., 516; St. Louis .S. W. Ry. Co. v. Holbrook, 19 C. C. A., 385, 73 Fed., 112, 41 U. S. App., 33. See, also, Ohio & Mississippi R. Co. v. Davis, 23 Ind., 553; Nichols v. Smith, 115 Mass., 332; Sloan v. Central Iowa R. Co., 62 Iowa, 728, 16 N. W., 331 ; Paige V. Smith, 99 Mass., 395. But see, contra, Cardot v. Barney, 63 N. Y., 281. In South Carolina & G. R. Co. V. C, C. G. & C. Ry. Co., 35 C. C. A., 423, 93 Fed.. 543, it was held that where the receiver of an in- solvent railway company had en- tered into a valid agreement by which another railway company was to operate the insolvent railroad, whereby the latter became the agent of the receiver, and judgments for personal injuries resulting from the operation of the road had been re- covered against the agent carrier, the latter was entitled to be reim- bursed by the receiver on account of such judgments, where it ap- peared that the injuries were not the result of recklessness or gross carelessness upon the part of the operating railway and that the lat- ter had exercised due care in the management of the road and in the selection of employees. In Georgia the liability of receivers and others operating railways has been defined by statute. Laws of 1895, p. 103. See Barry v. McGhee, 100 Ga., 759, 28 S. E., 455. Meara's Administra- tor V. Holbrook, 20 Ohio St., 137, supra, was an action by an adminis- trator, brought by leave of court against the receivers of a railroad, for personal injuries alleged to have been sustained by the deceased, who was a laborer on the railroad, in the employ of defendants, in attempting to couple two cars in use upon the road. The cause of action was set 538 RECEIVERS. [chap. XI. themselves from liability upon the ground that they are public officers, and as such, not responsible for the negligence of their employees, nor on the ground that they are agents and trustees; for, as to the public and as to their employees, the re- ceivers occupy neither of these capacities, there being no tangi- ble principle behind them who can be held liable in such ac- forth in a petition and an amended petition, to both of which demurrers were filed. The demurrers were sustained in the court below and judgment was rendered against the plaintiff. On error to the supreme court, the judgment was reversed. The court, Day, J., observe, p. 147: 'The demurrers admit the truth of the allegations contained in the peti- tions.- It is averred in each of them that Meara was employed by the re- ceivers as a laborer on the railroad. It is, therefore, not questioned but that his position as such was subor- dinate to the managing agents and superintendents of the receivers. It is averred in each of the peti- tions that the death of Meara was caused while engaged in the busi- ness of the receivers, without any fault of his own. In the original petition it is alleged to have been caused by the negligence of the agents and superintendents of the receivers; and, in both the amended petitions, by the negligence of the receivers themselves. The questions are, therefore, presented, whether a receiver operating a railroad is an- swerable in his official capacity for an injury to his servant, sustained, while in his employment, by reason of the negligence of the receiver, or the negligence of his agents in a position superior to that of the serv- ant. On the strength of the authori- ties already cited, as well as the reason and justice of the case, we think the question of his liability, in an action against him as receiver, should be determined by the same rules and principles that are appli- cable to persons or corporations en- gaged in the business of operating a railroad. . . . Nor would a re- covery against him, and satisfac- tion out of the fund properly ap- plicable to that purpose, work a greater hardship to the creditors and stockholders of the company than that always sustained by them where the company itself is made liable for like grievances when it operates its own road. On the con- trary, if the receiver be not held officially chargeable, in many in- stances they might gain an advan- tage, by his operating the road, over what they would have if the com- pany conducted its own business, subject to its incidental losses. Nor does it follow, if the receiver be held answerable as the company would have been if it had operated the road, that he would be relieved from accountability to his cestui que trust for losses they might sustain through his personal mis- conduct or negligence. In every view, therefore, it accords with sound principle and reason, that a receiver, exercising the franchises of a railroad company, should be held amenable in his official ca- pacity to the same rules of liability CHAP. XI.] RAILWAYS. 539 tions.i^ /^n^ since they exercise the functions and powers of common carriers, they can not escape corresponding duties and liabilities.!^ When, therefore, a statute of the state provides that railway companies shall be liable for all damages which may be sustained by any employee by reason of the negligence of other employees, or when damages are given by statute for the killing of cattle by a railway company, a receiver operating a railway is liable in like manner and to the same extent as the company itself would have been.i^ It is, however, important that are applicable to the company while it exercises the same powers of operating the road. In deter- mining the case before us, then, it only remains for us to apply the ordinary principles controlling cases of this class. Where a subordinate servant is injured, without his own fault, while engaged in the business of his employment, by reason of the negligence of his master or his agents, the master is liable to him in damages. Fifield v. Northern Rail- road, 42 N. H., 225; Brydon v. Stewart, 2 Macq. H. L., 30; Rail- road V. Keary, 3 Ohio St., 201. Meara was the servant of the re- ceivers and was injured according to the cases made in the several petitions demurred to, either through the negligence of the re- ceivers, or that of their agents in a position superior to that of Meara. The receivers are, therefore, liable. It follows that the court of common pleas erred in sustaining the de- murrers of the receivers to each of the petitions, and that the judgment in their favor must, therefore, be reversed." 14 Mcara's Administrator v. Hol- brook, 20 Ohio St., 137. See, con- tra. Cardgt v. Barney, 63 N. Y., 281. 15Z:-r parte Brown, 15 S. C, 518. 16 Hornsby v. Eddy, 56 Fed., 461 ; Central Trust Co. v. Wabash, St. L. & P. R. Co., 26 Fed., 12; Inter- national & G. N. Ry. Co. V. Bender, 87 Tex., 99, 26 S. W., 1047. But see Central Trust Co. v. Wabash, St. L. & P. R. Co., 30 Fed., 344. In Georgia it is held that a statute pro- viding that railway companies shall be liable for injuries caused to their employees through the negligence of co-employees does not apply to the receiver of a railway company and that the fellow-servant rule therefore remains in force. And it is accordingly held that the receiver is not liable where the injury results from the negligence of a fellow- servant. Henderson v. Walker, 55 Ga., 481 ; Thurman v. Cherokee R. Co., 56 Ga., 376; Youngblood v. Comer, 97 Ga., 152, 23 S. E., 509, 25 S. E., 838; Robinson v. Huidekoper, 298 Ga., 306, 25 S. E., 440; Central Trust Co. v. East Tennessee, V. & G. Ry. Co., 69 Fed., 353, followed by Same V. Same, 69 Fed., 357. But in Minnesota it is held that the em- ployees of the receiver of a rail- way company who is operating and managing the road come within the protection of the statute of that state which abolishes the fellow- 540 RECEIVERS. [chap. XI. to observe that judgment should be rendered against a re- ceiver in his official character only and it should not be made a lien upon the property or earnings in his possession.^"^ Such a judgment is regarded as merely ascertaining and fixing the amount due to the plaintiff, leaving the court which appointed the receiver to determine how and when it may be paid out of the assets in the receiver's hands.^^ And since the action is brought against the receiver in his official capacity and not against him personally, it is not necessary that it should be brought at the domicile of the receiver, but where the road is operated through several counties, it may be brought in the county in which the cause of action has arisen.^^ But the receiver of a railway company is not liable for damages for personal injuries suffered prior to his appointment and he is therefore not a proper party to an action brought for the recov- servant rule in its application to railway companies. Mikkelson v. Truesdale, 63 Minn., 137, 65 N. W., 260. And in Peirce v. Van Dusen, 24 C. C. A., 280, 78 Fed., 693, 47 U. S. App., 339, it was held that the statute of Ohio which provided that railway companies within the state should not make certain con- tracts for exemption from liability to employees, and also abolished under certain circumstances the fel- low-servant rule, did not apply to a receiver appointed over such a rail- way company, and that it made no difference in such case that the re- ceiver had been appointed by a fed- eral court. 17 Brown v. Brown, 71 Tex., 355, 9 S. W., 261. 18 Harding v. Nettleton, 86 Mo., 658; Brown v. Brown, 71 Tex., 355, 9 S. W., 261. Where receiver's certificates, by the order authoriz- ing their issue and upon their face, are made a first and prior lien up- on the property of the company and upon all net income derived from its operation after the payment of operating expenses and the costs of administration, a claim for per- sonal injuries suffered during the operation of the road by the re- ceiver is to be regarded as an ex- pense incurred in the operation of the road and, as such, it is entitled to payment out of the income or out of the corpus in preference to such certificates. Anderson v. Con- diet, 35 C. C. A., 335, 93 Fed., 349. As to the liability of the corpus of the estate in the hands of the re- ceiver of a railway company for the satisfaction of a claim for personal injuries suffered prior to the ap- pointment of the receiver, see Fore- man V. Central Trust Co., 18 C. C. A., 321, 71 Fed., 776, 30 U. S. App., 653. 19 Ball V. Mabry, 91 Ga., 781, 18 S. E., 64. CHAP. XI.] RAILWAYS. 541 ery of such damages. ^0 And an ancillary receiver appointed in a foreign state over the property of a railway company can not be held liable for damages for personal injuries suffered in the state of original appointment and resulting from the operation of the road in that state by the original receiver. ^i § 395a. Leave to sue receiver necessary; relief on peti- tion. It is to be borne in mind that the general doctrine elsewhere discussed,22 requiring leave of court to be granted before suit may be brought against a receiver, applies, in the absence of legislation to the contrary, with equal force in ac- tions against receivers of railways.23 And it rests wholly with- in the discretion of the court appointing the receiver, upon leave being asked to bring an action against him, to grant per- mission to bring an independent suit, or to determine the mat- ter upon petition in the cause in which he was appointed, di- recting, if necessary, an issue to be tried by a jury as to the damages sustained.24 The general usage is to determine all demands against a receiver upon petition in the original cause, and this practice is both more expeditious and more economical than by resort to an independent action. And the right to a 20 Northern Pacific R. Co. v. 3 Fed., 97; S. C, 2 Flippin, 704; Heflin, 27 C. C. A., 460. 83 Fed., Central Trust Co., v. Wabash, St. 93, 48' U. S. App., 562. And see, L. & P. R. Co., 23 Fed., 858; post, § 397&. Central Trust Co. v. D. & R. G. R. 21 Union Trust Co. v. Atchison, Co., 38 C. C. A., 143, 97 Fed., 239. T. & S. F. R. Co., 87 Fed., 530. And see Lyman v. Central Vermont 22 Chapter VIII,' subdivision V, R. Co., 59 Vt., 167, 10 Atl., 346, ante. where it is held that when a re- 23 Barton v. Barbour, 104 U. S., ceiver of a railway is also operating 126, affirming S. C, 3 MacArthur, in connection therewith another 212; Melendy v. Barbour, 78 Va., road as lessee, he is regarded as 544; Kennedy v. I., C. & L. R. Co., operating the leased road, not in his 3 Fed., 97; S. C, 2 Flippin, 704. official capacity, but under contract See, contra, Kinney v. Crocker, as lessee, and that an action may be 18 Wis., 74; St. Joseph & Denver brought against him to recover for City R. Co. V. Smith, 19 Kan., 225; injuries sustained by the negligence Blumcnthal v. Brainerd, 38 Vt., of his servants in the operation of 402; Paige v. Smith, 99 ]\Iass., 395. such leased road, without leave of 24 Melendy v. Barbour, 78 Va., court. 544; Kennedy v. I., C. & L. R. Co., 542 RECEIVERS. [chap. XI. trial by jury, in such cases, is treated as wholly discretionary with the court, which may direct the issues of fact to be tried by a jury if it sees fit, or may refer them to a master for de- termination. 25 But it is regarded as the better practice, when the cause of action is in tort, to grant leave to bring an inde- pendent action at law against the receiver, a court of equity not being the proper forum for determining questions of tort and of damages. 26 And when a street railway company is au- thorized by statute to intersect with and use the lines of an- other company, upon payment of just compensation, the court, having appointed a receiver over an existing street railway, has power to entertain a petition by another company to deter- mine the compensation to be paid by it for the use of the tracks and appurtenances in the receiver's possession.^'^ But since a receiver of a railway is not liable to an action for injuries sus- tained before his appointment and while the road was op- erated by the company, leave of court will not be granted to bring such action, and the person aggrieved will be left to pur- sue his remedy against the company.28 § 3956. Rule changed by act of congress; construction of act. The common-law rule requiring leave of court before bringing an action against a receiver has been changed by act of congress, as regards actions brought against re- ceivers of United States courts, in respect to their transac- tions in carrying on the business committed to their charge, as to which matters suit may now be brought without leave of court.29 The effect of this act is to authorize the bringing of 25 Kennedy v. I., C. & L. R. Co., may be reviewed upon the merits on 3 Fed., 97; S. C, 2 Flippin, 704. appeal. And see Central Trust Co. 26 Palys V. Jewett, 32 N. J. Eq., v. D. & G. R. Co., 38 C. C. A., 143, 302. But it is held in the same case, 97 Fed., 239. that where the person seeking dam- -~ Pacific R. Co. v. Wade, 91 Cal., ages for injuries sustained while 449, 27 Pac, 768. the road is operated by a receiver 28 Finance Co. v. Charleston, C. h submits his demand by petition in C. R. Co., 46 Fed., 508. the equity suit, and both parties 29 Section 3, of the act of con- submit to a hearing in this form, gress approved T^Tarch 3, 1887, c. the judgment of the court below 373, 24 Stat., 554, as revised and CHAP. XL] RAILWAYS. 543 actions against such receivers in all matters growing out of their management of the property in their charge, in any court having jurisdiction of the subject-matter, and without leave of the federal court by which the receiver was appointed. And while no other court may interfere with the custody of the property in the receiver's possession, it may yet establish a debt by its judgment against the receivership, leaving the manner of its payment and the adjustment of all equities between dif- ferent claimants interested in the property to the determina- tion of the court which appointed the receiver.^^ And under corrected by an act approved Au- gust 13, 1888, c. 866, 25 Stat., 436, provides as follows : "That every receiver or manager of any proper- ty, appointed by any court of the United States, may be sued in re- spect of any act or transaction of his in carrying on the business con- nected with such property, without the previous leave of the court in which such receiver or manager was appointed; but such suit shall be subject to the general equity jurisdiction of the court in which such receiver or manager was ap- pointed, so far as the same shall be necessary to the ends of justice." 1 U. S. Comp. Stat. 1901, p. 582; 4 Fed. Stat. Ann., 387. 30 Dillingham v. Russell, 73 Tex., 47, 11 S. W., 139; Dillingham v. Hawk, 9 C. C. A., 101, 60 Fed., 494, 23 U. S. App., 273. 23 L. R. A., 517; Reinhart v. Sutton, 58 Kan.. 726, 51 Pac, 221; Chesapeake, O. & S. R. R. Co.'s Receivers v. Smith, 101 Ky., 707, 42 S. W., 538; Baer v. McCullough, 176 N. Y., 97, 68 N. E., 129. See, also, Southern Pac. R. Co., V. Maddox, 75 Tex., 300, 12 S. W., 815; Foreman v. Central Trust Co., 18 C. C. A., 321. 71 Fed., 776, 30 U. S. App., 653; Colonial Trust Co. V. Pacific P. & N. Co., 142 Fed., 298; Ball v. Mabry, 91 Ga., 781, 18 S. E., 64; Rogers v. Chippewa Circuit Judge, 135 Mich., 79, 97 N. W., 154; Peterson v. Baker, 78 Kan., 337, — Pac, — . As to the control exercised by the federal court over judgments ob- tained against its receiver since the passage of the act in question, as to the effect of such judgments and as to the method of enforcing their payment, see Central Trust Co. v. St. Louis, A. & T. R. Co., 41 Fed., 551 ; Missouri Pacific R. Co. v. Texas Pacific R. Co., 41 Fed., 311. In Baer v. McCullough, supra, it was held, under the New York code of procedure which provides that in case of a transfer of inter- est or devolution of liability, the action may be continued by or against the original party, unless the court directs the person to whom the interest is transferred or upon whom the liability is de- volved to be substituted in the ac- tion or joined with the original party, that an action instituted un- der the act of congress against the receiver of a railway company may, upon the final discharge of the re- ceiver by the federal court, be con- 544 RECEIVERS. [CITAP. XT. the statute it is held that where a judgment is recovered against the receiver of a federal court in the court of a state, such judg- ment is concUisive as to the existence and amount of the plain- tiff's claim when it is sought to enforce it in the receivership proceeding.31 Nor is the conclusiveness of the judgment im- paired because it was rendered without a trial by jury, where the statute of the state permits either party to call a jury but they have failed to do so in the particular case.^^ A^d the act is held to be broad enough to include an action for dam- ages for injuries resulting from the negligence of a receiver in failing to keep a station platform in a reasonably safe condi- tion. ^^ And an action against the receiver of a water company for injuries resulting from a defective highway which the re- ceiver was bound to keep in a reasonably safe condition comes within the act and leave to sue is unnecessary.^^ So, an action against the receivers of a railway company to restrain them from entering upon plaintiff's land for railroad purposes until condemnation and payment of compensation falls within the statute and may be brought without leave of the appointing court.^^ And the act applies to a receiver of a corporation created under federal law appointed by one of the territorial courts of the United States.^^ Nor is the right given by the statute limited to the bringing of actions against the receiver in the court by which he was appointed, or in other federal courts, but he may be sued in any court of competent jurisdic- tion, either state or federal. ^^^ And process may be served upon the receiver in the same manner prescribed by the law of the tinued against him, or the plaintiff Holbrook, 19 C. C. A., 385, 73 Fed, in the action may substitute the pur- 112, 41 U. S. App., 33. chaser as party defendant. 33 Fullerton v. Fordyce, 121 Mo., 31 Dillingham v. Hawk, 9 C. C. 1, 25 S. W., 587, 42 Am. St. Rep., A. 101, 60 Fed., 494, 23 U. S. App., 516. 273. 23 L. R. A., 517; St. Louis S. 34 Robinson v. Mills, 25 Mont., W. Ry. Co. V. Holbrook, 19 C. C. 391, 65 Pac, 114. A.. 385, 73 Fed., 112, 41 U. S. App., 35 Stoize v. M. & L. W. R. Co., 33. And see State v. Port Royal 104 Wis., 47, 80 N. W.. 68. & A. R. Co., 84 Fed., 67. 36 Wheeler v. Smith, 81 Fed., 319. 32 St. Louis S. W. Ry. Co. v. 36a Central Trust Co. v. E. T., V. & G. R. Co., 59 Fed., 523. CHAP. XI.] RAILWAYS. 545 state for the service of like process upon the corporation over which he has been appointed. ^"^ But the act does not apply to or authorize proceedings by garnishment, since such proceed- ings are not suits against the receiver for any act or transac- tion of his, but are an equitable seizure of the fund within the custody of the court.^^ Upon the same principle it is improp- er to institute an action in a state court without leave of the federal court which has appointed a receiver, where the object of the action is to recover the possession of property in the custody of the receiver, ^^ Nor will the statute dispense with the necessary leave to sue in the case of an action brought against the receiver for the purpose of taking from his posses- sion and control property belonging to the company and held by it under a claim of title at the time the receiver was ap- pointed. ^^ Nor does the act apply where an action is brought against the receiver by a judgment creditor of a third person for the purpose of subjecting to the payment of such judgment money claimed to be due from the receiver to such third per- son ; ^1 nor to an action brought against the receiver to quiet title to land claimed by the plaintiff but in which the receiver 37 Peterson v. Baker, 78 Kan., upon the judgment against the re- 337, — Pac, — . And see this case ceiver and that the manner in which as to the continuance of the action the judgment shall be paid is a mat- in the name of the receiver not- ter under the exclusive control of withstanding his discharge by the the court which appointed the re- federal court. ceiver, and the judgment can be sat- 38 Central Trust Co. v. East- isfied only by application to that Tennessee, V. & G. R. Co., 59 Fed., court. Irwin v. McKechnie, 58 523 ; Central Trust Co. v. Chatta- Minn., 145, 59 N. W., 987, 26 L. R. nooga, R. & C. R. Co., 68 Fed., A., 218, and note, 49 Am. St. Rep., 685. The contrary view has been 495. taken in Minnesota, where it is 39 j. I. Case Plow Works v. held that a garnishment suit may Finks, 26 C. C. A., 46, 81 Fed., 529, be maintained against the re- 52 U. S. App., 253. ceiver of a railway company to 40 Hollifield v. Wrightsville & T. reach funds in his possession R. Co., 99 Ga., 365, 27 S. E., 715. belonging to the defendant, al- 41 Glover v. Thayer, 101 Ga., 824, though it is expressly stated that 29 S. E., 36. no executory process shall issue Receivers — 35. 546 RECEIVERS. [chap. XI. claims some interest upon behalf of the company ; ^2 nor to an action for damages for personal injuries sustained prior to the appointment of the receiver ; ^^ nor to an action brought against mortgagors and a receiver appointed in another proceeding to foreclose a mortgage upon property in the hands of the re- ceiver.'*^ Nor is the refusal of the receiver to agree upon terms and conditions under which another railroad may cross its lines at grade,^^ or his refusal to institute an action upon a cause of action due the company,^^ an act or transaction of the receiver within the meaning of the statute in question. The evident purpose of the act is to place receivers of railway com- panies appointed by the federal courts upon the same footing as the companies themselves, both as regards their liability for acts done in the operation of the road and in obtaining service of process.^'^ The right given by the act is not limited to cases where the cause of action arises from the act of the receiver himself or his agents, but it extends to the successor of a former receiver under whose administration the right of ac- tion accrued. So long as the property remains in the custody of the court and is administered through the agency of its officer, the receivership is continuous and uninterrupted, al- though the personnel of the receiver may change. The action is, therefore, in effect against the receivership, rather than against the receiver, the liability being an official and not a 42 Bennett v. Northern Pac. R. where receivers were appointed by Co., 17 Wash., 534, 50 Pac, 496. a federal court over a railway ex- 43 Smith V. St. Louis & S. F. Ry. tending through different states, Co., 151 Mo., 391, 52 S. W., 378, having their principal office in one ;., 48 L. R. A., 368, and note. of such states so that they could 44 American Loan & Trust Co. v. not be personally served in the Central V. R. Co., 84 Fed., 917. other, an order was entered direct- 45Buckhannon & N. R. Co. v. ing that service upon a clerk or Davis. 68 C. C. A., 345, 135 Fed., station agent of the receivers at 707, affirming S. C, 131 Fed., 115. any station in the county in which 46 Swope V. Villard, 61 Fed., 417. process might issue, should be ef- 47 Eddy v. Lafayette, 1 C. C. A., fective as valid service upon the re- 441, 49 Fed., 807, 4 U. *S. App., 247, ceivers. Central Trust Co. v. St. affirmed in 163 U. S., 456, 16 Sup. Louis, A. & T. R. Co., 40 Fed., 426. Ct. Rep., 1082, 41 L. Ed., 225. And CHAP. XI.] RAILWAYS. 547 personal one, and a successor may be sued for the act of a former receiver in a state court, and without leave of the fed- eral court.'*^ But the rule in such case applies only where the property involved is the same, and it has no application where the succeeding receiver is appointed over only a small part of the property over which the former receiver was appointed.*^ And an action may be brought without leave against a receiver appointed after the passage of the act of congress, although for an injury sustained by the plaintiff before the passage of the act.50 § 395c. Removal of cause by receiver to federal court. Upon the question as to the right of the receiver of a railway company appointed by a federal court, when sued without leave in a state court, to remove the cause to the court of his appointment where the amount involved is less than two thou- sand dollars, there is a direct conflict of authority in the deci- sions of the various circuits. It has been held that such actions, notwithstanding the statute, are to be considered as ancillary to the main proceeding and are therefore removable without the jurisdictional amount involved.^! The weight of author- ity, however, sustains the contrary and undoubtedly the better view. These cases hold that while, prior to the statute, such an action in a state court might properly be considered as an- cillary to the main cause and therefore removable without the jurisdictional amount being involved, since the enactment of the statute they are no longer to be regarded as ancillary but are separate and independent suits and are therefore not re- movable unless the requisite amount is involved ; and that to hold otherwise would be to defeat the obvious purpose of the 48 McNulta V. Lochridge, 141 U. 50 Texas & Pacific R. Co- v. Cox, S. 327, 12 Sup. Ct. Rep., 11, affirm- 145 U. S., 593, 12 Sup. Ct. Rep., ing S. C, 137 111., 270, 27 N. E., 905. 452 ; State v. Port Royal & A. R. 51 Carpenter v. Northern Pac. R. Co., 84 Fed., 67. Co., 75 Fed., 850; Sullivan v. Bar- 49 Jones v. Schlapback, 81 Fed., nard, 81 Fed., 886. 274. 548 RECEIVERS. [chap. XI. Statute which permits such actions without the leave of the court which has appointed the receiver.^^ § 395t/. New York decisions unsettled; liability for in- juries; rental of leased lines. Notwithstanding the general doctrine, holding receivers of railways to the same liabilities as common carriers as the companies themselves, has the clear weight both of principle and of authority in its support, it has not be uniformly followed in New York, and some incon- sistency and much uncertainty are observable in the decisions in that state upon the question under consideration. Thus, it has been held that the receiver occupies a position analogous to that of a public officer, charged with duties of a public nature, in the performance of which he is compelled to act in part through others, and that it would be a great hardship to im- pose upon him the responsibilities Vv^hich attach to persons act- ing through agents appointed for their own convenience or profit. And upon these considerations, it has been held that he is not liable to passengers for injuries sustained by the negli- gence of his employees, when no personal neglect is imputed to the receiver in their selection, the doctrine of respondeat superior not being applicable in such cases. ^^ The same court having previously held that, when a railroad is operated by a special receiver appointed in bankruptcy proceedings, the com- pany is not liable in an action for damages sustained through the negligence of the receiver's employees,^'* in the light of these decisions there would seem to be absolutely no remedy in New York, to one sustaining loss or damage through the operation of 52 Ray V. Peirce, 81 Fed., 881; court of New York, that, while an Gilmore v. Herrick, 93 Fed., 525; action for personal injuries sus- Pitkin V. Cowen, 91 Fed., 599; Pen- tained by a passenger would not lie dleton V. Lutz, 78 Miss., 322, 29 So. against the receiver personally, he 164. As to the right of removal would be liable in such action as re- in cases which do not come within ceiver, and the judgment should be the statute, see ante, § 60b. made payable out of the funds in 53 Cardot v. Barney, 63 N. Y., his hands as receiver. 281. In Camp v. Barney. 6 N. Y. S. 54 Metz v. B., C. & P. R. Co., 58 C. (Thomp. & Cook), 622; 4 Hun, N. Y., 61. 373, it was held by the supreme CHAP. XI.] RAILWAYS. 549 a railroad by a receiver. But in a later case, it is held that a receiver of another state, who, under the authority of the court appointing him, operates a railroad in New York as les- see, having covenanted in the lease to assume all obligations of the lessor company as a common carrier or otherwise, is liable to an action in New York for damages for injuries sus- tained by an employee upon such road by reason of defective machinery. In such case, it is held that his liability is not af- fected by the fact that he is a receiver in the foreign state, since he is not in possession of the road in New York, as such re- ceiver, but by virtue of his contract, and he can not, therefore, escape the ordinary liabilities of persons operating railroads. And the action being in tort, it may be brought against one of several receivers who occupy the same relation to the property and to the subject-matter of the action.^^ And in a still later case, it is held that when, by the order appointing him, the re- ceiver is authorized to take possession of all the property of the company and to exercise its functions and continue its opera- tions, and to pay rentals under any leases held by the company, if he takes possession of and operates a road held under lease by the company, he thereby assumes the obligations of the les- see and binds the estate to the payment of the rent. An action may, therefore, be maintained against him to recover such rent out of the funds in his hands, and in such action he is estopped from denying the validity of the lease.^^ § 396. Railway company in hands of receiver not re- sponsible for negligence of his servants; liability of com- pany for failure to comply with penal statute. Since re- ceivers of a railway, who are vested with its absolute control and management, are thus liable for injuries resulting from negligence in operating the road, to the same extent that the company itself might have been held liable, it would seem to be 55Kain v. Smith, 80 N. Y., 458. Y., 609. See, also, Frank v. New And see Fuller v. Jewett, 80 N. Y., York, L. E. & W. R. Co., 122 N. Y, 46. 197, 25 N. E., 332. 56 Woodruff V. Erie R. Co., 93 N. 550 RECEIVERS. [chap. XI. clear, upon principle, and in the absence of any absolute lia- bility created by statute, that the corporation itself can not be held responsible for the negligence of servants of a receiver op- erating the road. The receiver's possession is not the posses- sion of the corporation, which can not control either the re- ceiver or his employees. And in an action against a railway company for damages for personal injuries, or for the killing of stock, alleged to have resulted from the carelessness and neg- ligence of employees and servants, it is a sufficient defense that the road, at the time of the alleged injury, was not in defend- ant's possession, but in the possession of a receiver, who had exclusive charge of the employment and management of the agents and employees engaged in operating the road.'^'^ And while the owner and lessor of a street railway company may be liable for the negligence of the servants of its lessee, it can 5" Ohio & Mississippi R Co. v. Davis, 23 Ind., 553 ; Bell v. I., C. & L. R. Co., 53 Ind., 57; Turner v. Hannibal & St. Joseph R. Co., 74 Mo., 602; Ohio & Mississippi R. Co. V. Anderson, 10 Bradw., 313 ; Hicks V. I. & G. N. R. Co., 62 Tex., 38; Henning v. Sampsell, 236 111., 375, 86 N. E., 274; Schurr v. Omaha & St. L. Ry. Co., 98 Iowa, 418. 67 N. W., 280 ; St. Louis & S. F. Ry. Co. V. Bricker, 65 Kan., 321, 69 Pac, 328; Archambeau v. New York & N. E. R. Co., 170 Mass., 272, 49 N. E., 435; Tobin v. Central Vermont Ry. Co., 185 Mass., 337, 70 N. E., 431 ; Chamberlain v. N. Y., L. E. & W. R. Co., 71 Fed., 636; Gableman V. Peoria, D. & E. R. Co., 82 Fed., 790. For the application of the same principle in the case of a turn- pike company, see Lock v. Turn- pike Co., 100 Tenn.. 163, 47 S. W., 133. See, also, Metz v. B., C. & P. R. Co., 58 N. Y.. 61 ; I. & G. N. R. Co. V. Ormond, 62 Tex., 274; Heath V. Missouri, K. & T. R. Co., 83 Mo„ 617. See, also, Godfrey v. Ohio & M. R. Co., 116 Ind., 30, 18 N. E., 61. But it has been held that in such an action against the company, the fact that the road is in the hands of a receiver can not be in- quired into upon a motion to dis- miss for want of jurisdiction, al- though it may be urged in defense of the action. Wyatt v. O. & M. R. Co., 10 Bradw., 289. And in South Carolina it has been held that a railway company is liable for the tort of the receiver of its lessee. Parr v. Spartanberg, etc. R. Co., 43 S. C, 197, 20 S. E., 1009, 49 Am. St. Rep., 826. See Texas & Pacific R. Co. V. Gay, 88 Tex., Ill, 30 S. W., 543, as to the liability of a railway company which has collu- sively procured the appointment of a receiver over its property for in- juries to employees in the employ of the receiver. CHAP. XI.] RAILWAYS. 551 not be held liable for injuries resulting from the negligence of receivers of the lessee company while they are engaged in the operation of the road.^^ So when a railway is in the hands of a receiver and is operated by his servants and employees, the company will not be held liable for their action in obstructing a public street. 5^ So where a railway is being operated by a receiver, the company can not be held liable for failure to com- ply with a statute requiring the giving of a signal upon ap- proaching a public highway, since compliance by the company with the statute would necessitate interference with the opera- tion of the road by the receiver.^^ But where the statutory re- quirement is one with which the company may comply without interfering with the possession and operation of the road by the receiver, as where the statute requires the erection of sign- boards at crossings, the reason for the rule ceases and the com* pany may be held liable.^! But where a railroad is in the hands of a receiver, the company can not be held criminally liable for obstructing a public highway during the time that it is in the hands of the receiver.^^ "When a railway company, in an ac- tion brought against it for damages, pleads the appointment of a receiver who has charge of its affairs, a copy of the order of appointment, or the original, should be set forth with the plead- ings.^^ § 397. Statutory liability of company; judgment not enforceable by state court out of funds held by receiver of United States court. When, however, an absolute liability is fixed upon a railway company by statute, a different prin- ciple prevails. Thus, if the company is made by statute abso- lutely liable for the killing of stock in cases where its road is 58 Henning v. Sampsell, 236 111., 62 State v. Minneapolis & St. L. 375, 86 N. E., 274. Ry. Co., 88 Iowa, 689, 56 N. W., 59 State V. Wabash R. Co., 115 400. Ind., 466, 17 N. E., 909. 63 Ohio & Mississippi R. Co. v. 60 Arkansas Central R. Co. v. Fitch, 20 Ind., 498. State, 72 Ark., 250. 79 S. W., 77:i. 61 Arkansas Central R. Co. v. State, 72 Ark., 252, 79 S. W., 772. 552 RECEIVERS. [chap. XI. not securely fenced, the fact that the affairs of the company have passed into the hands of a receiver, appointed by a fed- eral court, constitutes no defense to an action on such liability against the railway company in a state court, and the plaintiff may recover judgment in such action upon the statutory lia- bility, notwithstanding the possession of the receiver. In such cases it is held that the corporate body still exists, and since the law renders it liable, the receiver operates the road subject to such liability.^^ So under a statute providing that upon the refusal of a railway company to fence its right of 64 Ohio & Mississippi R. Co. v. Fitch, 20 Ind., 498; McKinney v. Ohio & Mississippi R. Co., 22 Ind., 99; Louisville, New Albany & Chi- cago R. Co. V. Cauble, 46 Ind., 277 ; Kansas Pacific R. Co. v. Wood, 24 Kan., 619. But see, contra, Brock- crt V. Central Iowa R. Co., 82 Iowa. 369, 47 N. W., 1026. The doctrine of the text is very clearly stated in Louisville, New Albany & Chicago R. Co. V. Cauble, 46 Ind., 277, by Buskirk, J., who says, p. 279: "By the first section of the act of March 4, 1863, 3 Ind. Stat., 413, it is pro- vided 'that lessees, assignees, re- ceivers and other persons, running or controlling any railroad, in the corporate name of such company, shall be liable, jointly or severally •with such company, for stock killed or injured by the locomotives, cars or other carriages of such company, to the extent and according to the provisions of this act.* By the above quoted section, lessees, as- signees, receivers or other persons running or controlling any railroad company in the corporate name of such company are made liable either jointly with the railroad company, or severally, that is, with- out the company being joined with them, for stock killed or injured by the locomotives, cars or other car- riages of such company, to the ex- tent and according to the provisions of such act. By the second section of such act, it is provided in express terms that such action may be brought against the railroad, whether the same was being run by the company or by a lessee, as- signee, receiver or other person in the name of the company. The question discussed by counsel for appellant therefore resolves itself into the question of whether the legislature of this state possessed the constitutional power to pass the above recited act. The corporate existence, powers and franchises of the appellant were conferred by the legislature of this state. We have carefully examined the decree of the United States circuit court for the district of Indiana, appoint- ing Mr. Chapman receiver, and find nothing therein which attempts to take away the corporate existence, powers or franchises of the appel- lant, and it is, therefore, unneces- sary for us to express any opinion as to the power of the federal judiciary to decree a forfeiture of the corporate existence and fran- CHAP. XI.] RAILWAYS. 553 way, an adjacent owner may build the fence and recover double its value from the company, the fact that the property of the company has passed into the hands of and is being operated by a receiver constitutes no defense to such an action against the company. 65 And under a statute giving a right of action when the death of any person has been caused by the negligence or carelessness of the proprietor, owner, charterer or hirer of any railroad, or by the negligence or carelessness of his servants or agents, an action under the statute will not lie against a re- ceiver who is operating a railroad. Such a receiver does not fall within the class of persons designated, but is the official representative of the court and holds possession in that capa- city, having no personal proprietorship, ownership or interest in the property.^^ g^t under a statute providing that every railway company shall be responsible in damages to any person whose buildings or other property might be injured by fire communicated by locomotives, it is held that the statute, being remedial, should be given a liberal construction, and that the chises of a corporation created by company and its operations de- a sovereign state. The whole de- pended upon its corporate existence. cree proceeds upon the theory that If that had been taken away, the the appellant is a corporation ere- power and authority of the receiver ated and existing under the laws would have ceased and terminated, of this state. The whole effect of for no court, federal or state, can the decree is, to take the custody, confer corporate powers and fran- control and management of such chises upon an individual. Such corporation out of the hands of the powers can be created and con- persons who were controlling and ferred by the legislative department managing the same, and to place alone." the same into the custody and 65 Ohio & Mississippi R. Co. v. under the control and management Russell, 115 111., 52, 3 N. E., 561. of the receiver for a specified time 66 Turner v. Cross, 83 Tex., 218, and for a special purpose. The cor- 18 S. W., 578; Yoakum v. Selph, porate existence of the appellant 83 Tex., 607, 19 S. W., 145; Texas was left intact. The corporate & Pacific R. Co. v. Collins, 84 Tex., powers and franchises which had 121, 19 S. W., 365; Allen v. Dilling- been exercised by the officers of ham, 8 C. C. A., 544, 60 Fed., 176, the company were conferred for 23 U. S. App., 167; Burke v. Dil- the time being upon the receiver. lingham, 9 C. C. A., 255, 60 Fed., The power and authority of the re- 729, 23 U. S. App., 153. ceiver to manage and control the 554 RECEIVERS. [chap. XI. receiver of a railway company should therefore be held liable under it.^'^ And in an action brought by a lessor of real estate against the lessee, a railway company, to recover damages for waste to the demised premises, it affords no defense to the ac- tion that the alleged acts of waste occurred while the railway was in the possession of and operated by a receiver. In such case, there being an implied covenant upon the part of the les- see to so use the premises that no injury shall result to them, the fact that the breach of such covenant occurs through the act of a stranger to the lease, the receiver, affords no defense to the action. ^^ And since the appointment of a receiver over a railway company does not prevent the prosecution of pend- ing actions against the company, it is improper to join the re- ceiver as a party defendant to a pending action to recover for an alleged trespass committed by the company prior to the re- ceivership.^9 A state court is powerless to enforce payment of a judgment against a railway company, out of funds in the hands of a receiver appointed by a United States court, even under a statute of a state providing a process for the enforce- ment of judgments against railway corporations out of the funds in the hands of their receivers or agents. The receiver deriving his appointment and authority from the federal court, and being charged with the duty of operating the road and ac- countable to that court for the proceeds, these proceeds are be- yond the jurisdiction or control of the state court. The proper course for the plaintiff, in such a case, would seem to be either to apply to the federal court for leave to sue the receiver, or for an order on the receiver to pay the judgment recovered in the state court."^^ And in an action against a railway company to recover damages for personal injuries, defendant can not plead, either in bar or in abatement of the action, that at the time of beginning the suit the company was in the hands of a receiver, 67 Wall V. Piatt, 169 Mass., 398, 69 Decker v. Gardner, 124 N. Y., 48 N. E., 270. 334, 26 N. E., 814. 68 Powell V. Dayton, S. & G. R. 70 Ohio & Mississippi R. Co. v. R. Co., 16 Ore., 33, 16 Pac, 863. Fitch, 20 Ind., 498. CHAP. XI.] RAILWAYS. 555 since the appointment of the receiver does not impair the juris- diction of the court over the defendant company, or over the subject-matter of the action.'^^ § 397a. Suit against company after surrender of posses- sion by receiver. One who sustains injuries by the negli- gent operation of a railway while in the hands of a receiver of a federal court may maintain an action in a state court on ac- count of such injury against the railway company after its property has been restored to its possession by the federal court, when the current earnings of the road, while operated by the receiver, have been applied to permanent improvements and betterments of the property to an extent exceeding the amount of the judgment in such action. And this may be done, not- withstanding the federal court has discharged the receiver and has entered an order barring all claims which were not presented to that court within a given period, the plaintifif in such action not having presented his claim or intervened under the order. In such case the order requiring claimants to intervene and to present their claims within a given time does not affect the rights of parties in interest to enforce their demands in any other lawful manner and within such time as the law may prescribe.'^2 And when in such case a judgment has been re- covered against the receiver prior to his discharge, it may be '''^ Ohio & Mississippi R. Co. v. court. Texas & Pacific R. Co. v. Nickless, 71 Ind., 271. Bloom, 164 U. S., 636, 17 Sup. Ct. 72 Texas & Pacific R. Co. v. John- Rep., 216, 41 L. Ed., 580, affirming son, 76 Tex., 421, 13 S. W., 463 ; s. C, 9 C. C. A., 300, 60 Fed., 979, Texas & Pacific R. Co. v. Over- 23 U. S. App., 143. See, also, Texas heiser, 76 Tex., 437, 13 S. W., ^ paj.iflj, r q^ ^ Johnson, 151 U. 468; Texas & Pacific R. Co. v. g^ g^^ ^4 ^^^ q j^^p^ 250. which Geiger, 79 Tex.. 13, IS S W., ^^^ ^ ^^.^ ^^ ^^^^^ ^^ ^^^^^^^ ^^^ ^^'^' '^'^f i' ^^'If' ,?■ c „r judgment of the supreme court of Miller, 79 Tex., 78, 15 S. W., L ■ ,u 7/; t ... ' ' 00 T Texas m the same case, 76 lex.. 421, 13 S. W., 463. In this case it 264; Boggs v. Brown, 82 Tex., 41, 17 S. W., 830; Texas & Pacific . ,, , , R Co z; Brick, 83 Tex., 526, 18 ^'^^ held by the supreme court of S. W, 947; Texas & Pacific R. Co. the United States, that m the case V. Comstock, 83 Tex., 537, 18 S. W., as decided by the supreme court of 946. And in such case the action Texas there was no error m the may be maintained in a federal disposition of the federal questions 556 RECEIVERS. [chap. XL enforced against the railway company after its property has been restored to its possession.'^^ But since the raihvay com- pany is not in such cases hable, ipso facto, for the neghgence of its receiver, but only upon the ground of a diversion of the receiver's income in betterments upon the property afterward surrendered to the company, in the absence of proof of such diversion, judgment should not be rendered against the com- pany.'^'* But where a railway company has been allowed to resume possession of its road, which had been in the hands of a receiver in a foreclosure suit, under an order of the court which directed the receiver to turn over the possession of the involved, and its judgment was, therefore, affirmed. And see Hous- ton & Texas C. Ry. Co. v. Craw- ford, 88 Tex., 277, 31 S. W., 176, 28 L. R. A., 761, 53 Am. St. Rep., 752; San Antonio & A. P. Ry. Co. V. Bowles, 88 Tex., 634, 32 S. W., 880. 73 Texas & Pacific R. Co., v. Grif- fin, 76 Tex., 441, 13 S. W., 471. 74 Texas & Pacific R. Co. v. Huff- man, 83 Tex., 286, 18 S. W., 741. The cases cited in support of the foregoing section arose under the receivership of the Texas & Pacific Railway Company, whose road ex- tended through the state of Texas, the receiver being originally ap- pointed by the United States circuit court for the eastern district of Louisiana, and the principal admin- istration of the receivership being had in that court. No part of the road was located in the state of Louisiana, but the same receiver was afterward appointed in a sim- ilar action in the United States cir- cuit court for the eastern district of Texas. While in some of the cases above cited the supreme court of Texas criticised the propriety of such a receivership, it seems to have conceded that the circuit court of the United States in Louisiana had jurisdiction and that its order ap- pointing the receiver was, therefore, valid, and could not be questioned in a collateral proceeding. But in a later case in the same court, Texas & Pacific R. Co. V. Gay, 86 Tex., 571, 26 S. W., 599, it was held in an elaborate and exhaustive opinion, in the case of the same railway com- pany, incorporated under an act of congress, its road extending through Texas with its eastern terminus in that state, and no part of its line extending into the state of Louisiana, that the federal court in the latter state had no ju- risdiction to appoint a receiver over the property and that its order was, therefore, void. It was further held that the receiver, acting under a void order, occupied, in effect, the position of an agent of the com- pany, and that after his discharge th,e company itself might be held liable for injuries occurring while the railway was operated by him, in like manner as if operated by an ordinary agent. CHAP. XI.] RAILWAYS. 557 property and to render a report of receipts and disbursements, but reserved the settlement of all claims against the receiver, and provided that the company should take possession upon condition that it should pay off all obligations incurred by the receiver, it was held that the company was liable as a defendant to an intervening petition filed in the receivership proceeding for injuries resulting from the negligent operation of the road in the hands of the receiver. '^^ And where a railway company is organized under a statute which provides that it shall pur- chase the property of an insolvent railway company in the hands of a receiver and further provides that such purchasing company shall take the property subject to all suits and claims for damages against the receiver, the purchasing corporation becomes liable for damages for personal injuries resulting from the operation of the road by the receiver, and judgment is properly rendered against such company regardless of the question of betterments.'^^ § 397b. Receiver's liability official, not personal; may be enforced against his successor. The liability of the re- ceiver of a railway for the negligence or torts of his servants and employees in operating the road is not a personal one, and he is only liable in his official capacity as receiver or agent of the court, the proceeding being analogous to a proceeding in rem, and binding the property or estate, rather than the person of the receiver.'^'^ It is, therefore, error to render judgment against a receiver in his individual capacity and to award execution thereon, and the judgment should be against the receiver as such, to be paid out of the funds held by him in that capacity in due course of the administration of his receivership.'^^ So when the receiver resigns and a successor 75 Baltimore & O. R. Co. v. Bur- affirmed in 141 U. S., 327. 12 Sup. ris, 50 C. C. A., 48, 111 Fed., 882. Ct. Rep., 11; Erskine v. Mcllrath, 76 Cross V. Evans, 29 C. C. A., 60 Minn., 485, 62 N. W., 1130; Gray 523, 86 Fed., 1, 52 U. S. App., 720. v. Grand Trunk W. Ry. Co., 84 C. 77 McNulta V. Ensch, 134 III., 46, C. A., 392, 156 Fed., 736. 24 N. E., 631 ; McNulta v. Lock- 78 McNulta v. Ensch, 134 111., 46, ridge, 137 111., 270, 27 N. E., 452, 24 N. E., 631. 558 RECEIVERS. [chap. XI. is appointed, an action may be maintained against such suc- cessor and a recovery had against him for damages sustained by an injury occurring during the administration of the former receiver, the judgment being payable out of the funds in the hands of the successor in due course of administration. "^^ And since the habihty of a receiver in this class of cases is an offi- cial and not a personal liability, it constitutes no defense to such an action that a defect in the road which caused the in- jury existed when the property came into the receiver's pos- session, and that he had not had sufficient time to repair or to remedy such defect.^^ And an action against the receivers of a railway company for the death of plaintiff's intestate is not abated or barred by an order of the court in the receivership proceeding directing that the property in the hands of the re- ceivers should be turned back to the company, but providing that it should be accepted upon condition that the company should pay all obligations incurred by the receivers which should be adjudged to be valid debts and obligations of the receivers, the court retaining jurisdiction for the adjustment of such claims, but not providing for the discharge of the re- ceivers.^i But an action can not be maintained against the receiver of a railway company to recover damages for injuries sustained as the result of the alleged negligence of the company prior to the appointment of the receiver.^^ Sq an action will not lie against the receiver individually to hold him liable for negligence of servants employed by him as receiver.^^ § 398. Receivers liable to action for breach of duty as common carriers. It has already been shown that receiv- ers of railways are liable to actions for personal injuries in- curred during their management and operation of the road, "!■!> McNulta V. Lockridge, 137 III., 81 Cowen v. Merriman, 17 App. 270, 27 N. E., 452, affirmed in 141 D. C, 186. And see, ante, § 395. U. S., 327, 12 Snp. Ct. Rep., 11. 82 McDermott v. Crook, 20 App. 80 Texas & Pacific R. Co. v. D. C, 465. Geiger, 79 Tex., 13, 15 S. W., 214; 83 Erskine v. Mcllrath, 60 Minn., Bonner v. Mayfield, 82 Tex., 234, 485. 62 N. W., 1130. 18 S. W.. 305. CHAP. XI.] RAILWAYS. 559 leave of court being had to bring the action.^^ It is not to be understood that their Habihty is confined to this class of actions, and it may be affirmed, generally, that they are liable as common carriers for negligence in the performance of their duties, and an action for damages sustained by such negligence will lie against them in their official capacity. The fact that they were acting as receivers, under appointment from a court of chancery, can not be recognized as a defense to a suit at law for breach of any obligation or duty voluntarily assumed by them in conducting their business as such receivers. And their assumption of the duties and responsibilities of common car- riers is not regarded as incompatible with any duty or respon- sibility imposed upon them as receivers.^^ Being thus held liable as common carriers in the state of their appointment, such receivers may be held to the same liability in another state. And in an action brought against them in another state to re- cover damages for loss of freight, the court will not concede to the defendants an exemption from the ordinary liabilities of common carriers more extensive than is allowed them in the state of their appointment, and in which the loss occurred. And in such a case, the ordinary rule, that receivers are amen- able solely to the court appointing them, has been held to be in- applicable.^^ But while the cases supporting this doctrine are believed to state the correct rule as to the liability of railway re- ceivers as common carriers, they are not to be accepted as au- thoritative upon the right to institute such actions without leave of the court appointing the receiver, since, as we have al- ready seen, the better considered doctrine, and that supported by the clear weight of authority, in the absence of legislation to the contrary, requires such permission before the action may be brought.^"^ 84 See, ante, § 395. that when a citizen of New Jersey 85 Blumenthal v. Brainerd, 38 Vt, is appointed receiver over a rail- 402; Ex parte Brown, 15 S. C, 518. way corporation of that state, and 86 Paige v. Smith, 99 Mass., 395. afterward, by an ancillary proceed- 87 See § 395a, ante. In Davies v. ing in New York, he is appointed Lathrop, 20 Blatchf., 397, it is held receiver over the property of the 560 RECEIVERS. [chap. XI. § 39Sa. Right of way; contract with express company; personal contracts of company not binding on receiver. An action may be maintained against the receiver, by leave of court, to recover damages sustained by plaintiff by the construc- tion of the railway through his premises without making com- pensation therefor, prior to the receiver's appointment, the judgment, when recovered, to be satisfied out of the assets in the receiver's hands under the orders of the court appointing hini.^^ But a contract by which a railway company gives to an express company the exclusive right to transact all express business over the road for a given period, can not be enforced against a receiver afterward appointed in foreclosure proceed- ings against the railroad. Such a contract gives no lien upon the property of the company, and its specific performance by the receiver would be only a form of payment or satisfaction which he can not be required to make.^^ So the receiver is not bound by contracts of the railway company which are of a personal character and which he has not adopted or affirmed. Thus, a contract by which the company agrees to maintain a switch upon the land of a property owner is regarded as of a personal nature, and if receivers of the company discontinue such switch, they will not be liable in an action brought by the property owner.^^ So when a railway company has contract- ed with a marble company to carry marble from its quarries to a given point, allowing it to be stopped at an intermediate company in that state, and an ac- 89 Express Co. v. Railroad Co., 99 tion is brought by citizens of New U. S., 191. And see, ante, §§ 273 York, in a court of that state, and 393c. against the receiver, to recover for ^0 Brown v. Warner, 78 Tex., 543, the death of plaintiff's intestate 14 S. W., 1032. As to the right of upon a train operated by the re- an abutting property owner to main- ceiver in New Jersey, the receiver tain an action against a receiver of will be regarded as a citizen of New a railway for damages resulting Jersey, and the cause may, there- from the improper use of a street fore, be removed to the United occupied by the tracks of the com- States court in New York. pany, see Frankle v. Jackson, 30 88 Combs V. Smith, 78 Mo., 32 ; Fed., 398. Ratcliff V. Adler, 71 Ark., 269, 72 S. W., 896. CHAP. XI.] RAILWAYS. 561 station to be prepared for market, and a considerable quantity of marble upon which the freight has been prepaid under the contract is at such intermediate point at the date of appointing a receiver over the railway company, an action can not be maintained against the receiver for the specific performance of the contract, or the refunding of the freight already paid, the shipper having no lien for the amount thus paid.^^ § 398&. Receiver not liable after discharge; liability of purchasers of road. After the discharge of the receiver, no action can be maintained against him to recover for personal injuries sustained by the negligence of his employees, since he can not be made personally liable for their torts.92 if^ how- ever, the purchaser at the foreclosure sale acquires the property subject to all demands against the receiver, the court still re- taining jurisdiction of the cause for the purpose of enforcing payment of such demands, it may entertain a petition against the purchaser to recover for personal injuries sustained during the receiver's operation of the road.^S And in such case, a judgment for such cause of action being by the laws of the 01 Central Trust Co. v. Marietta afterward the property was sold to & N. G. R. Co., 51 Fed., 15. another company^ the order of the 92 Davis V. Duncan, 19 Fed., 477; court providing that the sale should Farmers' Loan & Trust Co. v. Cen- be upon the express condition that tral Railroad, 7 Fed., 537; McGhee the purchaser should pay all obliga- V. Willis, 134 Ala., 281, 32 So., 301 ; tions and indebtedness legally con- Archamb'cau v. Piatt, 173 Mass., tracted by the receiver before the 249, 53 N. E., 816; Tobin v. Central delivery of the possession of the Vermont Ry. Co., 185 Mass., 337. property and that the receiver 70 N. E., 431. And see Thompson should be discharged but that his V. Northern Pac. R. Co., 35 C. C. discharge should not operate to pre- A., 357, 93 Fed., 384. And see, ante, vent him from defending any suit § 255. brought against him as such re- 93 Farmers' Loan & Trust Co. v. ceiver still undetermined or any suit Central Railroad, 17 Fed., 758. In that might thereafter be brought Denver & R. G. R. Co. v. Gunning, against him as such receiver, it was 33 Colo., 280, 80 Pac, 727, where a held that both the receiver and the claim for damages had arisen as the purchaser were proper parties de- result of the death of the plaintiff's fendant to an action brought to en- wife through the negligent opera- force the claim. tion of the road by the receiver, and Receivers — 36. 562 RECEIVERS. [chap. XI. State made a lien upon the railway, the judgment may be estab- lished as a lien after the road has passed into the hands of purchasers.^'* But when the road is sold, subject to the pay- ment of all liabilities incurred by the receiver in its operation, a bill in equity can not be maintained against the purchasers to recover damages for injuries sustained during the receiver- ship, since equity will not assume jurisdiction of a controversy for the recovery of unliquidated damages in tort.^^ Such a purchaser, however, having purchased subject to all liabilities growing out of the receiver's operation of the road, is liable in an action at law for the recovery of such damages, the injury having been caused by the negligence of the receiver's employ- ees.^^ So where a proceeding has been instituted against the re- ceivers of a railway company to recover a statutory penalty for failure to maintain cattle guards, and, pending the proceeding, the receivers are discharged and the property is sold to another company under a decree which provides that the purchasers shall pay any unpaid obligations or liabilities incurred by the receivers, the action against the receivers is properly revived against the purchasing company and the latter may be held liable for the statutory penalty in question.^'^ And when a foreclosure sale is had expressly subject to all indebtedness in- curred by the receiver, which is declared to be a lien vipon the property prior to that of the mortgagees, the purchasers cov- enanting to pay all damages and liabilities incurred by the re- ceiver, or which should have been paid out of the property, the purchasers are liable for the payment of a judgment recov- ered against the receiver on account of the death of plaintiff's intestate while the road was operated by the receiver. In such case, the judgment creditor may maintain an action against the purchasers for the recovery of the judgment, or 04 Farmers' Loan & Trust Co. v. em Pac. R. Co., 35 C. C. A., 357, Central Railroad, 17 Fed., 758; S. 93 Fed., 384. But the contrary view C, 5 McCrary, 421. has been taken in Massachusetts. 95 Brown v. Wabash R. Co., 96 Tobin v. Central Vermont Ry. Co., 111., 297. 185 Mass., 337, 70 N. E.. 431. 96 Sloan V. Central Iowa R. Co., ^7 Memphis & Charleston R. Co. 62 Iowa, 728; Thompson v. North- v. Glover, 78 Miss., 467, 29 So., 89. CHAP. XI.] RAILWAYS. 563 to establish a lien upon the property and for its sale in satisfac- tion of the judgment.^^ So when property is purchased and paid for out of the receiver's income, and is delivered to the company upon the surrender back of the road at the termina- tion of the receivership, such property is liable in equity for damages sustained by injuries while the road was operated by the receiver, when the rights of third persons have not inter- vened, the liability, in such case, being based upon the diver- sion of income by the receiver.^^ But since the liability of a receiver of a railway for damages sustained during his man- agement of the road is an official and not a personal liability, it terminates with his discharge, and after he has been dis- charged and the property has been delivered pursuant to the order of the court, no judgment can be rendered against him for such injuries, even in an action which is pending at the time of his discharge. If the property has been delivered back to the railway company without sale it is proper to substitute the company as a defendant rather than to abate the action itself. In such case an amendment to the petition or com- plaint making the railway company a defendant after the dis- charge of the receiver is not the beginning of a new action, but merely a continuation of the former suit, and the statute of limitations as to the cause of action is suspended by the bringing of the original action against the receiver.^ And when a receiver, appointed by a federal court, has been discharged by that court and the property delivered over according to the orders of the court, the official existence of the receiver ceases, and suits pending in the state courts, upon a plea of the dis- charge, must be abated. ^ 98 Schmid v. N. Y., L. E. & W. 1 Brown, Receiver, v. Gay, 76 R. Co., 32 Hun, 335. And see Ryan Tex., 444, 13 S. W., 472; Boggs v. V. Hays, 62 Tex., 42; Hicks v. I. Brown, 82 Tex., 41, 17 S. W., 830; & G. N. R. Co., 62 Tex., 38; I. & Texas & Pacific R. Co. v. Com- G. N. R. Co. V. Ormond, 62 Tex., stock, 83 Tex., 537, 18 S. W., 946. 274; Brockert v. Iowa Central Ry. And see Texas & Pacific R. Co. v. Co., 93 Iowa, 132, 61 N. W., 405. Adams, 78 Tex., 372, 14 S. W., 666. 09 Mobile & Ohio R. Co. v. Davis, 2 Fordyce v. Du Bose, 87 Tex., 62 Miss., 271. 78, 26 S. W., 1050. 564 RECEIVERS. [chap. XL VI. Receivers' Certificates. § 39Sc-. Receivers' certificates sustained by authority; not invalid because bill is demurrable. 398c?. Purposes for which issued; order strictly construed; priorities; notice. 398^. Not commercial paper; innocent holders not protected; pur- chasers charged with notice of order. 398/. When bondholder estopped from questioning validity; when bondholder not estopped; consent of trustee to certificates; order for certificates appealable. 298g. Sale of road subject to certificates; purchaser concluded; me- chanic's lien. 398h. Certificates for construction; when new company liable for certificates. 398i. Case of Illinois Midland Railway Company. 398/. Priority as between compensation of receiver and that of trustee; same as to counsel fees. § 398c. Receivers' certificates sustained by authority; not invalid because bill is demurrable. In actions for the foreclosure of raihvay mortgages, a practice has grown up in recent years of authorizing the receiver appointed in the fore- closure proceedings to issue debentures or certificates of in- debtedness for the purpose of raising money to procure ma- terials, labor, supplies and rolling stock, for the maintenance and repair of the road, and in some instances for completing an unfinished line or for making extensions of an existing line of road. These certificates are, by the order of the court, de- clared to be a first lien upon the entire property, income and franchises of the railway company, and such order is usually recited in the body of the certificate itself. In cases where re- sort is had to this method of raising money, the income of the receivership being generally inadequate to the payment of the certificates, they are usually paid out of the proceeds of fore- closure, before distribution among the mortgage bondholders. The power to thus create a new lien or mortgage upon the property, and to give it priority over existing mortgages, marks the extreme limit which courts of equity have thus far attained in the exercise of their extraordinary jurisdiction. It can hardly be questioned that the exercise of such a power impairs CHAP. XI.] RAILWAYS. 565 the obligation of the mortgage contract, and frequently results in the diversion of a large portion of the mortgage security. A power so dangerous because so boundless can not be sus- tained upon any just principles of legal reasoning. Neverthe- less, as was said upon the question of preferring payment of operating expenses prior to the receivership, as against the lien of mortgage bondholders, this branch of the jurisdiction is so well established upon authority that its existence is no longer open to question.^ The exercise of the jurisdiction is justified upon the principle that the court having taken under its charge the property of the railway company as a trust fund for the payment of incumbrances, it may authorize its receiv- ers to raise money necessary for the preservation and manage- ment of the property, and may charge the same as a lien there- on, when necessary for the preservation of the trust estate."* The exercise of the power is also justified from the peculiar nature of railway property and from the necessity of continu- ing it in operation as a "going concern," pending foreclosure proceedings, as well as for the preservation and protection of the interests of the public.^ The jurisdiction is to be exercised with extreme caution, and, if possible, with the consent or acquiescence of the parties in interest.^ And when the cer- tificates have thus been issued, either with the consent of the bondholders, or without objection on their part, they will be 3 Wallace v. Loomis, 97 U. S., as against mortgage bondholders, 146; Meyer v. Johnston, S3 Ala., to issue receivers' certificates and 237; Hoover v. M. & G. L. R. Co., to make them a prior lien and 29 N. J. Eq., 4; Taylor v. P. & R. charge upon the mortgaged prem- R. Co., 7 Fed., 377; Bank of Mont- ises, for the payment of wages due real v. C, C. & W. R. Co., 48 Iowa, to operatives prior to the receiver- 518; Kennedy v. St. Paul & Pacific ship. R. Co., 2 Dill., 448; S. C, 5 Dill., 4 Wallace v. Loomis, 97 U. S., 519; Illinois Trust & Savings Bank 146. But see Street v. Maryland C. V. Pacific Ry. Co., 115 Cal., 285, 47 R. Co., 59 Fed., 25. Pac, 60. See, contra, Metropolitan ^ Meyer v. Johnston, 53 Ala., 237. Trust Co. V. Tonawanda Valley & 6 Wallace v. Loomis, 97 U. S., C. R. Co., 103 N. Y., 245, 8 N. E., 146; Investment Co. v. Ohio & N. 488, where it was held in a well- W. R. Co., 36 Fed., 48. considered opinion to be improper, S66 RECEIVERS. [chap. XI. enforced as a prior Hen upon the property, and will be paid out of the proceeds of foreclosure, before payment to the bond- holders.''' Nor are receivers' certificates which are otherwise valid rendered invalid by the fact that the bill in the proceed- ing in which they are issued is bad upon demurrer.^ § 398(/. Purposes for which issued; order strictly con- strued; priorities; notice. No limit has been fixed to the purposes for which receivers' certificates may be issued, other than that they shall be germane to the objects of the receiver- ship and necessary to the proper administration of the trust. Thus, they have been authorized for the preservation, manage- ment and repair of the road, and for the purchase of rolling stock; ^ for the making of repairs only; ^^ for the further con- struction, equipment and final completion of the road ; ^^ to 7 Wallace v. Loomis, 97 U. S., 146. Mr. Justice Bradley, deliver- ing the opinion of the court, says, p. 162: "The receivers were au- thorized by the order appointing them, amongst other things, to put the road in repair and operate the same, and to procure such rolling stock as might be necessary; and, for these purposes, to raise money by loan to an amount named in the order, and issue their certificates of indebtedness therefor; and the or- der declared that such loan should be a first lien upon the property, payable before the first mortgage bonds. The power of a court of equity to appoint managing receiv- ers of such property as a railroad, when taken under its charge as a trust fund for the payment of in- cumbrances, and to authorize such receivers to raise money necessary for the preservation and manage- ment of the property, and make the same chargeable as a lien thereon for its repayment, can not, at this day, be seriously disputed. It is a part of that jurisdiction, always ex- ercised by the court, by which it is its duty to protect and preserve the trust funds in its hands. It is, un- doubtedly, a power to be exercised with great caution ; and, if possible, with the consent or acquiescence of the parties interested in the fund. In this case it appears that the par- ties most materially interested either expressly consented to the order, or offered no objection to it." 8 Farmers' Loan & Trust Co. v. Centralia & C. R. Co., 37 C. C A., 528, 96 Fed., 636. 9 Wallace v. Loomis, 97 U. S., 146; Union Trust Co. v. Illinois Midland R. Co., 117 U. S., 434, 6 Sup. Ct. Rep., 809, affirming in part and reversing in part S. C, 28 Fed., 169. 10 Hoover v. M. & G. L. R. Co., 29 N. J. Eq., 4. 11 Bank of Montreal v. C, C. & W. R. Co., 48 Iowa, 518; Bank of Montreal v. Thayer, 7 Fed., 622; First National Bank v. Ewing, 43 C. C. A., 150, 103 Fed., 168. In CHAP. XI.] RAILWAYS. 567 complete an unfinished portion of the road within the time fixed by law, and thus to prevent the lapsing of valuable land grants and franchises of the company ; ^^ for the im- provement, repair and operation of the road ; ^^ to procure rolling stock, machinery and necessary supplies, and to repair and operate the road,^^ and in payment for labor, materials, supplies and taxes due prior to the receivership.^^ So they have been issued in payment for the construction of a line of railway which, while not a part of the mortgaged system, yet formed a part of the continuous line or system made up of different di- visions operated by the receiver as an entirety, and the use by the receiver of the branch in question being necessary to pre- vent the dismemberment of such system. ^^ And when an iron company has constructed a railroad for the transportation of ore from its mines, upon the appointment of a receiver over the company, certificates have been issued for rebuilding a bridge upon such railroad, for paying taxes and expenses of Bibber-White Co. v. White River V. E. R. Co., 53 C. C. A., 282, 115 Fed., 786, it was held to be an er- roneous exercise of judicial discre- tion for the court to authorize re- ceivers' certificates for the comple- tion of a line of railroad of which only one-third was already com- pleted, and to give such certificates preference over other certificates previously issued, especially where the bondholders were given no op- portunity to be heard. But in Rutherford v. Penn. M. R. Co., 178 Pa. St., 38, 35 Atl., 926, it was held that while ordinarily receivers' cer- tificates should not be issued for the completion of an unfinished line of railroad, yet it was proper to issue them where it was done with the approval of 96 per cent, of the bondholders and was without pre- judice to the non-assenting bond- holders. 12 Kennedy v. St. Paul & Pacific R. Co., 2 Dill., 448; S. C, 5 Dill., 519. 13 Turner v. P. & S. R. Co., 95 111., 134; Stanton v. A. & C. R. Co., 2 Woods, 506. 14 Swann v. Clark, 110 U. S., 602, 4 Sup. Ct. Rep., 241. 15 Humphreys v. Allen, 101 111.. 490; Taylor v. P. & R. R. Co., 7 Fed., 377; Union Trust Co. v. Illi- nois Midland R. Co., 117 U. S., 434, 6 Sup. Ct. Rep., 809, affirming in part and reversing in part S. C, 28 Fed., 169; First National Bank v. Ewing, 43 C. C. A., 150, 103 Fed., 168; Bank of Commerce v. Central C. & C. Co., 53 C. C. A., 334, 115 Fed., 878. i6Kneeland v. Luc-?, 141 U. S., 491, 12 Sup. Ct. Rep., 32. 568 RECEIVERS. [chap. XI. condemnation suits and for other purposes necessary to put the property in a salable condition ; and such certificates have been preferred in payment out of the proceeds of a sale of the property over the claims of mortgage bondholders.^"^ So the court may properly authorize the issuing of receivers' certifi- cates for the purpose of raising funds to defray the costs and expenses of a proposed litigation, and the fact that the result of such litigation is uncertain constitutes no objection.^^ As between receivers' certificates issued to pay debts incurred for labor, materials and supplies prior to the appointment of the receiver, and those issued to pay for repairs and other expenses incurred by the receiver himself in the operation of the road, the latter are to be regarded as the debts of the court rather than of the company and are therefore entitled to a preference in payment over the former, which are to be considered as the debts of the company.^^ The issue of certificates is, however, confined strictly to the purposes expressed in the order, and these purposes will not be extended by implication. And when the receiver is authorized to issue certificates as material is fur- nished and labor performed in extending the road, not to ex- ceed a given amount per mile, he can not issue them in advance of the actual performance of the labor or furnishing of the materials.20 Nor will they be issued without notice to all parties in interest, nor without a full hearing as to the necessity for the proposed expenditure,^^ nor at a higher rate of interest than that allowed by law.22 But notice to the trustee of mort- gage bondholders, of the application for leave to issue the cer- tificates, will be treated as notice to the bondholders, the trustee being regarded for such purposes as the representative of the l7Karn v. Rorer, 86 Va., 754, 11 20 Bank of Montreal v. C, C. & S. E., 431. W. R. Co., 48 Iowa, 518. 18 Town of Vandalia v. St. L., V. 21 Ex parte Mitchell, 12 S. C, 83; & T. H. R. R. Co., 209 111., 73, 70 Meyer v. Johnston, 53 Ala., 237; N. E., 662. Osborne v. Big Stone G. C. Co., 96 19 Bank of Commerce v. Central Va., 58, 30 S. E., 446. C. & C. Co., 53 C. C A., 334, 115 22 Meyer v. Johnston, 53 Ala., 237. Fed., 878. CHAP. XI.] RAILWAYS. 569 bondholders. 23 But the bondholders are not to be treated as represented by the trustee in the matter of notice when the trus- tee, although named as a defendant in the proceeding, was not in fact a party, and in such case the trustee, when finally made a party, may contest the validity of the certificates. ^4 § 398^. Not commercial paper ; innocent holders not pro- tected; purchasers charged with notice of order. Receiv- ers' certificates, being merely evidence of indebtedness issued for a special purpose, under a judicial order, and payable out of a special fund, are not negotiable instruments or commercial paper in the sense that innocent purchasers for value will be protected as against the equities existing between the original parties. And while they may be transferred by assignment, or even by delivery if payable to bearer, the purchaser or as- signee may only recover upon them to the extent that the original payee might have recovered. ^5 It follows, therefore, that the assignor or indorser of such certificates is not liable as a guarantor or indorser of commercial paper, nor does the assignment import a warranty that the certificates are collect- ible and will be paid. 26 So it is held that the negotiation and sale of the certificates is a trust personal to the receiver, which he can not delegate to an agent. And when one has purchased the certificates from an agent or broker of the receiver at a large discount, the agent not accounting to the receiver for the proceeds, the purchaser can not enforce the certificates. ^'7 So the certificates referring upon their face to the order under which they are issued, a purchaser is chargeable with notice of the terms of such order, and is bound to know at his peril whether 23 Wallace v. Loomis, 97 U. S., H. R. Co., 7 Fed., 513; McCurdy v. 146. Bowes, 88 Ind., 583; Stanton v. 24 Farmers' Loan & Trust Co. v. Alabama & C. R. Co., 31 Fed., 585; Centralia & C. R. Co., 37 C. C. A., Bernard v. Union Trust Co., 86 C. 528, 96 Fed., 636. C. A., 610, 159 Fed., 620. 25 Turner v. P. & S. R. Co., 95 26 McCurdy v. Bowes, 88 Ind., 111., 134; Bank of Montreal v. C, 583. C. & W. R. Co., 48 Iowa, 518 ; 27 Union Trust Co. v. C. & L. H. Stanton v. A. & C. R. Co., 2 Woods, R. Co., 7 Fed., 513. 506; Union Trust Co. v. C. & L. 570 RECEIVERS. [chap. XI. they are issued in accordance with its terms and conditions.28 Anil although the order of the court authorizing the issuing of certificates has described them as being negotiable, one who takes such certificates can not claim to hold as an innocent purchaser without notice, since they have not the quality of ne- gotiable instruments in the law merchant, and the purchaser is put upon inquiry of all which is done in the cause in which they have been issued. ^9 And certificates issued in excess of the amount authorized by the court are void, even in the hands of innocent holders, and will not be awarded priority of pay- ment out of the funds of the receivership. But when money is advanced in good faith upon such an overissue of certificates, and is used by the receiver in payment of overdue coupons for interest upon the mortgage indebtedness, the persons ad- vancing such money may be subrogated to the rights of the coupon holders, and may receive the proportion due to such coupons out of the proceeds of the foreclosure sale, upon final distribution. ^0 If, however, a receiver executes and places upon the market certificates containing false and fraudulent rep- resentations intended to deceive purchasers, the receiver is personally liable in an action for damages brought by one who purchases the certificates in good faith and relying upon such representations.^^ § 398/. When bondholder estopped from questioning validity; vi^hen bondholder not estopped; consent of trus- tee to certificates; order for certificates appealable. Al- though, as has already been shown, receivers' certificates are not negotiable instruments, yet when a receiver in foreclosure proceedings is authorized to issue them in payment for operating expenses, rentals, taxes and im- provements incurred before his appointment, a bondholder desiring to question their validity and priority of lien 28 Bank of Montreal v. C, C. & 30 Newbold v. P. & S. R. Co., 5 W. R. Co., 48 Iowa, 518. Bradw., 367. 29 Bernard v. Union Trust Co., ^i Bank of Montreal v. Thayer, 7 86 C. C A., 610, 159 Fed., 620. Fed., 622. CHAP. XI.] RAILWAYS. 571 should do so before they are issued and sold. And if, with full knowledge of all the facts, he permits them to be sold without objection, he and those claiming under him with full notice of such facts, can not afterwards be heard to question the payment of such certificates in full out of the pro- ceeds of the foreclosure sale, before distribution among the bondholders. ^2 g^t where, in an action brought to foreclose a trust deed securing bonds, one of the bondholders filed his peti- tion of intervention asking to be made a party plaintiff and to adopt the allegations of the bill except so far as modified by his ownership of the bonds, but the court refused to grant the petition and it was afterwards withdrawn and the bondholder thereupon appeared as a defendant in the action, it was held that the bondholder was not estopped to deny the validity of receivers' certificates previously issued. ^^ So where a trustee for mortgage bondholders consents that receivers' certificates shall issue and shall be a first lien upon the mortgaged property prior to the lien of the trust deed, such action by the trustee is a gross breach of trust and the mortgage bondholders will not be estopped from objecting to the validity of the certifi- cates.^* But when, after a final decree of foreclosure against a railway company and pending an appeal and supersedeas therefrom, the court below orders an issue of receivers' cer- tificates as a paramount lien upon the mortgaged property, an appeal will lie from such order, since it is a final determina- tion of the rights of the parties, which changes the relation of the company to its property and displaces rights already de- termined and established by the foreclosure decree.^^ 32 Humphreys v. Allen, 101 111., Petitioner, 129 U. S., 206, 9 Sup. 490. See, also, Langdon v. Ver- Ct. Rep., 265. To the same effect, mont & Canada R. Co.. 53 Vt., 228. see Bibber-White Co. v. White 33 Belknap Savings Bank v. La- River V. E. R. Co., 53 C. C. A., 282, mar L. & C. Co., 28 Colo., 326, 64 115 Fed., 786. See Farmers' Loan Pac, 212. & Trust Co. v. Centralia & C. R. 34 Belknap Savings Bank v. La- Co., Z7 C. C. A., 528, 96 Fed., 636. mar L. & C. Co., 28 Colo., 326, 64 as to the effect upon the validity of Pac, 212. receivers' certificates of the assent 35 Farmers' Loan & Trust Co., of a bondholders' committee. 572 RECEIVERS. [chap. XI. § 398°:. Sale of road subject to certificates; purchaser concluded; mechanic's lien. When receivers' certificates are issued in foreclosure proceedings as a first lien upon all the property of a railway company, to be paid before payment to mortgage bondholders out of the proceeds of sale, and the property is sold expressly subject to such liens and to all lia- bilities incurred by the receiver, a decree in a subsequent suit brought by the holders of the certificates, declaring them to be a first lien upon the property to the extent of the money actually advanced to the receiver thereon, will be upheld as against a purchaser at the foreclosure sale, and in an action by the hold- ers of the certificates to enforce their lien by a sale of the road, such purchaser will not be heard to question the validity of the certificates. 2^ In such case, the purchaser having acquired his title subject to all such liens and priorities as may be allowed by the court prior to the mortgage indebtedness, he can not, after such liens have been established in the foreclosure pro- ceedings, maintain a new action to dispute their validity, the parties in interest in the former suit having been fully heard in the proceeding to establish the validity and priority of such prior liens. 3"^ If, however, the railway is sold to satisfy the cer- tificates, such sale will not divest a mechanic's lien claimed by a creditor for the construction of the road, who has instituted proceedings to enforce his lien before the appointment of the receiver, and who was not made a party to the suit in which he was appointed and in which the property was sold. In such case, the receiver in no manner represents the creditor claim- 36 Swann v. Clark, 110 U. S., 602, certificates, and as to the effect of 4 Sup. Ct. Rep., 241; Central Na- laches by the certificate holder in tional Bank v. Hazard, 30 Fed., asserting his rights against the pur- 484, 24 Blatch., 310. See, also, chasers at the foreclosure sale, Mer- Central Trust Co. v. Sheffield & B. cantile Trust Co. v. Kanawha & O. C. I. & R. Co., 44 Fed., 526. But R. Co., 7 C. C. A., 3, 58 Fed., 6, 16 see, as to the effect of a final de- U. S. App., 37. tree confirming a foreclosure sale 37 Swann v. Wright's Executor, and divesting the lien of receivers' 110 U. S., 590, 4 Sup. Ct. Rep., 235. CHAP. XI.] RAILWAYS. 573 ing such Hen, and the property is, therefore, regarded as hav- ing been sold subject to his hen.^^ § 398/z. Certificates for construction; when new com- pany liable for certificates. When certificates are issued, with the consent of the mortgage trustee, to pay for the con- struction of a line not a part of the mortgaged system, but forming a part of a continuous system operated by the receiver and necessary for its continuous operation, the creditors re- ceiving such certificates surrendering the shares of stock which represent the ownership of the line so constructed, such shares passing to the purchaser at the foreclosure sale as part of his purchase, the bondholders and purchaser are estopped from questioning the lien of the certificates, or their right to be pre- ferred in payment out of the proceeds of sale.^^ § 398/. Case of Illinois Midland Railway Company. Re- ceivers' certificates issued for necessary repairs and better- ments, for the payment of tax liens, for wages of employees six months prior to the receivership, for debts due to other railway companies for track rentals, materials, labor and traffic bal- ances, for supplies and damages and to replace earnings which have been diverted from operating expenses and ordinary re- pairs to pay for betterments, while debts to a larger amount for operating expenses and ordinary repairs have been incurred, have been allowed priority out of the proceeds of a foreclosure sale as against mortgage bondholders. And such priorities have been allowed although the receivership was instituted upon a judgment creditor's bill, bills for foreclosure being afterward filed which were consolidated with the creditor's suit, although no order was entered in the foreclosure suits appointing a receiver. In such case, the express consent of the bondholders or trustee to the issuing of certificates is not nec- essary when the road has been operated for a considerable time by the receiver with their knowledge and without objection, and when the trustee has failed to avail itself of its rights un- 3S Snow V. Winslow, 54 Iowa, 29 Kneeland v. Luce, 141 U. S., 200, 6 N. W., 191. 491, 12 Sup. Ct. Rep., 32. 574 RECEIVERS. [chap. XI. der the mortgage. And such certificates having been sold at a discount by order of the court, the holders may be allowed payment of their face value with interest, the discount having been within the limit fixed by the order.^O And the road con- sisting of three separate divisions or sections covered by sep- arate mortgages, the line being operated by the receiver as an entirety, it is proper to apportion claims thus allowed priority among the different sections or divisions according to their length. But when the receiver has borrowed large sums of money without authority of the court, priority will not be al- lowed to such obligations, even though the money has been expended for necessary expenses of the receivership, for re- pairs, pay-rolls and supplies.'*^ 40 Union Trust Co. v. Illinois Midland R. Co., 117 U. S., 434, 6 Sup. Ct. Rep., 809. But in Stanton V. A. & C. R. Co., 2 Woods, 506, it is held that while persons who ad- vance money upon the faith of re- ceivers' certificates are not bound to see to its application, they may only enforce their certificates out of the proceeds of foreclosure to the extent of their actual advances to the receiver. But see Alabama Iron & R. Co. v. Anniston L. & T. Co., 6 C. C. A., 242, 57 Fed., 25, 13 U. S. App., 506. 41 Union Trust Co. v. Illinois Midland R. Co., 117 U. S., 434, 6 Sup. Ct. Rep., 809. The case of the Illinois Midland Railway Company here cited may be regarded as fix- ing the extreme limit thus far reached by courts of equity in the exercise of their extraordinary jurisdiction in divesting mortgage liens and in giving preference to the rights of general and unsecured creditors. In the progress of the litigation in the circuit court of the United States for the seventh cir- cuit, eighteen different series of re- ceiver's certificates were issued, in satisfaction of claims of almost every character incurred by the railway company and by its receiv- ers. Each series of certificates was, by the order authorizing its issue, decreed to be a prior and paramount lien upon the entire property of the railway company. Many of these certificates were, by the action of the circuit court, afterward held invalid, others were so held by the judgment of the supreme court, while the validity of still others was affirmed by that court. The history of railway foreclosures and receiv- erships may be searched in vain for a more instructive commentary up- on the dangers which result from the exercise of a jurisdiction which, in effect, impairs the obligation of the mortgage contract by divesting its lien in favor of the demands of inferior and unsecured creditors. Well might the court call a halt up- on the exercise of this extraordi- nary jurisdiction, in the language of Mr. Justice Brewer in Kneeland CHAP. XI.] RAILWAYS. 575 § 398/. Priority as between compensation of receiver and that of trustee; same as to counsel fees. It has been held, where the receiver of a street railway company has issued certificates which were declared to be a first lien upon the property of the company prior to the lien of the mortgage, that such certificates were entitled to priority over the com- pensation of the trustee named in the trust deed and of the trus- tee's counsel; but it was held that they were not entitled to a preference over the compensation of the receiver and his coun- sel, since such items were to be regarded as part of the costs of the suit.42 V. American L. & T. Co., 136 U. S., 89, 10 Sup. Ct. Rep., 950, as fol- lows, page 97: "Upon these facts we remark, first, that the appoint- ment of a receiver vests in the court no absolute control over the prop- erty, and no general authority to displace vested contract liens. Be- cause in a few specified and limited cases this court has declared that unsecured claims were entitled to priority over mortgage debts, an idea seems to have obtained that a court appointing a receiver acquires power to give such preference to any general and unsecured claims. It has been assumed that a court appointing a receiver could right- fully burden the mortgaged prop- erty for the payment of any unse- cured indebtedness. Indeed, we are advised that some courts have made the appointment of a receiver con- ditional upon the payment of all unsecured indebtedness in pref- erence to the mortgage liens sought to be enforced. Can anything be conceived which more thoroughly destroys the sacredness of contract obligation? One holding a mort- gage debt upon a railroad has the same right to demand and expect of the court respect for his vested and contracted priority as the hold- er of a mortgage on a farm or lot. So, when a court appoints a receiv- er of railroad property, it has no right to make that receivership con- ditional on the payment of other than those few unsecured claims which, by the rulings of this court, have been declared to have an equit- able priority. No one is bound to sell to a railroad company or to work for it, and whoever has deal- ings with a company whose prop- erty is mortgaged must be assumed to have dealt with it on the faith of its personal responsibility, and not in expectation of subsequently dis- placing the prioritiy of the mort- gage liens. It is the exception and not the rule that such priority of liens can be displaced. We empha- size this fact of the sacredness of contract liens, for the reason that there seems to be growing an idea, that the chancellor, in the exercise of his equitable powers, has unlim- ited discretion in this matter of the displacement of vested liens." 42 Petersburg Sav. & Ins. Co. v. Dellatorre, 17 C. C. A., 310, 70 Fed., 643, 30 U. S. App., 504. CHAPTER XII. OF RECEIVERS IN AID OF JUDGMENT CREDITORS. I. Principles Upon Which the Relief is Granteb § 399 II. Of the Receiver's Title 440 III. Of the Receiver's Functions and Rights of Action 453 I. Principles Upon Which the Relief is Granted. § 399. The jurisdiction of English origin; inadequacy of legal remedy the ground for relief. 400. American law shaped by New York courts; no answer to application that defendant has no property; duty of creditor to apply for receiver. 401. Supplementary proceedings under New York code; receiver granted almost as of course. 402. Judgment c editor must be diligent in assertion of his rights; effect of delay as a bar to relief. 403. Plaintiff must fully exhaust his remedy at law; receiver not granted when execution may be satisfied in the ordinary way; receiver appointed where debtor's interest is purely equitable. 403a. Receiver not appointed to collect municipal tax in aid of judg- ment creditor. 404. Receiver can not be appointed on sheriff's return of execution nulla bona before its return day. 405. Receiver of joint property of two defendants on judgment ren- dered against one; omission in direction of execution to sheriff. 406. Receiver not granted in aid of general creditor before judg- ment; illustrations of the rule; attaching creditors. 407. Apparent exception to the rule in New York in cases of partnerships; receiver allowed before judgment. 408. Lien of creditors who have advanced money for repairing vessel, when protected by receiver. 409. Receiver over effects of married woman doing business as trader, in action to charge her individual property. 410. Creditor holding annuity which is a charge on real estate may have receiver when annuity is in arrears. 576 CHAP. XII.] CREDITORS. 577 § 411. Fraudulent assignment by debtor ground for receiver; appoint- ment of receiver does not determine rights of assignee. 412. Receiver granted to carry out assignment by debtor for bene- fit of creditors, on refusal of assignee to act, or on his mis- conduct; right to receiver not affected by subsequent assign- ment by debtor. 413. No bar to the relief that property is claimed by adverse claim- ants; or beyond jurisdiction of court. 414. Answer denying property no bar to reference to master to ap- point; receiver not appointed to attack fraudulent assign- ment which creditor can set aside. 415. Practice on reference to master to appoint under New York system; assignment to receiver; examination of debtor, pur- pose and extent of. 416. Courts averse to interfering when contest is as to title of real estate claimed by third persons. 417. Buildings erected by debtor with his own funds, receiver ap- pointed over rents. 418. Receiver allowed over realty in first instance under English practice; infant heirs; rights of judgment creditors in posses- sion not affected. 419. Receiver not appointed on creditors' bill, as against mortgagee in possession; different mortgages; inadequate security. 420. Receiver in aid of judgment creditors as against mortgagee of chattels. 421. Judgment creditors may maintain action to set aside fraudu- lent mortgage; rights of judgment creditor in England. 422. Real estate in receiver's possession can not be sold under another judgment. 423. Priority as between purchasers of real estate at receiver's sale and at sheriff's sale. 424. The same; receiver acquires real property subject to judgment liens. 425. Discharge in bankruptcy, when no defense to creditors' bill seeking receiver. 426. Receiver under English bankrupt act of 1861. 427. Receiver refused on creditors' bill when his appointment would interfere with administration of estate of deceased. 428. Relief granted against judgment debtor doing business in name of wife; error to pay creditors before priority de- termined. 429. Discretion of court as to amount of defendant's property over which receiver will be extended; discretion as to sale; re- ceiver extended for other creditor. 430. Creditor not entitled to priority over interest due on mort- gages prior to his judgment. 431. Appointment after bill dismissed on demurrer. Receivers — Zl . 578 RECEIVERS. [chap. XII. § 432. Nature of property subject to receivership; rings and jewelry; notes and interest in firm; benefice of clergyman; seats in stock and produce exchange. 433. Relief refused when answer alleges nothing due to plaintiff; delay to determine regularity of proceedings. 434. Waiver of answer under oath no ground of objection. 435. When defendant directed to pay fund into court. 436. Courts averse to interfering on ex parte application. 437. Prior creditors protected, notwithstanding dismissal of bill. 438. Receiver in divorce proceedings to enforce decree for alimony. 439. Relief granted when only security for judgment is a life estate. 439a. Supreme Court of Judicature Act in England. 439&. No preference allowed as between creditors of the same class. § 399. The jurisdiction of English origin; inadequacy of legal remedy the ground for relief. No branch of the law of receivers is more frequently invoked in this country than that which governs the jurisdiction as exercised in behalf of judgment creditors, for the enforcement of their judgments in cases where the usual legal remedies have been exhausted, and when the aid of equity is, therefore, necessary for the protection of the creditor. The jurisdiction of equity by the appointment of receivers, in this class of cases, while deriving its origin from the English Court of Chancery, has been more largely shaped and developed by the decisions of American courts, than has any other branch of the law under considera- tion. The fundamental principle upon which it rests is the inadequacy of the legal remedy, and the consequent necessity for the aid of equity to supplement the remedy at law. This principle may be traced back through all the adjudications upon the subject, and it was said by Lord Eldon, to have been long settled, that when a judgment creditor took out execution, and found the estate of his debtor protected by circumstances re- specting a prior title, he might apply for a receiver, and that the fact that the creditor could not execute his judgment at I'aw would entitle him to a receiver of the debtor's estate.^ The same principle, it is believed, will be found to underlie most of the decisions in this country upon this topic, and it may be 1 See Curling v. Marquis Townshend, 19 Ves., 628, CHAP. XII.] CREDITORS. 579 regarded as the foundation of the entire jurisdiction of equity in appointing receivers in creditors' suits.^ § 400. American law shaped by New York courts; no answer to application that defendant has no property; duty of creditor to apply for receiver. The American law upon this subject has been very largely shaped by the deci- sions of the New York courts, both under the former chancery practice in that state, and under the code of procedure by which the former system was superseded. Under the practice of the New York Court of Chancery, the appointment of receivers on creditors' bills, after return of execution unsatisfied, was almost a matter of course, for the preservation of the debtor's property pending the litigation.^ And it was held that when the sworn bill, filed by the judgment creditor, showed that he had an equitable right to all the funds and property of the de- fendant to satisfy his debt, if this right was not denied by de- fendant in answer to the application for a receiver, no reason 2 As to the power of a court of equity to appoint a receiver to col- lect taxes due to a municipal cor- poration and to apply them in pay- ment of the indebtedness of such corporation, at the suit of its cred- itors, its charter having been re- voked by the legislature, see Meri- wether V. Garrett, 102 U. S., 472; Garrett v. City of Memphis, 5 Fed., 860. 3 See Bloodgood v. Clark, 4 Paige, 574; Osborn v. Heyer, 2 Paige, 342; Fitzburgh v. Evering- ham, 6 Paige, 29; Bank of Monroe V. Schermerhorn, Clarke Ch., 214. And see Johnson v. Tucker, 2 Tenn. Ch., 398. Indeed, the practice seems to have been more liberal than was at all times consistent with the established principles of equity; so much so, at least, as to provoke the criticism of Vice-Chan- cellor Sandford, in Iddings v. Bruen, 4 Sandf. Ch., 424. "Most of our notions of a receiver at this day," says the learned judge, "are derived from the course and prac- tice in judgment creditors' suits, where they are principally used, and in which many things have occurred to render them the mere puppets of the complainant in the particular suit. One cause of this has been the difficulty of procuring persons to accept the appointment, and give the security requisite, where the prospect of assets and of corre- sponding compensation was often doubtful, if not desperate. And an- other cause was the practice of lim- iting the assets to be handed over, to the amount of complainant's debt, and probable costs, where he had the good fortune to discover more than his own debt required." 580 RECEIVERS. [chap. XII. existed why the appointment should not be made* And it was not a sufficient answer to the appHcation to say that there was no property to protect belonging to defendant, since, in such case, he could suffer no injury, and plaintiff proceeded at the peril of his costs.^ The court proceeded upon the theory that, after the defendant debtor was enjoined from interfering with or disposing of his property himself, he could have no honest motive in resisting the appointment of a receiver, since, if he had property, it was for his own interest that it should be pre- served pending the litigation, and if he had none, there was nothing for the receiver to do, and plaintiff was liable for costs.6 And it was held to be the duty of the judgment credi- tor, after filing his bill to reach the equitable assets of his debtor, and obtaining an injunction to restrain the debtor from interfering therewith, to apply to the court within a reasonable 4 Bloodgood V. Clark, 4 Paige, 574. 5 Bloodgood V. Clark, 4 Paige, 574; Browning v. Bettis, 8 Paige, 568. The practice which obtained under the New York Court of Chancery was stated by Chancellor Walworth in Bloodgood v. Clark, as follows, p. 577: "In these cases of creditors' bills, where the return of the execution unsatisfied presup- poses that the property of the de- fendant, if any he has, will be mis- applied, and entitles the complainant to an injunction in the first instance, it seems to be almost a matter of course to appoint a receiver to col- lect and preserve the property pend- ing the litigation. And where the sworn bill of the complainant shows that he has an equitable right to all the funds and property of the de- fendant to satisfy his debt, if the right of the complainant is not de- nied by the defendant, in answer to the application for a receiver, there can be no good reason why the com- plainant should not have a receiver appointed to preserve the property from waste or loss. Indeed, this court has already declared that it is the duty of a complainant who has obtained an injunction upon such a bill, restraining the defend- ant from collecting his debts or disposing of property which might be liable to waste or deterioration, to apply to the court and have a receiver appointed without any un- reasonable delay. (See Osborn v. Heyer, 2 Paige, 343.) It is no suf- ficient answer to such an applica- tion to say there may not be any property to protect, as the com- plainant proceeds at the peril of costs, if there is no property. And if there is nothing for the receiver to take, the defendant can not be injured by the appointment." See, also, Fuller v. Taylor, 2 Halst. Ch., 301. But see, contra, Dollard v. Taylor, 33 N. Y. Supr. Ct. R., 496. 6 Fitzburgh v. Everingham, 6 Paige, 29. CHAP. XII.] CREDITORS. 581 time for a receiver of the debtor's assets, in order to prevent their being wasted, and to secure the collection of the debts.'' And in such case, when the bill made out a prima facie case for a receivei, it was regarded as no objection to the appointment that the defendant had not yet answered.^ § 401. Supplementary proceedings under Nev^r York code ; receiver granted almost as of course. Under the New York code of procedure, as well as in many of the states which have adopted the code practice from New York, pro- vision is made for the appointment of receivers on proceedings by judgment creditors "supplementary to execution," which proceedings have taken the place of the former creditors' bill. Indeed, the appointment of a receiver on supplementary pro- ceedings under the code of procedure, is regarded merely as a substitute for the proceedings had for the same purpose under the former chancery practice.^ And an examination of the New York decisions, in this class of cases, will show that the courts of that state are still governed by the principles estab- lished under the former practice, in administering this %ecies of relief in behalf of judgment creditors. Under the present system, the appointment of a receiver of the effects of a judg- ment debtor, upon supplementary proceedings, has become al- most a matter of course ; as much so, indeed, as it formerly was on creditors' bills under the chancery practice.^^ The object 7 Bank of Monroe v. Schermcr- ceivers, of the principles governing horn, Clarke Ch., 214; Osborn v. the courts in appointing them, and Heyer, 2 Paige, 342. See, also, of the practice and procedure under Bloodgood V. Clark, 4 Paige, 574. the code of procedure of North 8 Bank of Monroe v. Schermer- Carolina. horn, Clarke Ch.. 214. 10 Heroy v. Gibson, 10 Bosw., 591. 9 Spencer v. Cuyler, 9 Ab. Pr., See, also, Coates v. Wilkes, 92 N. 382; People v. Mead, 29 How. Pr., C, 376; Flint v. Webb, 25 Minn., 360. And see this case, generally, 263. But see, contra, Rodman v. for a statement of the practice and Harvey, 102 N. C, 1, 8 S. E., 888, procedure in appointing receivers where it is held that the appoint- in this class of proceedings under ment of a receiver in such proceed- the code. And see Coates v. ings is not as of course, and that it Wilkes, 92 N. C, 376. for a full dis- will be allowed only when it ap- cussion of the functions of such re- pears probable that the relief is 582 RECEIVERS. [chap. XII. of the proceeding under the code is to compel the apphcation of property concealed by the debtor, or which from its nature can not be levied upon under execution, to the payment of the creditor's judgment. And the remedy is regarded as a cumu- lative one, and would seem, therefore, to extend to property which might be the subject of levy and sale under execution.^l So in Minnesota, upon proceedings supplementary to execu- tion, a receiver may, in the discretion of the court, be appointed immediately upon the granting of an order for the examination of the judgment debtor, this being regarded as the better prac- tice, since the judgment creditor thereby acquires that priority of lien upon his debtor's property to which his vigilance entitles him. 12 And under proceedings supplementary to execution in Minnesota, a receiver may be appointed over the estate of a judgment debtor, with power to collect a debt due to him from a municipal corporation. ^^ § 402. Judgment creditor must be diligent in assertion of his rights; effect of delay as a bar to relief. The first general principle to be observed as governing this branch of the extraordinary jurisdiction of equity is, that a judgment creditor, seeking the aid of the court by the appointment of a receiver, must have used due diligence in the assertion of his rights. 1"* The bill must, therefore, be filed within a reasonable time after the return of execution unsatisfied. And while it is impossible to fix any precise period of limitation, within which necessary to properly apply the property of the judgment debtor, debtor's property to the payment of but which stand upon the books of the judgment, and that a receiver the corporation in the name of the should not be appointed to receive wife, see State Bank v. Gill, 23 and collect notes which are in fact Hun, 410. the property of the debtor's wife, 12 Flint v. Webb, 25 Minn., 263. although executed to the debtor as 13 Knight v. Nash, 22 Minn., 452. payee. 14 Gould v. Tryon, Walk. (Mich.), 11 Heroy v. Gibson, 10 Bosw., 591. 353. See, also, Fogarty v. Bourke, .\s to the right to a receiver, under 2 Dr. & War., 580; National Me- the New York code, in an action chanics Banking Association v. by a judgment creditor to recover Mariposa Co., 60 Barb., 423. shares of stock alleged to be the CHAP, XII.] CREDITORS. 583 the judgment creditor must assert his right to the aid of equity, it has been held that when he has suffered a period of nine years to elapse, after the return of his execution nulla bona, without taking any steps for the enforcement of his demand, and then files a creditors' bill on which he moves for a receiver, his long delay is of itself sufficient ground for refusing the relief.^^ And when, after moving for a receiver of the debtor's prop- erty, the judgment creditor permitted the proceedings to lie dormant, and took no further steps to procure the appointment for a perisd of more than a year, and until another creditor had procured an order for a receiver, the court refused to allow the receiver appointed on the second application to be displaced, but removed the other one. Such a case, it was held, should be governed by the principles applicable to dormant executions, and the vigilant creditor should be allowed priority.^^ And when the creditor had acquiesced in the debtor's possession of his property and estate for a long period of years, and had recognized the debtor's title by accepting from him a lease of a portion of the property, it was held sufficient ground for refus- ing a receiver, when the answer positively alleged that the in- debtedness had been paid in full.!"^ § 403. Plaintiff must fully exhaust his remedy at law; receiver not granted when execution may be satisfied in the ordinary way ; receiver appointed where debtor's inter- est is purely equitable. Another leading principle, and one of equal importance with that just stated, by which courts of equity are governed in the appointment of receivers in behalf of judgment creditors, is, that the plaintiff must have fully and completely exhausted his remedy at law for the collection of his judgment, before he is entitled to the aid of a receiver in equity.i^ And when the bill itself shows that defendant is 15 Gould r. Tryon, Walk. (Mich.). 17 Pogarty v. Bourke, 2 Dr. & 353. War., 580. 16 National Mechanics Banking 18 Smith v. Thompson, Walk. Association v. Mariposa Co., 60 (Mich.), 1; Thayer v. Swift, Barb., 423. Harring. (Mich.), 430; Steward v. 584 RECEIVERS. [chap. XII. in possession of property which is subject to levy and sale un- der execution, and that there is no obstacle or impediment in the way of enforcing the judgment by the usual process at law, no ground is presented for the appointment of a receiver.^^ And when it is apparent that the defendant debtor has such an interest in real estate as may be reached by execution, his title being clear and there being no obstacle in the way of en- forcing the judgment by execution, an additional reason for refusing a receiver, and for leaving the plaintiff to sell the property under execution, is found in the fact that by this course the defendant will not be deprived of the redemption allowed by law. For, while it would be possible to reserve the right of redemption on a sale by the receiver, it is regarded as the safer course to follow the method prescribed by law for sales under execution.^o So when both the judgment creditor and the sheriff to whom his execution was delivered were ap- prised of defendant's ownership of particular real estate, which had been offered in satisfaction of the debt before judg- ment obtained, and there was no impediment to its sale under execution, the court was of opinion that the legal remedy had not been sufficiently exhausted to give the judgment creditor a standing in a court of equity, or the right to a receiver of the rents and profits of such real estate.^l And when the bill itself Stevens, id., 169; Parker v. Moore, gine Co. v. Donau Brewing Co., 47 3 Edw. Ch., 234; Congdon v. Lee, Fed., 6. id., 304; Starr v. Rathbone, 1 Barb., 20 Second Ward Bank z'. Upmann, 70; Cassidy v. Meacham, 3 Paige, 12 Wis., 499. 311; Poppitz V. Rognes, 76 Minn., 21 Congdon v. Lee, 3 Edw. Ch., 109, 78 N. W., 964; Minkler v. 304. This was a motion on the part United States S. Co., 4 N. Dak., of plaintiffs in a creditor's bill, that 507, 62 N. W., 594, 33 L. R. A., 546, the tenants of certain real estate on and note; Morris v. Taylor, 32 L. which their judgment was a lien be R. Ir., 14. And see Whilden v. required to attorn and pay their Chapman, 80 S. C, 84, 61 S. E., rents to the receiver, before ap- 249. And see, ante, § 301. pointed in the cause. McCoun, 19 Parker v. Moore, 3 Edw. Ch., Vice-Chancellor, says, p. 308: "The 234; Starr v. Rathbone, 1 Barb., 70; facts, as they now appear by the Second Ward Bank v. Upmann, 12 answer and by the affidavits read Wis., 499. See, also, Buckeye En- in opposition to the motion of the CHAP. XII.] CREDITORS. 585 showed the possession of a large amount of property in the defendant, which could be taken on execution, and that no ex- ecution had been issued on the judgment for a period of three years, and that defendant was doing business as a merchant in his own name, it was held that there was no obstacle in the way of enforcing plaintiff's remedy at law, and he was refused complainants, show that there was no necessity for the complainants coming into this court for a discov- ery of the defendant's real estate now sought to be reached. The complainants were informed be- forehand of this particular prop- erty, and knew all about it. It was offered to them in satisfaction of their debt, before the judgment was obtained. When the sheriff called with the execution and in- quired for property, he was referred, by the defendant, to the records of deeds for a description of the prop- erty which he could levy on and sell ; and there was no impediment to such a sale. This must be sup- posed to have been well known, both to the complainants and the sheriff, who nevertheless returned the execution unsatisfied, without taking any step toward a levy or sale. There is no direct proof of collusion in this case between the complainants and the sheriff, but there is enough to show that the legal remedy had not been fairly exhausted when the bill was filed. The sheriff made a false return, or, at least, a return which he could not vouch for the truth of, until he had exposed the property for sale; and the complainants knew it to be so, yet immediately filed their bill founded upon it. With respect to the property in question, they stood in no need of a discovery or of any aid of this court to effect a sale. What right, then, have the complainants to a standing in this court, with respect to this property? To give them a right to the rents through the medium of the receiver, they should be honestly and fairly in court, either for the purpose of discovery or relief, or both. True, the sheriff's return of an execution unsatisfied, prima facie gives the right to file a bill of this sort ; and in Stoors v. Kelsey, 2 Paige, 418, a receiver was appointed, though it appeared that the defendant owned a lot of ground and gave the sheriff notice of the fact, and requested him to advertise it, which he re- fused to do; but there it did not pppear that the plaintiff had any knowledge or information of the fact of the defendant's ownership or interest in the land; and there was nothing from which to infer collusion between the plaintiff and sheriff in making the return. Here the case, in that respect, is differ- ent; and I think, under the circum- stances and the law and practice of this court in respect to these cred- tors' bills, that the complainants are bound to pursue their legal remedy for a sale of the property; and, not being legitimately in court for the purpose of discovery, and it not appearing how far, if any, the property will be deficient toward satisfying the judgment upon a 586 RECEIVERS. [chap. XII. the aid of a receiver.22 So when it appeared by the bill that the defendant debtor was the proprietor of a hotel, having a large amount of furniture and other property in his hotel, a re- ceiver was denied, the remedy at law by execution not having been exhausted. ^3 And when defendant showed by his affi- davit that the proceedings under the creditors' bill had been precipitated against him, without necessity and with no pre- vious notice of the amount of the judgment, or how much he was required to pay, and that he would have paid the judgment forthwith, had he been notified thereof, the court refused to ap- point a receiver.24 But where the debtor's interest in the prop- erty over which a receiver is sought is purely equitable and for this reason can not be reached by the ordinary process of the law by execution under the plaintiff's judgment, a receiver may properly be appointed. ^5 So where the property of the debtor which it is sought to subject to plaintiff's claim is an equitable reversionary interest in the proceeds of the sale of real estate which can not be reached by execution, a receiver is properly appointed. 26 And where a creditor has obtained judgment against an insolvent corporation and another and each is bound to pay the whole debt, he is entitled in the proper case to a re- ceiver over the corporation, although he has not exhausted his legal remedies against the judgment debtor.27 § 403a. Receiver not appointed to collect municipal tax in aid of judgment creditor. It is, however, to be borne in sheriff's sale, the court has not jurisdiction to lay hold of the rents in the meantime, and prevent the defendant from receiving them. The result is, that the complain- ants' motion must be denied, and the defendant's motion to dissolve the injunction be granted, so far as it restrains the defendant from in- terfering with the real estate or the rents and profits of it. With the injunction thus removed, the de- fendant can do no act to prejudice the lien of the judgment, or em- barrass a sale under a new execu- tion to be issued." 22 Parker v. Moore, 3 Edw. Ch., 234. 23 Starr v. Rathbone, 1 Barb., 70. 24 Hart V. Tims, 3 Edw. Ch., 226. 25 Cadogan v. Lyric Theatre, (1894) 3 Ch., 338. 26 Tyrrell v. Painton, (1895) 1 Q. B., 202. 27Davelaar v. Blue M. I. Co., 110 Wis., 470, 86 N. W., 185. CHAP. XH.] CREDITORS. 587 mind that the fact that the remedy at law has proved ineffectual in the particular case, does not confer jurisdiction upon a court of equity to appoint a receiver if the legal remedy is adequate and complete in itself, its inefficiency being wholly due to the actions of the persons or officers whose duty it is to afford the desired relief. Thus, when plaintiff obtains judgment against a county upon its obligations issued in aid of a subscription to a railway company, and in obedience to a writ of mandamus a tax is levied by the county authorities to pay the judgment, but the person selected as collector of the tax refuses to qualify or to act as such collector, equity has no jurisdiction to appoint a receiver for the purpose of collecting the tax, even though it is shown that no person may be found who will undertake such collection. The power of collecting taxes being wholly foreign to courts of equity, its exercise will not be assumed by such courts merely because the appropriate legal remedy has failed to afford relief. ^8 § 404. Receiver can not be appointed on sheriff's return of execution nulla bona before its return day. Intimately connected with the doctrine requiring the creditor to first ex- haust his remedy at law, is the question whether the aid of a receiver may properly be extended to a judgment creditor, upon the sheriff's return of an execution nulla bona before the return day thereof. While this question has given rise to some conflict of authority, and has not been wholly free from doubt, the doctrine may now be regarded as established, both upon principle and authority, that the return of an execution un- satisfied, before its return day and in the life-time of the writ, does not lay the foundation for a receiver upon a bill in be- half of the judgment creditor. The rule is founded upon the 28 Thompson v. Allen County, 115 poration and to apply them in pay- U. S., 550, 6 Sup. Ct. Rep., 140; ment of its indebtedness, its charter S. C, 18 Chicago Legal News, 127. having been revoked by the legisla- See Supervisors v. Rogers, 7 Wal., ture, see Meriwether v. Garrett, 102 175. As to the power of a court of U. S., 472; Garrett v. City of Mem- equity to appoint a receiver to col- phis, 5 Fed., 860. lect taxes due to a municipal cor- 588 RECEIVERS. [chap, XII. fundamental principle, that equity never lends its aid for the enforcement of rights which may be remedied in the usual course of proceedings at law, and the courts will not permit a judgment debtor to be harassed with a suit in chancery, until the creditor has availed himself of all his rights at law for the collection of his judgment. The court can not know, until the return day of the execution has elapsed, that the debtor may not have had property with which to satisfy the judgment ; and if it may dispense with a legal and sufficient return to the execution, it may dispense with the execution entirely, and thus assume a jurisdiction not given by law. It is, therefore, requi- site that the execution shall remain in the hands of the sheriff the full period of its life-time.29 29 Thayer v. Swift, Harring. (Mich.), 430; Spencer v. Cuyler, 9 Ab. Pr., 382. See, also, Cassidy v. Aleacham, 3 Paige, 311; Smith v. Thompson, Walk. (Mich.), 1; Wil- liams V. Hubbard, id., 28; Beach v. White, id., 495; Steward v. Stev- ens, Harring. (Mich.), 169; Beck v. Burdett, 1 Paige, 305; McElwain v. Willis, 9 Wend., 548. But see, con- tra, Williams v. Hogeboom, 8 Paige, 469: Tyler v. Willis, 33 Barb., 327; S. C, suh noni. Tyler v. Whitney, 12 Ab. Pr., 465; Bowen v. Park- hurst, 24 111., 257; First National Bank v. Gage, 79 111., 207. The doc- trine of the text is forcibly stated in Thayer v. Swift, Harring. (Mich.), 430, where the execution had been returned by the sheriff some days before its return day, as follows: "That there was no goods and chat- tels, lands and tenements to be found in his bailiwick to secure or pay the sum due the complainant, or any part thereof, to his knowl- edge, after diligent search." The motion for a receiver was denied. Farnsworth, Chancellor, observes as follows, p. 431 : "The founda- tion of the jurisdiction of this court in this class of cases is, that the judgment creditor shall have fully exhausted his remedy at law. It has been repeatedly held that the court will not retain a bill as a judg- ment creditor's bill merely, filed before the return day of the execu- tion. In the absence of any author- ity or dicta upon the subject, I should have as little doubt upon a case where the execution was actu- ally returned before the return day, although the bill was not filed un- til after the return day had elapsed. Courts of chancery have held the judgment creditor in every ad- judged case, before administering this harsh remedy of depriving the debtor absolutely of all control over every part and portion of his prop- erty, to bring himself strictly and rigidly within this rule. No case can be found where this remedy has been afforded without a strict compliance with all the forms. What is the reason of the rule? It is that a judgment debtor shall not CHAP. XII.] CREDITORS. 585 § 405. Receiver of joint property of two defendants on judgment rendered against one; omission in direction of execution to sheriff. Where an execution was issued against the joint property of two defendants, upon a judgment rendered against one of the two, personal service having been had only upon the one, and the sheriff returned to the execu- tion that the defendants had no goods or chattels, lands or be harassed with a suit in chancery until the creditor has availed him- self of all his common-law rights to collect his judgment. The only dictum to be found which has ever led to any doubt upon this subject, is to be found in the opinion of Chancellor Walworth, in the case of Cassidy v. Meacham, 3 Paige, 312. This idea is thrown out as a perhaps, and rather as a specula- tion than as a decision. He says, perhaps a return made before the return day may be good by rela- tion. But if we once depart from the well-settled rule, that the cred- itor shall fairly and fully first ex- haust his remedy at law, where shall we stop?" See, also, opinion of the same court in Steward v. Stevens, Harring. (Mich.), 169, where the same doctrine is an- nounced with regard to creditors' bills, although it does not appear from the reported case whether any motion was made for a re- ceiver. In Spencer v. Cuyler, 9 Ab. Pr., 382, which was under the New York code of procedure, the sheriff had returned the executions, at plaintiff's request, before maturity. The supreme court, at general term, say, Johnson, J., delivering the opinion : "A return thus procured is, for this purpose, to be regarded as the act of the party, and not the official act of the sheriff. The remedy by execution, in such case, has not been exhausted, as the stat- ute obviously intended it should be before these supplementary pro- ceedings could be instituted. If the practice adopted in the cases before us is to prevail, the issuing and re- turn of an execution would become a mere empty form, and might as well be dispensed with altogether; and besides, it would naturally, if not inevitably, lead to the most in- tolerable favoritism and abuse. If we allow a sheriff to yield to the persuasion or dictation of a friendly or influential creditor, and fix at his own discretion or caprice different return days for different execu- tions in his hands at the same time, we at once invest him with the dangerous powers of discriminat- ing between creditors, and giving one a preference over another in respect to all the equitable assets of the debtors, capable of being reached by these proceedings. This consideration alone seems to us a sufficient objection to the practice, without adverting to the hardship and oppression to which a defend- ant may be so readily and so sum- marily subjected under it." But in Williams v. Hogeboom, 8 Paige, 469, it was held that the objection that the complainant had not ex- hausted his remedy at law, because the sheriff did not wait until after 590 RECEIVERS. [chap. XII. tenements, out of which to satisfy the execution, without in express terms negativing the fact that either of the two had any separate property, such return was held sufficient founda- tion for a creditor's bill and a receiver of the joint property of the two defendants and of the separate property of the defend- ant who was served with process. ^^ But the objection that the bill did not allege that the execution was directed to the sheriff of the county where the defendant resided when it was issued, although an objection of form, was held to be sufficient ground for refusing a receiver, but the application was denied without costs, and the plaintiff was given leave to amend and to renew the application after amendment.^^ § 406. Receiver not granted in aid of general creditor before judgment ; illustrations of the rule ; attaching cred- itors. Having already shown that the aid of a receiver is extended only in behalf of creditors who have fully ex- hausted their remedy at law, it follows necessarily that the jurisdiction will not be exercised in favor of mere general creditors, whose rights rest only in contract and are not yet re- duced to judgment, and who have acquired no lien upon the property of the debtor. Courts of equity will not permit any interference with the right of a debtor to control his own prop- erty, at the suit of creditors who have acquired no lien thereon, and whatever embarrassment the creditor may experience, by reason of the slow procedure of the courts of law, must be return day of the execution before its return day, constituted no ob- making his return, was not well jection to the appointment of a re- taken, although it was said, follow- ceiver, in the absence of any collu- ing the dictum of Chancellor Wal- sion or fraud on the part of plaintiff worth in Cassidy v. Meacham, 3 to prevent a levy on the debtor's Paige, 311, that the court would property. And it is held in Illinois, not permit a creditor's bill, founded that a creditor's bill will lie upon upon such a return, to be filed the return of an execution nulla until after the return day of the bona before the return day. Bowen execution had passed. And in v. Parkhurst, 24 111., 257. Tyler v. Willis, 33 Barb., 327; S. C, 30 Austin v. Figueira, 7 Paige, 56. sub nom. Tyler v. Whitney, 12 Ab. 31 Williams v. Hogeboom, 8 Pr., 465, it was held that the return Paige, 469. of the execution unsatisfied, before CHAP. XII.] CREDITORS. 591 remedied by legislative and not by judicial authority. And while there are a few instances where the courts have main- tained a contrary doctrine, the great weight of authority sup- ports the rule, that, in the absence of statutory provisions to the contrary, a general contract creditor, before judgment, is not entitled either to an injunction or a receiver against his debtor, upon whose property he has acquired no lien.^^ ^^y 32 Hollins V. Iron Co., 150 U. S., 371, 14 Sup. Ct. Rep., 127; Uhl v. Dillon, 10 Md., 500; Niisbaum v. Stein, 12 Md., 315; Hubbard v. Hubbard, 14 Md., 356; Rich v. Levy, . 16 Md., 74; Hulse v. Wright, Wright, 61 ; McGoIdrick v. Slevin, 43 Ind., 522; Bayaud v. Fellows, 28 Barb., 451; May v. Greenhill, 80 Ind., 124; Adee v. Bigler, 81 N. Y., 349; Smith v. Superior Court, 97 Cal., 348; Johnson v. Farnum, 56 Ga., 144; Dodge v. Pyrolusite Man- ganese Co., 69 Ga., 665; Guilmartin V. Middle G. & A. R. Co., 101 Ga., 565, 29 S. E., 189; Virginia-Carolina Chemical Co. v. Provident S. L. A. Society, 126 Ga., 50, 54 S. E., 929; International Trust Co. v. United Coal Co., 27 Colo., 246, 60 Pac, 621, 83 Am. St. Rep., 59, and note; Klee V. Steele Co., 60 Minn., 355, 62 N. W., 399; Thompson v. Adams, 60 West Va., 463, 55 S. E., 668; Temple V. Glasgow, 25 C. C. A., 540, 80 Fed., 441, 42 U. S. App., 417, affirm- ing S. C, 7Z Fed., 709; Texas Con- solidated C. & M. Assn. V. Storrow, 34 C C. A., 182, 92 Fed., 5 ; Leary V. Columbia R. & P. S. N. Co., 82 Fed., 775 ; Tompkins Co. v. Catawba Mills, 82 Fed., 780. And see Blond- heim v. Moore, 11 Md., 365; Wig- gins V. Armstrong, 2 Johns. Ch., 144; Hoidrege v. Gwynne, 3 C. E. Green, 26 ; Young v. Frier, 1 Stockt., 465; Phelps v. Foster. 18 111., 309; Bigelow V. Andress, 31 III., 322; Rhodes v. Cousins, 6 Rand., 188; Falmouth National Bank v. Cape Cod S. C. Co., 166 Mass., 550, 44 N. E., 617. But see, contra, Hag- garty v. Pittman, 1 Paige, 298; Cohen v. Meyers, 42 Ga., 46; Cohen V. Morris, 70 Ga., 313; Crittenden V. Coleman, 70 Ga., 293; Oliver v. Victor, 74 Ga., 543; Orton v. Mad- den, 75 Ga., 83; Wolfe v. Claflin, 81 Ga., 64, 6 S. E., 599; Thompsen V. Diffenderfer, 1 Md. Ch., 489; Rosenberg v. Moore, 11 Md., 376; Wachtel v. Wilde, 58 Ga., 50; Mor- rison V. Shuster, 1 Mackey, 190. See, also, Kehler v. Jack Mfg. Co., 55 Ga., 639. Under the statutes of Minnesota, a receiver may be ap- pointed over the estate of an in- solvent debtor at the suit of cred- itors before judgment, and such re- ceiver may maintain an action to set aside fraudulent transfers of his property by the debtor. Chamber- lain V. O'Brien, 46 Minn., 80, 48 N. W., 447. So by statute in South Carolina creditors without judg- ment may maintain an action for a receiver over property of a debtor which has been transferred in fraud of his creditors. Regenstein zi. Pearlstein, 30 S. C, 192; Meinhard V. Strickland, 29 S. C, 491. And see Pelzer v. Hughes, 27 S. C, 408; Whilden v. Chapman, 80 S. C, 84, 61 S. E., 249. And see, ante. § 301. 592 RECEIVERS. [chap. XII. interference with the debtor's property, or with his right of disposing of it, before judgment, is beyond the judicial power, and courts of equity will not extend their extraordinary juris- diction beyond the limits fixed by the authorities.^^ Nor is the rule affected or varied by reason of fraud on the part of the debtor, and a receiver will not be granted in favor of a creditor Under the statute of Washington, it is held that a simple contract creditor of a corporation is entitled to a receiver over the corporation upon the mere showing of its in- solvency. Davis V. Edwards, 41 Wash, 480, 84 Pac, 22. In Joseph Dry Goods Co. v. Hecht, 57 C. C. A., 64, 120 Fed, 760, where plaintiff had apparently never obtained a judgment against the debtor, it was held that a receiver should not be appointed pendente lite where there was no showing that the debtor was insolvent or that he was without property sufficient to satisfy a final decree. As to the right of a surety upon the official bond of a tax col- lector, upon default by the latter, to have a receiver for the purpose of preventing a fraudulent transfer of his property, see Sanford v. United States F. & G. Co., 116 Ga, 689, 43 S. E, 61. As to the right to a receiver in aid of an action of debt under the code of Montana, see State V. District Court, 14 Mont., 577, 37 Pac, 969. As to the right of a debtor to waive the objection that the plaintiff has never recovered a judgment against him, see In re Konrad, 208 U. S, 90, 28 Sup. Ct. Rep, 219, 52 L. Ed, 403. SSUhlz'. Dillon, 10 Md, 500. This was a bill for an injunction and a receiver by a creditor upon an open account, alleging that the defend- ant was largely indebted for his stock in trade; that he was dis- posing of his stock, had sold his real estate, and was collecting debts due him, with intent to defraud his creditors, and that he intended to abscond to parts unknown for the purpose of hindering, delaying and defrauding his creditors. An in- junction was granted and a receiver was appointed by the court below, but on appeal the decree was re- versed and bill dismissed. The court, Bartol, J., say, p. 503 : "The bill filed by the appellees in this cause states no sufficient case en- titling them to the relief prayed. No authority has been shown to this court, nor can any be pro- duced, entitled to consideration, which sanctions the exercise of the high and extraordinary power of a court of chancery to interpose, by writ of injunction, in a case like the one before us, restraining a debtor in the enjoyment and power of disposition of his property. The appellees (the complainants below) are merely general creditors of the appellant, who have not prosecuted their claim to judgment and ex- ecution, nor in any other manner acquired a lien upon the debtor's property, and were not entitled to the writ of injunction nor to the appointment of a receiver. What- ever may be the supposed defects of the existing laws of the state, in leaving to the debtor the abso- CHAP. XII.] CREDITORS. 593 before judgment, even though the bill alleges that the debtor has made fraudulent transfers and mortgages of his property.^* Thus, where the bill alleged that the debtor was wasting his resources and sending his goods beyond the reach of his credi- tors; that he was utterly insolvent and had executed a mort- gage of his effects, without consideration and for the purpose of hindering and defrauding his creditors; and that plaintiff had brought suit upon his demand, but would not be able to obtain judgment and execution before defendant's assets would be wasted, the court refused an injunction and a receiver.^^ So it is held that the fact of the debtor having entered his ap- pearance and consented to judgment in certain actions, brought by other creditors upon demands which were justly due, will not warrant the court in granting a receiver upon the applica- tion of a creditor without judgment, since it is a debtor's right to prefer any creditor whom he may choose.^^ Nor will a re- lute power of disposing of his property, and leaving the creditor to the slow and very inadequate legal remedies now provided, if such defects exist, it is solely in the power of the legislature to correct them. It is not within the province of the chancery courts to stretch their power beyond the limits of the authorities of the law, for the purpose of remedying such defects. Such a course would be productive of great mischief, and make the rights of the citizen depend upon the vague and uncertain discretion of the judges, instead of the safe and well-defined rules of law. The learned Chancellor Kent, in the de- cision of the case of Wiggins v. Armstrong, 2 Johns. Ch. Rep., 144, has stated, most clearly and forci- bly, the principles which govern the case before us, and we adopt its reasoning as applicable here." .34Hulse V. Wright, Wright, 61; Receivers — 38. Rich V. Levy, 16 Md., 74; Nusbaum V. Stein, 12 Md., 315. But in the latter case, the court seem to base their decision somewhat upon the fact that it appeared from the bill that the debtor's assets were suffi- cient to discharge his liabilities. See, contra, Haggarty v. Pittman, 1 Paige, 298; Cohen v. Meyers, 42 Ga., 46; Rosenberg v. Moore, 11 Md., 376. 35 Rich V. Levy, 16 U^ 74. 36 McGoldrick v. Slevin, 43 Ind., 522. While the general doctrine of the text is believed to be sus- tained by the undoubted weight of authority, there are several cases in which a contrary doctrine has been announced. In Haggarty v. Pittman, 1 Paige, 298, an injunc- tion and a receiver were allowed in behalf of creditors without judg- ment, upon a bill alleging insolv- ency of the debtor, and that he had made an assignment of his 594 RECEIVERS. [chap. XII. ceiver be appointed at the instance of one who has instituted an action at law in tort, for the purpose of taking possession of property of the defendant and of preventing waste in order that the property may be turned over to the plaintiff in satis- faction of such judgment as may be obtained in the action at law.3" Even under a statute enacting that a receiver may be had in an action by a creditor to subject any property or fund to his demand, it is held that the relief will be allowed only as to funds or property upon which the creditor has a specific lien, and that the statute does not apply to the case of a general cred- itor upon account, who has acquired no lien upon the property of his debtor.38 Nor does a creditor, by attaching real prop- erty which is alleged to have been conveyed by the debtor in fraud of his creditors, acquire such a lien as to entitle him to property to one of his creditors, who was himself insolvent. So in Rosenberg v. Moore, 11 Md., 376, an injunction and a receiver were allowed on the application of gen- eral creditors, before judgment, upon the ground of a fraudulent conveyance of a portion of his property by the debtor, in trust for his creditors, and upon the further ground that the property was in imminent danger, being in the cus- tody of a person of notoriously bad character. But it does not appear from the case as reported, that any objection was urged on the ground that plaintiffs had no judgment or lien upon the debtor's property. In Thompsen v. Diffenderfer, 1 Md. Ch., 489, the court inclined to hold that creditors without judgment were entitled to a receiver, upon a bill alleging fraudulent transfers of his property by the debtor, and that he was in insolvent circum- stances, but the receiver was re- fused on the ground that the answers fully denied the equities of the bill. In Cohen v. Meyers, 42 Ga., 46, where the bill charged in- solvency of the debtor, and that he had fraudulently transferred his goods to a third person, who was charged with complicity in the fraud, and that the debtor had bought the goods with intent to defraud the plaintiffs, a receiver was allowed before judgment. In this case, the court based the right of the creditors to the relief upon the ground that the goods for which the indebtedness sued on was incurred, never in equity be- longed to the defendant, he having obtained them by fraudulent in- tent, and that a proper case was, therefore, presented for the action of a court of equity. Notwithstand- ing these cases, however, it is be- lieved that the weight of authority and reasoning supports the rule as laid down in the text. 37 Slover v. Coal Creek C. Co., 113 Tenn., 421, 82 S. W., 1131. 38 Carter v. Hightower, 79 Tex., 135, 15 S. W., 223. CHAP. XII.] CREDITORS. 595 a receiver over the property, his demand not having been re- duced to judgment.29 § 407. Apparent exception to the rule in New York in cases of partnerships; receiver allowed before judgment. While, as is thus shown, the rule denying the aid of a receiver for the protection of contract or general creditors, before judg- ment, is well established, an apparent exception to the rule has been recognized under the code of procedure in New York, in cases of partnership creditors, the exception, however, being based upon equitable principles not inconsistent with the spirit of the general rule. Thus, in the case of an indebtedness due from a copartnership, when the insolvency of the firm and of its individual members is conceded, and the indebtedness is ad- mitted to be justly due, the creditor may have an injunction and a receiver, as against the partners and third persons to whom they have attempted to assign their property for the pur- pose of hindering and delaying their creditors, even though his demand is not yet reduced to judgment. In such case, the debt not being disputed, and there being no advantage to be de- rived from a preliminary judgment and execution, it is deemed proper to extend all the relief desired in one and the same ac- tion, without compelling the creditor to resort to the delay of obtaining judgment in a separate suit.^^ The doctrine, how- ever, of the New York courts upon this point, would seem to be limited to cases where the indebtedness is not disputed, and 39 Clark v. Raymond, 84 Iowa, 10 How. Pr., 461. In Mott v. Dunn, 251, 50 N. W., 1068. And see Clark considerable reliance is placed by V. Raymond, 86 Iowa, 661, 53 N. the court upon the provision of the W., 354. As to the right to a re- code of procedure, that "where, ceiver in aid of attaching creditors during the pendency of an action, in Alabama, see Pearce v. Jennings, it shall appear by affidavit that the 94 Ala., 524, 10 So., 511; Dollins v. defendant threatens or is about to Lindsey, 89 Ala., 217, 7 So., 234; remove or dispose of his property Sackhoff V. Vandegrift, 98 Ala., 192. with intent to defraud his creditors, 40 Mott V. Dunn, 10 How. Pr., a temporary injunction may be 225. See, also. Levy v. Ely, 15 granted to restrain such removal How. Pr., 395 ; Jackson v. Sheldon, or disposition." 9 Ab. Pr., 127; LaCliaise v. Lord, 596 RECEIVERS. [CIIAP. XII. where the plaintiff creditor is proceeding not merely in behalf of himself and to secure his individual demand, but for the benefit of all creditors of the firm.^^ And in the case of a limited or special partnership, where, upon the insolvency of the firm, the assets become a trust fund, which it is the duty of the general partners to assign to a trustee for the benefit of all the firm creditors, if the general partners fail to perform this duty, the court may interfere by appointing a receiver of the firm assets for the benefit of all the creditors, in an action insti- tuted by a general creditor for himself and such others as may elect to take the benefit of the action. The relief, in such case, would seem to be founded upon the nature of the firm assets, as a trust fund upon the insolvency of the partners, the credi- tor instituting the proceedings being regarded as a cestui que trust of such fund, even though he has not yet obtained judg- ment.42 § 408. Lien of creditors who have advanced money for repairing vessel, when protected by receiver. It is also to be noted that creditors, even before judgment, may have such a special or equitable lien upon the debtor's property as to en- title them to the aid of equity and to the protection of a re- ceiver. For example, when persons have advanced money for effecting repairs upon a vessel, and for furnishing supplies, and have received from the master of the vessel an assignment of all the freight money and earnings of the vessel upon her voyage, and all lien and interest which he as master had there- on on account of such advances or his liability therefor, such creditors are entitled to an injunction to prevent any interfer- ence with the collection of the freight money, and a receiver to collect it, upon showing that the owners of the vessel are insolvent, and that the relief is necessary to protect their lien acquired by assignment from the master."*^ 41 LaCliaise v. Lord, 10 How. Pr., 42 Jackson v. Sheldon, 9 Ab. Pr., 461; Levy v. Ely, 15 How. Pr., 395. 127. See, also, Jackson v. Sheldon, 9 Ab. 43 Sorley v. Brewer, 18 How. Pr., Pr., 127. 276. CHAP. XII.] CREDITORS. 597 § 409. Receiver over effects of married woman doing business as trader, in action to charge her individual prop- erty. In Wisconsin, it is held to be competent for a court of general equity jurisdiction to appoint a receiver over the property and effects of a married woman, doing business as a trader, in an equitable action by her creditors to charge her individual property with the payment of her liabilities, when there is danger of the assets being wasted or put beyond the reach of creditors. Such a proceeding, it is held, bears a close resemblance to a creditor's bill for the enforcement of a judg- ment, and there would seem to be no impropriety in granting an injunction and a receiver, upon the same grounds as in cases of creditors' bills. ^'* § 410. Creditor holding annuity which is a charge on real estate may have receiver when annuity is in arrears. It is also held that a creditor holding an annuity, which is a charge upon real estate, may have the aid of a receiver when his annuity is in arrears and he is without legal remedy for its enforcement, although he can not have the receiver con- tinued when his arrears are paid off.'^^ And when a debtor has conveyed a life estate in certain leasehold premises, in trust for the purpose of securing his creditors by payment annually out of the rents and profits until the indebtedness shall be ex- tinguished, when the property is to be reconveyed, the creditors have such an interest as to entitle them to a receiver, when the payments are long in arrear, even though they do not oc- cupy the position of mortgagees and have no power to sell the > property.'*^ § 411. Fraudulent assignment by debtor ground for re- ceiver; appointment of receiver does not determine rights of assignee. Fraudulent assignments of his property by a judgment debtor, for the purpose of hindering and defeating 44 Todd V. Lee, 15 Wis., 365. 46 Taylor v. Emerson, 4 Dr. & 45 Sankey v. O'Maley, 2 Mol., 491. War., 117. See, also, Beamish v. Austen, Ir. Rep., 9 Eq., 361. 598 RECEIVERS. [chap. XII. his creditors, are frequently made the foundation for proceed- ings in equity for the appointment of a receiver in behalf of judgment creditors.'*'^ And when it is shown upon a cred- itor's bill that the judgment debtor has made an assignment of all his property in fraud of his creditors, to an assignee w'ho is known to be insolvent, such a breach of trust is pre- sented as to warrant the court in appointing a receiver of the property assigned. Especially will the relief be granted, in such case, when the debtor himself continues in possession of the property and exercises acts of ownership, there being no ac- tual change of possession. ^^ But while it is regarded as a sufhcient prima facie case for the appointment of a receiver, to show an assignment of his property by the debtor to hinder and delay his creditors, to an assignee who is irresponsible and insolvent, yet when defendant satisfactorily shows to the court by affidavit that the plaintiff is in error as to the pecuniary condition of the assignee, the court will not by a receiver take the property out of the hands of the assignee before the rights of the parties are finally determined.*^ So when the allega- tions of fraud in the assignment by the debtor are fully denied by answer, and it is not shown that the assignee is insolvent, or that there is danger of loss or injury to the property pend- ing the litigation, it is improper to appoint a receiver in the first instance.^^ And the appointment of a receiver in behalf of judgment creditors, over the property of their debtor, does not of itself preclude or determine the rights of an assignee of the debtor claiming his assets under an assignment from him, and the property can only be recovered by an action 47 See Connah v. Sedgwick, 1 although the plaintiff was not a Barb., 210; Goodyear v. Betts, 7 judgment creditor. How. Pr., 187; Shainwald v. Lewis, 48 Connah v. Sedgwick, 1 Barb., 7 Sawyer, 148; Hirsch, Elson & Co. 210; Hirsch, Elson & Co. v. Israel, V. Israel, 106 Iowa, 498, 76 N. W., 106 Iowa, 498, 76 N. W., 811. 811; Clark v. Bradley Co., 6 App. 49 Goodyear v. Betts, 7 How. Pr., D. C, 437. See, also, Stern v. 187. Austern, 120 N. C, 107, 27 S. E., 50 Pdzer v. Hughes, 27 S. C, 408. 31, where a receiver was appointed CHAP. XII.] CREDITORS. 599 brought by the receiver; since the court can not determine a disputed question of title in passing upon the appHcation for a receiver, especially when the assignee is not a party to the pro- ceeding.^! B^t in an action brought by a judgment creditor to set aside a conveyance of land made by the debtor with intent to defraud his creditors, the grantees being made par- ties, and the conveyance being found to be fraudulent as against the judgment creditor, it is proper to appoint a receiver to sell and convey the property.^2 go when a decree in equity is obtained against defendant requiring him to pay to com- plainant certain funds obtained by fraud and collusion, upon the return of execution unsatisfied, complainant is entitled to a receiver, upon a bill alleging that defendant has disposed and is about to dispose of his property with intent to evade the de- cree and to hinder and delay complainant in its enforcement. And in such case, it is not necessary to specifically describe the property which it is sought to reach by the creditor's bill.^^ So when a judgment debtor has disposed of a large amount of his stock in trade, without accounting for the proceeds, and leaving a large amount of indebtedness unpaid, a receiver has been appointed in a creditor's suit, although the debtor denied any fraudulent disposition of his property, a receiver being necessary to institute the proper suits to determine what dispo- sition was made of the property.^"* § 412. Receiver granted to carry out assignment by debtor for benefit of creditors, on refusal of assignee to act, or on his misconduct ; right to receiver not affected by subsequent assignment by debtor. Courts of equity will also extend the aid of a receiver for the protection of creditors 51 Journeay v. Brown, 2 Dutch., 53 Shainwald v. Lewis, 7 Sawyer, 111. And see this case for the 148. And see this case for an ex- practice in New Jersey in appoint- haustive discussion of the jurisdic- ing receivers in behalf of judgment tion of equity by creditors' bills to creditors. reach the assets of a judgment 52 Shand v. Hanley, 71 N. Y., 319. debtor, and of the right to a re- And see this case as to the effect of ceiver in such cases. a receiver's sale upon prior liens. 54 Strong v. Goldman, 8 Biss., 552. 600 RECEIVERS. [CIIAP. XII. under assignments made by the debtor in good faith and with- out fraud for the benefit of his creditors, when the assignee refuses to accept of the trust created by the assignment, or when he does not act in good faith in carrying out its terms. ^^ Thus, in the case of a general assignment by a debtor for the benefit of his creditors, upon the refusal of the trustee named in the deed of assignment to proceed with the execution of the trust, a receiver may be allowed upon a bill filed by creditors for whose benefit the assignment was made.^^ And when an assignment is made to trustees for the benefit of creditors, a judgment creditor of the assignor, who files his bill in behalf of himself and other creditors in interest, is entitled to a re- ceiver to take charge of the effects assigned, upon showing gross mismanagement on the part of the trustees, and a fail- ure on their part to comply with the requirements of the trust, and that there is imminent danger of the assets being wasted and diverted from the purposes for which they were assigned.^"^ So where real estate is conveyed by a debtor, in trust to be sold for the payment of his debts, the rents to be applied for the same purpose, and the trustee has been in pos- session a number of years without paying, a creditor may have a receiver appointed until answer, when the trustee resides beyond the jurisdiction of the court and has not appeared to the action.58 But where an action for a receiver has been in- stituted by a judgment creditor, the right to the appointment 55 Suydam v. Dequindre, Harring. applied for a receiver of the debts (Mich.), 347. And see Malcolm v. due the business, Lord Eldon held Montgomery, 2 Mol., 500. that the case was such that if the 56 Suydam v. Dequindre, Harring. vice-chancellor, before whom the (Mich.), 347. And where a share in application was pending, was about the profits of a business had been to appoint a receiver to collect the assigned to a person in considcra- assets, he would not interfere, tion of money advanced for the Candler v. Candler, Jac, 225. purpose of carrying on the busi- 57 Jones v. Dougherty, 10 Ga., ness, and a subsequent assignment 273. was made to a third party, of a 58 ]\Ialcolm v. Montgomery, 2 share of the profits in the same Mol., 500. business, and the prior assignee CHAP. XII.] CREDITORS. 601 of the receiver can not be defeated by a general assignment subsequently made by the debtor for the benefit of his cred- itors. ^^ § 413. No bar to the relief that property is claimed by adverse claimants ; or beyond jurisdiction of court. In pro- ceedings supplementary to execution, under the New York code of procedure, it is no sufficient objection to placing the prop- erty and effects of a judgment debtor in the hands of a re- ceiver, that the property sought to be reached is claimed by adverse claimants, and is such as may be taken on execution, and is accessible for purposes of seizure and sale, if the court is satisfied that the title to the property may be tried with as little expense in an action by the receiver, as in a suit brought by the adverse claimants. ^^ And in such proceedings a re- ceiver may be appointed over real property of the debtor and he may be required to convey such property to the receiver, although it is situated beyond the jurisdiction of the court and in another state.^^ And a receiver will be appointed in such case, notwithstanding the debtor has made an assignment for the benefit of his creditors under the insolvent laws of the state, the assignment being made after the granting of an injunction in the creditor's suit to restrain the debtor from making any disposition of his property. ^^ Nor does the fact that the bill does not specifically describe the property or in- 59 Monarch Co. v. Bank, 103 Ky., 380. See, also, Bailey v. Ryder, 10 276, 44 S. W., 955, 46 S. W., 700. N. Y., 363. But see, contra, Amy Where a statute provides that a re- v. Manning, 149 Mass., 487, 21 N. ceiver may be appointed where a E., 943, where it is held that, in corporation is dissolved or is in- the absence of statutory authority, solvent, a creditor of the corpora- a court of equity will not, under its tion can not be deprived of his right general equity powers, at the suit of to such appointment by a prior as- a judgment creditor, appoint a re- signment by the corporation for the ceiver to collect debts and choses in benefit of its creditors. Olcson v. action due to the debtor from per- Bank, 15 Wash., 148, 45 Pac, 734. sons residing in foreign jurisdic- 60 Todd V. Crooke. 4 Sandf., 694. tions. 61 Towne v. Campbell, 35 Minn., 62 Tomlinson & Webster M. Co. 231, 28 N. W., 254; Tomlinson & v. Shatto, 34 Fed., 380. Webster M. Co. v. Shatto, 34 Fed., 602 RECEIVERS. [chap. XU. terests of the debtor which it is sought to reach, when the same are not definitely known to complainant, afford a vaHd objection to the reHef.*^^ § 414. Answer denying property no bar to reference to master to appoint ; receiver not appointed to attack fraud- ulent assignment which creditor can set aside. It has al- ready been shown, that the denial by defendant in a creditor's bill that he has any property or effects of any kind, of which a receiver could take possession if appointed, is no bar to the exercise of the jurisdiction in behalf of the creditor in a proper case.^^ And in conformity with the same principle, it is held that the fact of the debtor having filed his answer, denying that he has any property or effects of any kind, presents no suffi- cient objection to a motion for an order of reference to a mas- ter to appoint a receiver, and requiring the debtor to transfer his effects to such receiver under oath.^^ So it would seem to be no objection to the appointment of a receiver of the ef- fects of a judgment debtor, that he has no other property than an equity of redemption in real estate, which he has al- ways been willing to have sold on execution. ^^ But it has been held improper to appoint a receiver, in proceedings sup- plementary to execution, merely for the purpose of attacking an alleged fraudulent assignment made by the debtor, when the judgment creditor himself has a right of action to set aside such assignment.^"^ § 415. Practice on reference to master to appoint un- der New York system; assignment to receiver; examina- tion of debtor, purpose and extent of. Under the practice of the New York Court of Chancery, it was customary, upon applications for receivers in aid of creditors' bills, to refer 63 Dutton V. Thomas, 97 Mich., 65 Fuller v. Taylor, 2 Halst. Ch., 93, 56 N. W., 229. 301. 64 See Browning v. Bettis. 8 66 Bailey v. Lane, 15 Ab. Pr., 373, Paige, 568; Bloodgood v. Clark, 4 note. Paige, 574. But see Dollard v. 67 Bollard v. Taylor, 33 N. Y. Taylor, 33 N. Y., Supr. Ct. R., 496. Supr. Ct. R., 496. CHAP. XII.] CREDITORS. 603 the case to a master in chancery to make the appointment. And it was held that the order of reference should authorize the master to appoint a receiver of all the property, equitable in- terests, things in action and effects belonging to the debtor, or in which he had any beneficial interest when the suit was instituted, except such articles of personal property as were by law exempt from sale on execution, and should require the master to take from the receiver the requisite security for the faithful performance of his trust. It should also require the defendant to assign to the receiver, under the direction of the master, all his property and effects, and should give the plaintiff leave to examine the debtor, or any other person, on oath before the master for any of the purposes of the refer- ence.^^ Under such an order of reference, however, the plain- tiff was not authorized to examine the defendant, or any other person, as to matters not connected with the receivership, or with ascertaining the possession, nature, value or character of the property which was to be assigned to the receiver. Plain- tiff could not, therefore, examine the debtor merely for the purpose of determining whether he had made a fraudulent as- signment of his property previous to the commencement of the action, when such property was no longer in his posses- sion. ^^ The chief purpose of such an examination was to as- certain what property the debtor had under his control and in his possession, in order that it might be delivered to the re- ceiver for the benefit of the creditor. The receiver was not » authorized, by virtue of his appointment, to seize such proper- ty as he might upon his own judgment deem that of the debt- or, but this was to be determined by the examination before the master, it being the receiver's duty simply to take such prop- 68 Green v. Hicks, 1 Barb. Ch., also, as to the practice on such ex- 309. And see this case as to the aminations, Dickerson v. Van Tine, practice under such orders of refer- 1 Sandf., 724. ence, and as to the extent and scope 69 Green v. Hicks, 1 Barb. Ch., of the examination of the debtor 309. permitted under the reference. See, 604 RECEIVERS. [chap. XII. erty as might be specified by the master, thus avoiding colli- sions between the receiver and adverse claimants. '^'^ § 416. Courts averse to interfering when contest is as to title of real estate claimed by third persons. While, as we have thus seen in the preceding sections, courts of equity are inclined to a liberal exercise of their jurisdiction by grant- ing receivers over the estate of a debtor in behalf of his judg- ment creditors, this extraordinary power is exercised with a considerable degree of caution when the contest is as to the title to real estate, which is in possession of and claimed by third parties. Indeed, courts of equity are always averse to any in- terference with the legal title in limine, and when a creditor's judgment is not of itself a lien upon lands which have been conveyed by the debtor to third parties, and the only equity of the judgment creditor is a right to resort to the lands by setting aside the conveyance from the debtor, the party in pos- session under what purports to be the legal title will not be deprived of his possession by the appointment of a receiver, unless upon a strong case of danger to the property and in- ability to respond to a decree because of insolvency,''^! And 70Dickerson v. Van Tine, 1 Rose, Freem. Ch., 718, to the effect Sandf., 724. that the plaintiff must show a clear "i^i Vause V. Woods, 46 Miss., 120. right to the property, or that he This was an appeal from an order has some lien upon it, or that the of the chancellor, appointing a re- property constitutes a special fund, ceiver upon a creditor's bill, to take to which he may resort for satis- into possession lands alleged to faction, or that the property is ex- have been conveyed in fraud of posed to loss or waste. It was said * plaintiff, an administrator, and of by Lord Eldon, in Jones v. Pugh, 8 his intestate in his life-time. The Ves., 71, that if real estate is as- court, Simrall, J., say, p. 128: "As sets, and the court can not avoid against the legal title, the interpo- seeing that it and the rents and sition is with reluctance ; it will profits must be responsible, it will only be done in case of fraud put a receiver on the estate. Walker clearly proved, and danger to the v. Denne, 2 Ves. Jr., 170. By the property. Lloyd v. Passingham, laws of this state, the property of 16 Ves. Jr.. 68, which was a case a decedent is chargeable with his between two claimants of the title. debts, primarily the personalty, A summary of the doctrine is and, secondarily, the lands ; not, stated by the chancellor in Mays v. however, in the sense that creditor? CHAP. XII.] CREDITORS. 605 when a judgment creditor had obtained a conditional order for a receiver over certain real property, alleged to belong to the debtor, but it was shown that the debtor had no such estate in the lands as was claimed by the creditor in his petition, hav- ing at the most but an equitable interest in some portion of them, it was regarded as sufficient cause for refusing to make the order for the receiver absolute, the order having covered the entire property.'^^ § 417. Buildings erected by debtor with his own funds, receiver appointed over rents. Where, however, a debtor has a life interest in certain real estate, upon which he has have a specific lien, but in the sense that creditors can subject both to their debts. The descent to the heir, or the right of the devisee, is Hable to be divested, if the real estate is required to pay debts. The gravamen of the bill is, that the deeds, or other instru- mentalities by which the real es- tate of William G. Vause was passed to, and vested in, the de- fendants, or some of them, was prompted by covin and fraud, to evade the debt due to the com- plainant's intestate; and, therefore, said real estate is as much bound for the debt as though such con- veyances had never been made. The judgment conferred no lien on these lands. The equity of the complainants is a right to resort to the lands, by setting aside these conveyances. The title of the de- fendants is a valid, legal title, as against all others than the creditor. If the property were worth more than the debt, there would be no reason to put the estate in the cus- tody of a receiver, unless the de- fendants were committing waste, and deteriorating its value. The court will not interpose for a mort- gagee, except upon the ground that the property is insufficient to pay his debt, and, therefore, he should, pending litigation, have the rents and income. Ligon v. Bishop et al., 43 Miss., 527. Nor will a receiver be appointed against an executor, on slight grounds. There must be abuse of the trust, or danger of in- solvency. Middleton v. Dodswell, 13 Ves., 266. The jurisdiction is exerted as part of the preventive justice of the court, mainly in order that the fund or property exposed to spoliation, and danger of loss, pending the litigation, may be taken charge of by the court, so as to abide the litigation. Where the contest is over the title, the defend- ant, if he has apparently and osten- sibly the legal title, will not be de- prived of possession unless upon a very strong case of risk of loss of the property, and inability to re- spond from insolvency to the de- cree. We have thought it proper to refer to these general principles which govern the jurisdiction of the court." 72 Tredennick v. Graydon, 1 Dr. & War., 316. 606 RECEIVERS. [chap. XII. with his own funds erected a building and receives the rents thereof, upon a bill by a judgment creditor the court may ap- point a receiver of the rents to apply them in payment of the judgment, although the real estate itself is held by trustees and the judgment is no lien thereon, since equity will not permit a debtor to thus evade the payment of his just obligations."^^ Nor will the courts permit a judgment debtor who occupies the position of a cesHii que trust of lands, under a trust created for his own benefit, to invest his individual property by build- ing upon the land, and thus create a trust in his own property for his own benefit, to the prejudice of his creditors.'^^ § 418. Receiver allowed over realty in first instance un- der EngHsh practice ; infant heirs ; rights of judgment cred- itors in possession not affected. It was the doctrine of the English Court of Chancery, that upon a bill by creditors claim- ing satisfaction out of both the real and personal estate of their debtor, if it appeared probable from defendant's answer that there was no personal estate, and both the realty in de- fendant's possession and its rents and profits must become responsible for such demands, the court might allow a receiver in the first instance, although the power was recognized as a delicate one."^^ And upon a bill by creditors for satisfaction out of the personal assets, and, if these should prove insuffi- cient, out of realty which had descended to an infant heir, a receiver has been allowed over the real estate.'^^ So upon a bill by creditors for a sale of real estate for the payment of their demands, the heir at law being an infant, a receiver was granted on application of the plaintiffs. "^"^ But when an in- cumbrancer seeks the aid of equity by a receiver over real es- tate of a defendant, and there are judgment creditors of the 73 Johnson v. WoodruflF, 4 Halst. 75 Jones v. Pugh, 8 Ves., 71. Ch., 120. affirmed on appeal to the 76 Sweet v. Partridge, Dick., 696. Court of Errors and Appeals, id., 77 Sweet v. Partridge, 1 Cox, 433. 729. 74 Johnson v. Woodruff, 4 Halst. Ch., 120. CHAP. XII.] CREDITORS. 607 defendant in possession, the appointment will be made without prejudice to the rights of such judgment creditors. '^^ And a judgment creditor in possession will not be ordered to attorn to a receiver subsequently appointed."^^ § 419. Receiver not appointed on creditors' bill, as against mortgagee in possession; different mortgages; in- adequate security. It will hereafter be shown, in discuss- ing the subject of receivers over mortgaged premises, that the courts are always reluctant to interfere w^ith the title of a mort- gagee, the general rule being that a mortgagee in possession, to whom anything is due, will not be disturbed by a receiver, the rule being based upon the reluctance of courts of equity to interfere with the legal title.^*^ And as against a mortgagee in possession of the premises, holding them as security for the payment of his debt, the court will not appoint a receiver of the rents and profits, upon a creditor's bill by a judgment creditor of the mortgagor, when the mortgagee has not been paid the amount due him and is able to account and respond for whatever he may receive.^! So when a mortgagee or trus- tee of certain property, which has been mortgaged to him by the debtor to secure debts due to the mortgagee and other cred- itors, is proceeding properly in the discharge of his trust by selling the property and applying the proceeds in payment of the mortgage indebtedness, a court of equity will not inter- fere by interposing a receiver, upon a creditor's bill filed against the debtor and the mortgagee.^2 gyf \^ ^j^ action by a judgment creditor to subject the debtor's property to the pay- ment of his debts, if the property is incumbered by numerous mortgages and judgments which are to be ascertained and their priorities determined, and the real estate is insufficient to pay the indebtedness, a receiver may be appointed to take 78 Davis V. Duke of Marlborough, see Brundage v. Home S. & L. 1 Swans., 74. Assn., 11 Wash., 277, 39 Pac, 666. 7J> Davis V. Duke of Marlborough, 81 Qninn v. Brittain, 3 Edw. Ch., 2 Swans., 118. 314. 80 See chapter XV, post. And 82 Furlong v. Edwards, 3 Md., 99. 60S RECEIVERS. [CIIAP. XII. possession of and to rent the property, and to collect the past due rents. ^'^ § 420. Receiver in aid of judgment creditors as against mortgagee of chattels. As against mortgagees of chattels, equity will extend the aid of a receiver upon the application of judgment creditors, if by reason of the fraudulent conduct of the mortgagee, or otherwise, such interference is necessary to protect the rights of all parties in interest.84 For example, when creditors have reduced their demands to judgment and have levied upon a stock of goods in the debtor's possession, they are entitled to an injunction and a receiver to take charge of the stock, as against the debtor and a third person claiming the goods as mortgagee, upon a bill alleging that the goods claimed to be covered by the mortgage are more than sufficient to pay the mortgage debt, and that the debtor has no other property out of which the judgment may be satisfied ; the bill also alleging that the mortgagee has permitted the debtor to use and dispose of the goods mortgaged, and that a portion of tlie stock levied upon is not covered by the mortgage.^^ So when a mortgagee of chattels in possession, having sold a part, and occupying as to the residue the position of a trustee for other creditors, is about to dispose of the residue to the preju- dice of a judgment creditor of the mortgagor or original debtor, a receiver may be appointed to take the proceeds of the unsold property, for the purpose of protecting the rights of all parties in interest. ^^ But, under a statute authorizing a receiver when the property is in danger of being lost or ma- terially injured or impaired, a debtor having executed a chat- tel mortgage of his stock of merchandise to creditors having claims nearly equal in amount to the value of the stock, and the mortgagees having taken possession by their agent, who 83 Smith v. Butcher, 28 Grat, 144. 85 Rose v. Bevan, 10 Md., 466. See. also, Grantham v. Lucas, 15 86 Gouthwaite v. Rippon, 8 L. J, W. Va., 425. N. S. Ch., 139. 84 Rose V. Bevan, 10 Md., 466. And see Gouthwaite v. Rippon, 8 L. J., N. S. Ch., 139. -CHAP. XII.] CREDITORS. 609 is selling- the goods in the usual course of trade, an attaching -creditor who has garnished such agent is not entitled to a receiver over the property, when it is not shown that it will not be properly accounted for, or that plaintiff's interest in the proceeds is liable to be impaired. ^'^ § 421. Judgment creditors may maintain action to set aside fraudulent mortgage ; rights of judgment creditor in England. When judgment creditors have, by their judg- ments, obtained a lien upon the real estate of their debtor, but a receiver is subsequently appointed over his effects and estate, such creditors may, notwithstanding the receivership, themselves maintain an action to set aside as fraudulent and void a mortgage which had been previously given by the •debtor, and to apply the proceeds of the property in satisfac- tion of their judgments, especially when it is alleged that the receiver neglects to act in the premises. But in such case, it is proper to make the receiver a party defendant to the ac- tion brought by the creditors, since he has an interest in the land subject to the lien of the judgments, and is entitled to the surplus avails of a sale of the land, if any, after satisfaction of the judgments which were liens thereon. ^^ And in England, when a mortgagee of the rates and tolls of a corporation has obtained a receiver in aid of the enforcement of his mortgage, a judgment creditor, although subsequent to the mortgage, may issue an elegit upon his judgment, but without prejudice to the rights of the receiver already appointed, or of any other receiver who may be appointed by the mortgagee.^^ But a judgment creditor in possession will not be ordered to attorn to a receiver subsequently appointed in behalf of an incum- brancer.9*^ § 422. Real estate in receiver's possession can not be sold under another judgment. Real estate in possession of 87 Silverman v. Kulin, 53 Iowa, ingham Canal Navigation Co.. Kay, 436. 142. 88 Gere v. Dibble, 17 How. Pr., 31. 90 Davis v. Duke of Marlborough, 89 Potts V. Warwick and Birm- 2 Swans., 118. Receivers — 39. 610 RECEIVERS. [chap. XII. a receiver, appointed upon a bill by a judgment creditor to have property of the debtor applied in satisfaction of his judg- ment, is regarded as being strictly in custody of the court, to abide the final decree which may be rendered in the cause. And in order that the court may be enabled properly to ad- minister the fund, no sale of the property will be allowed on execution under another judgment, without leave of the court first obtained for that purpose. And when such sale was at- tempted without leave of court, it was held void, and that it passed no title to the purchaser.^l 91 Wiswall V. Sampson, 14 How., 52. Air. Justice Nelson, delivering the opinion, observes as follows, p. 65 : "When a receiver has been ap- pointed, his possession is that of the court, and any attempt to disturb it, without the leave of the court first obtained, will be a contempt on the part of the person making it. This was held in Angel v. Smith, 9 Ves., 335, both with respect to receivers and sequestrators. When, therefore, a party is preju- diced by having a receiver put in his way, the course has either been to give him leave to bring an eject- ment, or to permit him to be ex- amined pro interesse suo. 1 J. & W., 176, Brooks v. Greathed; Dan- iell's Pr., ch. 39, § 4. And the doc- trine that a receiver is not to be disturbed extends even to cases in which he has been appointed ex- pressly without prejudice to the rights of persons having prior legal or equitable interests. And the in- dividuals having such prior interests must, if they desire to avail them- selves of them, apply to the court either for liberty to bring eject- ment or to be examined pro inter- esse suo: and this though their right to the possession is clear. 1 Cox, 422; 6 Ves., 287. The proper course to be pursued, says Mr. Daniell, in his valuable Treatise on Pleading and Practice in Chancery, by any person who claims title to an es- tate or other property sequestered, whether by mortgage or judgment, lease or otherwise, or who has a title paramount to the sequestration, is to apply to the court to direct the plaintiff to exhibit interrogatories before one of the masters, in order that the party applying may be ex- amined as to his title to the estate. An examination of this sort is called an examination pro interesse suo; and an order for such examination may be obtained by a party inter- ested as well where the property consists of goods and chattels, or personalty, as where it is real es- tate. And the mode of proceeding is the same in case of the receiver. 6 Ves., 287; 9 id., 336; 1 J. & W., 178; Daniell's Pr., ch. 39, § 4. A party, therefore, holding a judg- ment which is a prior lien upon the property, the same as a mortgagee, if desirous of enforcing it against the estate after it has been taken into the care and custody of the court to abide the final determina- tion of the litigation, and pending CHAP, XII.] CREDITORS. 611 § 423. Priority as between purchasers of real estate at receiver's sale and at sheriff's sale. When a debtor makes an assig-nment of all his property, real and personal, for the benefit of his creditors, and upon a judgment subsequently obtained against him and a creditor's bill filed thereon, the as- signment is set aside as fraudulent and void, and the debtor and his assignees are directed to assign and deliver all the property to the receiver appointed under the creditor's bill, up- on compliance with such order the title to the realty becomes vested in the receiver. A judgment, therefore, obtained against the debtor, after the assignment from him to the re- that litigation, must first obtain leave of the court for this purpose. The court will direct a master to inquire into the circumstances, whether it is an existing unsatisfied demand, or as to the priority of the lien, etc., and take care that the fund be applied accordingly. . . . It has been argued that a sale of the premises on execution and pur- chase, occasioned no interference with the possession of the receiver, and hence no contempt of the au- thority of the court, and that the sale, therefore, in such a case, should be upheld. But, conceding the proceedings did not' disturb the possession of the receiver, the ar- gument does not meet the objection. The property is a fund in court, to abide the event of the litigation, and to be applied to, the payment of t!ie judgment creditor, who has filed his bill to remove impediments in tlie way of his execution. If he has succeeded in establishing his right to the application of any portion of the fund, it is the duty of the court to see that such application is made. And in order to effect this, the court must administer it independ- ently of any rights acquired by third persons, pending the litigation. Otherwise, the whole fund may have passed out of its hands be- fore the final decree and the litiga- tion become fruitless. It is true, in administering the fund, the court will take care that the rights of prior liens or incumbrances shall not be destroyed ; and will adopt the proper measures, by reference to the master or otherwise, to as- certain them, and bring them before it. Unless the court be permitted to retain the possession of the fund, thus to administer it, how can it ascertain the interest in the same to which the prosecuting judgment creditor is entitled, and apply it upon his demand? . . . As we have already said, it is sufficient for the disposition of this case, to hold, that while the estate is in the cus- tody of the court, as a fund to abide the result of a suit pending, no sale of the property can take place, either on execution or otherwise, without the leave of the court for that purpose. And upon this ground, we hold that the sale by the marshal on the two judgments was illegal and void, and passed no title to the purchaser." 612 RECEIVERS. [chap. XII, ceiver, does not become a lien upon the land. And in a con- test between purchasers at a sheriff's sale under such subse- quently acquired judgment, and purchasers at a sale of the same property by the receiver, the latter will be held to have the title, since the lien of the judgment never having attached up- on the property, its sale under execution could confer no title upon the purchaser.^2 § 424. The same; receiver acquires real property sub- ject to judgment liens. The rule is otherwise, however, when the purchaser at the sheriff's sale purchases under a judg- ment recovered against the debtor prior to his assignment of his property to the receiver, even though such judgment be of a later date than that on which the creditor's bill was filed and the receiver appointed. And in such a case, as between the purchaser at the sheriff's sale, and a purchaser under the re- ceiver, the former will acquire the title. The reason for the distinction is found in the fact that the purchaser at the re- ceiver's sale derives his title, not under the judgment on which the receiver was appointed, but from the debtor's own convey- ance of his property to the receiver and the subsequent sale by that officer. And since the debtor can only convey his proper- ty to the receiver subject to the lien of existing judgments, a sale under an existing judgment confers a better title than can be derived through the debtor and the receiver. The conclu- sion, therefore, to be drawn from the cases, would seem to be that a receiver can not acquire title to real property of the debtor free from the liens of other judgment creditors, when such liens had attached before the assignment of his real es- tate by the debtor to his receiver.^^ § 425. Discharge in bankruptcy, when no defense to creditors' bill seeking receiver. It would seem that a dis- charge of the debtor in bankruptcy is not a sufficient defense to a creditor's bill seeking a receiver for the enforcement of a 92 Chautauque County Bank v. 93 Chautauque County Bank v. White, 6 N. Y., 236, reversing S. C, Risley, 19 N. Y., 369. See, also, 6 Barb., 589. Shand v. Hanley, 71 N. Y., 319. CHAP. XII.] CREDITORS. 613 judgment acquired after the discharge was granted, when the defendant appeared and contested the action in which the judgment was obtained and did not plead his discharge in bar, and when no apphcation has been made by the debtor to have the execution set aside because issued upon a judgment re- covered subsequent to his discharge. Under such circum- stances, the debtor having neglected to avail himself of his opportunity to take advantage of the discharge at the proper time, he will not be allowed to urge it against the appointment of a receiver upon the judgment remaining in full force.^^ § 426. Receiver under English bankrupt act of 1861. Under the English bankrupt act of 1861, when an insolvent debtor has executed a deed of inspectorship for the benefit of his creditors, covenanting to deal with his property accord- ing to the directions of the inspectors, upon a bill filed by them alleging that he is violating such covenants and hinder- ing the settlement of his affairs with his creditors, and that he is receiving and applying funds to his own use, a receiver will be appointed on the ground of preventing irreparable mis- chief to the creditors. And under such circumstances, the court may properly interfere by a receiver, even though the property may ultimately have to be distributed in bankruptcy, and al- though the bankrupt court might possibly afford the same re- lief.95 § 427. Receiver refused on creditors' bill when his ap- pointment would interfere with administration of estate of deceased. Equity will not lend its aid by a receiver when the granting of the relief would have the effect of inter- fering with the administration of the assets of a deceased debt- or, against whom judgment was obtained in his life-time. 9'* Steward v. Green, 11 Paige, selected, to appoint a receiver for 535. the temporary custody of the hank- y's Riches v. Owen, L. R., 3 Ch. rupt's estate, and as to the rights of App., 820. As to the power of a action of such a receiver, see Lan- court of bankruptcy, after an adju- sing v. Manton, 14 Bank. Reg., 127. dication and before an assignee is 614 RECEIVERS. [chap. XII. Thus, in the case of a judgment obtained and creditor's bill filed thereon during the debtor's life-time, and after his death the creditor's suit is revived against his administrator, the court will not grant a receiver of the effects of the deceased upon the application of plaintiff in the creditor's suit, since the property is to be disposed of in due course of administration according to law, and any priority which plaintiff may have gained by filing his bill dies with the death of defendant.^^ § 428. Relief granted against judgment debtor doing business in name of wife; error to pay creditors before priority determined. When a judgment debtor is conduct- ing a business in the name of his wife, and ostensibly as her agent, in w^hich he is aided by his sons who are minors, the business being wholly conducted and managed by the debtor and his sons, his interest is regarded as sufficient to warrant a court of equity in appointing a receiver to collect and preserve the assets, upon a bill by a judgment creditor showing that defendants are winding up the business, selling the property and collecting the credits. But it is error, in such a case, to direct the receiver to pay the creditors of defendants out of collections and sales made by him, before it is finally deter- mined whether they are entitled to priority of payment out of the funds ; since, even if they are entitled to priority, it is pre- mature to direct the payment before their claims have been as- certained and allowed by the court. And before such direction is given, an account should be taken and an opportunity afford- ed to prove the claims of creditors upon the one hand, and to contest them upon the other.^"^ 96 Sylvester v. Reed, 3 Edw. Ch., possession to the executor or ad- 296; Mathews v. Neilson, id., 346. ministrator, but would apply the But in the latter case, it is said that fund in payment of the judgment, if a receiver had already been ap- due regard being had, however, to pointed and had obtained possession the statutory rights of other crcdit- of property or money of the debtor ors. before his death, the court appoint- ^"^ Penn v. Whiteheads, 12 Grat., ing him, having possession through 74. its officer, would not part with that CHAP. XII.] CREDITORS. 615 § 429. Discretion of court as to amount of defendant's property over which receiver will be extended; discretion as to sale ; receiver extended for other creditor. Courts of equity sometimes exercise a discretionary power as to the amount of the debtor's property over which a receiver shall be appointed, or as to ordering an immediate sale for the pur- pose of satisfying the demands of judgment creditors. And when a receiver was appointed of the effects of a defendant debtor in several creditors' suits, the entire amount of the judgments being about $1,000, and the receiver took possession of the debtor's property, amounting to about $60,000, the court was of opinion that it would be proper for the receiver to for- bear selling at public auction, and he was directed to stay such sale until further order of the court. ^^ And when, under an act of parliament authorizing receivers of the property of a judgment debtor in aid of his creditors for the enforcement of their judgments, the court is vested with a discretion in limit- ing the quantity of the estate over which the receiver shall be extended, it will not appoint a receiver, for the enforcement of a small demand, over the whole of a large estate, but only over a portion sufficient to satisfy the indebtedness within a reason- able period. And under such a statute, when a receiver has been appointed over a part of defendant's estate, he may be extended over the remainder in behalf of another creditor who comes in for protection, thus saving the expense of a new ap- pointment, and such extension will be regarded as, in effect, an original appointment.^^ § 430. Creditor not entitled to priority over interest due on mortgages prior to his judgment. As regards priority of right between a judgment creditor and a mortgagee of the debtor, it is held, where the judgment is only a lien upon the 98Wardell v. Leavenworth, 3 right to the rents as between judg- Edw. Ch., 244. But see Billing v. ment creditors and mortgagees in Foster, 21 S. C, 334. such a case, Abbott v. Stratten, 3 99 Corbet v. Mahon, 2 Jo. & Lat., Jo. & Lat., 603. 671. And see, as to priority and 616 RECEIVERS. [CIIAP. XII. lands of defendant to the extent of such estate or interest as defendant had in them, that the judgment creditor is not en- titled to payment out of funds received by the receiver, in preference to interest due upon mortgages of the land which are prior to his judgment.^ § 431. Appointment after bill dismissed on demurrer. When a fund has already come into the hands of the court through the medium of a receiver, but the bill on which the appointment was made is afterward dismissed upon demurrer, a judgment creditor is entitled to a receiver upon a bill show- ing a judgment and levy upon the property, and that it is the only property of defendant within the jurisdiction of the court out of which his judgment can be satisfied, and that there are conflicting claims thereto which may defeat his ultimate re- covery unless the fund is placed in the hands of a receiver.^ § 432. Nature of property subject to receivership ; rings and jewelry ; notes and interest in firm ; benefice of clergy- man ; seats in stock and produce exchange. As regards the nature or specific kind of property over which a receiver may be appointed for the protection of judgment creditors, it would seem from the general scope and tenor of the decisions, that such a receivership may properly extend to property of any nature, real or personal, in which the debtor has such an inter- est as may avail his creditor. In New Jersey, it has been held that a receiver under a creditor's bill may be appointed to take charge of rings and jewelry of the defendant, since these are articles usually worn upon the person, and it might be out of the sheriff's power to levy on and take possession of them.^ And seats in a stock exchange and in a produce exchange, al- though their ownership is coupled with conditions and restric- tions, are property which may be subjected to the claims of creditors. It is, therefore, proper upon proceedings supple- mentary to execution to appoint a receiver over such seats be- 1 Holland v. Cork & Kinsale R. 3 Frazier v. Barnum, 4 C. E. Co., Ir. Rep., 2 Eq., 417. Green, 316. 2 Field V. Jones, 11 Ga., 418. CHAP. XII.] CREDITORS. 617 longing to the judgment debtor, and to direct the debtor to as- sign them to the receiver and to order their sale by him in sat- isfaction of the judgment.^ And in New York, on proceed- ings supplementary to execution under the code of procedure, when the debtor upon examination disclosed certain property consisting of notes in an insolvent firm, and an interest in an existing firm of which he was a member, the court regarded it as an eminently proper case for a receiver to take charge of the debtor's effects and to collect what was due to him.^ In England, a judgment creditor of a beneficed clergyman, whose judgment is, under acts of parliament, a lien upon the benefice of living of the clergyman, is entitled to the aid of equity by a receiver to collect the rents and emoluments pertaining to such living.^ § 433. Relief refused where answer alleges nothing due to plaintiff; delay to determine regularity of proceedings. A receiver will not be appointed of the effects of a defendant, upon a bill filed by one claiming to be a creditor, when the answer positively alleges that there is nothing due from de- fendant to plaintiff, and when no other creditors appear in support of the application."^ And when the court has reason- able ground to suspect irregularities in the judgment or execu- tion on which the creditor's bill is founded, it may delay the application for a receiver for a sufficient time to enable the ir- regularity to be determined in the court where the judgment was rendered, with leave to renew the application at a future time.8 So the relief will be denied when the bill contains no distinct charges of fraud, and when it does not appear clearly and distinctly that there is any property or thing in action to be preserved for the benefit of the judgment creditor.^ But when the bill charges that the judgment debtor has choses in 4 Habenicht v. Lissak, 78 Cal., '^ Fogarty v. Burke, 1 Con. & 351, 20 Pac, 874. Law, 565. 5 Webb V. Overmann, 6 Ab. Pr., 8 Bank of Wooster v. Spencer, 92. Clarke Ch., 386. 6 Hawkins v. Gathercole, 1 Sim., ^ First National Bank v. Gage, 79 N. S., 63. Ill-, 207. See, contra, Gage v. 618 RECEIVERS. [chap. XII. action and property which should be subjected to the payment of his indebtedness, and it is taken as confessed against the debtor, it is not error to appoint a receiver. ^^ § 434. Waiver of answer under oath no ground of ob- jection. The fact that plaintiff in a creditor's bill, seeking the appointment of a receiver, sees fit to waive the answer of defendant under oath, affords no sufficient objection to grant- ing a receiver in the action, and to making an order of refer- ence for the examination of defendant on oath before a master in chancery, with respect to the property which he is required to assign to the receiver. ii § 435. When defendant directed to pay fund into court. When a defendant in a creditor's bill, filed by a receiver of the estate of a deceased person, admits by his answer a balance of money in his hands belonging to the estate of the deceased, he should be directed to pay the fund into court without waiting for a final decree. And such fund may either be kept in the custody of the court, or invested under its special direction, as the court may see fit.^^ § 436. Courts averse to interfering on ex parte applica- tion. It is to be observed that courts of equity are al- ways averse to appointing receivers upon an ex parte applica- tion, and without due notice to defendants whose rights are to be affected. And a receiver will not be appointed ex parte upon a creditor's bill, when it is not shown that defendant has any property of a perishable nature, or choses in action which are in danger of being lost unless immediately collected; or that any other special circumstances exist, which render it necessary to put a receiver in immediate possession of the debt- or's property.l^ « Smith, 79 111.. 219. where it is held 10 Runals v. Harding, 83 111., 75. that the appointment of a receiver H Root v. Safford. 2 Barb. Ch., upon such a bill is almost a matter 33. of course, as under the former 12 Rutherford v. Jones, 26 Ga., chancery practice in New York un- 150. der similar legislation concerning i^ Sandford v. Sinclair, 8 Paige, creditors' bills. 373, affirming S. C, 3 Edw. Ch., 393. CHAP. XII.] CREDITORS. 619 § 437. Prior creditors protected, notwithstanding dis- missal of bill. When there are prior creditors, parties to the cause, having claims upon an estate which is placed in the hands of a receiver, although the plaintiff on whose applica- tion the receiver is appointed subsequently dismisses his bill and consents to the receiver's discharge, the court will yet protect the rights of such prior creditors by continuing the receiver; and it may require them to file a bill forthwith, as a condition of thus affording them protection.!^ § 438. Receiver in divorce proceedings to enforce de- cree for alimony. Upon supplementary proceedings under the code of procedure in Wisconsin, to enforce a judgment or decree for alimony rendered in an action for a divorce, the court may appoint a receiver to take possession of the effects of defendant in the divorce proceeding; and the sheriff's re- turn of nulla bona upon the execution for alimony, if made and signed before the supplementary proceedings are instituted, is sufficient foundation therefor, although the execution is not filed with the clerk until after such proceedings are begun. And the receiver thus appointed may maintain an action to set aside a fraudulent conveyance of his real estate, made by the defendant to defeat the decree for alimony.^^ And under the provisions of the code of California, the court may appoint a receiver over the property of the defendant either for the pur- pose of enforcing payment of alimony and expense money pre- viously ordered to be paid, or for the purpose of enforcing a previous order requiring the furnishing of security for such payment, or for the purpose merely of providing such se- curity. ^^ § 439. Relief granted when only security for judgment is a life estate. A receiver has been allowed in the Irish 14 Murrough v. French, 2 Mol., perior Court 111 Cal., 488, 44 Pac, 497. 177; Huellmantel v. Huellmantel, 15 Barker 7'. Dayton, 28 Wis., 367. 124 Cal., 583, 57 Pac, 582; Mc- See Goff v. Goff, 54 West Va., 364, Aneny v. Superior Court, ISO Cal., <^ S. E.. 177. 6, 87 Pac, 1020. '"'' Pc'.nlnma Savings Bank v. Su- 620 RECEIVERS. [chap. XII. Court of Chancery, in aid of a judgment creditor who had obtained a judgment in another court, the security for which was only a hfe estate which might lapse at any moment, there being also large prior incumbrances, and the defendant hav- ing sold his stock and furniture and gone abroad to avoid payment of the judgment.!'^ /^j-j^ ^ judgment creditor may have a receiver over the share of personal estate to which the debtor is entitled as one of the next-of-kin of a deceased intestate, no administration of the estate having been had.i^ § 439a. Supreme Court of Judicature Act in England. In England, notwithstanding the Supreme Court of Judicature Act of 1873, which authorizes the appointment of a receiver "in all cases in which it shall appear to the court to be just or convenient that such order should be made," a receiver will not be allowed over personal property, demands and choses in action of a judgment debtor, when no obstacles or impedi- ments exist to the enforcement of the judgment in the usual course by levying an execution upon such property and by at- taching the debts due to the debtor.^^ Nor, under this act, will a receiver be allowed over future earnings or salary of the debtor, which have not been by him assigned or charged with payment of the judgment debt.20 And it is held that to jus- tify the relief under the act, in aid of a judgment creditor, the circumstances must be such as would have warranted the ap- pointment of a receiver by the Court of Chancery before the passage of the act.^i And when a judgment debtor dies pend- ing proceedings against him by a judgment creditor for a re- ceiver, the court has no power to grant the relief, the action not having been revived against the representatives of the es- tate of the deceased debtor.22 But where it is sought to reach 17 AlcCraith v. Quin, Ir. Rep., 7 ris v. Beauchamp Brothers, (1894) Eq., 324. 1 Q. B., 801. 18, T 1, Ai, oo T T5 T 20 Holmcs •y. Millagc, ( 1893) 1 Q. 18 Mullane v. Ahern, 28 L. R., Ir. & . v / >* 105 ^■' 21 Harris v. Beauchamp Brothers, 19 Manchester & L. D. B. Co. v. (1894) 1 Q. B., 801. Parkinson, 22 Q. B. D., 173; Har- 22 /„ re Shephard, 43 Ch. D., 13L CHAP. Xn.] CREDITORS. 621 by garnishment funds belonging to non-resident defendants, and it appears probable that the defendants will withdraw the funds thus owing them beyond the jurisdiction of the court, a receiver is properly appointed under the provisions of the act.23 § 439&. No preference allowed as between creditors of the same class. Where a court of equity has appointed a receiver over the estate of an insolvent debtor and the receiver has taken possession of his property, no creditor will be al- lowed, by obtaining judgment against the insolvent after the receiver has taken possession, to obtain a preference over other creditors of the same class, and this is true even though the ac- tion in which the judgment was recovered was instituted be- fore the receiver actually took possession of the property.24 23 Goldschmidt v. Oberrheinische 343, 28 S. E., 860. And see, post, Metallwerke, (1906) 1 K. B., 373. § 461. 24 Lang V. Macon C. Co., 101 Ga., 622 RECEIVERS. [chap. XII. II. Of the Receiver's Title. § 440. Appointment of receiver does not divest previously acquired liens; receiver takes no better title than that of debtor. 441. Receiver acquires no title to property of debtor which is exempt from execution. 442. Exemption extended to proceeds of insurance; also to judg- ment for damages for seizing exempted property. 443. Assignment by debtor to receiver not necessary as to personal property and choses in action; receiver may recover prop- erty without assignment; levy by sheriff a contempt of court. 444. Assignment passes only property in which debtor has bene- ficial interest; need not except property held in trust or previously assigned; should except exempted property; right of action for tort does not pass. 445. Irregularities in appointment of receiver no justification for refusal to make assignment and submit to examination. 446. Formal assignment necessary, though defendants swear they have no property; assignment resembles mortgage; no re- assignment necessary. 447. No assignment to receiver necessary under New York code; receiver acquires only right of action as to property previ- ously transferred in fraud of creditors. 448. Receiver's title prior to that of judgment creditor subsequent- ly levying execution; title not defeated by delay in taking possession; preference over assignment; date of receiver's title. 449. Title to choses in action as between receiver and purchaser; title acquired by receiver under code of procedure; lis pendens. •J-50. Receiver takes no title to income of inalienable trust fund accruing after appointment. 451. Receiver takes estate by curtesy in New York, and may re- cover rents. 452. Efifect of debtor's death before appointment actually made. § 440. Appointment of receiver does not divest pre- viously acquired liens; receiver takes no better title than that of debtor. In considering the nature of the title to the debtor's property and estate, which is acquired by a re- ceiver appointed in behalf of judgment creditors, the first principle to be observed is that the appointment of the receiver does not operate to divest liens previously acquired on the property of the debtor by other creditors acting in good faith. CHAP. XII.] CREDITORS. 623 The appointment is regarded as being made subject to such rights and liens as may have been previously acquired by other judgment creditors, who will not be divested of their liens by virtue of the subsequent receivership.25 For example, a judgment creditor is entitled to the enforcement of his lien against the personal property of his debtor, and to the fruits of a levy made thereon, notwithstanding the subsequent ap- pointment of a receiver of the debtor's effects in a creditor's suit; since, until such appointment is actually made, there is no such lien by virtue of the creditor's suit upon the personal property of the debtor, as to prevent a levy and sale under exe- cution.26 So when a sheriff has made a valid levy upon the debtor's property under a judgment against him, and a re- ceiver is subsequently appointed over the debtor's estate, the receiver takes title subject to the rights acquired under the levy. And in such a case, when the receiver agrees with the sheriff, that if the latter will desist from sale under his levy and will permit the receiver to sell, he will pay the plaintiff in execution, or the sheriff for his use, the amount of such execu- tion, if it shall be determined that plaintiff's levy was a prior lien, such agreement may be enforced by action against the re- ceiver.27 So creditors, who have by their judgments acquired a lien upon their debtor's real estate prior to the appointment of a receiver over his estate, may maintain an action to set aside a fraudulent mortgage executed by the debtor; since the receiver's appointment, being subsequent to the lien of their judgments, does not divest them of their right of action. 28 And, in general, it may be said that a receiver over a debtor's property occupies the same relation toward the proceeds or 25 Becker v. Torrance, 31 N. Y., 26 Davenport v. Kelly, 42 N. Y., 631 ; Davenport v. Kelly, 42 N. Y., 193. And see Van Alstyne v. Cook, 193 ; Gere v. Dibble, 17 How. Pr., 25 N. Y., 489. 31 ; Cohen v. Gold Creek M. Co., 27 Becker v. Torrance, 31 N. Y., 95 Fed., 580. And see Van .Alstyne 631. V. Cook, 25 N. Y., 489. See, ante, -8 Gere v. Dibble, 17 How. Pr., § 138. 31. 624 RECEIVERS. [chap. XII. fund derived from the property as the debtor himself.^^ If, at the time of the receiver's appointment, the property is in the possession of a sheriff, under writs of attachment levied in behalf of attaching creditors, the receiver's title and right to possession are subordinate to those of such attaching cred- itors, who may, when necessary, be protected by a writ of pro- hibition to prevent the court from interfering with their pos- session.2^ And a receiver can not acquire a better or greater title than that of the debtor,^!^ nor can he assert rights with respect to the receivership property which the debtor himself would have been estopped from asserting.^^ Thus, where a debtor is estopped to assert that a transfer of property is void as being in fraud of creditors, the receiver of the debtor will likewise be estopped. ^^ So where a corporation is precliided by the conduct of its officers from maintaining an action against a subscriber for the amount of his stock subscription, the receiver of the corporation will be unable to maintain the action. 24 § 441. Receiver acquires no title to property of debtor which is exempt from execution. As regards property of the debtor which is exempt by law from levy and sale under execution, the doctrine established by the courts of New York is that a receiver appointed on proceedings supplementary to execution under the code, in the nature of an ordinary cred- itor's bill under the former chancery system, acquires no title 29 Crine v. Davis, 68 Ga., 138. N. E., 1076 ; Foster v. Rincker, 4 30 State V. Superior Court, 7 Wyo., 484, 35 Pac, 470; First Na- Wash., 77, 34 Pac, 430; State v. tional Bank v. Cook, 12 Wyo., 492, Superior Court, 8 Wash., 210, 35 76 Pac, 674, 78 Pac, 1083. Pac, 1087, distinguished in State v. 32 Gottlieb v. Miller, 154 111., 44, Superior Court, 11 Wash., 63, 39 39 N. E., 992; Great Western Tele- Pac, 244. And see Cherry v. W. graph Co. v. Loewenthal, 154 111., W. I. E. Co., 11 Wash., 586, 40 Pac, 261, 40 N. E., 318. 136. 33 Gottlieb v. Miller, 154 111., 44, 31 Gottlieb V. Miller, 154 111., 44, 39 N. E., 992. 39 N. E., 992; Great Western Tele- 34 Great Western Telegraph Co. graph Co. v. Loewenthal, 154 111., v. Loewenthal, 154 111., 261, 40 N. 261, 40 N. E., 318; Chicago Title & E., 318. Trust Co. V. Smith, 158 111., 417, 41 CHAP. XII.] CREDITORS. 625 by virtue of his appointment to such property."^ And the rule holds good, even though the order of appointment is in gen- eral terms, without excepting exempted property; since such order, however broad in its language, must be understood as limited in its operation, by the statute exempting the property from execution, and the law attaches to the order and becomes a part of it. A judgment debtor may, therefore, maintain an action against his receiver, for property taken by the latter which is exempt from sale under execution. ^6 § 442. Exemption extended to proceeds of insurance; also to judgment for damages for seizing exempted prop- erty. The doctrine as stated in the preceding section is not limited in its application to the property itself which is ex- empted by law from sale under judicial process, but extends also to the proceeds of insurance realized upon the property when destroyed by fire.^'^ And when property of the debtor, which is exempt by law from sale under execution, is destroyed by fire subsequent to the appointment of the receiver, the right of action for the insurance does not vest in the receiver, and he has no interest therein.^^ And a receiver of a judgment debtor will not be allowed an order," directing the debtor to assign to him a policy of insurance upon furniture of the defendant, which was exempt from execution and which has been des- troyed by fire ; since, in such case, the debtor has not voluntarily parted with or waived his right to the exempted property. ^^ The doctrine is also extended to the case of a judgment for damages, recovered by the debtor against a creditor who had seized and sold property which was exempt from execution, the judgment being regarded as representing the property, for the value of which it was recovered. A receiver, therefore, who 35Finnin v. Malloy, 2,Z N. Y. 524; Sands v. Roberts, 8 Ab. Pr., Supr. Ct. R., 382; Cooney v. Coon- 343. ey, 65 Barb., 524. See, also, Tillot- "^^ Sands v. Roberts, 8 Ab. Pr., son V. Wolcott, 48 N. Y., 188. 343. 36 Finnin v. Malloy, 33 N. Y. 3-.) Cooney v. Cooney, 65 Barb., Supr. Ct. R., 382. 524. 37 Cooney v. Cooney, 65 Barb., Receiver?, — 40. 626 RECEIVERS. [chap. XII. has collected such a judgment, will be ordered to release it in favor of the debtor.^^ § 443. Assignment by debtor to receiver not necessary as to personal property and choses in action; receive-- may recover property without assignment; levy by sheriff a contempt of court. Under the former chancery practice in New York, it was customary, upon the appointment of a receiver in aid of a creditor's bill, to require the defendant to execute an assignment to the receiver of all his property and effects, and a similar practice has been followed in other states retaining the chancery system. While there was some doubt, under the New York decisions, as to whether such an as- signment was not really necessary to vest in the receiver the title to real estate of the debtor,^! yet as regards personal property, choses in action, and equitable interests of the debtor, the assignment was regarded merely as a matter of conve- nience, the established doctrine being that as to all such proper- ty and interests the title passed to the receiver by virtue of his appointment, without the intervention of or any necessity for a formal assignment from the debtor.^^ Especially was this the case with regard to equitable interests and choses in ac- tion in favor of the debtor, as to which it was held that an assignment could transfer no additional or higher right than the receiver had by virtue of his appointment.'*^ And when a receiver was appointed over the estate of three defendants in a creditor's bill, only two of whom joined in an assignment of their property to the receiver, he was held to be invested with the title to the personalty, so as to maintain an action of trover therefor. Such a receiver was held to have a clear priority over purchasers of the same property, under exe- 40 Tillotson V. Wolcott, 48 N. Y., 6 Barb., 542. See, also, Mann v. 188. Pentz, 2 Sandf. Ch., 272. Albany 41 See Wilson v. Wilson, 1 Barb. City Bank v. Schermerhorn, Clarke Ch., 594. Ch., 297. 42 Storm v. Wacldell, 2 Sandf. 4.3 Iddings v. Bruen, 4 Sandf. Ch., Ch., 505; Iddings v. Bruen, 4 252. Sandf. Ch., 252; Wilson v. Allen, CHAP. XII.] CREDITORS. 627 cution on a judgment recovered subsequent to the appointment of the receiver, and to be entitled to recover the property from such purchasers.^4 And the property being thus under the control of the court, through its officer the receiver, the court would not permit judgment creditors to levy thereon for the satisfaction of their judgments, and a sheriff making such a levy was held in contempt of court.'*^ § 444. Assignment passes only property in which debtor has beneficial interest; need not except property held in trust or previously assigned; should except exempted property; right of action for tort does not pass. As re- gards the property which passes to the receiver by virtue of an assignment from the debtor, under an order of court appoint- ing a receiver of the money, property, things in action and ef- fects of the defendant, nothing passes under the general words of assignment, except property or things in action in which the defendant has some beneficial interest at the time of making such assignment. It is not necessary, therefore, that it should contain an express reservation of property which the debtor holds merely in the character of trustee for others, under a valid and subsisting trust, and in which he has no beneficial interest. Nor is it necessary to expressly except from the op- eration of the assignment property which the debtor had before assigned to the receiver, who had been appointed in a previous creditor's suit. Such an assignment, however, should contain an exception reserving to the debtor such property as he is entitled to hold exempt from levy and sale under execution ; and this should be done, even though the order appointing the receiver and directing the debtor to assign and deliver over his property is expressed in general terms, without excepting any exempted property.^^ But a mere right of action in favor of a debtor for a personal tort, since it can not be reached by plaintiff in a creditor's bill, is not an asset which will pass to 44 Wilson V. Allen, 6 Barb., 542. 40 Caggcr v. Howard, 1 Barb. Ch., 45 Albany City Rank v. Scber- 368. merhorn, Clarke Ch., 297 628 RECEIVERS. [CIIAP. XII. a receiver appointed on such bill, by virtue of the assignment made by the debtor to the receiver.'*'^ § 445. Irregularities in appointment of receiver no jus- tification for refusal to make assignment and submit to examination. The fact that there were irregularities in the appointment of a receiver upon a creditor's bill in aid of a judgment at law, affords no justification upon a motion for an attachment against the defendant, for not appearing before a master in chancery to make an assignment of his property to the receiver, and to submit to an examination. The proper course for a defendant, desiring to take advantage of such irregularities, is to move to set aside the appointment, and for an order staying the proceedings before the master in the mean- time.^^ Nor do such irregularities afford any valid objec- tion to an examination of the debtor touching his assets as re- quired by the order appointing the receiver.'*^ § 446. Formal assignment necessary, though defend- ants swear they have no property; assignment resembles mortgage; no re-assignment necessary. When a receiver is appointed upon a creditor's bill, and defendants are ordered to assign to him all their property, assets, and choses in ac- tion, they will be conjpelled to make a formal assignment to the receiver to enable him to test the validity of any disposition which they may have made of their property, and to bring suits in relation thereto, even though they have sworn that they have no property.^^ In such event, however, nothing will be re- quired beyond a formal assignment, un4ess it is made to ap- pear by other testimony that the debtors have sworn falsely as to their property and effects.^^ And it has been held that an assignment of his effects by a judgment debtor to a receiver appointed on a creditor's bill, partakes of the nature of a mort- 47 Hudson V. Plets, 11 Paige, 180. ^0 Chipman v. Sabbaton, 7 Paige, 48 Howard v. Palmer, Walk. 47. (Mich.), 391. 51 Chipman v. Sabbaton, 7 Paige, 49 Thomas v. Gartner, 97 Mich., 47. 608, 57 N. W., 188. CHAP. XII.] CREDITORS. 629 gage for the payment of the judgment and costs, and when this purpose is attained the assignment has no further force, and that no re-assignment to the debtor is necessary.^^ § 447. No assignment to receiver necessary under New York code; receiver acquires only right of action as to property previously transferred in fraud of creditors. Un- der the New York code of procedure, upon the appointment of a receiver of the effects of a judgment debtor upon proceedings supplementary to execution, no assignment is necessary to in- vest the receiver with the title to the debtor's personal proper- ty or choses in action ; since such title vests at once in the re- ceiver by virtue of his appointment, and no subsequent act or assignment by the debtor to a third party can divest the lien thus acquired in the creditor's suit.^^ The rule prevails also with regard to real estate of the debtor, although the contrary was formerly held,^^ and it is now the recognized rule that the receiver, by virtue of his appointment, becomes vested with all the title to the debtor's property, both real and personal, without the execution of any assignment from the debtor, no distinction being made between realty and personalty.^^ The 52 Anderson v. Treadwell, Ed- It was, therefore, held that where mond's Select Cases, 201. the debtor had sold and conveyed 53 Porter v. Williams, 5 How. real estate to a purchaser in good Pr., 441 ; People v. Hulburt, id., faith and for value, although after 446; S. C, 1 Code R., N. S., 75. the receiver was appointed, the And See Fessenden v. Woods, 3 debtor not having made an assign- Bosw., 550. As to the title of a re- ment to the receiver, the latter ceiver in proceedings supplementary could not maintain an action of to execution to policies of insur- ejectment against the purchaser, ance upon the life of the judgment And to the same effect is Scott v. debtor, see Reynolds v. Aetna Life Elmore, 10 Hun, 68. It is believed, Ins. Co., 160 N. Y., 635, 55 N. E., however, that the doctrine of these 305. cases is entirely overthrown by 54 See Moak v. Coats, 33 Barb., Porter v. Williams, 9 N. Y., 142. 498, where it was held that the title 55 Porter v. Williams, 9 N. Y.. to the personalty only passed to the 142; Wing v. Disse, 15 Hun, 190; receiver by virtue of his appoint- Manning v. Evans, 19 Hun, 500. ment, and that the title to the realty And see Fessenden v. Woods, 3 did not vest in him until an assign- Bosw., 550. ment was executed by the debtor. 630 RECEIVERS. [chap. XII. doctrine, however, would seem to be limited to property actual- ly in the possession of the debtor, and it is held that the ap- pointment does not invest the receiver with title to property previously transferred or assigned by the debtor in fraud of his creditors. As to such property, it is held, he can acquire no title by succession to the rights of the debtor, since the transfer is valid as to him, and the fraudulent assignee ac- quires a good title to the property as against the debtor and all other persons, except the creditors of the debtor. As to such property, therefore, the receiver's only right is a right of ac- tion, as trustee for the creditors, to set aside the fraudulent transfer and to recover the property, for the benefit of the judgment creditors at whose suit he was appointed. ^^ And if, in such case, the receiver takes no steps to set aside such assignment until after the debtor is adjudicated a bankrupt and an assignee of his estate is appointed, the receiver can not then maintain an action to set aside the assignment and to re- cover the assets.^"^ § 448. Receiver's title prior to that of judgment creditor subsequently levying execution; title not defeated by de- lay in taking possession ; preference over assignment ; date of receiver's title. Since a receiver, in proceedings supple- mentary to execution, acquires title to the debtor's property by virtue of his order of appointment, which order divests all the title and interest of the debtor and vests it in the re- ceiver, his title takes precedence over that of a judgment cred- itor who levies an execution subsequent to the receiver's ap- pointment. The receiver may, therefore, maintain an action for the recovery of property so levied upon and sold, and may ^'6 Bostwick V. Menck, 40 N. Y., N. J. Eq., 291 ; Bergen v. Littell, 41 383; Olney v. Tanner, 10 Fed., 101, N. J. Eq., 18, 2 Atl., 614. But see affirmed on appeal, 21 Blatchf., 540. Skinner v. Terhune, 45 N. J. Eq., And a receiver, under the statutes 565, 19 Atl., Zll ; Boid v. Dean, 48 of New Jersey, may file a bill in his N. J. Eq., 193, 21 Atl., 618. own name to set aside a fraudulent 57 Olney v. Tanner, 10 Fed., 101, transfer of the judgment debtor's affirmed on appeal, 21 Blatchf., 540. propertj'. Miller v. Mackenzie, 29 CHAP. XII.] CREDITORS. 631 recover its value with interest from the date of sale. Nor is the receiver's title to the property, or his right of action for its recovery, defeated because of his delay in taking possession until after levy of the execution, when no fraud or collusion is shown, and when there is no evidence that the delay of the receiver in taking possession was by the consent or direction of the creditors at whose instance he was appointed. ^^ So after the appointment of a receiver in behalf of the creditors of an insolvent debtor, such debtor can not make a valid as- signment of his property in the receiver's possession by way of preference to certain creditors, since, the property or fund being in the possession of the court for equitable distribution, the debtor has no power to interfere therewith. ^^ And imder the statutes of North Carolina, it is held that a receiver in this class of cases becomes vested with the title of the judgment debtor as of the date of service of a restraining order upon the debtor, or, in the absence of such order, from the date of filing and recording the order appointing a receiver.^^ § 449. Title to choses in action as between receiver and purchaser; title acquired by receiver under code of pro- cedure; lis pendens. As regards the title to choses in action of the debtor, as between the receiver and an assignee or pur- chaser from the debtor, who purchases subsequent to the filing of the creditor's bill and with notice thereof, it was held, under the former chancery practice in New York, that the title ac- quired by the receiver was superior to that of the purchaser, and would prevent the latter from maintaining a bill in equity for the enforcement of the chose in action. ^i Under the code of procedure, it would seem that a receiver, appointed in supple- mentary proceedings, acquires title to such property only of the debtor as belonged to him at the time the proceedings were SSFessenden v. Woods, 3 Bosw., 60 Rose v. Baker, 99 N. C, 323, 550. 5 S. E., 919. •'>9 McGowan v. Myers, 66 Iowa, ^i Weed v. Smull, 3 Sandf. Ch., 99, 23 N. W., 282. 273. 632 RECEIVERS. [chap. XII. instituted.<52 And it is held in Rhode Island, that the filing of a petition in eqnity for the appointment of a receiver, under the insolvent law of the state, operates as lis pendens as to all prop- erty and assets of the defendant debtor. When, therefore, af- ter the filing and during the pendency of such a petition against a copartnership, one member of the firm assigns his individual property to a third person, the court may require such partner and his assignee to convey the property so assigned to the re- ceiver.^3 § 450. Receiver takes no title to income of inalienable trust fund accruing after appointment. An order appoint- ing a receiver in a creditor's suit does not invest him with title to any part of the income of a trust fund, to accrue to the debtor after the date of the receiver's appointment, which fund is devised to the debtor and is inalienable in his hands.^^ And in New York, a receiver appointed in proceedings supple- mentary to execution can not maintain an action in the nature of a creditor's suit to recover the interest of the judgment debtor as a beneficiary in a trust fund, the trust having been created by a person other than the debtor, nor can the receiver reach the surplus of such fund, beyond what is required for the support of the beneficiary.^^ § 451. Receiver takes estate by curtesy in New York, and may recover rents. In New York, where the common- law estate by curtesy is still recognized, it is held that the es- tate thus acquired by the husband upon the death of his wife intestate after issue born, is such an estate or interest as will pass to a receiver of the husband, on proceedings against him by a judgment creditor. And the receiver is entitled to recover the rent due on account of such estate at the period 62 Campbell v. Genet, 2 Ililt., 290. 65 Campbell v. Foster, 35 N. Y., 63 Petition of Arnold, 15 R. I., 361; McEwen v. Brewster, 17 Hnn, 15, 23 Atl., 31. 223. See, also, Manning v. Evans, 64 Graff V. Bonnett, 31 N. Y., 9, 19 Hun, 500. :..ffirming S. C, 2 Rob. (N. Y.), 54. CHAP. XII. J CREDITORS. C33 of his appointment, and all rent accruing afterward and until the expiration of his receivership. ^^ § 452. Effect of debtor's death before appointment ac- tually made. Under the code of procedure in North Caro- lina, when a receiver is appointed in supplementary proceed- ings in aid of a judgment creditor, but the debtor dies before the appointment is actually made, the receiver does not acquire title to the debtor's effects, and the judgment creditor does not become entitled to any priority therein, the laws of the state having fixed the distribution of the assets of a deceased among his creditors.^*^ 66 Beamish v. Hoyt, 2 Rob. (N. 67 Rankin v. Minor, 72 N. C, 424. Y.), 307. 634 RECEIVERS. [chap. XII. III. Of the Receiver's Functions and Rights of Action. § 453. Functions and duties fixed by order of court; what usually in- cluded. 454. Receiver a trustee for creditors; may sue to set aside fraudu- lent transfers; parties defendant in such suit; may remove cloud; may not enforce trust; when fraudulent conveyance not set aside. 455. Receiver's rights of action limited to extent necessary to satisfy judgments; can not unite rights of subsequent creditors with former action. 456. Receiver estopped by estoppel of creditor. 457. Receiver can not take forcible possession of property assigned to third person; rights of property to be determined by action. 458. In action by receiver to recover property assigned, when as- signees allowed to retain possession; when receiver refused injunction and receiver. 459. Allegations necessary in action by receiver to set aside fraudu- lent assignment; debtor a proper party defendant; effect of order. 460. Receiver can not recover property assigned in trust for pay- ment of debts, when trust partly fulfilled. 461. Priority as between different judgment creditors. 462. Receivers in aid of proceedings in bankruptcy. 463. Receiver of corporation appointed in creditor's suit can not enforce subscription by shareholder. 464. In action by receiver on notes, defendant can not set off judg- ment against receiver on note of debtor. 464a. Receiver entitled to letters patent; effect of sale; membership in exchange. 465. Receiver may maintain action for proceeds of note in hands of third parties, applied on judgment against debtor. 466. Interest devised to testator can not be divested on mere petition or application. 467. Action against debtor for conversion of property; mortgage of chattels; receiver can not maintain action for money received by debtor after appointment. 468. Action by receiver to recover usurious payments. 469. Acquiescence in sheriff's sale by creditor, effect of on action by receiver. 470. Appointment of receiver can not be questioned in action by receiver; rents received from sub-tenants of debtor by re- ceiver should go to landlord. 471. Receiver appointed by one federal court can not sue in another to recover securities belonging to debtor. 471c. Effect of death of parties or of receiver; practice in such case. CHAP. XII.] CREDITORS. 635 § 453. Functions and duties fixed by order of court; what usually included. In appointing receivers over the property and effects of a debtor, upon the application of his judgment creditors, it is usual for the order of appointment to fix in general terms the functions and duties of the receiver, and these are subject to modification or enlargement by fur- ther order of court, from time to time, as the exigencies of the case may demand. These functions usually embrace the re- ceiving of whatever property and effects may belong to the debtor; the collection of debts and demands due to him, and the prosecution of suits for this purpose when necessary; and the payment into court of the proceeds, to be applied in satis- faction of the judgment in aid of which he was appointed. And under the rules of court prevailing under the former chan- cery practice in New York, a receiver appointed in aid of a creditor's bill was vested with a general power to sue for all demands due to the debtor. And it would seem that he might institute such actions siw motii, merely obtaining the consent of the creditors for his own protection as to the question of costs. ^^ § 454. Receiver a trustee for creditors; may sue to set aside fraudulent transfers; parties defendant in such suit; may remove cloud; may not enforce trust; when fraudulent conveyance not set aside. As regards the gen- eral functions and rights of action of a receiver in proceedings supplementary to execution under the New York code of pro- cedure, and in other states which have adopted the same prac- tice, the established doctrine is, that such receiver is not the mere agent or representative of the debtor, but occupies the relation of a trustee for the creditors in whose behalf he is 68 Green v. Bostwick, 1 Sandf. maintain an action for the partition Ch., 185. As to the right of a re- of real estate of the judgment ceiver appointed in proceedings sup- debtor, see, Dubois v. Cassidy, 75 plementary to execution, under the N. Y., 298. New York code of procedure, to 636 RECEIVERS. [chap. XII. appointed.^^ He is, therefore, entitled to enforce the rights of such creditors to the extent necessary for the satisfaction of their demands.''^ And for this purpose, he may institute ac- tions in his own name to set aside fraudulent assignments or transfers of his property, made by the debtor with a view of defeating his creditors, and may recover the property so trans- ferred for the purpose of applying it in satisfaction of the judgments.'^^ So the receiver may maintain an action to set aside a void chattel mortgage or to recover the property or 69Bostwick V. Menck, 40 N. Y., 383. See Same v. Same, 4 Daly, 68, reversing S. C, 8 Ab. Pr., N. S., 169; Farmers' Loan & Trust Co. v. Minneapolis Engine & Machine Works, 35 Minn., 543, 29 N. W., 349. In Porter v. Williams, 9 N. Y., 142, it is said that such a re- ceiver is a "trustee for all parties," but the language would seem to be too broad, in view of the decision in Bostwick v. Menck, which limits the receiver's functions to those of a representative or trustee for the creditors, in whose behalf he was appointed, excluding others who had not joined in the proceedings. And see, post, § 539a. 70 Bostwick V. Menck, 4 Daly, 68, reversing S. C, 8 Ab. Pr., N. S., 169; Manley v. Rassiga, 13 Hun, 288. 71 Porter v. Williams, 9 N. Y., 142; Bostwick v. Menck, 40 N. Y., 383; Mandeville v. Avery, 124 N. Y., 376, 26 N. E., 951; Manley v. Rassiga, 13 Hun, 288; Hamlin v. Wright, 23 Wis., 491 ; Hill v. West- ern & A. R. Co., 86 Ga., 284, 12 S. E., 635; Prescott v. Pfeiffer, 57 Mich., 21, 23 N. W., 477; Walsh v. Byrnes, 39 Minn., 527, 40 N. W., 831; Pender v. Mallett, 123 N. C, 57, 31 S. E., 351. And see Cham- berlain V. O'Brien, 46 Minn., 80, 48 N. W., 447. But see, contra, Higgins V. Gillesheiner, 26 N. J. Eq., 308. And see, ante, § 320. The earlier doctrine of the supreme court of New York was directly the reverse, and it was held that the receiver's functions were lim- ited to the control of property of which the debtor had possession, either actual or constructive, at the time of appointment, and that he could not maintain an action to set aside a fraudulent assignment made by the debtor prior to the receiver- ship, or to recover the property so assigned, and that the remedy must be sought in an action by the judg- ment creditor himself. Seymour V. Wilson, 16 Barb., 294; Hayner v. Fowler, 16 Barb., 300. Seymour v. Wilson was, however, reversed by the court of appeals on other grounds (14 N. Y., 567), the court not passing upon any of the points decided below. And the opinion of the court of appeals in Porter v. Williams, 9 N. Y., 142, may be re- garded as setting the question at rest in New York, and firmly es- tablishing the doctrine enunciated in the text. The court, Willard, J., say, p. 150: "The act which the receiver seeks to avoid, in this case, CHAP. XII.] CREDITORS. 637 its value.'^2 And in such case, the pendency of the supple- mentary proceedings is no bar to the receiver's action to set aside the fraudulent conveyance, since the object of the former proceeding is to reach such property of the judgment debtor as is not claimed adversely, while the purpose of the latter is to reach property claimed adversely and which can not be reached by the supplementary proceedings. And in such an action, it is proper to join all the fraudulent grantees as defendants, since the fact of their being accessory to the debtor's fraudulent at- tempt to place his property beyond reach of his creditors, gives them such a common connection with the subject-matter of the suit that they may all be joined as defendants, although they purchased at different times, and each is charged with the fraud in his own purchase only.'^^ Such a receiver may also maintain an action to remove a cloud upon the title of the judgment debtor, and to sell the property on execution under the judgment upon which the receiver was appointed.'^^ ^or is it necessary to enable the receiver to maintain an action to set aside a fraudulent transfer of his property by the debtor that the receiver should be invested with the legal title to such property, since, for the purposes of the action, he stands in the place of and represents the judgment creditor. The right was an illegal act of the debtor. He stands, in this respect, in the The object of the action is to set same condition as the receiver of an aside an assignment made by the insolvent corporation, or as an exec- debtor with intent, as alleged, to utor or administrator, and like defraud the creditor under whose them can assail the illegal and judgment and execution the plain- fraudulent acts of the debtor whose tiff was appointed receiver, and the estate he is appointed to adminis- other creditors of the assignor. ten" Such conveyance was void at com- '^~ Stephens v. Perrine, 143 N. mon law, and is expressly forbidden Y., 476, 39 N. E., 11. And see ty the statute. It is void as against Richards v. Haliday, 92 Fed.. 798. the creditors of the party making 73 Hamlin v. Wright, 23 Wis., it, though good as between him and 491. his grantee. The plaintiff, repre- "^4 Wright v. Nostrand, 94 N. Y., senting the interest of the creditors, 31. And see this case as to the has a right to invoke the aid of the requisite proof of the receiver's ap- court to set aside the assignment. pointment in such case. 638 RECEIVERS. [CKAP. XII. to maintain such an action does not depend upon any succes- sion by the receiver to the title of the debtor, but upon the equity of the creditor to have a conveyance set aside which is invahd as to him, aUhough effectual as a cloud to prevent the application of the property to the satisfaction of his judg- ment. "^^ Nor is the receiver's right of action confined to set- ting aside the fraudulent transfer, but he may follow the fund or proceeds of the sale of the property thus transferred and may reclaim it as against any person other than a bona fide holder.''^ And when, under the laws of the state, any cred- itor of a defendant in attachment may intervene in the suit and contest the grounds for attachment, a receiver of such a defendant, appointed in a judgment creditor's suit, is regard- ed as a representative of creditors to the extent that he may intervene in their behalf in like manner as the creditors them- selves.'^^ But while the right of action of a receiver in a judg- ment creditor's suit to set aside fraudulent transfers of his property by the debtor is well established, he is, like any other suitor, limited to the appropriate remedies, and he may not maintain a bill in equity for this purpose when full relief may be had at law.'^^ But the receiver is not the representative of the creditor for the purpose of enforcing a trust created by statute in favor of the creditors of a debtor who pays t.he con- sideration for lands which are conveyed to another, since, in such case, the debtor acquires no legal or equitable interest in the land, and the creditor may proceed directly to enforce the trust.79 § 455. Receiver's rights of action limited to extent nec- essary to satisfy judgments ; can not unite rights of subse- quent creditors with former action. It is further to be ob- served, with reference to the functions of receivers in the class 75 Dunham v. Byrnes, 36 Minn., "SPrescott v. Pfeiffer, 57 Mich., 106, 30 N. W., 402. 21. 23 N. W., 477. 'J'S Mandeville v. Avery, 124 N. "^9 Underwood v. Sutcliffe, 77 N. Y., 376, 26 N. E., 951. V., 58. "" Paine v. Holliday, 68 Miss., 298, 8 So., 676. CHAP. XII.] CREDITORS. 639 of actions under consideration, and their right of action to set aside fraudulent assignments made by the debtor, that the receiver is regarded as a trustee for the creditors only in whose behalf he has been appointed, and that he can maintain his action only to the extent necessary to satisfy their judg- ments, and no further. His rights of action in this respect are precisely such as the creditors themselves might have main- tained, and no more; and since he succeeds to their rights of action, he can maintain a suit to set aside assignments in fraud of their rights, only to the extent necessary to satisfy their de- mands and costs, and has no right to interfere with the trans- fer beyond this.^^ And when the receiver, after instituting an action to set aside a fraudulent conveyance made by the debtor, SOBostwick V. Menck, 40 N. Y., 383. See, also, Olney v. Tanner, 10 Fed., 101, affirmed on appeal, 21 Blatchf., 540; Goddard v. Stiles, 90 N. Y., 199; Righton v. Pruden. 7Z N. C, 61 ; Young v. Clapp, 147 Til., 176, 32 N. E.. 187, 35 N. E., 372; Russell V. Chicago Trust & Sav- ings Bank, 139 111., 538, 29 N. E., 37; Holbrook v. Ford, 153 111.. 633, 39 N. E., 1091, 27 L. R. A., 324, 46 Am. St. Rep., 917. Bostwick v. Menck, 40 N. Y., 383, was an ac- tion brought by a receiver appointed in behalf of a judgment creditor to set aside a fraudulent assignment of the debtor's property. The judg- ment on which the receiver was ap- pointed was for about $200, and the decree directed the defendant to pay over to the receiver all the avails of the assigned property, amounting to $15,000, except such as he had distributed under the as- signment before the suit was brought. The judgment was re- versed on appeal, Grover, J., hold- ing as follows, p. 385 : ". . . The only right of the receiver is, there- fore, as trustee of the creditors. The latter have the right to set aside the transfer and to recover the property from the fraudulent holder, and the receiver is, by law, invested with all the rights of all (he creditors represented by him in this respect. It is clear that the right of the receiver representing the creditors, and acting in their behalf, is no greater than that of the creditors. What, then, are the legal and equitable rights of a cred- itor as to property fraudulently transferred? Manifestly only to treat as void and set aside such transfer, so far as shall be neces- sary to satisfy his debt and costs. He has no right to interfere with (he transfer beyond this. When his debt and costs are paid, the transfer is as valid as to him as to other per- sons. If this be the extent of the rights of a single creditor, and all that can be conferred upon a re- ceiver appointed by law to act as his trustee, it is clear that the right is not enlarged by the appointment of the same person as receiver for 640 RECEIVERS [chap. XII. is appointed receiver of the estate of the same debtor in sub- sequent proceedings by other judgment creditors, he can not unite the rights of such subsequent creditors with the former action by a supplemental bill or complaint.^i So the receiver being appointed only for the benefit of the judgment creditor instituting the proceeding, his right of action to recover the debtor's property terminates when the judgment upon which he was appointed is paid, and he then becomes functus ofHcio.^^ And it is improper to direct the receiver to pay other judg- ments than those upon which he was appointed, without no- tice to the debtor, and with no opportunity to him to be heard, since the receiver does not represent the debtor as to such other judgments. ^^ § 456. Receiver estopped by estoppel of creditor. The functions and powers of the receiver, as regards rights of ac- tion to set aside fraudulent transfers made by the debtor, be- ing limited to such rights of action as the judgment creditor might himself have maintained, he can not effect a result which several creditors. The receiver is was not the purpose of this provi- then trustee for all, clothed with sion of the code to seize upon and power to set aside transfers fraudu- sequestrate the judgment debtor's lent as against the demands repre- estate for the benefit of all his crcd- sented by him, only to an extent itors. Its purpose was to furnish a sufficient to satisfy such demands cheap and easy mode of discover- and costs. When this is done his ing the concealed property of a duties, and consequently his powers judgment debtor, and applying it and right to act further in behalf to the satisfaction of the judgment of the creditors, cease as to prop- or judgments in which proceedings erty that has been transferred by were taken. When property enough the debtor. As to property owned to satisfy such judgment or judg- by the debtor at the time of the ments is reached, the purpose of appointment, we have seen that the the appointment of a receiver is rule is different; that, as to such accomplished; that officer owes property, the appointment vests the no duty to other creditors of the legal title to the whole in the re- debtor." ceiver, and he may consequently 81 Bostwick v. Menck, 4 Daly, 68, assert his title thereto without re- reversing S. C, 8 Ab. Pr., N. S., gard to the amount of the judg- 169. ments upon which he has been 82 Righton v. Pruden, 73 N. C, 61. appointed." And Mr. Justice James, 83 Goddard v. Stiles, 90 N Y., 199. in the same case, p. 389, says : "It CHAP. XII.] CREDITORS. 641 the creditor himself could not have effected; since he stands in the place of the judgment creditor, and is limited by any acts ■or conduct on his part which would have barred proceedings by the creditor himself. And when the creditor is estopped by his own act from proceeding against the debtor or his as- signee, to set aside a fraudulent assignment of the debtor's property, such estoppel applies equally as against the receiver, appointed in aid of such creditor. For example, when a debtor purchases property with the intention of assigning it to de- fraud the vendor, and carries this intention into execution, if the vendor, instead of disaffirming the sale and suing for the wrongful conversion, elects to affirm the contract and sues for the purchase price, after judgment thereon and the appoint- ment of a receiver in aid of the judgment, the receiver will not be allowed to maintain an action to set aside the fraudulent assignment.^'* § 457. Receiver can not take forcible possession of prop- erty assigned to third persons; rights of property to be determined by action. Since the receiver, in this class of cases, is vested with the same rights of action to set aside fraudulent transfers by the debtor as the creditors whom he represents, he can not take, or authorize others to take, forcible possession of property previously assigned by the debtor to a third person, when the property was actually transferred under a sale valid as between the debtor and the vendee. The only right of the receiver, in such a case, is a right of action to set aside the transfer; and it constitutes no defense to an action of trespass, brought by the purchaser of the property from the debtor, that the defendants, who had taken forcible posses- sion of the property, acted under the direction of the debtor's receiver.SS fhe receiver can not question such a transfer as 84 Kennedy v. Thorp, 51 N. Y., Richards v. Allen, 3 E. D. Smith, 174. And see as to the doctrine of 399. ■estoppel in actions by a receiver, 85 Brown v. Gilmore, 16 How. .Pr.. 527. Receivers — 41. 642 RECEIVERS. [chap. XII. representing the debtor, since the debtor himself can not im- peach his own completed act, however fraudulent as against creditors. Nor can the receiver authorize the forcible taking possession of the property as representing the judgment cred- itors, since the property, even though transferred to delay and hinder such creditors, does not for that reason belong to them, or to their representative, so as to give a right to its imme- diate and absolute control, before action brought to set aside the transfer.^^ So when the debtor is in possession of proper- ty, belonging to or claimed by a third person under a title ap- parently valid, and which is held by the debtor as his agent, it is improper by order of court to direct the delivery of such property to the receiver, since the courts will not thus sum- marily dispose of or determine the title to property claimed by third parties, but will leave the parties to the appropriate mode of recovering the property, in an action by the receiver against the person claiming title.^"^ So where the property of a debtor upon which apparently valid liens are asserted by third persons is claimed by a receiver, the court should not sum- marily order such property to be delivered to the receiver but he should be required to resort to the appropriate action for its recovery. ^^ And where a receiver has been appointed in a federal court, he is not entitled thereby to maintain a petition in the receivership proceeding in the nature of a plenary suit in equity for the recovery of purely legal demands against a person not a party to the receivership proceeding but his rem- edy in such case should be at law.^^ And when the court is fully authorized to appoint a receiver of the debtor's estate, who might bring an action to test the title to property in the hands of a third person, claiming title from the debtor, it is improper to determine such disputed cjuestion of title upon a SG Brown v. Gilmore. 16 How. Pr, 12 Wyo., 492, 76 Pac, 674, 78 Pac, 527. 1083. 8" Rodman v. Henry, 17 N. Y., 80 Whelan v. Enterprise T. Co., 482. 164 Fed., 95. 88 First National Bank v. Cook, CHAP. XII.] CREDITORS. 643 summary application, the remedy by the appointment of a re- ceiver being the appropriate course to pursue.^^ § 458. In action by receiver to recover property as- signed, when assignees allowed to retain possession ; when receiver refused injunction and receiver. When the re- ceiver of a judgment debtor brings an action to set aside an assignment made by the debtor for the benefit of his creditors, it is proper for the court to permit the assignees to continue in possession, and to dispose of the property and collect the debts, holding the proceeds subject to the order of the court, when no fraud is shown as against the assignees, and when they are perfectly solvent and able to respond to any liability on account of the property assigned. The assignees, under such circumstances, will be regarded in the light of special re- ceivers, and bound to abide by such further order as the court may make in the premises. ^i And when the receiver insti- tutes an action for the recovery of property assigned by the debtor, under a voluntary assignment for the benefit of his creditors, he is not entitled to an injunction and a receiver of the assigned property, if he fails to show that the assignment was made to delay, hinder or defraud the creditors. ^2 § 459. Allegations necessary in action by receiver to set aside fraudulent assignment ; debtor a proper party de- fendant; effect of order. To entitle the receiver to main- tain an action to set aside an assignment of the debtor's prop- erty for the benefit of his creditors, it is not sufficient to allege in his pleadings merely that he was appointed receiver in the creditor's suit, but the judgment and other facts necessary to sustain the creditor's suit should be set forth. In other words, the receiver must state the equities of the parties whom he rep- resents, in order to maintain such an action, since he is only clothed with the same rights of action which might have been 90 Teller v. Randall, 40 Barb., 242. 92 Bostwick v. Elton, 25 How. Pr., 91 Spring v. Strauss, 3 Bosw., 607. 362. 644 RECEIVERS. [chap. XII. maintained by the creditors whose representative he is.^^ And in an action by the receiver to remove a cloud from the title of property of the debtor and to subject it to execution, the pro- duction of an order appointing the receiver, made by a court of competent jurisdiction and reciting the facts necessary to give the court jurisdiction, affords conclusive evidence of the regularity of the order and prima facie evidence of the facts necessary to confer jurisdiction. ^"^ And in an action brought by such a receiver, to set aside an alleged fraudulent assign- ment and conveyance of the debtor's property to a third per- son, the debtor himself is a proper party defendant.^^ § 460. Receiver can not recover property assigned in trust for payment of debts, when trust partly fulfilled. It has been held that where a debtor assigns his property to one of his creditors, upon condition that he shall deduct his own demand out of the proceeds, and then apply the balance in payment of the other creditors, and the assignee sells and transfers the property to a third person upon the same condi- tion and subject to the same trust, and such purchaser fulfills the duty in part, a receiver of the debtor's effects, appointed in behalf of a judgment creditor, can not maintain an action against the purchaser for a balance of the fund remaining in his hands. In such case, it being the plain duty of the pur- chaser to distribute the fund among the creditors, the receiv- er acquires no right of action for its recovery.^^ § 461. Priority as between different judgment creditors. As between different judgment creditors of the same debtor, one of whom, by his superior diligence, obtains possession of . or a charge upon the debtor's property, equity will not inter- fere in behalf of a more dilatory creditor to disturb such pos- session. ^"^ And this is equally true, even though the judgment 93 Coope V. Bowles, 42 Barb., 87; 96 Smith v. Woodrufif. 1 Hilt., 462. S. C, 28 How. Pr., 10. 97 Bates v. Brothers, 2 Sm. & G., 94 Wright v. Nostrand, 94 N. Y., 509. See, also. Parks v. Sprinkle, 31. 64 N. C, 637. And see, ante, § 439&, 95 Palen v. Bushnell, 18 Ab. Pr., 301 ; Allison v. Weller, 3 Hun, 608. CHAP. XII.] CREDITORS. 645 cf the creditor obtaining such priority is later in date than the others. ^8 It is held, therefore, in a race of dihgence be- tween judgment creditors for the property of their debtor, that the one who first institutes a creditor's suit and procures a receiver therein takes priority, and is entitled to the property of the debtor not previously levied upon, as against a creditor who has not yet obtained a receiver.^^ But when judgment creditors claim a lien upon a fund in the hands of the receiver of their debtor, and petition the court for an order appropriat- ing the fund in payment of their judgment, the court will not grant such order in limine and before the other creditors in- terested in the fund can be heard. It is, however, proper to restrict the receiver from paying out the fund, in such case, without notice to the creditors claiming the lien. And the creditors claiming such lien may be authorized to institute an action against the receiver to establish their rights.^ So when, pending an attachment suit, a creditor's bill is filed against the defendants, under which receivers are appointed over their effects, plaintiffs in the attachment, after obtaining judgment, can not, by a summary rule against the receivers, compel pay- ment in full of their demand out of funds of the receivership, before a full hearing as to the priorities of all parties in in- terest.2 § 462. Receivers in aid of proceedings in bankruptcy. Under the English practice, receivers are sometimes appointed in aid of creditors who have instituted proceedings in bank- ruptcy against a debtor; and a receiver thus appointed, upon the application of any one creditor, is regarded as appointed equally for the benefit of all. Such a receiver, therefore, can not rightfully permit a payment to be made to the creditor ^8 Bates V. Brothers, 2 Sm. & G., New York code against their 509. debtor, in property which the 9^ Parks V. Sprinkle, 64 N. C, 637. debtor had assigned to a third And see, as to the relative rights party, Conger v. Sands, 19 How. and liens of different judgment Pr., 8. creditors who have instituted sup- 1 Hubbard v. Guild, 2 Ducr, 685. plementary proceedings under the 2 Lowe v. Stephens, 66 Ga., 607. 646 RECEIVERS. [chap. XII. on whose application he was appointed, in preference to the remaining creditors, and such a payment will be held fraudu- lent and void as against the trustee of the creditors in the proceedings in bankruptcy.^ § 463. Receiver of corporation appointed in creditor's suit can not enforce subscription by shareholder. It has been elsewhere shown, in discussing the subject of receivers of insolvent corporations appointed for winding up their affairs under the statutes of various states, that such receivers are fre- quently vested with the power of making assessments for and collecting unpaid balances due from delinquent shareholders upon their subscriptions to the capital stock of the corpora- tion.^ But this power or right of action is derived wholly from statute, and does not exist in the absence of statutory author- ity. And it is held in New York, that a receiver of a corpora- tion appointed on a creditor's bill, and vested with only the ordinary powers of receivers in creditors' suits, can not, by virtue of his appointment, maintain a bill in equity against a shareholder to enforce payment of a balance due upon his sub- scription to the capital stock of the corporation.^ § 464. In action by receiver on notes, defendant can not set off judgment against receiver on note of debtor. In an action by the receiver of an insolvent debtor to recover upon notes due to the debtor's estate, the maker of such notes can not set off against the action a judgment which he has obtained against the receiver upon a note executed by the judgment debtor; since, to allow such set-off, would be to give the de- fendant a preference over other creditors. His judgment against the receiver is regarded only as a legal determination of the amount and validity of his claim, and not an adjudica- tion giving it preference over others.^ 3 Ex parte Jay, L. R., 9 Ch. App., corporation appointed in behalf of 133. a judgment creditor under the 4 See § 324, ante. laws of New York, Angell v. Sils- 5 Mann v. Pentz, 3 N. Y., 41.S. bury, 19 How. Pr., 48. And see, as to the functions and G Clark ^. Brockway, 3 Keyes, 13; powers of a receiver of a moneyed S. C, 1 Ah. Ct. Ap. Dec, 351. CHAP. XII.] CREDITORS. 647 § 4(i4a. Receiver entitled to letters patent; effect of sale; membership in exchange. A receiver over an insol- vent debtor, under the statutes of Rhode Island, is entitled. by virtue of his appointment, to letters patent owned by the debtor, and the court may order the debtor to make a convey- ance to the receiver, if necessary to fully invest him with title thereto.'^ But, in the absence of such a conveyance, it is held that a sale and assignment by a receiver of the interest of the judgment debtor in letters patent confers no title upon the pur- chaser, such an assignment not being a wa'itten instrument signed by the owner of the patent, as required by the act of Clark V. Brockway was an action by the receiver of the estate of one Sherman, to recover upon notes executed by defendant to the as- signees of Sherman, and which had passed from the assignees to the receiver on the assignment being set aside as void against creditors. Defendant had obtained a judg- ment on a note of Sherman's held by him, and a further judgment against the receiver, directing the latter to pay such judgment out of the assets in his hands. The court below denied the right of set-off and gave judgment for the receiver for the amount of the notes, and the judgment was affirmed on appeal. Hunt, J., says, p. 14: "The defendant, in his suit against the present plaintiff, as receiver, and others, recovered a judgment directing the receiver to pay the amount of the notes held by him, $345.48, with the costs, and he claims that judgment to be deci- sive of the present suit. In this, I think, he errs. His judgment is a legal determination of the validity of his claim, but it does not deter- mine when it shall be paid, or what, if any, shall be its preference over other debts. By obtaining an offset against the notes in suit, the defendant would at once obtain payment of his claim to that amount, and this without regard to the amount of debts or assets applicable to the general settlement of Wm. Sherman's affairs. He might thus obtain a large propor- tion or the whole of his debt, wiiile others, equally entitled, might be compelled to accept a much smaller proportion. This the law does not allow. Equality in the payment of debts by a receiver is the rule of law, unless, by diligence or for some special reason, a preference is declared of one creditor or of one class over creditors generally. No such circumstance exists in this case, and the judgment is to be re- garded as determining simply the validity of the plaintiff's claim on the notes held by him. His debt is adjudged to be valid, but it must take its chances of payment with other valid debts in the general ad- ministration of the estate of Wm. Sherman." 7/m re Kcnch, 14 R. I., 571. 648 RECEIVERS. [chap. XII. congress, but a mere assignment by operation of law, and with- out the action of the patentee or owner.^ But a receiver in proceedings supplementary to execution, in New York, suc- ceeds to the title of the judgment debtor in a certificate of mem- bership in the New York Cotton Exchange, and may maintain a suit to redeem such certificate from one to whom it has been pledged.^ § 465. Receiver may maintain action for proceeds of note in hands of third parties, applied on judgment against debtor. When a receiver of the efifects and estate of a judgment debtor, appointed in different creditors' suits, be- comes vested with the title to all the debtor's property imme- diately upon the filing and recording of his order of appoint- ment, he may maintain an action for the proceeds of a note due to tht estate in the hands of third parties, notwithstand- ing they have, subsequent to the appointment, procured an ex parte order of court directing the note to be applied upon a judgment which they hold against the debtor; since the title to the note having vested in the receiver, it is not in the power of the court to divest his title on an application to which he is not a party.l^ § 466. Interest devised to testator can not be divested on mere petition or application. A receiver of a judgment debtor can not, by mere motion or application to the court, reach an interest in property of an inalienable nature, which is vested in the debtor as cestui que trust, or devisee under a will. And when a testator has devised his property to executors, in trust to convert it into money and to divide it in certain shares, one of which is to go to the debtor, the court will not grant the receiver an order for the sale of such interest, upon a mere application or petition for that purpose. If the creditors are to derive any benefit from the provisions of the will, in such 8 Gordon v. Anthony, 16 Blatchf., 10 Rogers v. Corning, 44 Barb., 234. 229. 9 Powell V. Waldron, 89 N. Y., 3,28. CHAP. XII.] CREDITORS. 649 case, it must be by a proceeding to which the executor is a party.ll § 467. Action against debtor for conversion of proper- ty ; mortgage of chattels ; receiver can not maintain action for money received by debtor after appointment. A re- ceiver appointed in a judgment creditor's suit would seem to have the same rights of action against the debtor himself, for the conversion of his property, as against strangers, and he may, therefore, maintain an action for such conversion by the debtor. But he acquires only such title as the debtor had at the time of appointment, and if the debtor's title was a mere equity of redemption in mortgaged chattels, and the receiver neglects to redeem the property by paying off the mortgage, until the right of the mortgagee becomes absolute, neither the debtor, nor the plaintiff as his receiver, has any interest in the property which can be the subject of a conversion, or sustain an action by the receiver.12 And the receiver is not by virtue of his appointment, invested with any title to property which may be afterward acquired by the debtor ; he can not therefore, maintain an action for the recovery of money received by the debtor subsequent to the appointment.^^ § 468. Action by receiver to recover usurious payments. In New York, it is held that a receiver in a creditor's suit may maintain an action for the recovery of usurious payments made by the debtor to a third person ; since the receiver is the representative, not merely of the debtor, but of the creditors, and his title is, therefore, sufficient to maintain such an action. And the judgment debtor is not a necessary party to such an action. 1^ § 469. Acquiescence in sheriff's sale by creditor, effect of, on action by receiver. A receiver of a judgment debtor can not maintain an action to recover back the value of prop- 11 Scott V. Nevius, 6 Duer, 672. 14 Pakn v. Bushnell, 18 Ab. Pr., 12 Gardner v. Smith, 29 Barb., 68. 301. 13 Graff V. Bonnett, 25 How. Pr., 470. 650 RECEIVERS. [CIIAP. XII, erty which has been sold at a sheriff's sale under executions against the debtor, when the creditor, in whose behalf the re- ceiver was appointed, was present by his attorney and request- ed and acquiesced in the sale by the sheriff, but afterward pro- cured the appointment of a receiver, on failing to obtain the proceeds of such sale, which were diverted to the payment of other executions in the hands of the sheriff.^^ ^ 470. Appointment of receiver can not be questioned in action by receiver; rents received from sub-tenants of debtor by receiver should go to landlord. When a debtor voluntarily appears in court, and consents to a receiver being appointed over his estate and effects for the benefit of his creditors, in an action instituted by such receiver to recover upon a demand due to or for property owned by the debtor, the defendant can not object to the irregularity in the receiver's appointment, since, the party against whom the receiver was appointed having consented to the proceeding and waived all irregularities therein, it does not lie in the mouth of his debtor or of third persons to question the regularity of such proceed- ings.l^ Nor can the validity of the receiver's appointment be assailed, collaterally, as in a suit brought by him against third parties, if sufficient jurisdictional facts w^ere shown in the origi- nal proceeding for his appointment to warrant the court in the exercise of its jurisdiction ; since the judgment debtor being concluded so long as the order is unreversed, third persons are also concluded. 1'^ When a receiver over a judgment debtor re- ceives rents from sub-tenants of the debtor, for the rental of premises of which the debtor held a lease, such funds are not subject to distribution among the creditors generally, but are reserved for the landlord of the premises, wdiose equity is superior to that of all other creditors. And in such a case, 15 Richards v. Allen, 3 E. D. 89 N. Y., 328; Green v. Bookhart, Smith, 399. 19 S. C, 466. 16 Tyler v. Willis, 33 Barb., 327; i ' Whiulesey v. Frantz, 74 N. Y„ S. C, sub nom. Tyler v. Whitney, 456. 12 Ab. Pr., 465 ; Powell v. Waldron, CHAP. XII.] CREDITORS. 651 the receiver will be directed to pay the money to the landlord, or to his representative, upon petition showing the facts. ^^ § 471. Receiver appointed by one federal court can not sue in another to recover securities belonging to debtor. It is held that a receiver appointed on a creditor's bill in a cir- cuit court of the United States, having no right or authority except such as is conferred upon him by the order of his ap- pointment, can not maintain an action in a federal court in an- other district to compel the surrender of certain securities of the debtor held by defendant, to be applied in satisfaction of the judgment in aid of which the receiver was appointed. Such a receiver, it is held, has no extra-territorial jurisdiction or rights of action, and the federal court by which he was ap- pointed is treated, for the purposes of such a case, as a court of local and limited jurisdiction. Nor is his right of action, under such circumstances, enlarged by the fact that, under the statutes of the state in which he was appointed, receivers on creditors' bills are vested with full title, and have full au- thority to maintain suits; since the laws of the state can not enlarge or alter the effect of the order of the federal cour^, nor enlarge the jurisdiction of that court.^^ 18 Riggs V. Whitney, 15 Ab. Pr., ferred by an order of the circuit 388. court of the United States, for the 19 Brigham v. Luddington, 12 eastern district of Wisconsin, can Blatchf., 237. This was a bill filed not maintain this suit in this dis- in the circuit court of the United trict. The opinion of the supreme States, for the southern district of court in Booth v. Clark, 17 How- New York, by a receiver appointed ard, 322, seems to me fully to sus- on a judgment creditor's bill in the tain this objection. That was an circuit court of the United States, action in the circuit court for the for the eastern district of Wiscon- District of Columbia, by a receiver sin, seeking a recovery of certain appointed under a creditor's bill securities of the judgment debtor, filed in a court of equity of the state and to apply them in satisfaction of of New York. He was held not the judgment. Mr. Justice Wood- entitled to sue. The suggestion of ruff says, p. 242: "I notice, with- counsel, that the circuit court for out enlarging upon the stibject. a this district and the circuit court further objection, viz., that the for the eastern district of Wiscon- complainant, having no right or sin, derive their authority from the authority, except such as was con- same government and the same 652 RECEIVERS. [chap. XII. § 471i/. Effect of death of parties or of receiver; prac- tice in such case. When a receiver is appointed in a cred- itor's suit instituted to reach the property and equitable inter- ests of judgment debtors, and to subject them to the payment of the judgment, and tlie debtors assign their property to the receiver, the receiversliip does not terminate by the death of the receiver, or by the death of the judgment debtors. And while the creditor's suit abates by the death of the judgment debtors, the title to their property is regarded as vested in the court itself. It is, therefore, competent for the court to ap- point a new receiver, who ma}'^ institute actions to recover the estate of the debtors. 20 So the death of a receiver appointed to wind up the affairs of a partnership does not abate the re- ceivership, and it is proper for the court in such case to appoint another receiver.^i And upon the death of a receiver, a rule to show cause is the proper procedure to continue the action in the federal laws, does not meet the difficulty. The decision did not proceed upon the sole ground that the jurisdiction of New York was foreign to that of the federal courts ; but on the ground that such a re- ceiver could not sue in another ter- ritorial jurisdiction. The circuit court for this district and the cir- cuit court for the eastern district of Wisconsin each exercises a local and limited jurisdiction, and I am not able to withdraw this case from the operation of the decision of the supreme court above cited. (See on this subject, Hope Mutual Life Ins. Co. v. Taylor, 2 Robert- son, 278.) To the suggestion of counsel, that, by the statutes of Wisconsin, receivers appointed on creditors' bills are vested with full title, and have full authority, to maintain suits, which this court ought to recognize, it must suffice to say: (1) This receiver was ap- pointed under and by virtue of the general power of courts of equity, and with such efifect only as is due to the order of the court making the appointment. He was not ap- pointed under or by virtue of any statute. (2) The statutes of the state of Wisconsin can not enlarge or alter the effect of an order or decree of the circuit court of the United States, nor enlarge or mod- ify the jurisdiction of that court or its efficiency. Payne v. Hook, 7 Wal., 425. These views render it wholly unnecessary to consider the merits of this suit or the various matters ably discussed on the hear- ing. I am constrained to conclude that the bill should be dismissed." 20 Nicoll V. Boyd, 90 N. Y., 516. 21 Smith V. Harris, 135 Ind., 621, 35 N. E., 984. CHAP. XII.] CREDITORS. 653 name of his successor, and if the defendant wishes to contest the fact of the death of the former receiver, the issue should be raised in the return to the rule.22 22 Pickett V. Fidelity & C Co., 60 S. C, 477, 38 S. E., 160, 629. CHAPTER XIII. OF RECEIVERS OVER PARTNERSHIPS. I. Principles on Which the Relief is Granted § 472 II. Receiver Upon Dissolution of the Firm 509 III. Exclusion from Firm as Ground for Receiver 522 IV. Receiver Upon Death of Partner 530 V. Functions and Duties of the Receiver 538 I. Principles on Which the Relief is Granted. § 472. The jurisdiction well established; doctrine of Lord Eldon; probability of decree for dissolution. 473. Courts proceed with extreme caution; beneficial nature of the relief. 474. Receiver granted on same ground as injunction; actual abuse necessary; dissolution; quarrel between partners. 475. Court does not determine ultimate rights of the parties. 476. There must be an actual partnership inter se; employee, though nominal partner, can not have receiver. 477. Right to participate in profits the test; burden of proof on plaintifif. 478. Defendant permitted to give security to account to plaintiff, in lieu of receiver. 479. Denial of partnership by defendant not alone sufficient to pre- vent receiver. 480. Not the province of the court to superintend the business. 481. Receiver may manage business pendente lite; running steam- boat; horses and carriages; political paper; borrowing money. 482. Courts will interfere only in clear cases; and where there is mismanagement. 483. Breach of duty must be shown; irreconcilable disagreement; fraud; probability of loss. 484. Want of confidence as a ground for receiver. 485. Failure to co-operate in managemant of business no groimd for receiver; unprofitable business no ground for relief. 486. Appointment not a matter of course; confidence between part- ners. 654 CHAP. XIII.] PARTNERSHIPS. 655 § 487. Defendant resolved to break up business; impossibility of con- tinuing advantageously. 488. Dispute as to firm property; insolvency and bad faith of de- fendant; bankruptcy. 489. Violation of agreement for dissolution; exclusion from books; embittered feeling. 490. Partner in possession can not have receiver. 491. Receiver not granted when equities of bill denied by answer. 492. Refused when plaintiff's right is not questioned or disturbed. 493. Receiver in behalf of outgoing partner. 494. Receiver on judgment creditor's bill after dissolution. 495. Appointment prevents preference to creditor; does not inter- fere with rights or liens of creditors already acquired. 496. Failure to contribute to capital stock; sale of interest; insol- vency; exclusion by purchaser. 497. Not sufficient to allege large sums of money in defendant's hands ; misapplication of funds ; agreement for arbitration. 498. Receiver refused over shares of stock constituting entire assets of firm. 499. Use of firm effects by remaining partners after dissolution. 500. Partnership for sawing lumber; failure to take timber from land of one partner. 501. When court may direct issue to be tried by jury. 502. Courts averse to interfering ex parte. 503. Jurisdiction over foreign partnerships. 504. Partnership in working farm; deficiency in profits. 505. Priority by attaching creditors before final decree. 506. Injunction auxiliary to receivership continued to hearing. 507. Receiver granted as between purchasers or assignees of differ- ent partners. 508. Limited partnerships. 508a. Effect of denial of motion in former suit. § 472. The jurisdiction well established; doctrine of Lord Eldon; probability of decree for dissolution. The appointment of receivers in actions between partners for an accounting and a settlement of their partnership affairs, to take charge of the assets, collect the debts and wind up the business of the firm, is a legitimate exercise of the jurisdiction of courts of equity, and one which is clearly sustained by the authorities.^ And the power of thus appointing a receiver in an action for the dissolution of a partnership and the settlement 1 See Saylor v. Mockbie, 9 Iowa. 209 ; Jordan v. Miller, 75 Va., 442. 656 RECEIVERS. [chap. XIII. of the firm business, is regarded as essential to the object sought by such suit, and falls within that class of incidental powers which the courts having jurisdiction over such cases have full authority to exercise.^ The doctrine of the English Court of Chancery, as laid down by Lord Eldon, was, that the court would not take a partnership business into its own hands by the appointment of a receiver, unless the suit was so framed that a decree could be made at the hearing, either that the business be carried on according to the terms of some instrument, which by agreement between the parties was to regulate the manner of conducting the business, or that it be wholly ended and the part- nership dissolved.^ And while the tendency of the latter deci- sions, especially in this country, has been averse to the con- tinuance and management of a partnership business by a re- ceiver, the other element in the rule as laid down by Lord El- don, viz., the probability of a decree for a dissolution, is still recognized as a controlling element in determining whether a receiver shall be appointed. ^ § 473. Courts proceed with extreme caution; beneficial nature of the relief. The determination of an application for a receiver, upon a bill seeking the dissolution of a partner- ship, is justly regarded as a matter of extreme delicacy, and one which requires the most careful consideration upon the part of the court; since, if the application is granted, its effect is to terminate the partnership contrary to the wishes of the defend- ant partner, while, if, refused, it leaves defendant to continue the business at the risk of great loss and prejudice to plaintiff's rights.^ But, while the courts proceed with extreme caution in exercising their power of appointing receivers in this class of cases, the jurisdiction is regarded as an extremely beneficial 2 Gridley v. Connor, 2 La. An., 87. These considerations are well ex- 3 Const V. Harris, Turn. & R., 517. pressed by Lord Langdale, Master 4 For the application of the doc- of the Rolls, in the latter case, trine in Alabama, see Gillett v. Hig- p. 500, as follows: "It must be ad- gins, 142 Ala., 444, 38 So., 664. mitted that when an application is 5 New V. Wright, 44 Miss., 202; made for a receiver in partnership Madgwick v. Wimble, 6 Beav., 495. cases, the court is always placed in CHAP. XIII.] PARTNERSHIPS. 657 one, !;ince cases frequently arise of disputes in the settlement of partnership affairs, where the interests of both parties can only be properly secured by the intervention of equity through the appointment of a receiver.*^ g 474, Receiver granted on same ground as injunction ; actual abuse necessary ; dissolution ; quarrel between part- ners. It may be said, generally, that substantially the same conditions are requisite to warrant the extraordinary aid of equity by appointing a receiver in partnership cases, as are necessary to induce the court to interfere by injunction. Some actual abuse of the partnership property, or of the rights of a copartner, must appear, and not a mere temptation to such abuse, and the grounds relied upon should usually be such as to authorize a decree for a dissolution of the firm. When the dis- solution has already taken place, or when it is apparent that it will be decreed upon the ground of some breach of duty by one of the partners, a receiver may be appointed, but the court will not interfere merely because of a quarrel between the partners, a position of very great difficulty. 472. Frick, J., very forcibly oh- On the one hand, if it grants the serves, with reference to the power motion, the effect of it is to put an of appointing receivers, as follows, end to the partnership which one of p. 476 : "It is a high power, never ex- the parties claims the right to have ercised where it is likely to produce continued; and on the other hand, irreparable injustice or injury to if it refuses the motion, it leaves private rights, or where there exists the defendant at liberty to go on any other safe or expedient remedy, with the partnership business, at While in a variety of instances, es- the risk, and probably at the great pecially in partnership transactions, loss and prejudice, of the dissent- where the parties, after dissolution ing party. Between these difficul- of their connections, can not agree ties, it is not very easy to select the upon the adjustment, and the prop- course which is best to be taken, erty or funds in dispute are in the but the court is under the necessity hands of one partner alone, each of adopting some mode of proceed- having an equal right to the con- ing to protect, according to the best trol of the property, cases must view it can take of the matter, the necessarily arise where the interest interests of both parties, and it has of both can only be properly se- accordingly interfered in many cured by the intervention and ap- such cases." pointmcnt of a receiver." 6 See Speights v. Peters, 9 Gill, Receivers — 42. 658 RECEIVERS. [chap. XIII. since this does not, of itself, constitute sufficient ground for a dissolution."^ But a receiver is properly appointed at the in- stance of one of the partners where it appears that the partner- ship is insolvent and that there are serious dissentions among" " Henn v. Walsh, 2 Edw. CIi., 129. The principles governing the courts in the appointment of receivers in partnership cases are well stated by McCoun, Vice-Chancellor, in this case, as follows, p. 130: "A part- nership agreement, like any other, is binding upon the parties, and they must adhere to its terms. Neither partner is at liberty to recede from it against the will of the other with- out a sufficient cause. Mere dis- satisfaction by one partner will not justify him in filing a bill for a dis- solution, where, by their express agreement, it is to continue for a definite term; and this court will not interfere to dissolve the con- tract upon such ground. Here, there was a five-years partnership, with the privilege of dissolving it at the end of two years. The com- plainant has become dissatisfied; and he makes various charges in his bill, showing prima facie cause enough for a dissolution before the stipulated time. But his allega- tions are positively and fully de- nied in the answer. As the mat- ter now stands, the complainant's case fails, and he would not be en- titled, on the hearing, to a decree for a dissolution— consequently, not to an injuncti-)n or receiver in the meantime. If there be any breach of covenants by one partner which, in its consequences, would be so im- portant as to authorize the party complaining to call for a dissolu- tion before the copartnership could be dissolved by the efflux of time. the complainant may then have an injunction. There must be some actual abuse of the partnership property or of the rights of a co- partner, and not a mere temptation to such abuse, which will induce this court to interfere. The same rules apply in respect to the ap- pointment of a receiver. It must appear to be such a case as would authorize a decree for dissolution. In thus interposing, the court gen- erally looks to the winding up of the affairs, and not to the continu- ation of a trade under its author- ity. Where a dissolution has already taken place, or it is appar- ent that it will be decreed on the ground of some breach of duty or contract by one of the partners, there a receiver will be appointed. But if partners quarrel, a receiver will not be appointed merely on such an account, because it may not, of itself, be a sufficient ground for severing the connection be- tween them. In the present case, the complainant produces affidavits to show a breach of the articles of the partnership by the defendant's withdrawing more than the stipu- lated twenty-five dollars per month. The affidavits are not positive on the subject. They speak merely from what appears by entries in the books, coupled with what is believed; while on the other hand the denials of the defendant are positive. I can not at present, in the face of all this, interfere. It may be an unfortunate connection CHAP. XIII.] PARTNERSHIPS. 659 the partners and a probability of waste and the necessity for an accounting and dissolution.^ § 475. Court does not determine ultimate rights of the parties. Upon applications for receivers of partnership assets, in actions for a dissolution and a settlement of the affairs of the firm, the court does not determine the ultimate rights of the parties, and will refuse to pass upon those rights upon such preliminary applications. The duty of the court, in such cases, is merely to protect the property pendente lite, for the benefit of whoever may ultimately be determined to be en- titled thereto, when the court shall have before it all the evi- dence necessary to a full and complete determination of the questions involved. And the court does not, on the preliminary application, pretend or assume to say which of the partners is entitled to the firm assets.^ But when the case is ready for final hearing upon the pleadings and proofs, it is error to appoint a receiver over a partnership without first adjudicating the merits upon which the right to such relief depends, and without any showing of urgency or of an immediate necessity for the ap- pointment. ^^ § 476. There must be an actual partnership inter se; employee, though nominal partner, can not have receiver. It is important to observe, that, as regards the parties them- selves, a court of equity will not lend its extraordinary aid by appointing a receiver unless an actual partnership inter se be shown to have existed. It is, therefore, in all cases, essential to the exercise of the jurisdiction, that there should actually be an existing partnership, either admitted by defendant or estab- which the complainant has formed. v. Perkins, 13 Mont., 143, 32 Pac, Still, he entered into it advisedly; 653. and he must endure it until the 8 Veith v. Ress, 60 Neb., 52. 82 contract allows of a withdrawal, N. W., 116. unless he can overthrow the de- 9 Blakeney v. Dufaur, 15 Beav., nials of the defendant by superior 40. evidence. The injunction must be 10 Morey v. Grant, 48 Mich., 326, dissolved, and the motion for a re- 12 N. W., 202. ceiver denied." And see Mcintosh 660 RECEIVERS. [chap. XIII. lished by satisfactory proof, since otherwise the individual property of a defendant might be taken from him by a receiver, and in the end it might appear that plaintiff had no right.^l When, therefore, the existence of a partnership is directly in dispute, and is denied by defendant, in an action for an ac- counting, the court will not appoint a receiver in limine, es- pecially when there is no allegation of defendant's insolvency, or of his inability to respond in the event of a final recovery against him.^^ And when the partnership is only a nominal one, the parties using a firm name, but under an agreement that one shall be employed as a clerk or employee of the other, receiving as compensation a share of the profits, either with or without additional salary, the agreement expressly stating that they are not partners, and that no partnership relation was intended to be formed, the person thus employed can not main- tain a bill against the other for an injunction and a receiver, since he has no such lien upon the assets as to warrant the interposition of a court of equity in his behalf.^^ And this is true, even though the parties by their conduct have become lia- ble as partners to third persons, the rights of third persons or of creditors not being involved in the litigation.^* § 477. Right to participate in profits the test; burden of proof on plaintiff. In the application of the general rule which limits the relief to cases of existing partnership between the parties, it must satisfactorily appear that the partnership was actually completed so far as to entitle the parties to a par- ticipation in profits ; since the right to participate in the profits, and the danger which one partner might sustain by being ex- cluded therefrom, pending an action for a dissolution, consti- iiGoulding v. Bain, 4 Sandf., Irwin v. Everson, 95 Ala., 64, 10 716; Kerr v. Potter, 6 Gill, 404; So., 320; Wood v. Wood, 50 West Irwin V. Everson, 95 Ala., 64, 10 Va., 570. 40 S. E., 416; Rowland v. So., 320; Nutting v. Colt, 3 Halst. Auto Car Co., 133 Fed., 835. Ch., 539. See, also, Hobart v. 13 Kerr v. Potter, 6 Gill, 404; Ballard, 31 Iowa, 521; Popper v. Nutting v. Colt, 3 Halst. Ch.. 539. Scheider, 7 Ab. Pr., N. S., 56. 14 Kerr zk Potter, 6 Gill, 404 12 Goulding v. Bain, 4 Sandf., 716 ; CHAP. XIII.] PARTNERSHIPS. 661 tiite the principal reason for the appointment of receivers in this class of actions. And the burden of showing the exist- ence of a partnership at the time of the application for a re- ceiver rests upon the plaintiff. When, therefore, the consum- mation of the relation to the extent of a right to participate in the profits is not shown, there being only a contract which might ripen into a partnership upon payment of certain money, being in the nature of an executory agreement to form a part- nership, a receiver should not be allowed.!^ § 478. Defendant permitted to give security to account to plaintiff, in lieu of receiver. When plaintiff, in an action for the dissolution of a partnership, has obtained an injunc- tion and a receiver, but the partnership relation is denied by de- fendants, and it is apparent that plaintiff's interest in the firm, if any, is very small, and that by continuing the receiver the business will be greatly imperiled and perhaps ruined, it is proper for the court to modify the order for the injunction and receiver, by permitting defendants, in lieu thereof, to give security for the payment to plaintiff of any sum which may be found due him upon a final settlement. In such a case, the court, proceeding upon equitable principles, will mold and adapt its remedy so as to attain substantial justice, without compromising the rights of any of the parties.!^ And where 15 Hobart t'. Ballard, 31 Iowa, 521. stead, to permit the defendants to 16 Popper V. Scheider, 7 Ab. Pr., file security to pay the plaintiff any N. S., 56. McCiinn, J., says, p. 58: sum that may be found due him on ". . . This action is in the nature a final settlement of the partner- of a suit in equity, in which the re- ship accounts. In view of the facts lief demanded is the dissolution of that a partnership between the an alleged copartnership, and an plaintifif and defendants is posi- adjustment of the partnership ac- tively denied; that a very small counts, and in which provisional proportion of the partnership cap- relief is sought by an injunction ilal was contributed by the plain- and the appointment of a receiver. tiff, if, indeed, any were contributed I allowed an interlocutory order for by him in the character of partner; an injunction and the appointment that by the allowance of an injiuic- of a receiver. The motion now is tion and the appointment of a re- to modify the order of injunction ceiver the partnership business, and appointing a receiver; and, in- which is very large and flotu^ish- 662 RECEIVERS. [chap. XIII. it appears that the appointment of a receiver in an accounting between partners will result in great injury and loss to both parties which can easily be avoided by the giving of a proper bond, the court may deny the appointment of a receiver upon the filing of such a bond>'^ And under a statute which pro- vided that a receiver should not be appointed if the defendant should offer a proper bond to hold plaintiff harmless, and it appeared that such a bond had been tendered, it was held that a receiver should not be appointed. ^^ § 479. Denial of partnership by defendant not alone sufficient to prevent receiver. While it is true, as has thus been shown, that, in cases of doubt as to the existence of a partnership, courts of equity will not interfere by a receiver, yet if, from the affidavits presented upon the application, it satisfactorily appears that there is a partnership and that defendant is in possession of most of the assets, denying the other partner access thereto, the court may properly grant the aid of a receiver, although defendant by affidavits denies the existence of a partnership. In other words, the mere denial by the defendant partner of the e:>:istence of a partnership is not sufficient to prevent the appointment, when the court is satis- fied from the evidence in support of the application that the partnership relation exists.^^ ing, will be arrested, and perliaps visional remedy is only auxiliary ruined; and that by the modifica- to ultimate relief, and should never tion proposed, the plaintiff will be usurp or anticipate the office and abundantly secured in all his effects of a trial on the merits." rights, absolute or contingent, I 17 Cary Bros. v. Dalhoff C. Co., can not doubt but the equity of 'che 126 Fed., 584. To the same effect,^ case requires a rescission of the Mann v. Gaddie, 88 C. C. A., 1, 158 order of injunction and receiver- Fed., 42, reversing S. C, 147 Fed., ship, and the substitution of an 955. And see, ante, §§ 9, 124, 308. order to the effect suggested. It is 18 Roberts v. Pipkin, 63 S. C, 252, thus that a court of equity molds 41 S. E., 300. and adapts the remedial relief it 19 Hottenstein v. Conrad, 9 Kan., accords, so as to reach the ends of 435. Brewer, J., says, p. 440: "It substantial justice, without com- would be opening the door to a promising the rights or interest of great deal of wrong to hold that any party to the litigation. A pro- by simply denying the existence of CHAP. XIII.] PARTNERSHIPS. 663 § 480. Not the province of the court to superintend the business. It is important to bear in mind, in considering the subject of receivers in partnership cases, that it is not the province of a court of equity to conduct the business of a co- partnership, and while a receiver may be directed to continue the business a sufficient length of time to enable the court to determine the rights of the parties Htigant, it is not the prov- ince of the court to become the superintendent and manager of the private business of parties.^^ Indeed, this necessarily fol- lows from the very object and purpose contemplated by the court in appointing a receiver upon a bill for the dissolution of a partnership, such purpose being the preservation of the firm property until the cause can be determined, the court, through a partnership, a party in possession of large amounts of partnership property could hold that possession until, after the delay of a suit, the verdict of a jury had established the partnership. It would often re- sult in real victory to the wrong- doer. A court having the right to hear testimony as to a fact, upon a motion, has a right to find the ex- istence of that fact. Wherever an application for a receiver in a part- nership case is made, the court has to hear some testimony as to the existence of the partnership. Or- dinarily, there is on this point no ■counter testimony ; yet the court finds on the testimony presented on the motion that there was a partnership. Without such find- ing, it could not appoint a receiver. Having power to make such a find- ing, that power is not taken away by the introduction of counter tes- timony. It must still find as to the fact. If there be much contradic- tion in the testimony, it may re- quire proof of additional facts, such as the insolvency of the defendant. before making any appointment. But still, its power to examine the testimony, and determine as to the fact, remains. Whatever a court may examine into on motion, it may also determine. Its deter- mination, for the purposes of the motion, establishes the fact." 20 Allen V. Hawley, 6 Fla.. 164; Wolbert v. Harris, 3 Halst. Ch., 605 ; First National Bank v. Cook, 12 Wyo., 492, 76 Pac, 674, 78 Pac, 1083. See, also. Marten v. Van Schaick, 4 Paige, 479; Jackson v. De Forest, 14 How. Pr., 81. And see, ante, § 36. In Allen v. Hawley, 6 Fla., 164, Mr. Justice Dupont ob- serves : "As it is not the province of the court to create a copartner- ship, so it is equally foreign from its functions to conduct its business. It never could have been contem- plated that a court of chancery should become the superintendent of the private affairs of individuals. Its legitimate province is to adjust the rights and settle the disagree- ments of parties growing out of such transactions." 664 RECEIVERS. [chap. XIII. its officer the receiver, having charge of the firm assets, not in hehalf of either party, but for the common benefit of all. 21 Nor will a receiver be appointed over a partnership for the purpose of carrying out a proposed settlement or compromise of an indebtedness due to the firm, which neither partner under the articles would be empowered to carry out, since the court can not clothe its receiver with larger powers in this regard than might be exercised by the partners themselves. ^2 ^ 481. Receiver may manage business pendente lite; running steamboat; horses and carriages; political paper; borrowing money. While, as is thus seen, courts of equity will not sanction the permanent or continued manage- ment of a partnership business in the hands of a receiver, he may, in a proper case, be allowed to continue the management of the business pending legal proceedings for a dissolution, in order that the good-will may be preserved to the ultimate purchaser, and its full value be realized by the partners at a final sale, and to prevent great loss to the parties. 23 Thus, when two persons are interested as partners in a steamboat, upon a bill for a dissolution and an accounting it is proper to appoint a receiver, and to direct him to operate the boat during the con- tinuance of the litigation, and until the rights of the parties can be finally determined.24 So when the partnership property is of such a nature that it is liable to injury by remaining idle, and it is for the obvious benefit of all parties that it should be employed until a sale may be effected, as in the case of horses and carriages, when profits might accrue from their hire and the expense of their keeping is a serious charge upon the re- ceiver, the court may permit him to let and hire the property for the benefit of the partnership fund, until a favorable sale is 21 V^olbert v. Harris, 3 Halst. 479 ; Jackson v. De Forest, 14 How. Ch., 605. Pr., 81 ; Heatherton v. Hastings, 5 22 Niemann v. Niemann, 43 Cli. Hun, 459. And see Gwynne v. D., 198. Memphis A.-A. Co., 93 Tenn., 603, 23 Allen V. Hawley, 6 Fla., 164; 30 S. W., 23. Marten v. Van Schaick, 4 Paige, 24 Allen v. Hawley, 6 Fla., 164. CHAP. XIII.] PARTNERSHIPS. 665 effected. 2^ And when, upon the dissolution of a manufac- turing firm, the partners are unable to agree among them- selves as to the manner of closing out the business and there are outstanding contracts which should be completed, the court may appoint a receiver and may authorize him to complete such contracts and to continue the business with a view of selling it as a going concern. ^^ And it has been held, where a large por- tion of the assets of a partnership consisted of material in the process of manufacture and notes taken in the course of the business of the firm which could be made available only by a temporary and limited continuance of the business, that the receiver might be authorized to continue the business to a limited extent and to borrow money for that purpose which should be given a preference over prior mortgage liens. 27 But the court will not assume the responsibility of continuing the publication of a political paper, which constitutes the partner- ship assets, any longer than is absolutely necessary for the preservation of the property; and until a sale can be effected by the receiver, the partners owning the paper may be allowed to continue its editorial management, the publication being managed under the receiver's direction. 28 § 482. Courts will interfere only in clear cases; and where there is mismanagement. Courts of equity are averse to the dissolution of partnerships and the appointing of receivers, when it is apparent that this course will result disas- trously to the interests of the parties, and when the defendant partner protests against a dissolution. And it may be said generally, that the courts will not lend their aid by receivers, in this class of cases, except in cases falling clearly within the principles laid down by the authorities.29 And while the gen- eral rule is well established, that if upon the dissolution of a 25 Jackson v. De Forest, 14 How. Paige, 479. But see Meridian N. & Pr., 81. P. Co. V. Diem & W. P. Co., 70 26 Taylor v. Neate, 39 Ch. D., 538. Miss.. 695, 12 So., 702. 2T Blythe v. Gibbons, 141 Incl., 29 See Paige t^. Vankirk, 1 Brews., 332. 35 N. E., 557. 290; Heflebower v. Buck, 64 Md., 28 Marten ?/. Van Schaick, 4 15, 20 Atl., 991. 666 RECEIVERS. [chap. XIII. partnership the partners can not agree upon the disposition to be made of the firm assets, and one of the partners prevents or seeks to exckide the other from participation in the management of the firm effects, a receiver will be appointed, yet it must clearly and satisfactorily appear that there is a conflict of inter- est, and that one partner is seeking to deprive the other of his right to manage the business. When, therefore, it does not appear that the defendant partner, against whom a receiver is sought, has offered any opposition to plaintiff's participa- tion in settling the firm business, and the answer denies that defendant is proceeding against the rights or contrary to the interests of his copartner, and denies that he has made any demand upon plaintiff for any of the firm assets, a receiver will be refused. The court will not, under such circumstances, in the absence of proof of mismanagement on the part of defend- ant, permit him to be deprived of all control over the settle- ment of the business. ^^ § 483. Breach of duty must be shown; irreconcilable disagreement ; fraud ; probability of loss. The general rule is, that to warrant a receiver in partnership cases, there must be some breach of duty on the part of one of the partners, or a violation of the articles of copartnership.^^ And when- ever, by reason of dissensions or disagreements between part- ners, the intervention of a court of equity becomes necessary to effect a settlement and winding up of their affairs, a re- ceiver will be allowed upon a bill by one partner showing a breach of duty or a violation of the copartnership agreement by the other.32 Thus, wilful acts of fraud by the defendant, 30 Terrell v. Goddard, 18 Ga., 664. ever the intervention of a court of And see Warwick v. Stockton, 55 equity becomes necessary, in con- N. J. Eq., 61, 36 Atl., 488. sequence of dissensions or disagree- 31 New V. Wright, 44 Miss., 202. ments between the partners, to 32 Allen V. Hawley, 6 Fla., 164. effect a settlement and closing of Mr. Justice Dupont observes, p. 164: the partnership concerns, upon bill "From the examination which we filed by any of the partners, show- have made of the authorities on ing either a breach of duty on the this subject, we think the law may part of the other partners, or a vio- be considered as settled, that when- iation of the agreement of partner- CHAP. XIII.] PARTNERSHIPS. 667 such as misappropriation of firm funds, making false and im- proper entries upon the firm books, and depriving complain- ant of access to the books, and concealing from him the true condition of the business, afford sufficient ground for appoint- ing a receiver.^2 Sq when the pleadings disclose a serious and apparently irreconcilable disagreement between the part- ners, both as to the control and disposition of their effects and as to their respective demands against each other, the granting an injunction and a receiver is regarded as a provident exercise of the powers of a court of equity, sanctioned alike by authority and by the exigencies of the case.^^ It should, how- ever, clearly appear that on account of the dissensions and dis- agreements complained of, serious injury will result to the parties unless a receiver is appointed, and such dissensions, without fault of defendant, will not justify the summary in- terposition of a receiver, unless it is clearly shown that the parties will suffer loss by continuing in possession of the prop- erty.^^ § 484. Want of confidence as a ground for receiver. The fact that a partner's conduct has been such as to destroy the mu- tual confidence which ought to subsist between partners, is an important element influencing the court in granting relief by an injunction and a receiver.36 And when one of two partners has exclusive control of the firm business, and so mismanages it that the firm speedily becomes insolvent, and all friendship and confidence between the partners are destroyed, the ap- pointment of a receiver may be regarded as the only practi- cable method of speedily and peaceably winding up the affairs ship, a receiver will be appointed 36 Smith v. Jeyes, 4 Beav., 503 ; as a matter of course." Todd v. Rich, 2 Tenn. Ch., 107. See, 33 Barnes v. Jones, 91 Ind., 161; also, Boyce v. Burchard, 21 Ga., 74; Shannon v. Wright, 60 Md., 520. Williamson v. Wilson, 1 Bland, 418; 34 Whitman v. Robinson, 21 Md., Sutro v. Wagner. 8 C. E. Green, 30. And see Smith v. Brown, 44 388; White z;. Colfax, 33 N. Y. Supr. West Va., 342, 30 S. E., 160. Ct. R., 297. 35 Loomis v. McKenzie, 31 Iowa, 425, 668 RECEIVERS. [chap. XIII. of the firm. The rehef will be granted, in such a case, even though the plaintiff in the bill may have acted in an unwarrant- ed and illegal manner, in himself attempting to exclude defend- ant from possession and control of the assets after filing his bill. 2'^ So when it is apparent from the bill and answer that neither partner has confidence in the other, and it is admitted by both that the firm is in a condition of insolvency, and each partner charges the other with intent to waste the joint proper- ty and to give an undue preference to certain creditors, it is pe- culiarly fitting and proper that a receiver should be appointed, as a means of winding up the firm business for the benefit of all concerned. Under such circumstances, the relief is grant- ed primarily for the benefit of the firm creditors, that they may come in pari passu and share in the proceeds according as their respective priorities may be shown. ^^ § 485. Failure to co-operate in management of business no ground for receiver; unprofitable business no ground for relief. It is to be observed, however, that the mere want of co-operation by one partner in managing the business, thus leading the other to act upon his own responsibility, is not sufficient ground for the interference of equity by a re- ceiver, when the defendant has not interfered with the man- agement of the business by the plaintiff. And when one mem- ber of the firm occupies the relation of managing partner, having practically the sole management and control of the business, the mere fact that the other refuses to co-operate with him affords no sufficient ground for a receiver.39 Nor does the fact that the partnership business has been unprofitable, or that it should be discontinued and the firm dissolved, warrant a court in taking the property out of defendant's hands, to be administered by a receiver.^^ 37 Boyce v. Burchard, 21 Ga., 74. ing receivers in partnership cases. 38 Williamson v. Wilson, 1 Bland, 30 Roberts v. Eberhardt, Kay. 148. 418. And see this case for an ex- 40 Moies v. O'Neill, 8 C. E. Green, tended discussion of the principles 207; Shoemaker v. Smith, 74 Ind., governing courts of equity in grant- 71. CHAP. XIII.] PARTNERSHIPS. 669 § 486. Appointment not a matter of course ; confidence between partners. The appointment of a receiver, upon a bill for an accounting of partnership affairs, is not a matter of course, since the granting of such applications as of course would frequently work great hardship and injustice. And when no disqualification is shown on the part of the defendant partner, the bill alleging no facts showing the necessity for a receiver, and merely alleging in general terms that plaintiff is on principles of equity entitled to the interposition of the court and the aid of a receiver, the court will refuse to interfere, the confidence reposed by one partner in another being a suffi- cient objection to the appointment of a receiver under such circumstances.^! § 487. Defendant resolved to break up business; im- possibility of continuing advantageously. When the con- duct of the defendant partner has been such as to satisfy the court that he has deliberately resolved to break up and ruin the firm business, and the personal relations between the part- ners are such that they can never carry on the business advan- tageously, a fit case is presented for an injunction and a re- ceiver.*-^ § 488. Dispute as to firm property ; insolvency and bad faith of defendant; bankruptcy. Although there may be some dispute as to whether property in possession of the de- fendant partner, in an action for an accounting between part- ners, is really firm property, yet when it appears that it was re- ceived in part payment for a sale of firm property, and plain- tiff shows that defendant is insolvent, and that he has acted in bad faith and has disposed of part of the property with in- tent to defraud creditors, sufficient cause is shown for an in- junction and a receiver, leaving defendant to show if he can, in the further stages of the cause, that the property in question 41 Opinion of Gould, J., in Tom- 42 Sutro v. Wagner, 8 C. E. Green, linson v. Ward, 2 Conn., 396. 388. 670 RECEIVERS. [chap. XIII. was his individual property.^^ But when the articles provide that upon the deatli or bankruptcy of either partner he shall be deemed to have ceased to be a member of the firm, but that his share in its capital shall remain as a loan to the surviving or continuing members during the residue of the term, to be secured by their bond, upon the bankruptcy of some of the partners their trustees in bankruptcy are entitled to a receiver over the firm, notwithstanding such provision in the articles, the relief being granted for the protection of creditors of the bankrupt partners. In such case the solvent partner may prop- erly be appointed receiver and manager upon giving adequate security.4^ § 489. Violation of agreement for dissolution ; exclusion from books; embittered feeling. When, upon the dissolu- tion of a partnership, the members enter into an agreement fixing the terms of dissolution, and the retiring partner trans- fers the entire partnership property to the remaining part- ners, retaining only an equity to compel them to pay the firm liabilities, the courts will be exceedingly jealous in guarding the retiring partner's rights, and in enforcing performance of their agreement by the other partners. And if they violate and de- part from the terms of such agreement in important particu- lars, and deny the retiring partner's right to have access to the books, to which he is entitled under the terms of the dissolu- tion, sufficient cause is shown for a receiver to wind up the partnership affairs. And the fact that such an embittered state of feeling exists between partners, with reference to the wind- ing up of their affairs, as to render it r .nifest that the right of supervision by one partner can not be exercised without great unpleasantness, is an additional ground for granting re- lief by a receiver.45 But when the partners, upon a dissolution of the firm, enter into an agreement as to the method of collect- ing and disposing of their outstanding accounts and of closing 43 Saylor v. Mockbie. 9 Iowa, 209. 45 White v. Colfax, 33 N. Y. Supr. 44 Collins V. Barker (1893), 1 Ch., Ct. R., 297. 578. CHAP. XIII.] PARTNERSHIPS. 671 up the firm business, a receiver should not be appointed when defendants are responsible, and when no danger is shown as likely to result from awaiting the final disposition of the case upon its merits. ^^ § 490. Partner in possession can not have receiver. As between the partners themselves, a receiver is appointed only for the protection of the party complaining against the adverse possession of the other partner. There is, therefore, no ground for a receiver upon the application of a partner who is himself in possession, since he is fully authorized to sell the firm assets, subject to his liability to account to the other partner for his share. And if the defendant partner does not object to the control of the property by plaintiff, the latter, being in posses- sion, will not be allowed a receiver-^"^ So when a partnership expires by limitation, a receiver will not be appointed upon the application of one partner, in the absence of any showing of mismanagement by the defendant partner in possession, who offers to surrender the assets to plaintiff for final adjustment of their affairs. Nor will the court in such case interfere be- cause the plaintiff partner lacks the requisite experience to wind up the business, or because of a disagreement between the parties as to the construction of the partnership articles.^^ § 491. Receiver not granted when equities of bill de- nied by answer. Upon application for the extraordinary aid of equity by a receiver in cases of partnership, the relief will usually be denied when the equities of the plaintiff's case are fully met and negatived by defendant's answer.49 Thus, in an action for an accounting of the firm affairs and for a receiver of its assets, when the defendant partner denies by his answer the principal allegations of the bill, and denies that he has excluded plaintiff from participating in the business, 46 Simon V. Schloss, 48 Mich., 233, 49 Parkhurst v. Muir, 3 Halst. Ch., 12 N. W., 196. 307; Williamson v. Monroe, 3 Cal., 47 Smith V. Lowe, 1 Edw. Ch., ZZ. 383 ; Coddington v. Tappan, 26 N. 48Bnfkin v. Boyce, 104 Ind., S3, J. Eq., 141. See, also, Rhodes v. 3 N. E., 615. Lee, 32 Ga., 470. 672 RECEIVERS. [chap. XIII. or from ha\ing access to the books, and also denies that he has refused to account with the plaintiff concernins^^ the tirm business, a receiver will not be allowed. ^^ So when the alle- gations of the bill are so general in their nature that an indict- ment for perjury could not be founded upon them if false, and the equities of plaintiff's case are fully denied by the an- swer, defendant denying that he has been guilty of any waste or improper expenditure or misappropriation of the partnership fund as charged in the bill, although plaintiff may be entitled to an accounting, no sufficient ground is presented to justify withdrawing the property from the hands of a defendant part- ner who is fully acquainted with the business, and placing it in the hands of a receiver.^^ And if the equities of the bill are all successfully met and contradicted by the answer, it is proper for the court to dissolve a preliminary injunction granted upon filing the bill, and to refuse the appointment of a receiver.^^ § 492. Refused when plaintiff's right is not questioned or disturbed. As between partners themselves, a receiver will not be appointed to take possession of property which the plaintiff partner claims to belong to himself, as his individual property, transferred to him by the firm, when it is not alleged that his right as individual owner of the property is questioned, or his possession disturbed. ^^ § 493. Receiver in behalf of outgoing partner. Where, upon the dissolution of a partnership, the outgoing partner as- signs his entire interest in the firm assets to the remaining partner, upon condition of the latter assuming all the debts of the firm, and agreeing to save the retiring partner harmless on account thereof, the relation thus established between the parties is analogous to that of principal and surety, the con- tinuing partner having the clear legal title to the property, and there being no joint ownership. And while a receiver is 50 Parkhurst v. Miiir, 3 Halst. 52 Rhodes v. Lee, 32 Ga., 470. Ch., 307. 53 Buchanan v. Comstock, 57 •"1 Williamson v. Monroe, 3 Cal., Barb., 579. 383. CHAP. XIII.] PARTNERSHIPS. 673 not ordinarily allowed as against a clear legal title, when there is no lien or acknowledged trust, yet upon a bill by the surety or outgoing partner, showing that the continuing partner is fraudulently acting in disregard of his covenants, and sending his money beyond the state, and that plaintiff is being sued for the firm debts, a receiver may be appointed to take charge of such an amount of the firm assets as will suffice to discharge the joint indebtedness and relieve the surety. ^^ § 494. Receiver on judgment creditor's bill after disso- lution. When, upon the dissolution of a partnership, one partner assumes payment of all the firm indebtedness, and a creditor's bill is afterward filed upon a judgment against the firm, on which a receiver is sought, the application for a receiv- er should not be confined merely to the individual property of the partner as to whom the firm indebtedness has been assumed by his copartner, but should extend to and cover the partnership effects, as well as the separate property of the defendant who is the real debtor.^^ § 495. Appointment prevents preference to creditor; does not interfere with rights or liens of creditors already acquired. Upon a bill for an accounting between partners, and for a settlement of their affairs after a dissolution, the appointment of a receiver has the effect of preventing one partner from giving a preference to any creditor by a warrant of attorney to confess judgment for a firm indebtedness. And a creditor thus obtaining judgment acquires no such lien as entitles him to satisfaction of his judgment out of the fund in the receiver's hands, in preference to the other partnership creditors.5^ So when, upon a bill to wind up an insolvent firm, a receiver is appointed and is in charge of the firm assets, and an order is made for creditors to prove their demands, credit- ors can not by obtaining judgment and filing a creditor's bill obtain priority over the general creditors out of the funds in the receiver's hands. Especially are such judgment creditors 54 West V. Chasten, 12 Fla., 315. 56 Waring v. Robinson, Hoffm., 55 Henry v. Henry. 10 Paige, 314. 524. Receivers — 43. 674 RECEIVERS. [chap, XIII. estopped from claiming priority when they have proven their claims before the master, and when they have shared in a divi- dend paid by the receiver.^''^ But the jurisdiction of equity over the affairs of insolvent partnerships, by the appointment of re- ceivers, will not be exercised in such manner as to interfere with the rights of creditors, which have ripened into liens upon the firm property by the use of diligence, before the receiver's ap- pointment. And the levy of an execution by a judgment credit- or of the firm, upon partnership property, before the order appointing a receiver, will not be overreached by such order, and the subsequent appointment of the receiver will not de- prive the execution creditor of the rights acquired by his levy.^^ If, however, a receiver is already appointed and is in possession of the firm assets for the benefit of all the creditors, no creditor will be permitted to levy upon and sell the property for his own benefit.^^ § 496. Failure to contribute to capital stock ; sale of in- terest; insolvency; exclusion by purchaser. The fact that one partner fails to contribute his portion of the capital stock of the firm, as fixed by the articles of copartnership, and that he sells his interest in the firm to a third person, without the knowledge or consent of the other partner, coupled with his insolvency and refusal to pay any portion of the partnership indebtedness, and the fact that the purchaser has taken posses- sion of the firm property and threatens to exclude the other partner therefrom, are sufficient grounds for granting an in- junction and a receiver to take charge of the assets. ^^ § 497. Not sufficient to allege large sums of money in defendant's hands ; misapplication of funds ; agreement for arbitration. It is not sufficient ground for appointing a re- ceiver, upon a bill for the settlement of partnership affairs, that 57 Jackson v. Lahee, 114 111., 287, port v. Kelly, 42 N. Y., 193. 2 N. E., 172. 59 Knode v. Baldridge, 73 Ind.. 54. 58 Van Alstyne v. Cook, 25 N. Y., 60 Heathcot v. Ravenscroft, 2 489; Hoffman v. Schoyer, 143 III., Halst. Ch., 113. 598, 28 N. E., 823. .\nd see Daven- CHAP. XIII.] PARTNERSHIPS. 675 the defendant partner has large sums of money belonging to the firm in his hands, when it is not shown that there is any danger of the money being ultimately lost to the plaintiffs, and no allegation is made that defendant is insolvent and unable to respond for the amount due.^^ But the withdrawal by a part- ner of large sums from the firm to meet his individual losses sustained in stock speculations has been held to constitute suffi- cient ground for a receiver. And the relief has been allowed in such case, notwithstanding a provision in the articles of part- nership for the submission to arbitration of all differences be- tween the partners, since the jurisdiction of equity to grant a receiver in such case is not ousted by an agreement of the par- ties to submit to arbitration. ^2 § 498. Receiver refused over shares of stock constitut- ing entire assets of firm. In an action between partners, a receiver will not be appointed to take charge of and sell cer- tain shares of stock in an incorporated company, which consti- tute the entire assets of the firm, when it is not determined how much of the stock belongs to each partner, the question de- pending upon the state of th'eir accounts ; and when it is not alleged that the defendant partner is insolvent, and he denies by his answer the equities of plaintiff's case and consents that one- half the stock may be transferred to plaintiff, and offers to give such security as the court may require to indemnify the plaintiff partner for any balance which may ultimately be found in his favor.^^ § 499. Use of firm effects by remaining partners after dissolution. The fact that, after the dissolution of the partnership, the remaining partners continue to carry on the business on their own account, with the partnership effects, is sufficient ground to warrant the interference of equity by a re- ceiver. 64 61 Wellman v. Harker, 3 Ore., 520. 63 Buchanan v. Comstock, 57 62 Pini V. Roncoroni (1892), 1 Barb., 568. Ch., 6.33. ®^ Harding v. Glover, 18 Ves., 281. 676 RECEIVERS. [CHAF. Xlli. § 500. Partnership for sawing lumber; failure to take timber from land of one partner. In case of a partnershii) formed for the purpose of sawing lumber, where by the arti- cles of copartnership the partner having charge of the business was to take the timber used for the business from land belong- ing to the other partner, a violation of this part of the contract has been held a sufficient breach of duty to warrant an injunc- tion and a receiver, when the business was shown to be in a de- clining condition and the firm indebtedness increasing.^^ § 501. When court may direct issue to be tried by jury. When the appointment of a receiver of a partnership estate, in an action for an accounting between the partners, is de- pendent upon whether it was a partnership at will or for a term of years, and if at will whether it has actually been dissolved, the court will not determine the question upon a motion for a receiver, but may direct an issue to be tried at law as to whether there was a subsisting partnership between the parties.66 So if, upon an application for a receiver on a bill for the settlement of partnership affairs, there is doubt as to whether plaintiff is entitled to an interest in the profits, the court may direct an issue to be tried by a jury, as to whether plaintiff is entitled to profits, and, if so, in what amount.^^ And when the existence of the partnership is denied, a receiver will not be appointed in aid of an execution over the effects of the firm until the question of the existence of the partnership is determined.^^ § 502, Courts averse to interfering ex parte. The courts are averse to appointing receivers in controversies between partners, without notice to the defendant partner and without service of process, especially when an injunction has already been granted which is ample to protect the property from loss until the motion for a receiver may be regularly heard. ^^ 65 New V. Wright, 44 Miss., 202. 69 McCarthy v. Peake, 18 How. 66 Fairburn v. Pearson, 2 Mac. & Pr., 138 ; Mann v. Gaddie, 88 C C. G., 144. A., 1, 158 Fed., 42, reversing S. C, 67 Peacock v. Peacock, 16 Ves., 49. 147 Fed., 955. 68 Guild V. Meyer, 56 N. J. Eq., 183, 38 Atl., 959. CHAP. XIII.] PARTNERSHIPS. 677 § 503. Jurisdiction over foreign partnerships. As re- gards the jurisdiction of equity in cases of foreign partner- ships, it is held, in Massachusetts, that a receiver will not be ap- pointed against a non-resident purchaser of the interest of one partner, conducting the business in another state, although it would seem that as against such partner, if within the juris- diction of the court, a receiver may be had.'^^ And when an association in the nature of a partnership was formed in Eng- land, for the purpose of conducting mining operations in Brazil, and the property of the association in Brazil was vested in a trustee for management, upon a bill by a member of the association in England, in behalf of himself and all others, for an accounting and distribution of profits, the trustee hav- ing clandestinely left the country, and having threatened to sell the property of the association, the court allowed a receiver and granted an injunction to restrain the trustee from selling, the relief being justified by the necessity of protecting the property.*^! § 504. Partnership in working farm; deficiency in prof- its. Where plaintiffs, the owners of a farm, have entered into an agreement with defendant in the nature of a part- nership, for working the farm and dividing the profits, with a provision that plaintiffs may terminate the partnership on six months' notice, if the profits shall not reach a certain amount, upon showing that the profits have not reached the amount agreed upon, plaintiffs have been allowed an injunction and a receiver. "^2 § 505. Priority by attaching creditors before final de- cree. As regards the effect of a receivership in partner- ship cases upon the rights of creditors, it is held, in California, that the filing of a bill by one partner for a dissolution and an accounting, and the appointment of a receiver thereon, will not prevent a general creditor of the firm from proceeding by attachment and judgment, and thus gaining a priority over 70 Harvey v. Varncy, 104 Mass., 72 Dunn z'. McNaught, 38 Ga., 179. 436. 71 Shcppard v. Oxenford, 1 Kay & J., 491. 678 RECEIVERS. [chap. XIII. other creditors, at any time before a final decree dissolving the firm. Until a dissolution of the partnership, it is held, it can not be known that the firm is insolvent or that the court will administer its assets, and it would, therefore, be unjust to deny a creditor not a party to that litigation the right to prosecute an action at law for the recovery of his demand.'^^ § 506. Injunction auxiliary to receivership continued to hearing. When, upon a bill for the settlement of partner- ship affairs and for a receiver, an injunction is granted and a receiver appointed, if, under the circumstances of the case, the injunction is regarded as a proper auxiliary to the receiver- ship, upon overruling a motion to rescind the appointment of the receiver, the injunction will be continued until the hearing or further order of the court.'^'* § 507. Receiver granted as between purchasers or as- signees of different partners. The right to invoke the aid of equity by the appointment of a receiver of partnership effects, in an action to wind up the firm affairs, is not limited to the parties themselves, and the jurisdiction may, under proper cir- cumstances, be exercised in favor of the assignees of the part- ners who have succeeded to their interests in the firm. For example when both partners have assigned and transferred their respective interests in the firm, upon a bill by the pur- chaser or assignee under one of the partners against the as- signees of the other, alleging their possession of the property as well as their insolvency and refusal to allow plaintiff to be let into possession, a proper case is presented for appointing a receiver, upon the general principles which govern the juris- diction as between partners themselves.'^^ § 508. Limited partnerships. In cases of limited part- nerships, the courts of New York allow the appointment of re- 73 Adams v. Woods, 8 Cal., 152; 74 Williamson v. Wilson, 1 Bland, Naglee v. Minturn, id., 540; Adams 428. V. Woods, 9 Cal., 24. And see 75 Maynard v. Railey, 2 Nev., 313. opinion of Burnett, J., in Adams v. Hackett, 7 Cal., 187. CHAP. XIII.] PARTNERSHIPS. C79 ceivers upon the insolvency of the firm, for the protection of all the creditors, and will not permit any creditor to obtain a pref- erence in the satisfaction of his demand. It is held, in that state, that upon the insolvency of such a partnership its assets immediately become a trust fund to be divided equally among all the creditors, and it is the duty of the general partners to place this fund in the hands of a trustee for equal distribution among the creditors. And when the general partners neglect the performance of this duty, the court will appoint a receiver, who becomes entitled to the entire assets of the firm as they existed at the date of insolvency, and discharged of all liens suffered or created by the partners after that date."^^ 76 Jackson v. Sheldon, 9 Ab. Pr., 127. See, also, Lottimer v. Lord, 4 E. D. Smith, 183. In Jackson v. Sheldon, 9 Ab. Pr., 127, the defend- ants in the case had formed a spe- cial or limited partnership under the statute of New York. Insolv- ency ensued, and judgments hav- ing been recovered against the partners by default, under which their stock was levied upon and partly sold, they made an assign- ment for the benefit of their cred- itors. Jackson, who was a creditor at large of the firm, brought this action to set aside the judgments and vacate the sales, and for the appointment of a receiver to take the assets and apply them for the benefit of all the creditors. The court, Davies, J., say, p. 133, after a review of the New York author- ities : "These cases, therefore, fully sustain the proposition that as soon as the special partnership becomes insolvent, it is the duty of the gen- eral partners to place the assets of the firm in the hands of a compe- tent trustee, to divide the same equally among its creditors. The question presented in this case is, whether, having neglected that duty, the court will permit them, by reason of such omission, to ac- complish indirectly what they are prohibited from doing directly — give a preference among their cred- itors. I think clearly not. The moment the firm became insolvent their effects became trust funds, to be divided equally among all their creditors. No one creditor could obtain a preference over another for payment out of this fund, by reason of any act of omission or commission on the part of these, whose duty it was immediately to place the funds and assets in the hands of a competent trustee. On the happening of insolvency, the assets of a limited copartnership, equally with those of a moneyed corporation, have attached to them the character of trust funds, in which all creditors are entitled equally to participate, and in which no one can share to the disadvan- tage of the others. . . The gen- eral partners of this special part- nership, not having discharged the 680 RECEIVERS. [chap. XIII. § 508^-. Effect of denial of motion in former suit. The appointment of a receiver in an action for the settlement of partnership affairs being merely ancillary to the principal re- lief sought, it constitutes no bar to the relief that a similar motion was denied in a former suit brought by the plaintiff partner for a settlement of the firm business, which suit was dismissed by plaintiff of his own motion. Such dismissal being without prejudice to plaintiff's rights, he is at liberty to bring another action witli all its rights and incidents, including the right to apply for a receiver.'^'^ duty which the law casts upon them, on the happening of the in- solvency of the partnership, by placing the trust funds in the hands of a competent trustee, for equal distribution among all the credit- ors, it is entirely competent for this plaintiff to invoke the aid of this court to accomplish the same re- sult. It is the duty of this court to appoint a receiver for that pur- pose, who will be entitled t(3 take charge of and possess himself of all the assets, funds and effects of said partnership as they existed at the time of its insolvency, dis- charged of all liens suffered or created since the happening of that event, and to collect in the same, and to distribute the same equally among all the creditors of the part- nership. The injunction and re- ceiver as prayed for in the com- plaint should have been granted, and the order appealed from deny- ing the same must be reversed with costs." "^7 Anderson v. Powell, 44 Iowa, 20. CHAP, XIII.] ■ PARTNERSHIPS. 681 II. Receiver Upon Dissolution of the Firm. § 509. English rule denying receiver unless plaintiff is entitled to a dissolution. 510. English rule followed in this country; receiver does not neces- sarily follow injunction; disagreement on dissolution; right to use retiring partner's name. 511. Ground for dissolution not necessarily ground for receiver; re- lief refused when defendant has advanced entire capital; in- solvency of defendant. 512. Relief refused purchaser of one partner's interest at sheriff's sale. 513. Departure from agreement, when ground for receiver in case of theater. 514. Court should be careful to preserve the business; relief not granted when it would destroy value of business without benefit to either party. 515. Relief granted on exclusion from firm; refused when answer denies bill. 516. Receiver granted against partner authorized to close up firm. 517. Assignment of assets by insolvent partners for benefit of their creditors, ground for relief. 518. General assignment for benefit of all creditors, when receiver refused. 519. Partnership at will, receiver almost of course; funds applied ratably, and without preference. 520. Appointment on final decree; failure to give bond. 521. Usually appointed on interlocutory application; injunction also granted. § 509. English rule denying receiver unless plaintiff is entitled to a dissolution. It is the established doctrine in England, that a receiver in partnership cases will only be al- lowed when the relief is ancillary to a dissolution of the firm. And when the court can not foresee that it will ultimately decree a dissolution, or when the object of the suit is not to obtain a dissolution, but on the contrary to continue the part- nership, the bill praying the establishment of the firm and the specific performance of the partnership articles, equity will not lend its extraordinary aid by a receiver. '^^ And while, under the English practice, it is almost a matter of course to 78 Hall z: Hall, 3 Mac. & G., 79 ; Roberts v. Eberhardt, Kay, 148. 6S2 RECEIVERS. [CITAP. XIII. appoint a receiver upon a bill for the dissolution of a firm, if the case presented is such as to entitle plaintiff to a dissolu- tion, the court will not interfere and take the conduct of a partnership into its own hands, if upon the case ao presented it is doubtful whether plaintiff is entitled to a dissolution.'^^ The rule may be stated in general terms, that to warrant a re- ceiver in partnership cases, such a state of facts must be shown by the party complaining as, if proven at the hearing, will entitle him to a dissolution. ^0 And in considering wheth- er the conduct of one partner has been such as to entitle the other to a dissolution, for the purpose of determining an ap- plication for a receiver, the court will consider not merely the specific terms of the partnership articles, but also the duties and obligations implied in every contract of partnership. And when it is obvious that the conduct of the defendant partner "9 Goodman v. Whitcomb, 1 Jac. & W., 589; Chapman v. Beach, id., 594. The doctrine is well stated in Goodman v. Whitcomb, by Lord Eldon, as follows: "This is a bill filed for the purpose of having a dissolution of the partnership de- clared, and if the court can now see that that must be done, it follows very much of course that a receiver must be appointed. But if the case made stands in such a state that the court can not see whether it will be dissolved or not, it will not take into its own hands the conduct of a partnership which only may be dissolved. It may be a question whether the court will not restrain a partner, if he has acted improp- erly, from doing certain acts in future, but if what he has done does not give the other party a ■ right to have a dissolution of the partnership, what right has the court to appoint a receiver, and make itself the manager of every trade in the kingdom? Where part- ners differ, as they sometimes do, when they enter into another kind of partnership, they should recollect that they enter into it for better and worse, and this court has no jurisdiction to make a separation between them because one is more sullen or less good-tempered than the other. Another court, in the partnership to which I have alluded, can not, nor can this court in this kind of partnership, interfere, un- less there is a cause of separation which, in the one case, must amount to downright cruelty, and in the other must be conduct amounting to an entire exclusion of the partner from his interest in the partnership. Whether a disso- lution may ultimately be decreed I will not say, but trifling circum- stances of conduct are not sufficient to authorize the court to award a dissolution." 80 Smith V. Jeyes, 4 Beav., 503. CHAP. XIII.] PARTNERSHIPS. 683 has been so injurious to the firm, and so inconsistent with his duties as a partner, as to entitle plaintiff to a dissolution, a re- ceiver will be appointed. ^^ § 510. English rule followed in this country; receiver does not necessarily follow injunction; disagreement on dissolution; right to use retiring partner's name. The English rule as above stated has been followed in this country, especially in the courts of New York, where the doctrine is well settled that a receiver will not be appointed over a sub- sisting partnership, unless it satisfactorily appears that plain- tiff will ultimately be entitled to a decree for a dissolution and the winding up of the firm business. ^^ The grounds re- lied upon by the courts in granting receivers are, the neces- sity of winding up the affairs of the firm and dividing the surplus, and they do not interfere for the purpose of continu- ing or managing the business, this being a responsibility which the courts will not usually assume.^^ And although a prelim- inary injunction has been granted, ex parte, upon a bill by a partner seeking a dissolution of the firm, it does not necessa- rily follow that a receiver will be appointed ; and if the court is satisfied that no such case is presented as to entitle plaintiff to a final dissolution, it will refuse a receiver, leaving the in- junction to be dissolved in due time upon proper motion. ^^ But when, upon the dissolution of a partnership, the mem- bers of the firm can not agree upon the mode of adjusting its affairs, it is the usual practice of the courts, with a view to protect the rights of all parties in interest, to exclude the partners from participating in the adjustment of the firm busi- ness, and to appoint a receiver for that purpose, and to grant 81 Smith V. Jeyes, 4 Beav., 503. of defrauding creditors, see Metcalf 82Garretson v. Weaver, 3 Edw. v. Moses, 161 N. Y., 587, 56 N. Ch., 385; Jackson v. DeForest, 14 E., 67. How. Pr., 81. As to the appoint- 83 Jackson v. DeForest, 14 How. ment of a receiver in an action Pr., 81. brought for the dissolution of a ^'^ Garretson v. Weaver, 3 Edw. partnership as a part of a fraudu- Ch., 385. lent scheme devised for the purpose 684 RECEIVERS. [ClIAP. XIII. an injunction as a necessary adjunct of the receivership.^^ So when a partnership at will is dissolved, there being no pro- vision in the articles as to the division of the property or as to the manner of closing up the firm affairs, the partners be- ing unable to agree upon such matters, and the defendant partner claiming the entire interest in the lease and good- will, a proper case is presented for appointing a receiver.^^ And where a firm has been dissolved by mutual agreement and part of the assets have been placed in the hands of one of the partners and part in the hands of the other for the purpose of winding up the affairs of the firm and liquidating the as- sets, and afterward the partners are unable to agree as to the manner in which the property shall be sold, a receiver is prop- erly appointed to close up the affairs of the firm under the direction of the court.^'^ And where, upon the dissolution of a firm by mutual agreement, the retiring partner had given the remaining partner the right to continue the use of the former's name as a part of the firm name upon the condition that the defendant partner should incur no liability under such name, and the defendant partner, who was insolvent, was vio- lating this agreement and had incurred liabilities in excess of the value of the partnership property, a proper case was pre- sented for the appointment of a receiver to dispose of the stock under the order of the court.^^ § 511. Ground for dissolution not necessarily ground for receiver; relief refused when defendant has advanced entire capital; insolvency of defendant. While it is thus seen that courts of equity, both in England and in America, rarely interfere by a receiver in partnership cases unless it is apparent that plaintiff will ultimately be entitled to a dissolution of the firm, it is to be borne in mind that the mere fact of the case as presented being suffi- 85 Van Rensselaer v. Emery, 9 87 Bennett v. Smith, 108 Ga., 466, How. Pr., 135. And see Fleming v. 34 S. E., 156. Carson, 37 Ore., 252, 62 Pac, 374. «§ Josclove v. Bohrman, 119 Ga., 86 McElvey v. Lewis, 76 N. Y., 204. 45 S. E., 982. 373, CHAP. XIII.] PARTNERSHIPS. 685 cient to warrant a decree for a dissolution does not of itself constitute sufficient ground for a receiver, in the ab- sence of improper conduct or breach of duty by the defend- ant partner.89 And when a partnership is dissolvable by mutual consent, or determinable at the will of either party, equity will not, as of course, assume control of the business by placing it in the hands of a receiver, although the party com- plaining is entitled to an immediate dissolution, but a re- ceiver will be withheld unless the relief appears to be neces- sary to protect and preserve the interests of the parties-^" The reason for the doctrine as here stated is found in the manifest injustice which would necessarily result if, in case of a partnership determinable at will, a court of chancery would as of course, and for no other reason than that such was the wish of one member of the firm, assume control of the business and place it in the hands of a stranger to the firm.91 Especially will the court refuse to interfere by a re- ceiver when, by the articles of copartnership, the defendant partner was required to advance and has advanced the entire capital, the business being conducted by him in his own name and owned by him individually, the plaintiff's interest in the property upon a dissolution being only a share of the profits, and no suggestion of defendant's insolvency or irresponsibility being made, and no proof of fraud appearing.92 When, how- 89 Harding v. Glover, 18 Ves., 281. 91 Birdsall v. Colie, 2 Stockt., 63. "I have frequently disavowed," ^2 Cox v. Peters, 2 Beas., 39. "The says Lord Eldon in this case, "as a true principle," says Green, Chan- principle of this court, that a re- cellor, p. 41, "is that adopted by ceiver is to be appointed merely on Chancellor Williamson, viz., that the ground of a dissolution of a where a partnership is dissolved by partnership. There must be some mutual consent, or determined by breach of the duty of a partner, the will of either party, a court of or of the contract of partnership." chancery will not as of course as- See, also. Cox z/. Peters, 2 Beas., 39; sume the control of the business, Renton v. Chaplain, 1 Stockt., 62; or place it in the hands of a re- Birdsall v. Colie, 2 Stockt., 63 ; Wil- ceiver. A receiver will be ap- son V. Fitchter, 3 Stockt., 71. pointed only where it appears 90 Cox V. Peters, 2 Beas., 39; necessary to protect the interest of Birdsall v. Colie, 2 Stockt., 63. the parties." And see Renton v. 086 RECEIVERS. [CIIAP. XIU. ever, in addition to the fact of a dissolution, or a right to dissolve the firm, the plaintiff partner shows that the defend- ant is insolvent and that there is danger of loss if the firm assets are intrusted to his charge, sufficient ground is present- ed to entitle plaintiff to the aid of a receiver.^^ § 512. Relief refused purchaser of one partner's interest at sheriff's sale. When the partnership interest of one member of a firm is sold at sheriff's sale under execution against him, the purchaser at such sale stands in no better position than the partner himself, and a court of equity will not in behalf of such purchaser interfere with the other part- ner, by appointing a receiver to wind up the firm business, un- less his gross misconduct calls for such interference. Espe- cially will the court be justified in withholding relief, in such a case, when the bill does not allege insolvency of the defend- ant partner, and it does not appear that he is unable to respond for any interest to which the purchaser may be entitled on completion of the accounts, and when it is not shown that the purchaser ever called upon the defendant for an accounting.^'* § 513. Departure from agreement, when ground for re- ceiver in case of theater. While the aid of a receiver in partnership matters is usually confined to cases where the party aggrieved appears to be entitled to a dissolution, there are instances where a departure from the terms of the agree- ment between the partners for the management of their busi- ness has been considered sufficient ground for a receiver, even though the case as presented would not justify a dissolution and none was sought. Thus, when the proprietors of a thea- ter had executed an agreement regulating the management of their business, and providing that the profits should be de- voted exclusively to certain purposes, and that the treasurer should be directed so to apply them, but by a subsequent agree- Chaplain, 1 Stockt., 62; Birdsall v. 94 Renton v. Chaplain, 1 Stockt., Colie, 2 Stockt., 63. 62. 93 Randall v. Morrell, 2 C. E. Green, 343. And see Jones v. Weir, 217 Pa. St., 321, 66 Atl., 550. CHAP. XIII.] PARTNERSHIPS. 687 ment the parties, then entitled under the original proprietors to seven-eighths of the theater, contracted for a different ap- plication of the profits, and otherwise affected or varied the rights of the owner of the remaining one-eighth interest, who had refused to become a party to the new agreement, a receiver was appointed upon a bill by the latter to enforce a specific performance of the covenants contained in the original agree- ment.^^ § 514. Court should be careful to preserve the business ; relief not granted when it would destroy value of business without benefit to either party. In the case of a valuable partnership business which has been built up by the joint la- bors and contributions of all the partners, upon a bill for a dissolution and a receiver, the court should be careful to pre- serve the business itself, if possible, and to put all parties upon a fair and equal footing with regard to it. And if it is appar- ent that the appointment of a receiver to direct a sale of the entire business, and to wind up the concern, would destroy its value without benefit to either party, the relief will be de- nied. And this is true, even though the dissensions which have sprung up between the partners are such as to make it manifest that the business can not be carried on advantageously, and although the case presented is otherwise sufficient to warrant a dissolution.^^ § 515. Relief granted on exclusion from firm; refused when answer denies bill. When both partners are desirous of a dissolution of the firm, and the circumstances of the case, as disclosed by bill and answer, are such as seem to require a dissolution, the bill charging and the answer admitting that plaintiff is excluded from the partnership premises, sufficient cause is presented for a receiver to collect the firm debts and take charge of the assets.^'^ But when plaintiff relies for a 95 Const V. Harris, Turn. & R., "^ Wolbert v. Harris, 3 Halst. Ch., 496. 605. 96Slemmer's Appeal, 58 Pa. St., 168. 688 RECEIVERS. [chap. XIII. dissolution and a receiver upon the fact that defendant has drawn from the business in excess of the sum stipulated in the copartnership articles, and this is denied by defendant's answer, which denies all l' c charges of the bill, the court will refuse an injunction and a receiver.^^ § 516. Receiver granted against partner authorized to close up firm. When, upon the dissolution of a partner- ship, one partner is authorized, by agreement between the parties, to close up the firm business, and its property and as- sets are turned over to him, upon his agreeing to hold the other partners harmless, notwithstanding his right, under the contract, to exclusive possession, if the bill shows that he is wasting or misapplying the funds, or that there is danger to the remaining partners from his insolvency or fraudulent ^con- duct, a sufficient case is stated to justify a receiver.99 But in case of such an agreement the court will not, by appointing a receiver, take the control and winding up of the business from the hands of the partner to whom it has thus been in- trusted by stipulation of the parties, in the absence of a clear showing of fraud or misconduct and danger to the assets.^ § 517. Assignment of assets by insolvent partners for benefit of their creditors, ground for relief. In case of a partnership dissolvable at the pleasure of either of the part- ners, and which does, in fact, become dissolved by the insol- vency of certain members of the firm, an attempt by the in- solvent partners to appropriate the firm assets to the payment of their private indebtedness by an assignment thereof for the benefit of their creditors, is sufficient to entitle the other partners to an injunction and a receiver. And in such case, the receivership and the injunction should extend to and cov- er all of the firm assets in the hands of the defendant part- 98 Henn v. Walsh, 3 Edw. Ch., charged on the coming in of defend- 129. ant's answer, denying the equities 99 Drury v. Roberts, 2 Md. Ch., of the bill. 157. But the receiver was dis- 1 Heflebower v. Buck, 64 Md., 15. CHAP. Xlir.] PARTNERSHIPS. 689 ners and their assignee, in order to prevent their misappro- priation.^ § 518. General assignment for benefit of all creditors, when receiver refused. When, upon the dissoUttion of a partnership, the partners sign and pubhsh a notice of the dis- solution, giving one partner the exclusive right to wind up and settle the affairs of the firm, the fact that such partner makes a general assignment of all the firm assets for the benefit of all the firm creditors, equally and without preference, will not of itself be deemed sufficient cause for a receiver, when no ground is shown for believing that the fund in the hands of the assignee is in danger, and when he is abundantly able to respond in damages.^ § 519. Partnership at will, receiver almost of course; funds applied ratably, and without preference. When either member of a partnership has the right to dissolve the firm at will, and the articles make no provision for closing up the concern, the appointment of a receiver on a bill for that purpose, in the event of a disagreement between the partners as to closing up the firm business, is almost a matter of course.'* And in such a case, the court will direct the receiver to apply the partnership property and funds in payment of all debts of the firm ratably, without preference to the favorite creditors of either partner.^ § 520. Appointment on final decree ; failure to give bond. It is competent upon the final judgment, in an action for the dissolution of a partnership, to appoint a receiver as part of the decree or judgment of the court, and to direct him to take possession of the firm property and sell the same, and to col- lect the outstanding debts and distribute the proceeds among the partners according to their respective shares. And it is not sufficient ground for reversing such a judgment or de- 2 Davis V. Grove, 2 Rob. (N. Y.), 4 Law v. Ford, 2 Paige, 310; Mar- 134; Same v. Same, id., 635. ten 7'. Van Schaick, 4 Paige. 479. 3 Hayes v. Heyer, 4 Sandf. Ch., 5 Law v. Ford, 2 Paige, 310. 485. Receivers — 44. 690 RECEIVERS. [chap. XIII. cree, that the receiver thus appointed was not required to give bond, it being regarded as the fault of the defendant in not asking for a bond.^ And in an action for the dissolution and winding up of the firm, the plaintiff partner being himself one of the principal creditors, upon a decree dissolving the firm and establishing plaintiff's rights as a creditor, it is error to give to the defendant partner, who is insolvent, sole control of winding up the business, to the exclusion of plaintiff, and a receiver should be appointed for that purpose.*^ § 521. Usually appointed on interlocutory application; injunction also granted. While, as is thus seen, the aid of a receiver may be granted as part of the final decree in the cause, the relief is usually granted upon an interlocutory ap- plication on filing a bill for a dissolution and an accounting. And it is frequently the case that the court, as a necessary ad- junct to the relief sought by the bill, will also grant an inter- locutory injunction to restrain defendant from interfering with the management of the business, pending the proceedings for a dissolution. 6 Shulte V. Hoffman, 18 Tex., 678. 7 Watson v. McKinnon, 7Z Tex., 210, 11 S. W., 197. CHAP. XIII.] PARTNERSHIPS. 691 III. Exclusion from Firm as Ground for Receiver. § 522. Exclusion from management of business strong ground for re- lief. 523. Assignment by one partner and exclusion from firm. 524. Employment with share of profits, when a partnership; re- ceiver granted on exclusion from profits. 525. Exclusion and impossibility of adjusting disagreements. 526. Receiver appointed in behalf of purchaser of partner's interest. 527. Dissolution by proceedings in bankruptcy; status of assignees; exclusion. 528. Partnership in vessel ; exclusive profit. 529. Exclusion from books, and fraudulent conduct. § 522. Exclusion from management of business strong ground for relief. In actions for the dissolution of part- nerships and the winding up of their affairs, the fact that one partner has excluded the other from participation in the profits of the business, or from his share in its management and con- trol, has always been regarded as one of the strongest grounds for equitable relief by the appointment of a receiver.^ And it was said by Lord Eldon, that the most prominent considera- tion on which the court acts in appointing a receiver of a partnership business is the circumstance of one partner hav- ing taken upon himself the right to exclude another from as full a share in the management of the firm business as he who assumes that power himself enjoys.^ And it was said by the same authority, that, as in the ordinary course of trade, if 8 See Gowan v. Jeffries, 2 Ashm., 628; Whipple v. Lee, 46 Wash., 296 ; Wilson z;. Greenwood, 1 Swans., 266, 89 Pac, 712. See Bryant v. 471 ; Const v. Harris, 1 Turn. & R., Fitzsimmons, 106 Md., 421, 67 Atl., 525 ; Kirby v. Ingersoll, 1 Doug. 356, for the appointment of a re- (Mich.), 477; Katsch v. Schenck, 18 ceiver to take possession of a race- L. J., N. S. Ch., 386; Wolbert v. horse which was held to be partner- Harris, 3 Halst. Ch., 605 ; Katz v. ship property but which was in the Brewington, 71 Md., 79, 20 Atl., 139; exclusive possession of one of the Gillett V. Higgins, 142 Ala., 444, 38 partners. So., 664; Fink v. Montgomery, 162 9 See observations of Lord Eldon Ind.. 424, 68 N. E., 1010; Redding in Const v. Harri.s, Turn. & R., 525. V. Anderson, 37 Wash.. 209, 79 Pac, 692 RECEIVERS. [chap. XIII. one partner seeks to exclude another from his due share in the business, the court will grant a receiver, so in the course of winding- up the partnership affairs the court will, when necessary, interpose on the same principle. ^'^ And where one partner is fraudulently mismanaging the affairs of the partner- ship and is excluding the other from the business, and it ap- pears that a dissolution must ultimately be granted, a receiver is properly appointed although there is no allegation that the defendant partner is insolvent.^^ § 523. Assignment by one partner and exclusion from firm. In illustration of the general doctrine of exclusion from the firm as ground for a receiver, it is held, that where one partner, without the knowledge or consent of his copart- ner, assigns and transfers all the firm effects, with the evident purpose of shutting out the other partner from any participa- tion in the settlement of the firm business, the assignment hav- ing the effect of discontinuing the business and of excluding the other partner from examining the books or controlling the firm property, a sui^cient case is presented to warrant the in- terposition of equity by a receiver. And in such case, the as- signee can have no claim, even as to the interest of the as- signing partner, sufficient to defeat the application. ^^ § 524. Employment with share of profits, when a part- nership ; receiver granted on exclusion from profits. When defendant had entered into a contract with plaintiff that he would pay him a given sum as salary for his services in de- fendant's business, and in addition thereto would give him a certain proportion of the net profits of all new business ob- tained through him, the agreement was regarded as constitut- ing a partnership; and defendant having excluded plaintiff from all participation in the profits of the business, upon a bill 10 Wilson V. Greenwood, 1 Pac. 153. overruling Wales v. Den- Swans., 471. nis, 9 Wash., 308, 37 Pac, 450. 11 Cole V. Price, 22 Wash., 18, 60 12 Kirby v. Ingersoll, 1 Dong. (Mich.), 477. CHAP. XIII.] PARTNERSHIPS. 693 for a dissolution and an accounting, a receiver was allowed. In such a case, the plaintiff, being entitled to a share in the profits, has an interest in seeing that the business out of which the profits arise is properly disposed of, and upon being ex- cluded therefrom, he is entitled upon principle to have a re- ceiver when the parties can not come to an amicable adjust- ment of their differences.^^ § 525. Exclusion and impossibility of adjusting dis- agreements. In the application of the doctrine of exclusion as a ground for appointing a receiver in partnership cases, it is not absolutely necessary that the court should be satisfied that the partnership fund is in peril. And when the fund in dispute is prima facie the proceeds of the partnership, and the defendant refuses to allow his copartner to participate therein, and excludes him from all participation in the profits, so that the rightful ownership of the fund can not be de- termined until a final adjustment of their affairs, it is proper to continue a receiver in possession. Under such circum- stances, the inability of the partners to come to an adjust- ment of their interests would seem to render it a provident ex- ercise of the powers of a court of equity to continue in charge of the property until it can finally determine the rights of the parties.14 § 526. Receiver appointed in behalf of purchaser of part- ner's interest. When a partner sells his interest in the busi- ness to a third person, although such sale in effect works a dis- 13 Katsch V. Schenck, 18 L. J., N. presumptive title in the defendant, S. Ch., 386. the court would interfere with 1* Speights V. Peters, 9 Gill, 472. great reluctance, and only where Mr. Justice Frick observes, p. 479 : the property was in danger of being "It is assumed by the appellant materially injured or lost. But in that the court, as preliminary to respect to a fund which is claimed the appointment of a receiver, must and is prima facie the proceeds of also be further satisfied that the a partnership, it is but a provident property is in imminent peril. This, exercise of equity power to place however, is not always a necessary the property under the care of the condition of the action of the court. court." .^gainst the legal title, or a strong 594 RECEIVERS. [chap. XIII. solution of the firm, the remaining partner is not entitled to the exclusive use and possession of the property, and if he excludes the purchaser from participation therein, denying not only his rights but the rights of the partner from whom he purchased, and sets up an adverse title to the property, suf- ficient cause is shown for appointing a receiver.!^ § 527. Dissolution by proceedings in bankruptcy ; status of assignees; exclusion. In case of the dissolution of a partnership by proceedings in bankruptcy against one member of the firm, the assignees of the bankrupt partner become, as to his interest, tenants in common with the solvent partner. And in such a case, upon an application for a receiver on the ground of exclusion, a court of equity will proceed upon the same principles by which it is governed in all cases where some members of a firm seek to exclude others from that share in the management of the business to which they are entitled.!^ § 528. Partnership in vessel; exclusive profit. Where there were several partners jointly interested in a vessel, and the defendant partners had been in possession, acting as ships- husbands and brokers, and had acted in fraud of the plaintiffs by clandestinely making a profit from the employment of the vessel for their own exclusive benefit, upon a bill for an ac- counting, it was held a sufficient case to warrant the appoint- ment of a receiver ad interim, to take possession of the ves- sel's machinery, which had been removed for repairs, and of which defendants had possessed themselves to the exclusion of plaintiffs. ^'^ § 529. Exclusion from books, and fraudulent conduct. A receiver will be appointed upon a bill by one partner for a settlement of the partnership affairs, when it is alleged that defendant refuses to make any settlement and denies plaintiff 15 Seibert v. Seibert, 1 Brews., don in Wilson v. Greenwood, 1 531. Swans., 482, 483. 16 See observations of Lord El- 17 Brenan v. Preston, 2 De G., M. & G., 813. CHAP. XIII.] PARTNERSHIPS. 695 access to the firm books, and that he has failed to pay the firm indebtedness, and has fraudulently appropriated the partner- ship funds to his own use and diminished the firm assets. Such a case is regarded as presenting such elements of fraud and imminent danger, as to clearly warrant the extraordinary aid of the court.i^ iSHaight V. Burr, 19 Md., 130. 161; Shannon v. Wright, 60 Md., See, also, Barnes v. Jones, 91 Ind., 520. 696 RECEIVERS. [chap. XIII. IV. Receiver Upon Death of Partner. § 530. English doctrine; receiver upon death of both partners. 531. Death of one partner no ground for relief unless survivor guilty of mismanagement. 532. Mismanagement of survivor; relief granted on bill by adminis- trator of deceased. 533. When administrator entitled to the relief; may himself be re- ceiver; the decree. 534. Rights of the receiver. 535. Legatee of deceased partner, when entitled to relief. 536. Receiver allowed, notwithstanding appointment of executor; authority to sue. 537. Relief allowed when answer admits facts alleged in bill. § 530. English doctrine; receiver upon death of both partners. The jurisdiction of equity in appointing receiv- ers in partnership cases is sometimes called into exercise by reason of the death of one or both partners. It was the doc- trine of the English Court of Chancery, established at an early date, that upon the death of both members of a copartnership, a receiver would be appointed. And the grounds for the re- lief in such case were, that no such confidence exists as be- tween the representatives of the deceased partners, as exist- ed between the partners themselves.^^ § 531. Death of one partner no ground for relief unless survivor guilty of mismanagement. Ordinarily, in case of the death of a single member of a copartnership, since the sur- viving partner has a legal right to possession of the firm assets and to wind up the business, he will not be deprived of this right by a receiver, unless upon proof of mismanagement or of danger to the partnership effects.^O And while it is true 19 Phillips V. Atkinson, 2 Bro. C. confidence between the representa- C, 272. "Where the^ is a co- lives, and therefore the court will partnership," says Lord Kenyon, appoint a receiver." "there is confidence between the 20 Connor v. Allen, Harrinsr. parties, and if the one dies the con- (Mich.), 371; Walker v. House, 4 fidence in the other partner re- Md. Ch., 39; Dickens v. Dickens, mains, and he shall receive; but 154 Ala., 440, 45 So., 630. To the Vvhen both are dead, there is no same effect, see Comstock v. Mc- CHAP. XIII.] PARTNERSHIPS. 697 that equity interferes by a receiver with much less rehictance when the partnership has been dissolved, than when it is still in existence, yet where the proceedings are instituted against a surviving partner by the representatives of a deceased mem- ber of the firm, the court will not interfere without being first satisfied, by the mismanagement or improper conduct of the survivor, that the confidence reposed in him was misplaced.^i And where a surviving partner has disposed in a valid and binding manner of all the partnership assets before the filing of a bill for a receiver by a creditor of the firm, it is improper to appoint a receiver, since there is no property for him to take and administer. 22 § 532. Mismanagement of survivor; relief granted on bill by administrator of deceased. If, however, the surviv- ing partner is guilty of mismanagement and of improper con- duct in his control of the firm business, a different case is pre- sented, and courts of equity are, under such circumstances, in- clined to a somewhat liberal exercise of their extraordinary jurisdiction, in behalf of the representatives of a deceased partner.23 And in case of the death of one member of a firm, in the absence of any partnership articles, or of any provision for a continuance of the business by the administrators or rep- resentatives of a deceased partner, if the survivor refuses to proceed within a reasonable time to close up the firm business, and continues to manage it in his own name, and for his own benefit, equity will grant an injunction against its continu- ance and will appoint a receiver, upon a bill filed by the ad- ministrator of the deceased partner. 24 In such a case, the survivor is regarded as a trustee for the creditors and repre- sentatives of the deceased partner. And the laws of the state requiring an executor or administrator to close up the estate Donald, 113 Mich., 626, 71 N. W., 2.3 Holdcn's Adtn'rs v. McMakin, 1087. Par. Eq. Cas., 270; Madgwick v. 21 Walker v. House, 4 Md. Ch., Wimble, 6 Beav., 495; Miller v. 39. Jones, 39 111., 54. 22 Havens & Geddes Co. v. Har- 24 Holden's Adm'rs v. McMakin, ris. 140 Tnd., 387, 39 N. E., 49. Par. Eq. Cas., 270. 698 RECEIVERS. [chap. XIII. of the deceased within one year, the same rule was held ap- pHcable by analogy to the surviving partner, and he having delayed and refused a settlement for a period of fourteen months, using the firm property during this entire period for his own benefit, it was held that there had been such improper delay as to warrant the interposition of equity.^^ So when, by the terms of the partnership articles, it is provided that in case of the death of either partner, the option shall be given his representatives of continuing the business, but upon the death of one partner the survivors insist that they are entitled to continue the firm with the funds of the deceased, and to compel his representatives to be partners therein, they are en- titled to a receiver as against the surviving partners.26 § 533. When administrator entitled to the relief; may himself be receiver; the decree. The administratrix of a deceased partner has a sufficient interest in the firm property, as the personal representative of the deceased, to entitle her to the appointment of a receiver over the interest of the deceased in the firm assets, upon a bill for the settlement of the partner- ship affairs.2'' And while the administrator of a deceased part- ner primarily has nothing to do with the collection of firm debts or with the management of firm assets, it being the duty of the survivors to settle the partnership affairs, yet if there should be an unreasonable delay in the performance of this duty, or if the survivors are wasting the partnership property, it becomes the right and duty of the administrator to insti- tute proceedings against the survivors for an accounting and a receiver, in order that the affairs of the partnership may be properly adjusted. In such case, the administrator may him- self, if otherwise a proper person, be appointed receiver, the court, however, requiring him to give an additional bond with satisfactory security.^S The proper decree in such a case is, that the receiver be appointed upon giving the required bond, 25 Holden's Adm'rs v. McMakin, 27 Clegg v. Fishwick, 1 Mac. & G., Par. Eq. Cas., 270. 294. 26 Madgwick v. Wimble, 6 Beav., 28 Miller v. Jones, 39 111., 54. The 495. principles by which courts of equity CHAP. XIII.] PARTNERSHIPS. 699 and that the surviving partners pay over to him such money as has cx)me to their hands, and has not been expended by them in the payment of partnership debts and in the legitimate ex- penses of the business. They should also be required to de- liver to the receiver all evidences of debt and choses in ac- tion against debtors of the firm, and all personal property, if any. belonging to the firm, and should be enjoined from the collection of any debts due to the partnership.^^ § 534. Rights of the receiver. In the class of cases un- der consideration, when the administrator or representative of the deceased partner procures the appointment of a receiver of the partnership effects, the receiver by virtue of his appoint- ment is invested with all the rights and equities of the de- ceased partner, for the purposes of the trust with which he is clothed. And he completely represents the equitable rights of the administrator and of the deceased, for the purpose of ad- ministering the assets of the firm and applying them in pay- ment of the partnership indebtedness.^*^ And upon the ap- pointment of a receiver for the settlement of partnership af- fairs, after the death of a partner, he becomes fully invested are governed, in this class of cases, administrator. If, however, there are very clearly stated in the opin- is an unreasonable delay on the part ion of the court by Mr. Justice of the surviving partners in closing Lawrence, p. 60, as follows : "The the affairs of the partnership, or if law governing the relations of the they are wasting the partnership administrator of a deceased partner property, it is then the right and to the surviving partner, so far as duty of the administrator, if the concerns any questions involved in partnership creditors remain inac- this case, is well settled. Prima- tive, to file a bill, as in the present rily, the administrator has nothing instance, calling the survivors to ac- to do with either the partnership count and praying for an appoint- assets or the partnership debts. ment of a receiver and the complete The surviving partners take the ex- adjustment of the partnership af- clusive legal title to the former for fairs. The administrator himself, the payment of the latter. If any if a proper person, may be made re- assets remain in their hands after ceiver, but in that event the court payment of all liabilities, they should require him to give a new should account to the administrator bond as such." for the distributive share of the 29 Miller v. Jones, 39 111., 54. tlcccased, which then becomes, for "0 Tillinghast i'. Champlin, 4 R. I., the first time, assets in his hands as 173. 700 RECEIVERS. [chap. XIII. with the possession and control of the assets, the surviving partner having no further authority to adjust the affairs of the firm. In such case, a judgment recovered by a former creditor for services rendered, in a suit against the surviving partner to which the receiver was not a party, is not binding or conchisive as against the receiver, and the court may re-inves- tigate the merits of such demand, and may determine for it- self the amount which is justly due to such creditor.^l § 535. Legatee of deceased partner, when entitled to relief. When a legatee of a deceased partner was entitled to his share of the profits accruing from the partnership busi- ness, and continued the business with the surviving member of the firm for a long period of years, being treated as a part- ner and receiving his share of the profits, and he afterward filed a bill for a dissolution, and defendant denied his right to an accounting or to any relief, upon the ground that plaintiff, being a minister, was incapacitated under an act of parliament from engaging in any trading business, defendant also claim- ing the entire property for himself, a receiver was allowed. ^2 § 536. Receiver allowed, notwithstanding appointment of executor; authority to sue. In Louisiana it is held, that a court having jurisdiction of an action for the settlement of partnership affairs, has power to appoint a receiver, notwith- standing the death of one partner and the appointment of an executor or administrator of his estate ; and that such ap- pointment is of itself sufficient authority for the receiver to institute an action to recover money due to the firm.^^ § 537. Relief allowed when answer admits facts alleged in bill. When a bill in equity is filed by creditors of a part- nership against the surviving members of the firm, for the set- tlement of the firm accounts and for a receiver, and the answer admits all the material facts alleged in the bill, it is proper to appoint a receiver to take charge of the partnership assets.^^ 31 Kirkpatrick v. McElroy, 41 N. 33 Helme v Littlejohn, 12 La. An., J. Eq.. 539, 7 Atl., 647. 298. 32 Hale v. Hale, 4 Beav., 369. ^^ Dick v. Laird, 4 Cranch C. C, 667. CHAP. XIII.] PARTNERSHIPS. 701 V. Functions and Duties of the Receiver. § 538. Duty to collect debts; entitled to assets; will not be enjoined; rights of third persons. 539. Takes whole equitable title to firm property; may bring suit, suo motu, to obtain possession; choses in action; when re- ceiver can not recover individual property of partner. 539a. Extent of receiver's title. 540. Selection; partner allowed to act without salary; holds funds as officer of court. 541. Court will aid receiver in obtaining assets in hands of surviv- ing partners. 542. Partner acting as receiver can not withhold funds as due to him personally. 543. Sale not allowed by receiver of inferior court, pending appeal as to its jurisdiction. 544. Receiver required to produce books and accounts for examina- tion. 545. Payment of partnership debts. 546. Appointed to collect debts which defendants are enjoined from collecting; payment to plaintiff. 547. Insane hospital; sale of lease and good-will; injunction against continuing same business. 548. Receiver over husband on bill for divorce, not entitled to part- nership property. 549. Receiver over brewing business, functions of. 550. Retiring partner compelled to pay notes, may have action against receiver of new firm. 551. Purchaser of partner's interest not allowed to interfere with re- ceiver. 552. Funds in receiver's hands not subject to garnishment. 552a. When receiver not required to pay deposit in full. § 538. Duty to collect debts; entitled to assets; will not be enjoined; rights of third persons. Upon the appoint- ment of a receiver in an action for the dissolution of a part- nership, it is his duty to proceed without delay to collect the outstanding debts.^^ And when a receiver of part- nership effects is appointed in proceedings under judgments against the firm, and the appointment has become perfected by his giving the requisite security, he becomes at once en- 35 Jackson v. De Forest, 14 How. Pr., 81. 702 RECEIVERS. [chap. XIU. titled to possession of the firm assets, which are regarded as being- in the custody of the court, and not to be disposed of without a hearing- of all i)artics in interest. And it is improp- er, in such case, to enjoin the receiver from the management of the property or fund, since this would be in effect equiv- alent to restraining the court itself from disposing of the funds which may come into the hands of its officer.^^ But the appointment of a receiver, in an action for an accounting and settlement of partnership affairs, will not be extended so as to include and direct the taking possession of specific property alleged to belong to the firm, when the question of whether it is or is not partnership property is directly in issue by the pleadings, and is one of the points in controversy in the liti- gation.^^ And upon an application for a receiver in partner- ship cases, the court will not undertake to determine what is and what is not partnership property, as between members of the firm and third persons, and if disputes arise with refer- ence to any particular property claimed by third persons, the proper course is to determine the controversy by an action either for or against the receiver.^^ § 539. Takes whole equitable title to firm property; may bring suit, suo motu, to obtain possession ; choses in action; when receiver can not recover individual property of partner. A receiver of the effects of a partnership, ap- pointed in an action for the settlement of the firm business, is regarded as vested with the whole equitable title to the part- nership property, without any assignment for that purpose, and in an action to obtain possession of the property he repre- sents the interests therein of all parties to the suit in which he was appointed. And it is held, that to enable him to prop- erly discharge his trust, he may, suo motu, and without special leave of the court, bring an action to possess himself of the 36 Van Rensselaer v. Emery, 9 -^8 Higgins v. Bailey, 7 Rob. (N. How. Pr., 135. Y.), 613. •^7 Gregory v. Gregory, 1 Sweeny, 613. CHAP. XIII.] PARTNERSHIPS. 703 property to which he is officially entitled, incurring no risk thereby except as to costs, and, least of all, have the persons against whom he brings such action the right to object that he brings suit without leave of court. ^^ The appointment of a receiver upon the insolvency of the firm operates, in effect, as an assignment of the firm assets, with all securities incident thereto, for the benefit of firm creditors."*^ But since a re- ceiver's authority is conferred by law, and is not like that of a voluntary assignee of the parties, a receiver of a partnership succeeds, not only to the legal title of the partners as joint tenants, but also to the equitable rights and remedies of the firm and of its beneficiaries. '^^ Ordinarily, however, the re- ceiver is not entitled to sue for the recovery of debts due to the firm without leave of court.'^^ B^t in an action brought by the receiver to foreclose a vendor's lien upon real estate which has been sold by him, it constitutes no defense that one of the partners was not a party to the suit in v^hich the re- ceiver was appointed, when it is not shown that such partner was then alive and within the jurisdiction of the court, or that he had a substantial interest in the partnership.^^ And when the receiver is authorized to sell all the property, choses in ac- tion and effects of the firm within the jurisdiction of the court, a purchaser at such sale will acquire a good title to choses in action and accounts due to the firm from persons resid- ing beyond the limits of the state, the partners themselves residing within the state and the court having full jurisdiction over them. In such case, the members of the firm can not afterward maintain an action against the purchaser to compel 30 Tillinghast v. Champlin, 4 R. recover firm goods which have been I.^ 173. seized under a chattel mortgage 40Winslow V. Wallace, 116 Ind., executed by one member of the firm 317, 17 N. E., 923. after the other partner has become 41 Wallace v. Yeager, 4 Phila. R., insolvent and assigned his interest 251 ; Pearce v. Gamble, 72 Ala., 341. for the benefit of his creditors, Og- 42 Fincke v. Fnnke, 25 Hun, 616. den v. Gregg. 29 Hun. 146. And see as to the right of such a 43 Stclzer v. La Rose, 79 Ind., receiver to maintain an action to 435. 704 RECEIVERS. [chap. XIII. him to account for the proceeds which he has collected from parties resithiig" beyond the state."^^ But since the receiver takes only the firm assets and collects only the debts due to the firm, it is improper for the court to direct him to collect for the benefit of firm creditors from an assignee of an individual partner, not indebted to the firm, the surplus which may re- main in the hands of such assignee after payment of the in- dividual creditors of such partner."*^ For the same reason, a receiver appointed to take charge of the property of an insol- vent partnership can not maintain a bill to set aside a convey- ance made by a member of the firm of his individual property which had been conveyed by him to defraud the creditors of the firm. 4 6 § 539(7. Extent of receiver's title. It has been shown elsewhere that a receiver appointed in a judgment creditors' suit is regarded as a trustee and representative of the creditors and that he may accordingly maintain all necessary actions to set aside fraudulent conveyances and transfers executed by the debtor prior to the receivership.'*'^ Where, however, the receiver is appointed for the settlement of the affairs of a partnership, not at the instance and for the benefit of creditors but upon the application of one of the partners against the other, such receiver is in no sense a representative of the cred- itors of the firm and he accordingly occupies no better posi- tion than the firm with respect to its property, and he can as- sert no greater right or title with reference to the business and property of the partnership than could the members of the firm themselves. ^^ Thus, a receiver appointed in such a 44Loney v. Penniman, 43 Md., seniles v. Dunn, 61 N. J. Eq., 130. 391, 48 Atl., 315. 45 Wallace v. Milligan, 110 Ind., "^^ % ASA, ante. 498, 11 N. E., 599. See, as to the 48 Security Title & Trust Co. v. liability of a co-partnership for a Schlender, 190 111., 609, 60 N. E., loan made to the firm by one of its 854; Weber v. Weber, 90 Wis., 467, members out of funds held by him 63 N. W., 757. as a receiver, R3'an z*. Morrill, 83 Ky., 352. CHAP. XIII.] PARTNERSHIPS. 705 proceeding can not maintain an action to set aside a fraudulent conveyance made by the partnership prior to the receivership.^^ § 540. Selection; partner allowed to act without salary; holds funds as officer of court. As regards the selection of a proper person to be appointed receiver over a copartnership, upon the dissolution of the firm, the general principles gov- erning in the selection of receivers are applicable, and these have been elsewhere discussed.^^ A plaintiff partner, in an action for a dissolution of the firm, has sometimes been ap- pointed receiver, although the practice in this country is an unusual one, and only to be justified upon the implied condi- tion that he will discharge the duties of his trust free of charge. Such a receiver will not, therefore, be allowed any compensa- tion for his services in managing the property intrusted to his charge.^l But if the partners having a three-fourths interest in the firm agree upon one of their number as receiver, and the principal creditors of the firm unite in the application for his appointment, he being otherwise well qualified for the posi- tion, it is proper to appoint him upon his undertaking to act without compensation.^^ fhe English practice seems to be to give each of the partners liberty to propose himself to act as receiver without salary.^^ But the partner who may be ap- pointed no longer acts in the capacity or sustains the relation of a partner, but is an officer of the court, having given due security to account for the moneys which he may receive in his official capacity, and being responsible directly to the court for his conduct.^"* When, therefore, the defendant partner is appointed receiver, in an action for the settlement of partner- ship affairs, and uses a part of the firm assets in private spec- ulations for his own benefit, the other partner can not main- tain a bill in equity for a division of the profits realized out of 4fi Weber v. Weber, 90 Wis., 467, 52 Todd v. Rich, 2 Tenn. Ch., 107. 63 N. W., 757. 53 Blakeney v. Diifaur, 15 Bcav., 50 See chapter III, ante, Of Selec- 40: Sargant v. Read, 1 Ch. D., 600. tion and Eligibility. •'^"^ Blakeney v. Dufaur, 15 Beav., 51 Brien v. Harriman, 1 Tenn. 40. Ch., 467. Receivers — 45. 706 RECEIVERS. [chap. XIII. the speculation, the defendant holding the funds not in the capacity of a partner, but as a receiver and officer of the court. 55 § 541. Court will aid receiver in obtaining assets in hands of surviving partners. A receiver in partnership cases is entitled to and will be allowed by decree of court the possession of all money in the hands of the surviving partners, as well as all evidences of indebtedness and choses in action due to the firm, and all assets and personal property of the firm. And the court may, if necessary, enforce its decree for the delivery of such assets by the surviving partners to the re- ceiver, by process of attachment. 56 § 542. Partner acting as receiver can not withhold funds as due to him personally. When, pending an action for the dissolution of a firm and the settlement of its affairs, one of the partners is appointed receiver, he will not be allowed, by virtue of his appointment, to withhold partnership funds, collected in his capacity as receiver, upon the ground that they are due to him personally, since to allow such an application of the funds would necessarily defeat the very object of his appointment, and would constitute a flagrant breach of trust. And the partner acting as receiver has no greater right to the control of funds collected by him in that capacity than have his copartners, the entire fund being under the control and subject to the disposal of the court.57 55 Whitesides v. Lafferty, 3 tween a receiver and a party to a Humph., 150. The court, Turley, suit, as makes him liable for profits J., say, p. 151 : "There is no pre- made by a use of the money dur- tense for saying that complainant ing the continuance of his receiver- is entitled to this division, upon the ship; he is an officer appointed by ground that it was a partnership the court, responsible to the court transaction; the relation of part- for the discharge of his duties, and ners did not exist between the par- personally liable for any loss of the ties at the time; it had been dis- funds in his hands." solved, and defendant held the 56 Miller v. Jones, 39 111., 54. moneys, not as partner, but as re- 57 Gridley v. Conner, 2 La. An., ceiver. We know of no principle 87. Eustis, C. J., says, p. 89: which creates such a relation be- "... We deem it proper to CHAP. XIII.] PARTNERSHIPS. 707 § 543. Sale not allowed by receiver of inferior court, pending appeal as to its jurisdiction. When proceedings are pending in a court of inferior common-law jurisdiction for the settlement of partnership affairs, and a receiver has been appointed, but the question of the jurisdiction of the inferior court is in doubt, it is improper for that court, pending an appeal for the determination of its jurisdiction, to direct its receiver to sell the partnership property, and such sale should be held in abeyance until the question of jurisdiction is prop- erly determined. 58 And it is improper, upon an interlocutory order and in advance of a final hearing, to direct a sale by the receiver of property as assets of the firm, when its title to such state what we conceive to be the law in relation to the obligations of a partner, who, pending a suit for a settlement anrf liquidation of a part- nership, collects money belonging to the partnership under the appoint- ment from the court. A partner so receiving it has no right to withhold it from the action and control of the court, under any plea or pretense personal to himself. He can not be permitted to defeat the very object of his appointment, by violating or evading his trust. If receivers, partners or others are thus permit- ted to retain the fund from credit- ors, and as the cause progresses, in- volving them in new litigation, how can the partnership be settled in the presence of these hydra preten- sions? The retention of funds col- lected under the authority of the court is a flagrant breach of trust, and the power to compel their im- mediate subjection to its control it- self unquestionable; and without the vigilant and eflficient exercise of this power on all proper occasions, the judicial settlement of the con- cerns of a partnership would be- come a mere farce. After the dis- solution of a partnership, and pend- ing its liquidation, a partner is not permitted to do any act, still less make use of the partnership funds in a manner inconsistent with the purpose of a just and proper settle- ment; and it has been held that, where a partner has collected part- nership money under circumstances from which an agreement on his part not to receive it can be inferred, and where his receiving it was contrary to good faith, he may be held to pay the money into court. In this case Conner was permitted to retain as a partner the money he has collected as receiver, and confound it with the partnership affairs. We think the money thus collected ought to have been paid into court, and that Conner had no more right over it than his copart- ners had." 58McNab V. Noonan, 28 Wis., 434. 708 RECEIVERS. [chap. XIII. property is denied by answer, and is one of the issues to be determined in the action. ^^ § 544. Receiver required to produce books and accounts for examination. A receiver of a partnership may be re- quired by order of court, upon the apphcalion of defendants in the cause, to produce for examination before a master in chancery all books of accounts relating to his management of the firm business, or to receipts and payments made by him in and about the business; but the court will not order him to submit to an inspection of the books upon his own premises, since it can not order that defendants may enter another man's house.^^ § 545. Payment of partnership debts. In Louisiana, it has been held that the payment of partnership debts by a re- ceiver appointed by consent of the partners, out of funds col- lected by him in his official capacity, constitutes a sufficient answer to a rule upon the receiver to show cause why he should not pay the money into court, the receiver being treated as the agent of the parties for the purposes of such payment. It was accordingly held to be error, on the hearing of the rule to show cause, to reject testimony offered by the receiver to prove that he had paid the firm debts and that they were just- ly due.61 § 546. Appointed to collect debts which defendants are enjoined from collecting; payment to plaintiff. Upon a bill by one member of a firm for a dissolution, a receiver should be appointed to collect such debts as the remaining partners are enjoined from collecting; and the receiver thus appointed may be required, by order of court, to pay over to plaintiff such proportion of the collections as he is entitled to receive.^2 59 Brush V. Jay, 113 N. Y., 482, 62 Maher v. Bull, 44 Ifl., 97. As 21 N. E., 184. to the right of the partners to a 60 Maund v. Allies, 4 Myl. & Cr., participation in the profits realized 503. by the receiver during his contin- 61 Kellar v. Williams, 3 Rob. nance of the business, see McMahon (La.), 321. V. McCIernan, 10 W. Va., 419. CHAP. XIII.] PARTNERSHIPS. 709 § 547. Insane hospital; sale of lease and good-will; in- junction against continuing same business. When the chief value of a partnership business is its good-will, which has been built up by the joint efforts of all the partners, and the business is of such a nature that it is impossible for a re- ceiver to conduct it, as in the case of a partnership for carry- ing on an insane hospital and lazaretto for foreign immigrants, it is proper for the court to direct the receiver to sell the lease of the premises where the business is conducted, together with the good will. And in such case, for the purpose of giving efficacy to the sale of the good-will, the court will permit either of the parties to become a purchaser, and will enjoin the re- maining parties from conducting the same business in that locality. ^^ § 548. Receiver over husband on bill for divorce, not entitled to partnership property. When, upon a bill for divorce, filed by the wife against her husband who has ab- sconded, a receiver is appointed to take charge of the hus- band's effects, his appointment does not divest the husband's title to partnership property, and the receiver has no right to dispossess the other partner. If, therefore, he has taken pos- session of the firm property under a misapprehension of his rights and duties, he will be required to make restitution there- of to the other partner.^^ § 549. Receiver over brewing business, functions of. A receiver appointed over a partnership stock in trade, in the business of brewing, has been directed to act as clerk in the trade, and to collect in debts according to the course of the business, to pay excise duties and other charges, and to bring actions in the name of the partners. ^^ § 550. Retiring partner compelled to pay notes, may have action against receiver of new firm. When, upon dis- solving a partnership, it is agreed between the partners that the firm notes shall be paid by the members continuing in 63 Williams v. Wilson, 4 Sandf. 64 Hamill v. Hamill, 27 Md., 679. Ch., 379. cr, skipp v. Harwood, Dick., 114 710 RECEIVERS. [chap. XIII. business under a new partnership, a part of the consideration for such agreement being the sale of the retiring partner's in- terest, who is afterward compelled to pay the notes, he has the same remedy against a receiver of the assets of the new firm to recover the amount paid, that he would have had against the new firm itself before the appointment of a receiver, and may maintain an action against the receiver to recover the amount paid.^^ § 551. Purchaser of partner's interest not allowed to in- terfere with receiver. Where, in an action to dissolve a partnership and to wind up its affairs, a receiver is appointed and takes possession of the firm property, a subsequent pur- chaser of one partner's interest in the firm can not, as assignee or purchaser of such interest, interfere with the rights and du- ties of the receiver, or with any property in his hands, since he acquires by his purchase only such interest as his vendor might have had in the partnership assets, after all liabilities of the finn were discharged.^*^ § 552. Funds in receiver's hands not subject to garnish- ment. A receiver appointed on a bill for the dissolution of a partnership, being an officer of court, and the funds in his hands being in custody of the law, it has been held that such funds are not subject to attachment or garnishment by the firm creditors, and can only be disposed of by direction of the court, not being subject to the action of the parties to the liti- gation or of their creditors.^^ 66 Allyn V. Boorman, 30 Wis., until a dissolution of the partnership 684. has been judicially declared and a 67 Noonan v. McNab, 30 Wis., receiver ordered to make a pro rata 277. distribution of the assets among the 68 Receiver of Adams & Co. v. creditors, they are not prevented Roman, unreported, cited in opin- from resorting to adverse proceed- ion of Terry, J., in Adams v. Hack- ings, and may thereby gain a pref- ett, 7 Cal., 187; Longstaff v. Hurd, erence over less diligent creditors. 66 Conn., 350. 34 Atl., 911. But see And see Adams v. Woods, 8 Cal., opinion of Burnett, J., in Adams v. 152; Same v. Same, 9 Cal., 24; Nag- Hackett, 7 Cal., 187, holding that, lee v. Minturn, 8 Cal., 540. CHAP. XIII.] PARTNERSHIPS. 711 § 552fl. When receiver not required to pay deposit in tull. The receiver of an insolvent copartnership will not be required to pay in full a balance due from such firm to cred- itors who had deposited money with the firm from time to time as security for advances, the deposit not being a special one, or of any specific money, and neither the firm nor the re- ceiver having any specific fund upon which such creditors have a charge or lien.^^ 69 Butler z.. Sprague. 66 N. Y., Continental Life Insurance Co., 71 oyj. bee, also, Attorney-General v. N. Y., 325. CHAPTER XIV. OF RECEIVERS OVER REAL PROPERTY. I. Principles Upon Which the Relief is Granted § 553 II. Receivers as Between Tenants in Common 603 III. Receivers as Between Vendors and Purchasers 609 IV. Functions of the Receiver 618 I. Principles Upon Which the Relief is Granted. § 553. The jurisdiction well established, but cautiously exercised; courts averse to interfering in limine with possession under title. 554. English doctrine of interference only in aid of equitable title; distinction as to personalty and realty; conflicting claimants, heirs at law. 555. Relief refused when there is adequate remedy at law. 556. Appointment does not affect title of either party; does not pre- vent statute of limitations from running. 557. Receiver rarely granted against defendant in possession, claim- ing under legal title; the general rule stated. 558. Exceptions to the rule based on probability that plaintiff will prevail, and upon danger to the property. 559. Receiver refused when plaintiff's right is doubtful and no dan- ger is shown. 560. Probability of plaintiff's success not sufficient, as against long acquiescence, and when no danger is shown. 561. Not granted when notice of lis pendens will protect plaintiff's rights. 562. The rule applied to case of lessor and lessee. 563. Danger to property an important element; dissensions in re- ligious society. 564. Distinction between appointing receivers, and continuing those already in possession. 565. Departure from rule; fraud by defendant in obtaining posses- sion; inadequate consideration and undue influence. 566. Title shown by plaintiff, none by defendant; prevention of vexatious litigation; abuse of trust and insolvency of de- fendant; receiver of rents and profits pending litigation in another state. 712 CHAP. XIV.] REAL PROPERTY. 713 § 567. Appointed on bill by creditors when no personalty shown; rights of judgment creditors in possession not prejudiced; probable title in plaintiff and danger to rents. 568. Receiver in proceedings to determine widow's dower; receiver may compel assignment of dower. 569. Receiver in proceedings to establish will, or to execute trusts of will. 570. When granted in contest between heir-at-law and devisee un- der will. 571. Appropriation of rents and profits as against heirs; objection to administration by pretended heirs. 572. When granted as against tenant for life; devise to wife; set- tlement upon daughter. 573. Vendor not allowed relief because of vendee's insolvency and commission of waste. 574. When granted for protection of annuitants. 575. Relief generally refused in actions of ejectment. 576. When granted in ejectment, for preservation of rents and profits pendente lite. 577. Plaintiff allowed receiver after recovery of lands, when neces- sary to preserve rents and profits. 578. When granted over leasehold interest. 579. Assignee of lease not entitled to receiver. 580. Not granted over house on leased ground because of in- solvency of defendant in possession. 581. Landlord may re-enter on expiration of term; discharge of re- ceiver. 582. When same receiver extended to subsequent applications. 583. Right to rents as afifected by order extending receiver. 584. Receiver in behalf of cestui que trust as against trustees. 585. Relief granted for protection of rent charge. 586. Denied plaintiff in suit to enforce mechanic's lien. 587. Granted in aid of proceedings in bankruptcy. 588. Granted in action to apply trust property in payment of debts equal in priority. 589. Nature of defendant's interest in real property; benefice of clergyman. 590. When refused over ungathered crop; when allowed. 591. Refused in cases of marriage settlements; when allowed after divorce. 592. Difficulty in collection of rent no ground for receiver. 593. Plaintiff's acquiescence, and participation in fraud, a bar to relief. 594. Granted when property has escheated to state. 595. Refused on defendant paying rents and profits into court. 596. One not party to the cause can not object; remainder-man and tenants can not restrain receiver from turning them out of possession. 714 RECEIVERS. [chap. XIV. § 597. Practice in placing receiver in possession; who responsible for loss by owner remaining in possession. 598. When granted before answer. 599. Effect of appointing receiver over corporation upon title to its real estate. 600. Order should state precisely over what property receiver is ap- pointed; appointment may be over part only. 601. When plaintiff entitled to funds in receiver's possession. 602. Real estate subject to judgment and execution on termination of receiver's functions. 602a. When receiver allowed against plaintiff suing in forma pauperis. § 553. The jurisdiction well established, but cautiously exercised ; courts averse to interfering in limine with pos- session under title. The power which is exercised by- courts of equity in appointing receivers over real property, for its better protection and to secure the rents and profits pen- dente lite, although well established both in England and in America, is yet regarded as an extremely delicate branch of equity jurisdiction, and one whose exercise should be guard- ed with the utmost caution. It will hereafter be shown that the courts are exceedingly averse to any interference in limine with the possession of real estate by a defendant, claiming under legal title, and that equity will only interpose a receiv- er, as against such possession, in cases of great emergency, the general rule being that conflicting questions of title should be determined in courts of law.l And while, as will be shown, there are frequent cases where the relief is granted, upon spe- cial circumstances of an equitable nature appealing strongly to the conscience of the court, such cases will be found upon investigation to illustrate and strengthen the general tendency already indicated. § 554. English doctrine of interference only in aid of equitable title; distinction as to personalty and realty; conflicting claimants, heirs at law. It was the established doctrine of the English Chancery, that the court would never exercise its extraordinary powers by appointing a receiver over real property, in behalf of a claimant out of possession, iSee, post, § 557. CHAP. XIV.] REAL PROPERTY. 715 except in aid of an equitable title.2 And a broad distinction is recognized between interfering with the possession of real estate by a receiver, and cases where the relief is extended for the preservation of personal property pendente lite; since in the case of personalty it is the whole property, the corpus, which equity is called upon to protect by a receiver, and which may be lost without the interference of the court, while in the case of real property the court is only asked to preserve the rents and profits, which are merely the proceeds of the property de anno in annum, and which do not, therefore, demand the same summary interference.^ When, therefore, there are sev- eral conflicting claimants to an estate asserting their title as heirs-at-law of the deceased owner, and no impediment is shown to a trial of their rights at law, equity will not enter- tain jurisdiction of the controversy by appointing a receiver in behalf of one of the claimants not in possession who pre- sents no equitable title, but a mere legal title or right which may be asserted and established in a court of law. Nor does the fact that there are outstanding terms, in such case, pre- sent any additional ground for relief in equity by a receiver.^ 2 Carrow v. Ferrior, L. R., 3 Ch. three claimants, none of whom has App., 719. established his title as heir-at-law. 3 Carrow v. Ferrior, L. R., 3 Ch- There is no privity or contract be- App., 719. And see opinion of tween them. There is nothing bind- Vice-Chancellor Wood in Talbot v. ing any of them to take any other Hope Scott, 4 Kay & J., 132. course than that of standing on his 4 Carrow v. Ferrior, L. R., 3 Ch. strict rights, and we are asked to App., 719. This was a contest be- decide that one of them can come tween three claimants as heirs-at- here and ask the court to put a re- law of a deceased lunatic, two of ceiver in possession, though there the heirs having filed separate bills, is no allegation of any impediment alleging the existence of outstand- to a trial at law beyond the exist- ing terms, and praying for a re- ence of outstanding terms. I con- ceiver of the real estate until the sidered this point much in Talbot question of heirship could be deter- v. Hope Scott, 4 K. & J., 96, but mined, the third claimant proceed- do not regret having heard it re- ing by a petition in lunacy. The argued, though considering the vast right to a receiver was denied. Lord amount of property involved in Justice Wood observing as follows, that case, and the hostile feeling bc- p. 728: "In this case there are tween the parties, the fact of there 716 RECEIVERS. [chap. XIV. § 555. Relief refused when there is adequate remedy at law. It necessarily follows from the doctrines above con- sidered, as well as from the general principles governing the extraordinary jurisdiction of courts of equity, that the aid of an injunction and a receiver will not be granted in a contest concerning the possession of real property, when adequate redress may be had at law in the usual forms of action appro- having been no appeal is significant. I then came to the conclusion that there was no jurisdiction to appoint a receiver on the application of a claimant who was out of possession and did not claim by an equitable title, and I am still of the same opinion. The plaintiflF's case was there rested on the ground of the court's jurisdiction to interfere for the protection of property pending litigation, but that question had been fully discussed in Jones v. Jones, 3 Meriv., 161, which seemed to me to have so settled the law that I ventured to say there had been no case for twenty years in which a person claiming by a dry, legal title as heir-at-law, and out of possession, had ever attempted to obtain the appointment of a re- ceiver. The question as to the ef- fect of outstanding terms is dis- posed of by Bainbrigge v. Baddeley, 3 Mac. & G., 413. The vice-chan- cellor has observed, upon this de- cision, as being the reversal by the lord chancellor of a decision by a judge having much greater expe- rience than himself in courts of equity, but I can only look at it as a judgment of a lord chancellor differing from an inferior judge. It was held in that case that the existence of outstanding terms makes no difference as to the ap- pointment of a receiver, the course of the court being merely to put the outstanding terms out of the way, and not to treat them as introducing any new equities. It was urged that this was not a case where the court is asked to turn any one out of pos- session, but a case where the pos- session is vacant, and that the court will interfere to protect the prop- erty as it does to protect personal estate pending a litigation as to probate. I had occasion to consider this in Talbot v. Hope Scott, 4 K. & J., 96, and I observed that the two cases were different. It may be true, on the highest general prin- ciples, that there ought to be no difference in this respect between real and personal property, but our law clearly regards them very dif- ferently, and looks upon the person in possession of real estate as en- titled to ke^ it till some one else shows a better title. Unless the person in possession of real estate is affected by some equity, this court will not interfere. The con- sideration is not unimportant that personal estate may be made way with altogether, if this court does not interfere, but only the rents of real estate can be lost. But, in my opinion, the leading principle gov- erning the case is that this court does not interfere as to real estate unless there is an equity." CHAP. XIV.] REAL PROPERTY. 717 priate to such end; and in all such cases, equity will leave the parties aggrieved to pursue their legal remedy. Thus, upon a bill by a devisee of real estate, claiming title and right of possession, and alleging that defendant has unlawfully intrud- ed n.to possession, and has continued to hold without right or authority, receiving the products and depriving plaintiff of all means of support, the bill seeking an injunction and a re- ceiver and to quiet and declare plaintiff's title, no sufficient cause is presented to warrant the aid of equity, even though it is alleged that the defendant in possession is insolvent. In such a case, plaintiff, claiming the legal title, should assert that title in a court of law by some appropriate action, and equity will not interfere.^ § 556. Appointment does not affect title of either party; does not prevent statute of limitations from running. In actions affecting the title to real property, when a receiver is sought to take charge of the property, and to preserve the rents and profits pending litigation, the appointment of the receiv- er in no manner affects the title of either party to the litiga- tion, although the relief will be granted only in behalf of one having an acknowledged interest, or when there is a strong probability of his ultimate recovery. The receiver is appoint- ed for the benefit of the person making the application, and for any other parties in interest who may choose to avail them- selves of the proceedings. The primary object in making such appointment is the preservation of the property, or of Its rents and profits, from waste and destruction, while the ulterior objects had in view are those contemplated by the suit itself. And if plaintiff ultimately succeeds in establishing his title to the entire property, the appointment may be re- garded as having been entirely for his benefit.^ And it would seem that the appointment of a receiver does not so alter the possession of the estate in controversy, in the person who may finally be adjudged to have been entitled thereto at the 5 Pfeltz V. Pfeltz, 14 Md., 376. 6 Chase's Case, 1 Bland, 206. 718 RECEIVERS. [CIIAP. XIV. time of the appointment, as to prevent the operation of the statute of hmitations dnring the controversy.'^ § 557. Receiver rarely granted against defendant in pos- session, claiming under legal title ; general rule stated. It has ah'eady been shown, that equity is extremely averse to any interference with the possession of real property, by a de- fendant claiming under a legal title. And it may be laid down as a general proposition, supported by an overwhelming array of authority, both in England and in America, that courts of equity proceed with extreme caution in granting re- ceivers as against a defendant in possession, and will rarely interfere with such possession by appointing a receiver in lim- ine, upon a mere legal title asserted by plaintiff. And when- ever the contest is simply a question of disputed title to the property, plaintiff asserting a legal title in himself, against a defendant in possession and receiving rents and profits un- der claim of legal title, equity refuses to lend its extraordinary aid by interposing a receiver, just as it refuses an injunction under similar circumstances, leaving the plaintiff to assert his title in the ordinary forms of procedure at law. And while, as will hereafter be shown, there are special circumstances of fraud or of imminent danger of loss or of irreparable injury, which may sometimes warrant a departure from the general rule, yet in the absence of any such controlling circumstances, the courts insist upon its rigid enforcement, and refuse to de- prive a defendant of his possession, under claim of title, until plaintiff's right is established at law.^ A departure from the 7 Anonymous, 2 Atk., IS. & Cr., 162 ; Municipal Commission- 8 Lloyd V. Passingham, 16 Ves., ers of Carrickfergus v. Lockhart, 59; S. C, 3 Meriv., 697; Mordaunt Ir. Rep., 3 Eq., 515; Parkin v. Sed- V. Hooper, Amb., 311; Owen v. Ho- dons, L. R., 16 Eq., 34; Foxwell v. man, 3 Mac. & G., 378, affirmed by Van Grutten, (1897), 1 Ch., 64; the House of Lords, 4 H. L. Rep., Vause v. Vl'^oods, 46 Miss., 120; 997; Bainbrigge z;. Baddeley, 3 Mac. Schlecht's Appeal, 60 Pa. St., 172; & G., 413 ; Talbot v. Hope Scott, 4 W^illis v. Corlies, 2 Edw. Ch., 281 ; Kay & J., 96 ; Lancashire v. Lan- Gregory v. Gregory, 33 N. Y. Supr. cashire, 9 Beav., 120; Skinners Ct. R., 1; Clark v. Rtdgely, 1 Md. Company v. Irish Society, 1 Myl. Ch., 70; Chicago & Allegheny Oil CHAP. XIV.] REAL PROPERTY. 719 rule can only be justified upon strong grounds of judicial ne- cessity, or in case of fraud clearly proven, or of imminent dan- ger unless immediate possession is taken by the court.9 And the burden rests upon complainant to make out a clear case to justify the relief, and the court should be reasonably satisfied that he will finally recover and that the benefit of such recovery will be lost to him without a receiver, before it will interfere; and an affidavit upon information and belief is not sufficient ground for interposing. lO Nor will defendant be deprived of his possession by a receiver, unless it is made to appear that there is great risk of ultimate loss to the property, and of insolvency on the part of defendant, so that he will be unable to respond to a final decree. ^ And in the absence of fraud, or of any privity between the parties, or of any equities touch- ing the conscience of defendants in possession, equity inva- riably refuses to extend the aid of a receiver, until plaintiff has established his title at law.i2 And where a defendant in eject- & Mining Co. v. U. S. Petroleum Co., 57 Pa. St., 83; S. C, 6 Phila. 521 ; Cofer v. Echerson, 6 Iowa, 502; Emerson and Wall's Appeal, 95 Pa. St., 258 ; De Walt v. Kinard, 19 S. C, 286; Rollins v. Henry, 77 N. C, 467; Twitty v. Logan, 80 N. C, 69; Bryan v. Moring, 94 N. C, 694; Sengfelder v. Hill, 16 Wash., 355, 47 Pac, 757, 58 Am. St. Rep., 36; Spokane v. Amsterdanisch T. K., 18 Wash., 81, 50 Pac, 1088; Kel- ly V. Steele, 9 Idaho, 141, 72 Pac, 887; Ryder v. Bateman, 93 Fed., 16. See PulHs v. Pullis, 157 Mo., 565, 57 S. W., 1095 ; Freer v. Davis, 52 West Va., 35, 43 S. E., 172, 94 Am. St. Rep., 910. As to the right to a receiver over real property and the circumstances which will justify the relief, under the code of pro- cedure of North Carolina, which provides that a receiver may be ap- pointed "before judgment, on the application of either party, when he establishes an apparent right to property, which is the subject of the action, and which is in the posses- sion of an adverse party, and the property or its rents and profits are in danger of being lost, or mate- rially injured or impaired," see Mc- Nair v. Pope, 96 N. C, 502, 2 S. E., 54. As to the appointment of a re- ceiver at the instance of the holder of a tax certificate covering prem- ises involved in a foreclosure suit, see Walker v. Fitzgerald, 69 Neb., 52, 95 N. W., 32. 9 Lloyd V. Passingham, 16 Ves., 59. And see S. C, 3 Meriv., 697, where a subsequent application for a receiver was also refused. 10 Davis V. Reaves, 2 Lea, 649. 11 Vause V. Woods, 46 Miss., 120. 12 Talbot V. Hope Scott, 4 Kay & J., 96, a leading case, in which the English authorities are carefully 720 RECEIVERS. [chap. XIV. ment succeeds in the trial court in establishing his defense that he is in possession as a purchaser and not as a tenant of the plaintiff, as claimed by the latter, the court will refuse a receiver for the rents and profits pending an appeal from the judgment of the trial court. ^^ § 558. Exceptions to the rule based on probability that plaintiff will prevail, and upon danger to the property. The grounds of the exceptions to the general rule, as above stated, reviewed. Vice-Chancellor Wood observes, p. Ill : "With regard to the first part of the relief prayed by the bill, namely, the receiver, which is really the substantial part of the case, I apprehend that, as to the settled estates, it is too clear for any contention at the present day, that this court will not inter- fere at the instance of a person alleging a merely legal title in him- self against other persons in pos- session of the estates, to grant a receiver and put them out of pos- session. In Lord Fingal v. Blake, 2 Moll., 78, and in the subsequent case of Lloyd v. Lord Trimleston, id., 81, there are some observations of Sir A. Hart, which seem to have a leaning in favor of such interfer- ence, and to which I shall refer presently; but there is no decision which in the least bears out the proposition that the court will in- terfere under such circumstances, for it is manifest that, in the first of these cases, the receiver was granted by consent. That there may be a possible case in which this court would interfere to pre- vent absolute destructive waste, where the value of the property would be destroyed if no steps were taken, I can understand ; but I have found nothing that bears any re- semblance to the doctrine con- tended for, that at the instance of a person alleging a mere legal title, this court will interfere against an- other who is in possession, to de- prive him of that possession. I have known, and everybody must have known, numerous instances where ejectment has been brought for very valuable property, upon a merely legal title; yet I think I may say that, for the last twenty years, if not for longer, no one has ever dreamt of approaching this court, however heavy the litigation between the parties, for the pur- pose of obtaining a receiver, until he had established his right at law to possession of the estates. The ground of the rule adopted by the court, in this respect, I conceive to be extremely sound ; the general ground being that the court can not interfere with a legal title of any description, unless there be some equity by which it can affect the conscience of the defendant. Where there is an entire want of privity between the plaintiff and the defendant, and the defendant is simply a wrong-doer at law, this court does not take upon itself to interpose, unless in very exceptional cases." 13 Corbin v. Thompson, 141 Ind., 128, 40 N. E., 533. CHAP. XIV.] REAL PROPERTY. 721 will be found, upon examination, to resolve themselves into two general conditions, both of which must combine to war- rant a court of equity in granting a receiver as against a de- fendant in possession. These conditions are, first, that plain- tiff must show a strong ground of title, with a reasonable probability that he wall ultimately prevail; and second, that there is imminent danger to the property, or to its rents and profits, unless the court shall interpose.^^ Especial importance is attached by the courts to the first of the conditions here named, and when the parties are litigating the right to real property, and the litigation depends upon questions to be de- cided at law, defendant beiag in possession and standing on his legal title, it is regarded as an indispensable condition to the exercise of the jurisdiction of equity by a receiver, that a reasonable probability be shown to the court that the par- ties claiming to disturb the possession will ultimately estab- lish their title to the property.i^ And when this question is 14 Mordaunt v. Hooper, Amb., 311 ; Bainbrigge v. Baddeley, 3 Mac. & G., 414; John v. John, (1898), 2 Ch., 573; Ryder v. Bateman, 93 Fed., 16. See, also. Mayo v. Mc- Phaiil, 71 Ga., 758. In Mordaunt V. Hooper, Amb., 311, Lord Hard- wicke stated that a motion for a receiver was very uncommon where the matters in dispute depended on a mere legal title, although a case might be so circumstanced as to in- duce the court to grant it. And both the grounds stated in the text being fully made out by affidavit and by defendant's answer, a receiver was allowed. But the reporter adds, that "it was a very strong case, and almost all the facts in- sisted on by defendant in his answer were denied by affidavits." In Whyte V. Spransy, 19 App. D. C, 450, a receiver was held properly appointed to collect the rents and Receivers — 46. profits of real estate pending an ac- tion of ejectment to recover the possession of the property, where it appeared that the plaintiff, who had made to the defendants a loan upon the property secured by a trust deed, had purchased the property at fore- closure sale upon default in the pay- ment of Interest and taxes by the defendants, who were insolvent and were refusing to deliver up pos- session of the property and were converting the rents and profits thereof to their own use, thereby compelling the plaintiff to resort to an action of ejectment which, ow- ing to the crowded condition of the dockets of the courts, could not be tried for a year. 15 Bainbrigge v. Baddeley, 3 Mac. & G., 414. See, also, Gofer v. Echerson, 6 Iowa, 502 ; Gregory v. Gregory, 33 N. Y., Supr. Ct. R., 1. Bainbrigge v. Baddeley, 3 Mac. & 722 RECEIVERS. [chap. XIV. involved in much obscurity, and is dependent upon the con- struction of deeds, which is attended with doubt and difficulty, the court may properly refuse to interfere.^^ G., 414, was an action to set aside a will, under which defendant claimed title to, and was in posses- sion of, the property in dispute. The Master of the Rolls having ap- pointed a receiver of the property upon the application of plaintiff, the order was discharged on motion before the lord chancellor. Lord Truro observes, p. 417: "It is ad- mitted that, if the will of 1818, under which the defendant claims, can be substantiated as a valid will, the plaintiff has no case. The valid- ity of the will is a question which, from its nature, must be decided at law. . . . Now, it appears to me that the jurisdiction of the court to grant a receiver can not be denied, nor do I understand it to be denied. There are few cases that can be stated in which the court has not jurisdiction when it is es- sential to the justice of the case to interfere to preserve the property for the party entitled. But that jurisdiction is governed by circum- stances applicable to the different stages of proceedings, and to differ- ent cases; but when the parties are litigating the right to property, and the litigation depends upon ques- tions then to be decided at law, what are the circumstances in which the jurisdiction is to be exercised and is properly applicable in grant- ing a receiver? There are, I appre- hend, two grounds, and two only; first, that there is a reasonable prob- ability of success on the part of the plaintiff; and secondly, that the property, the subject of the suit, is in danger. This motion, however, is made against a party who is in possession; that possession is not shown to have been obtained by violence or by wrong, using the word 'wrong' in the sense of being without color of title, but under the sanction of the court. What, under such circumstances, is it proper for me to presume? What is the prima facie case, as far as concerns his title? Am I warranted in presum- ing that the will under which he claims is bad or good? I apprehend I ought to presume, until I have the case so before me as to enable me judicially to form an opinion upon the subject, that the will is good. This court ought not, in any case, to disturb the possession of a party who stands upon his legal title, without a reasonable probability that the plaintiff will ultimately succeed. I consider, therefore, that one indispensable ground for the exercise of the jurisdiction is the reasonable probability shown to the court that the parties claim- ing to disturb the possession will ultimately establish a title to it. I do not see any such reasonable probability here; not at all using that expression to prejudice the plaintiff's title, or to express any opinion upon it. His case may be the strongest that ever was pre- sented ; it may, when it comes to be laid before the proper tribunal, entitle him to a verdict without any doubt or hesitation; but I have not the materials before me to war- rant me in coming to that conclu- sion." 16 Owen V. Homan, 3 Mac. & G., CHAP. XIV.] REAL PROPERTY. 723 § 559. Receiver refused when plaintiff's right is doubt- ful and no danger is shown. As illustrating the general doctrine already stated, it is held that when the defendant is in possession, having the legal estate, without fraud, and also claims to be the equitable owner, there being a doubt as to the question of right between the parties, and no danger al- leged or shown as to the rents and profits, the court will refuse a receiver.!''' So when the contest before the court is merely as to the right of possession, and plaintiffs show no peculiar cir- cumstances or immediate danger to the property, requiring the intervention of a receiver, the only ground relied upon be- ing the alleged insolvency of defendant in possession, equity will not interfere, especially if there is doubt as to plaintiff's right to recover.l^ § 560. Probability of plaintiff's success not sufficient, as against long acquiescence, and when no danger is shown. While the probability that plaintiff will ultimately succeed in establishing his title is an important element in determining whether a receiver shall be allowed as against a defendant in possession, yet such probability is not of itself sufficient ground for interfering, when defendant's possession has been acqui- esced in for a long series of years, and no danger to the prop- erty is shown from a continuance of such possession. ^^ And when the property in controversy has been held and managed and its proceeds have been applied by a corporation, in a par- ticular manner and for a long period of years, equity will not disturb such possession by a receiver and an injunction, upon the ground that such application is a breach of trust, unless the court is perfectly satisfied that defendant in possession 378, affirmed on appeal to the House growing upon it, see Smith v. Liisk, of Lords, 4 H. L. Rep., 997. See, 119 Ala., 394, 24 So., 256. also, Cofer v. Echerson, 6 Iowa, 18 Cofer v. Echerson, 6 Iowa, 502. 502. 19 Municipal Commissioners of 17 Lancashire v. Lancashire, 9 Carrickfcrgus v. Lockhart, Ir. Rep., Beav., 120. As to the right to a re- 3 Eq., 515. ceiver over real estate the chief value of which consists of timber 724 RECEIVERS. [chap. XIV. is a mere naked trustee, without any right or discretion in the management of the property.^O § 561. Not granted when notice of lis pendens will protect plaintiff's rights. It has already been shown that equity will not disturb the possession of a defendant holding under claim of legal title, by appointing a receiver when ade- quate redress may be had at law. In accordance with this principle, it is held where plaintiff shows no probable cause for his ultimate recovery, and where it is apparent that the filing of a notice of lis pendens, in accordance with the prac- tice of the state, will operate effectually to prevent a transfer of the lands in controversy pendente lite, and will protect plaintiff's equitable interest therein, if any, that a receiver will not be granted. 2^ § 562. The rule applied to case of lessor and lessee. The general rule already stated, denying the aid of a receiver in a contest as to title as against a defendant in possession, is ap- plicable to the case of a lessor and lessee of real estate, and equity rarely interferes with the lessee's possession by grant- ing a receiver. The lessee, being clothed with title and posses- sion under his lease, and being in the enjoyment of rights ap- parently legal, will not be deprived of his possession by a re- ceiver, unless under very urgent and peculiar circumstances. And to entitle him to relief in such a case, the plaintiff or lessor must show a clear right, with such attending circumstances of danger or of probable loss as will move the conscience of a chancellor. Thus, in the case of a lease of certain premises, conferring upon the lessee the right to bore for and take oil therefrom, the lessee returning as rent one-fourth of the product to the lessor, in an action by the latter in equity for an account- ing and an injunction against the lessee, in aid of an action at law for the forfeiture of the lease, equity will refuse an injunc- 20 Skinners Company v. Irish So- Supr. Ct. R., 1 ; Spokane v. Amster- ciety, 1 Myl. & Cr., 162. danisch T. K., 18 Wash., 81, 50 Pac. 21 Gregory v. Gregory, 33 N. Y. 1088. CHAP. XIV.] REAL PROPERTY. 725 tion and a receiver of the lessee's portion of the proceeds.22 But in an action by a lessor against lessees for the recovery of possession after the expiration of the term, the title being- in plaintiff and possession being wrongfully withheld by defend- 22 Chicago & Allegheny Oil & Mining Co. v. The United States Petroleum Co., 57 Pa. St., 83; S. C, 6 Phila., 521. The court, Agnew, J., say, in the case as reported in 57 Pa. St., at p. 89: "The orig- inal bill, in this case, prayed for a decree of forfeiture of the lease held by the defendants, and for the appointment of a receiver for the lessee's share of the oil. The amended bill avers breaches of the covenant in the lease, and a forfei- ture thereby; states that an action at law has been brought to enforce the forfeiture, and that this bill is in aid thereof; and then prays for an account of all the oil, and for the appointment of a receiver as be- fore, and in the meantime that the defendants shall be restrained from taking and disposing of any oil ob- tained upon the land. The prayer for an account being withdrawn, the relief prayed for is the appoint- ment of a receiver of the defend- ants' portion of the oil, and an in- junction to restrain the defendants in the meantime, that is, until the suit at law is determined. . . . What, then, are we called upon to do? Simply to appoint a receiver to take into custody and to deprive the lessee of his share of the prod- uct until the plaintiffs can see whether they will be successful in obtaining a judgment of forfeiture in a doubtful case. No receiver is asked for the landlord's portion, and plainly because as to it the purpose is to require delivery with- out interruption. The actual pur- pose is to take into custody that which will be mesne profits in the event of establishing the forfeiture. Took at the case in any direction, and all that is in it is to obtain our assistance in giving effect to an alleged forfeiture, and to restrain the defendants from the exercise of their legal rights under the lease, while the plaintiffs are engaged in experimenting at law for the for- feiture. It is not for the protection of a clear and well defined right, and to prevent an irremediable in- jury which may ensue if we do not intervene, nor is it the ordinary case of one who shows an equitable right in the subject of custody, and asks the court to interfere for its security until the termination of litigation. The appointment of a receiver is the exercise of a power in aid of a proceeding in equity, and is the subject of sound discre- tion. The court must be convinced that it is needful and is the appro- priate means of securing a proper end. Such an appointment is a strong measure, and not to be ex- ercised doubtingly. Where a party is clothed with title and possession such as are conferred by a lease in writing, and is in the enjoyment of rights apparently legal, a receiver will not be appointed unless under urgent and peculiar circumstances. The plaintiff must show a clear right in such a case, or a prima facie, with such attending circum- stances of danger or probable loss 726 RECEIVERS. [chap. XIV. ants, who are insolvent, a receiver may properly be appoint- ed.23 § 563. Danger to property an important element; dis- sensions in religious society. Upon an application for a receiver to take charge of real estate and receive the rents and profits, pending a litigation as to the right of conflicting claim- ants, a vital point of inquiry, as already indicated, is, as to whether there is danger to the property by suffering it to re- main in possession of the party controlling it. Or, in other words, are there any special circumstances rendering it neces- sary for the better preservation of the property, pendente lite, that it should b«i taken under custody of the court. And when no such circumstances are shown, the court will not exercise its summary jurisdiction by a receiver. For example, when an unincorporated religious society holds certain real estate, the legal title to which is vested in trustees for the use of the so- ciety, and a dissension occurs resulting in the withdrawal of one portion of the society from the other, and the members withdrawing claim to hold the original faith of the society and to be entitled to the realty, upon a bill filed by them to establish their right to the property as against the trustees in possession, a receiver will not be granted when there is neither proof nor allegation before the court of danger to the proper- ty from waste or destruction by defendants, and no apprehen- sion of injury in consequence of the property remaining in their possession, or under their control, pending the litiga- tion.24 as will move the conscience of a (1902) 1 Ch., 387; Leney v. Cal- chancellor to interfere. Finding lingham, (1908) 1 K. B., 79. no such elements in this case, the 24 Willis v. Corlies, 2 Edw. Ch., bill is dismissed, and the costs or- 281. McCoun, Vice-Chancellor, dered to be paid by the plaintiffs." says, p. 286: "The defendants, as 23 Nesbitt V. Turrentine, 83 N. C, trustees and as such committee, have 535. As to the right of the lessor the present possession, and assume of a hotel to a receiver for the li- the exercise of rights in those ca- cense and for the rents and profits, pacities. Believing themselves to be see Charrington & Co. v. Camp, the rightful trustees and managers. CHAP. XIV.] REAL PROPERTY. 727 § 564. Distinction between appointing receivers, and continuing those already in possession. While courts of equity, as is thus shown, are extremely averse to interfering by a receiver with the possession of real property held by de- fendants under a claim of legal title, and will not ordinarily interpose unless there be some clear equity afifecting the con- science of the party in possession, yet when the property is ac- tually in possession of the court by its receivers, and a propo- sition is pending for a com])romise and a division of the prop- erty between the different claimants, it is proper for the court to continue its custody of the property already assumed, until the rights of the parties may be adjusted. The question pre- sented, in such case, is not the creation but the continuance of the receivership, and the burden falls, not upon the applicant to continue, but upon those who seek to rescind the action of the court. It is proper, therefore, under such circumstances, to continue the receiver until further order.25 they take care to preserve the prop- erty as their own; and there is neither proof nor allegation before me of the danger to it from acts of waste or destruction by defend- ants, or any apprehension of injury in consequence of the property being in their possession or under their control pending the litiga- tion. Nor is it alleged that the defendants are irresponsible men, and unable to make good the loss of rents to the complainants, if they, the defendants, should be de- creed to account for rents which they may in the meantime receive. Under circumstances like these, it appears unnecessary to appoint a receiver, nor would such appoint- ment be consistent with the prin- ciples by which this court is gov- erned. . . After all, it comes back to the only inquiry which I apprehend can be made in this stage of the cause: is there danger to the property? In other words, is there evidence of fraud in ob- taining the possession, or any spe- cial circumstances to render it nec- essary for the preservation of the property pendente lite, or proper in the exercise of a sound discretion for the interference of the court in this summary manner? As there is scarcely a color of pretense for this application on any of the above grounds, I must refuse it with costs." 25 State V. Allen, 1 Tenn. Ch., 512. The distinction is clearly stated by Cooper, Chancellor, as follows, p. 514: "If this application was to have a receiver for the first time upon property in possession of the defendants under an adverse claim as heirs and devisees of W. P. Downs, I should probably refuse it. The court is very slow to appoint a 728 RECEIVERS. [chap. XIV. § 565. Departure from rule; fraud by defendant in ob- taining possession ; inadequate consideration and undue in- fluence. Having thus considered the general doctrine of courts of equity, denying the aid of a receiver as against a de- fendant in possession, in a contest concerning the legal title, it remains to examine those cases where a departure from the rule has been allowed, upon grounds of a purely equitable nature, appealing strongly to the conscience of a chancellor. The element of fraud in obtaining possession by a defendant has been treated by the courts as an important feature in cases where a departure from the general rule has been sanc- tioned. And when it is sought to annul a conveyance of real receiver of realty in the peaceable possession of defendants under a claim of right, and when the con- test is between claimants of the legal title. For the court can not interfere with the legal title, unless there be some equity by which it can affect the conscience of the party in possession. And such in- terference is, to a certain extent, giving relief, and upon a prelimi- nary motion, depriving the defend- ant of a present use and enjoyment of the estate, and pro tanto and pro tempore, giving a decision against him. The property was not, however, at the filing of this bill, in the peaceable possession of the defendants. On the contrary, it was in the custody of this court, by its receivers, at the instance of several of these defendants setting up adverse claims to each other. If now, in this attitude of affairs, the claimants choose, in view of a claim hostile to all of them, to agree upon a division of the prop- erty among themselves by a com- promise, and not by a judicial decision of their respective rights, the question of the appointment of a receiver could scarcely be said to turn upon peaceable possession under a legal title. The previous litigation and the previous receiv- erships demonstrate that no one of the claimants is yet in peaceably under legal right. The very fact that each of these claimants has been able, as against the other, to have a receiver appointed, proves the existence of some equity to af- fect the conscience of each, and authorizes the appointment of a re- ceiver, not to deprive them of a previous legal possession, but to con- tinue the custody already assumed by the court until the rights of the parties can be adjudicated. The question is not the creation but the continuance of the receivership; not the deprivation of an existing right, but the prevention of the ac- quiring a new right, it may be by collusion. The burden is not upon the applicant to continue, but upon those who seek to rescind the re- ceivership. The present receiver will be continued until further order." CHAP. XIV.] REAL PROPERTY. 729 estate made by plaintiff, upon the ground of fraud and undue influence in obtaining the conveyance, if upon bill and answer there is a strong probability of plaintiff maintaining his cause and ultimately obtaining the relief sought, a receiver may be appointed in the first instance. ^6 And when, in such an action, the bill shows that the grantor was a person of weak intel- lect; young and inexperienced, of constant habits of intoxica- tion, and ignorant of the real value of the property conveyed ; that the consideration paid was grossly inadequate to the value of the property and that he was persuaded to execute the deeds 26 Huguenin v. Baseley, 13 Ves., 105; Sthwell v. Williams, 6 Madd., 49, 1st American Edition, 38, af- firmed by the lord chancellor, sub nom. Stilwell v. Wilkins, Jac, 280. In Huguenin v. Baseley, 13 Ves., 105, Lord Erskine observes, p. 106: "Two distinct questions arise : 1st, whether so strong a probability of title appears upon this bill and an- swer, as will induce the court, upon the principles on which it acts, to consider this plaintiff as having a strong interest to have the estate secured, in case she should obtain a decree ; 2dly, whether this de- fendant, having the legal estate by adverse title, not being a trustee by his admission, a receiver ought to be appointed by interlocutory order on motion. . . I admit, I am not in this way to decide or preju- dice this cause. All that it is nec- essary to say is, that there is a very strong probable title in the plaintiff to call back this estate, upon such terms as may seem proper at the hearing, which she appears to have conveyed under such circum- stances, reserving only an interest for life. The question then is, whether, whatever may be my opinion of the complexion of this case upon the bill and answer, I ought to interfere by appointing a receiver. A very strong case has been produced in favor of that. In Vann v. Barnett, 2 Bro. C. C, 158, the defendant had the legal estate in trust to pay himself. But, as one of the ruling principles of this court is that there must be some evil actually existing, or some evidence of danger to the property if the court should not interfere, to induce it to act in this stage of a cause, as in the instance of waste, though I have a strong inclination to grant a receiver, I will look into the authorities before I determine." Upon a subsequent day Lord Er- skine observed : "Under all the circumstances of the case, I have no doubt of the jurisdiction to ap- point a receiver. But, in order to avoid the expense of that, the plaintiff being entitled for her life to an annuity, admitted to be very near, if not quite, equal to the rents, I propose an inquiry what arrears of the annuity are due; the defendant to pay the amount forthwith, to give security for the future payments, and to account for the rents and profits." The order was drawn up accordingly. 730 RECEIVERS. [chap. XIV. under the impression that he was conveying only a life estate, an appropriate case is presented for a receiver, when the an- swers of defendants in possession merely allege their igno- rance of the facts charged in the bill, without denying those facts.2' So the relief has been granted in an action to set aside a conveyance alleged to have been procured by fraud and un- due influence exercised over the grantor, a person of weak intellect, and the grantee being insolvent aside from the prop- erty in question. 28 § 566. Title shown by plaintiff, none by defendant; pre- vention of vexatious litigation; abuse of trust and insol- vency of defendant; receiver of rents and profits pending litigation in another state. When plaintiff shows an equi- table title to a part of the property in controversy, and a legal and equitable title to the remainder, and defendant shows no title, either legal or equitable, a receiver may be appointed pending the litigation. And an additional ground for the relilf is presented, in such case, where it appears that the interfer- ence of equity may prevent vexatious litigation, there being a great number of tenants of the property, and a probability of prolonged litigation, unless the matter is determined by a court of equity.29 So an abuse of trust by the party in possession, by which the safety of the property is endangered, coupled with his insolvency and consequent insecurity of the rents and profits, will warrant the court in extending the aid of a re- s' Stilwell V. Wilkins, Jac, 280. than probable that it is true, the affirming S. C, sub nom. Stitvvell inadequacy was so monstrous, the V. Williams, 6 Madd., 49, 1st Amer- situation of the young man and ican Edition, 38. In the case as the state of his intellect were such, reported in Jac, 280, Lord Eldon that it is hardly possible to suppose says, p. 283: "I am ready to admit that the transaction can stand; and that I do not remember any in- I think, therefore, that this is a stance of a receiver being so ap- case where such an order may be pointed, but still the question is, made, though it is not the general whether there may not be a case habit of the court." where it ought to be done. If the 28 Mitchell v. Barnes, 22 Hun, 194. case stated be true, and it is more 29 Cole v. O'Neill, 3 Md. Ch., 174. CHAP. XIV.] REAL PROPERTY. 731 ceiver.30 And where complainant, in whom, in an action of ejectment, the title to certain realty had been adjudged to be, had been enjoined by the court of another state from taking possession of the land and the defendant who was hopelessly insolvent was proceeding to collect the rents and profits arising from the property, a receiver was properly appointed to collect the rents and profits until the final determination of the litiga- tion in the other state.^^ § 567. Appointed on bill by creditors when no per- sonalty shown ; rights of judgment creditors in possession not prejudiced; probable title in plaintiff and danger to rents. It was the doctrine of the English Court of Chan- cery, that upon a bill by creditors claiming satisfaction against both the real and personal estate of the debtor, if it appeared probable from defendant's answer that there was no personal estate, and that both the realty in defendant's possession and the rents and profits thereof must become responsible for the demands, the court might appoint a receiver in the first in- stance, although the power was recognized as a delicate one.^^ But when an incumbrancer seeks the aid of equity by a re- ceiver over defendant's real estate, and there are judgment creditors of the defendant in possession, the appointment will be made without prejudice to the rights of such creditors.^^ And in the Irish Court of Chancery, the doctrine is held that the court has full jurisdiction to grant a receiver, even against a defendant in possession of real property, in an action for the recovery of lands, when plaintiff shows a probable title and danger of the rents being lost.^* But the relief will not be granted to the owners of real estate merely because of the diffi- culty of collecting rents from their tenants. ^^ 30 Chase's Case, 1 Bland, 213. 32 Jones v. Pugh, 8 Ves., 71. 31 Atlas Savings & Loan Assn. v. 3.3 Davis v. Duke of Marlborough, Kirklin, 110 Ga., 572, 35 S. E., 772. 1 Swans., 74. And see Fisher v. Graham, 113 Ga., 34 Scott v. Scott, 13 Ir. Eq., 212. 851, 39 S. E., 305. 35 /„ re Madden, 3 L. R., Ir., 172. 7Z2 RECEIVERS. [chap. XIV. § 568. Receiver in proceedings to determine widow's dower; receiver may compel assignment of dower. The aid of equity by a receiver is sometimes invoked for the pro- tection of dower interests in the estate of a deceased husband. And in a proceeding by a widow to have her dower set aside, if it is shown that the property is in possession of and con- trolled by a person who is insolvent, and who has taken the benefit of the state insolvent laws pending the litigation, and that the rents and profits are exposed to imminent danger or to inevitable loss, a receiver may be allowed. ^^ But upon a bill by an heir-at-law and devisee of a deceased person to determine the widow's dower, in order to warrant an injunction against the disposal of the property, and a receiver of the rents and profits, it is not sufficient merely to allege that the rents are in jeopardy, but it must be shown how they are jeopardized. And when there is no allegation that the rents and profits of the real estate, which is supposed to be subject to the dower interest, will be lost by reason of insolvency of those receiving them, or that plaintiff has not an adequate remedy at law for such of the rents as he may be entitled to, a receiver should not be granted. ^'^ But where a widow has fraudulently and without consideration and in order to hinder her creditors, released her dower right to her children, a receiver is properly ap- pointed, who may, in the name of the widow compel her dower to be assigned for the purpose of ripening the dower right into an estate and applying it to the payment of her debts. ^^ § 569. Receiver in proceedings to establish will, or to execute trusts of will. The jurisdiction of equity by the appointment of a receiver is sometimes invoked for the pro- tection of heirs or devisees, or for the enforcement of trusts created by the ancestor's will. And upon a bill by children of a testator to establish his will, and to enforce the performance 36 Chase's Case, 1 Bland, 206. ^^ Tenbrook v. Jessup, 60 N. J. 37 Knighton v. Young, 22 Md., 359. Eq., 234, 46 Atl, 516. CHAP. XIV.] REAL PROPERTY. 733 of certain trusts in favor of plaintiffs upon which the testator devised his property, and for an account of rents and profits, a receiver has been allowed of the rents and profits, when it was manifest that the testator's intentions had been disre- garded.^9 And a receiver has been granted upon a bill filed by parties interested in the execution of the trusts of a will, alleging that rents had not been collected, and that incum- brancers were threatening to take possession of the estate or otherwise proceed for the recovery of their mortgage debts, unless a receiver should be appointed. ^^ When, however, the heir-at-law is in possession, equity will not ordinarily grant a receiver in an action to carry into execution the trusts of the will of a deceased testator, until the will has been proven, when it is not admitted by answer, since the court will not dis- place the possession of the heir-at-law until his title has been displaced. ^1 So in a proceeding to establish a will, the con- troversy being as to which of two instruments is the last will of the testator, it is improper to appoint a receiver to take pos- session of the lands of the testator, especially when it is not shown that the defendant in possession is insolvent, or unable to respond to final judgment in the cause.^^ -q^^ \^ jg held, when the heir-at-law, disputing the will of his ancestor, enters into possession of the devised estates, and a court of equity directs an issue to be tried at law as to the validity of the will, devisavit vel non, upon a bill by the executors against the heir to establish the will, that the court may properly appoint a receiver against the heir in possession, and may enjoin him from committing waste.^^ But a legatee under a will, whose legacy is a charge upon the estate of the testator, subject to prior mortgages and other charges, is not entitled to a receiver over the estate, because the rents and proceeds are being ap- plied to keep down the interest on such charges."** 89 Podmore v. Gunning, 5 Sim., ^2 Bryan v. Moring, 94 N. C. 694. 485. 4SFingal v. Blake, 1 Mol., 11.1 40 Hart v. Tulk, 6 Hare, 611. 44 Faulkner v. Daniel, 3 Hare, 204. 41 Dobbin v. Adams, 8 Ir. Eq., 157. note. 734 RECEIVERS. [chap. XIV. § 570. When granted in contest between heir-at-law and devisee under will. As between the heir-at-law and a devisee under the will of the ancestor, pending litigation con- cerning the relative rights of the parties, equity does not in- terfere as of course by appointing a receiver of the estate against a devisee in possession ; and in the absence of any spe- cial circumstances of mismanagement or danger to the estate, a receiver will be refused, and the parties will be left to pursue their remedy at law.'*^ In such cases, the court proceeds upon the principle that the heir, if he recovers at all, must recover upon the strength of his title at law, and the possession of the devisee under the will is regarded as a lawful possession, which the court will not disturb by a receiver.^^ Nor will a receiver be granted upon the application of one claiming as a devisee under a will, upon a bill against other devisees and an heir-at- law to establish the will and enforce its trusts, when its validity is disputed and it is not shown that the property is exposed to any danger by remaining in possession of defendants. ^"^ But as between an heir-at-law in possession and a devisee under the will of the ancestor, which is being contested by the heir, equity may interpose for the protection of the devisee in a strong case by granting a receiver of the rents and proceeds, when the court is satisfied that the heir is entirely shut out from inheriting by the terms of the will. But such a state of facts is not to be regarded as affecting the right of an heir from whom the testator has not taken away the legal estate.^^ And when, in such a case, the heir-at-law has obtained a ver- dict against the will, he will be regarded as entitled to posses- sion of the estate, and equity will refuse to disturb his posses- sion by appointing a receiver in behalf of a devisee under the will, notwithstanding a new trial has been directed in the action to test the validity of the will.^^ 4o Schlecht's Appeal, 60 Pa. St., 47 Clark v. Drew, 1 Russ. & M., 172; Knight v. Dnplessis, 1 Ves., 103. 324. See S. C, 2 Ves., 360. 48 Fingal v. Blake, 2 Mol., SO. 46 Knight v. Duplessis, 2 Ves., 360. 49 Lloyd v. Trimleston, 2 Mol., 81. CHAP. XIV.] REAL PROPERTY. 735 § 571. Appropriation of rents and profits as against heirs; objection to administration by pretended heirs. When a conveyance of real estate is made in trust for the benefit of the grantor's wife during her hfe, with remainder to his children equally, to receive the rents and profits for life, and after the wife's death the grantor takes possession and ap- propriates the rents and profits to his own use, no sufficient ground is presented for a receiver, when it is not shown that the person alleged to be in wrongful possession is insolvent, or that the rents and profits are in danger of being lost to the heirs.50 Nor is it sufficient ground for appointing a receiver over the estate of a deceased person, upon a bill by the next of kin, that the defendants, pretending to be heirs of the deceased, are opposing plaintiff's application for letters of administra- tion, when the bill states no grounds of opposition on the part of defendants, and nothing appears to show that plaintiff may not in due course obtain the administration. A demurrer, therefore, to such a bill for want of equity will be sustained. ^^ § 572. When granted as against tenant for life; devise to wife; settlement upon daughter. Where plaintiffs were entitled, as younger children of a deceased ancestor, to certain portions allowed them in the settlement of his estate, raised out of a term of years, and had obtained a decree for a sale of the term for that purpose, but the tenant for life obstructed the enforcement of the decree, a receiver of the rents and profits was allowed as against the tenant for life.^^ And where the holder of the life estate rented the premises, and, after her death, the tenant continued in possession, claiming to own the premises as heir, upon a bill against the tenant for an account- ing and payment of the rents accruing after the death of the owner of the life estate, and for a receiver, the case was re- 50 Clark v. Ridgely, 1 Md. Ch., 70. St. Paul Trust Co. v. Mintzer, 65 51 Jones V. Frost, 3 Madd., 1st Minn., 124, 67 N. W., 657, 32 L. American Edition, 9. R. A., 756, and note, 6 Am. St. 52 Brigstocke v. Mansel, 3 Madd., Rep., 444. 1st American Edition, 32. And see 7o6 RECEIVERS. [CHAP. XIV. garded as an appropriate one for the relief, and a reference was made to a master to appoint a receiver. ^-^ But when by his will a husband directed the appropriation of so much of the rents and income of certain real property to the support of his widow as might be necessary for that purpose, a receiver of the rents was refused at the suit of a judgment creditor of the widow,^* And when a father conveyed to his daughter for life an undivided one-half interest in certain real property, with the right to a specified share of the rents, but reserving to himself the control and management of the property during his life, a receiver was refused in an action by the daughter against the father to establish her rights, defendant not being shown to be insolvent, or unable to respond for the rents col- lected.55 § 573. Vendor not allowed relief because of vendee's insolvency and commission of waste. The owner of land, who has contracted for its sale, and executed a bond for title, conditioned upon the payment of vendee's notes for the pur- chase-money, can not, on the ground of vendee's insolvency and commission of waste, obtain a receiver to hold the property pending an action to rescind the contract ; since, however im- prudent the contract of sale may have been, the vendor can not, because of his own imprudence, obtain such relief, and must be left to pursue his remedy at law.^^ 53 Anonymous, Amb., 311, note 1. the vendor, on the ground of that 54 Barnett v. Montgomery, 79 Ga., insolvency, simply, ask for the ap- 726, 4 S. E., 874. pointment of a receiver who shall 55 Crockett v. Crockett, 75 Ga., hold the property until a decree 202. can be had cancelling the contract 56 Jordan v. Beal, 51 Ga., 602. of sale? There was no fraud The court, Trippe, J., say, p. 604: charged. The charge as to waste, "All questions were eliminated etc., was denied by the answer and from the case at the hearing by the by affidavits. No authority was answer of defendants and the sup- referred to showing that such a pletory affidavits, but one. That remedy exists, and we can see question is, can the vendee of lands, much danger and unlimited trouble who sells and gives a bond for title that would be given to the courts to an insolvent vendor, one who if the principle contended for were has no property, and so known to a correct one. The owner of prop- CHAP. XIV.] REAL PROPERTY. IZl § 574. When granted for protection of annuitants. The aid of equity by a receiver is sometimes extended in behalf of annuitants, or creditors whose demands are an annual charge upon the real estate of their debtor, the efifect of such appoint- ment being virtually to attach the rents due from tenants of the premises on which the annuity is charged.^^ And upon a bill for an accounting of arrears of an annuity charged upon defendant's real estate, equity may grant a receiver in limine, to take charge of the rents until the rights of the parties can be finally ascertained, when it is shown that the annuity is in arrears, and the premises are an insufficient security.^^ So when an annuity is a charge upon the benefice of a clergyman, in the nature of an equitable mortgage, the annuitant is en- titled to a receiver of the income from the benefice, in prefer- ence to later judgment creditors.^^ And where plaintiff claimed an annuity which defendant had by deed charged upon certain of his property by name, and generally upon all other of his property, and plaintiff, upon a bill to raise the arrears of his annuity, had obtained a receiver over a portion of de- fendant's premises, the value of which was insufficient to satis- fy the annuity, and plaintiff subsequently discovered other erty thus selling it does so with his made, as is invoked by complain- eyes open. He takes the risk. He ants, under the facts as they ap- reserves the title as security. His peared at the hearing before the lien is higher than any other. A chancellor, every vendor of land specific remedy is given him by who makes a rash or imprudent statute: Code, sees. 3684, 3886. No sale would at once seek the rem- fraud in the contract is practiced edy, and there would be a harvest upon him. He has simply made an of suits for relief from one's own imprudent bargain, or comes to the improvidence or error. This would conclusion he has, as his debtor, work a greater evil than is the the purchaser, does not pay him at hardship of waiting six months on the time agreed on, and then asks a suit at law and a sale as provided a court of equity to take the land by law." at once out of the possession of the 57 Hayden v. Shearman, 2 Ir. Cli., purchaser and hold it for him until N. S., 137; Beamish v. Austen, Ir. he can have a decree to set aside Rep., 9 Eq., 361. the whole bargain, and then to ■''>8 Kelly v. Butler, 1 Ir. Eq.. 435. give him back his land. If this ^9 Eattersby v. Homan, 2 Ir. Ch., were the rule, or if a holding were N. S., 232. Receivers — 47. 738 RECEIVERS. [chap. XIV. prop^ty belonging to defendant, the receiver was extended to such other property. ^'^ But, in conformity with the general principle denying the aid of a receiver when the party ag- grieved has an adequate remedy at law, an annuitant, whose annuity is a charge upon real property, will not be allowed a receiver because his annuity is in arrears, if he has the power of distraining upon the land ; since the remedy by distraint is ample, and equity will not grant a receiver in behalf of one who does not need such aid.^^ And when a testator has by his will charged an annuity upon real property, a court of equity will not, pending a controversy as to the validity of the will, appoint a receiver in behalf of the annuitant, while there appear to be prior charges and incumbrances upon the property, which, in the event of the will being declared valid, must be first paid out of the property.^2 g^t if an annuity charged upon real property is in arrears, and there is doubt as to the remedy at law, a receiver may be appointed, the jurisdiction in equity, in such cases, being regarded as concurrent with the jurisdiction at law.^^ And upon a bill by a father against his children to set aside conveyances to the latter, upon the ground that they were fraudulently obtained, and that defendants had refused to pay the father an annuity charged upon the premises con- veyed, the case was regarded as a proper one for a receiver, unless defendants would, without delay, pay the amount of the annuity.^"* § 575. Relief generally refused in actions of ejectment. As regards the appointment of receivers in aid of actions of ejectment, or suits for the recovery of real property, there is some apparent conflict in the decisions of the courts, which may be harmonized only by keeping in view the general prin- 60 Lyne v. Lockwood, 2 Mol., -IQS. 62 D'Alton v. Trimleston, 2 Dr. & But in this case, a reference was or- War., 531. dcred to a master, to report whether 63 Beamish v. Austen, Ir, Rep., 9 any other creditors were entitled to Eq., 361. priority. 64 Probasco v. Probasco, 30 N. J. 6lSollory V. Leaver, L. R., 9 Eq., Eq., 108. 22. CHAP. XIV.] REAL PROPERTY. 739 ciples already established as governing applications for receiv- ers over real property pendente lite. The better doctrine un- doubtedly is, that in ordinary actions of ejectment, or suits for the recovery of real property in the nature of ejectment at common law, when no especial equities exist in favor of plain- tiff, the contest being merely as to the legal title of the premises in dispute, a receiver of the rents and profits will not usually be appointed pendente lite. Unless, therefore, some equitable grounds are made to appear, entitling plaintiff to the rents and profits as such, or unless it is shown that their sequestration is essential to his protection, equity will refuse to lend its aid by a receiver, since the interference would, in effect, amount to a complete ouster of the defendant, by taking away from him the subject-matter of the litigation, without trial or judgment.^^ And in such case, a valid legal title in the plaintiff is not of it- self a sufificient ground for the relief.^^ § 576. When granted in ejectment, for preservation of rents and profits pendente lite. When, however, the plain- tiff, in an action for the recovery of real estate, shows an ap- 65 People v. Mayor of New York, Supreme Court, General Term, 10 Ab. Pr., Ill, reversing S. C, Su- preme Court, Special Term, 8 Ab. Pr., 7; Thompson v. Sherrard, 35 Barb., 593; S. C, 22 How. Pr., 155; Corey v. Long, 12 Ab. Pr., N. S., 427; Whitworth v. Wofford, 73 Ga., 2.S9; Davis v. Taylor, 86 Ga., 506, 12 S. E., 881 ; Rollins v. Henry, 77 N. C, 467; Mapest;. Scott, 4 Bradw., 268; State v. District Court, 13 Mont., 416, 34 Pac, 609; Foxwell V. Van Grutten, (1897) 1 Ch., 64. And see to the same effect, under the code of civil procedure in Cali- fornia, Bateman v. Superior Court, 54 Cal., 285. .And see, also, San Jose Safe Deposit Bank v. Bank of Madera, 121 Cal., 543. 54 Pac, 85. .As to the right to a receiver of the rents and profits of real property, pending an action of ejectment, un- der the statutes of North Carolina, see Kron v. Dennis, 90 N. C, 327. In Smith v. White, 62 Neb., 56, 86 N. W., 930, it was held, under a statute providing for the appoint- ment of receivers ". . . in all other cases where receivers have hereto- fore been appointed by the usages of courts of equity," that a receiver should not be appointed in an action of ejectment before judgment. And the same rule has been announced in New Jersey under the statute of that state. Oehme v. Rucklchaus, 50 N. J. Law, 84, 11 Atl., 145. 66 People V. Mayor of New York, Supreme Court, General Term, 10 Ab. Pr., Ill, reversing S. C. Su- preme Court, Special Term, 8 .\b. Pr., 7. 740 RECEIVERS. [chap. XIV. pareiitly good title, and, in addition thereto, that there is immi- nent danger of loss of rents and profits because of the misman- agement and insolvency of defendant in possession, a different case is presented, and a receiver may be granted for the better preservation of the rents and profits pendente litc.^'^ And when, pending his action of ejectment, plaintiff files a bill show- ing a good legal title to the premises, which is not successfully controverted by the answer, and it is shown that plaintiff is in great danger of losing the rents and profits, by reason of defendant's negligent and wasteful management, and that the property is depreciating in value and not paying interest on its incumbrances, because of the bad management of defendant, who is himself in insolvent circumstances, a fitting case is pre- sented for the aid of equity by a receiver. In such a case, de- fendant being regarded as holding over as against his own deed, and not being responsible for mesne profits or permissive waste, by reason of his insolvency, the aid of equity is neces- sary to protect the holder of the legal title.^^ And in an equi- table action to recover real estate, upon the ground that the proceedings by which plaintiff's ancestor had been divested of the title were void for fraud, mistake and want of jurisdiction in the court in which the proceedings were had, an injunction and a receiver have been allowed when it was shown that defendants in possession were irresponsible and were collect- ing the rents, and that the premises were in a ruinous condi- tion and would continue to deteriorate if left to defendant's possession pending the litigation, such a case being distin- guished from an ordinary action of ejectment. ^^ And a re- ceiver has been allowed to take charge of the rents and profits of coal mines pendente lite, even without allegations of mis- management or insolvency, where there was no attempt to 6" Payne v. Atterbury, Harring. 68 Payne v. Atterbury, Harriiig. (Mich.), 414; Ireland v. Nichols, 37 (Mich.), 414. How. Pr., 222; S. C, 1 Sweeney, 69 Rogers v. Marshall, 6 Ab. Pr., 208; Vizard v. Moody, 117 Ga, 67, N. S., 4^57. 43 S. E., 426. See, also, Rogers v. Marshall, 6 Ab. Pr., N. S., 457. CHAP. XIV.] REAL PROPERTY. 741 take the possession of the land away from the defendant but the action was merely ancillary to a pending action of eject- ment brought to determine the title. "^^ g^t the appointment of a receiver, in an action to recover possession of real prop- erty, is not regarded as a special proceeding or an independent action in itself, but rather as a part of the original action and auxiliary thereto, having no independent existence of its ownJ^ § 577. Plaintiff allowed receiver after recovery of lands, when necessary to preserve rents and profits. After plaintiff, in an action for the recovery of lands, has recovered a verdict and judgment in his favor, his right to a receiver of the rents and profits would seem to be based upon stronger grounds, and there are frequent cases where the relief has been extended under such circumstances, when necessary to pre- serve the rents and proceeds from loss.'^2 Thus^ in an action to recover possession of lands on which are located valuable mineral springs, the chief value of the land consisting in the proceeds derived from sales of these waters, after verdict and judgment for plaintiff, and pending a motion for a new trial, it is proper to appoint a receiver upon satisfying the court that the relief is necessary to protect the plaintiff's rights in the property, and that defendant is wasting the waters and otherwise impairing the value of plaintiff's interest therein, and that he is insolvent and unable to respond to a judgment in damages.'^^ And when defendants are in possession of land, under a contract for its purchase made with plaintiff's intestate, but fail to make the necessary payments, and plaintiff brings his action and recovers judgment for the return of the land upon payment of a specified sum, upon a bill by plaintiff for an ''^ Ulman v. Clark, 75 Fed., 868. collected by a receiver appointed in 71 Whitney v. Buckman, 26 Cal., aid of an action of ejectment, after 447. judgment for plaintiff and pending '^- Frisbee v. Timanus, 12 Fla., an appeal, see Garniss v. Superior 300; Collier v. Sapp, 49 Ga., 93; Court, 88 Cal., 413, 26 Pac, 351. Whitney v. Buckman, 26 Cal., 447. 73 Whitney v. Buckman, 26 Cal., As to the right to rents and profits 447. 742 RECEIVERS. [chap. XIV. accounting- of the rents and profits of the land durint^ defend- ants' occupancy, the bill alleging that defendants are insolvent, a receiver may be appointed until the determination of the ques- tions involved.'^'* So when plaintiff in ejectment recovers judg- ment in a state court, and defendant obtains a writ of certiorari to remove the proceedings to the United States court, and the state court, to prevent a conflict of jurisdiction, suspends exe- cution of the judgment in ejectment, plaintiff is entitled to a re- ceiver of the rents and profits, upon a bill against the adminis- trators of the defendant in ejectment, alleging that they are re- ceiving the rents and profits ; that the property is depreciating in value; that there is no judge of the United States court in office, and that the proceedings in certiorari are merely a pre- tense to maintain a harassing litigation for the purpose of keeping possession of the premises and enjoying the rents. Such a state of facts presents a case requiring that the rents and profits shall be held by some indifferent person, under security, until the title can be determined and the rights of the respective parties adjusted. And the case is regarded as fall- ing within that class of cases in which a court of equity will interpose for the protection of parties when no adequate remedy exists at law^'^^ § 578. When granted over leasehold interest. The ju- risdiction of equity by the appointment of receivers of the rents and profits accruing from real property is not confined to cases where the estate or interest sought to be protected is the fee simple, but extends also to leasehold interests, over which a receiver may be granted in proper cases. And when a leasehold interest in lands is conveyed to a trustee in trust to secure an in- debtedness due to creditors of the lessee or assignor, but such trustee declines to undertake the performance of the trust, a receiver may be appointed in behalf of the creditors to carry into execution the trusts of the deed under the direction of the court. "^^ And a receiver may be appointed, before answer, 74 Collier v. Sapp, 49 Ga., 93. 76 Taylor v. Emerson, 6 Ir. Eq., 75 Frisbee v. Timanus, 12 Fla., 224. 300. CHAP. XEV.] REAL PROPERTY. 743 over a leasehold interest of a minor, when there is danger of eviction for non-payment of rents due to the landlord, and when it is manifestly for the minor's benefit that the relief shall be granted."^"^ So where one has advanced money, with the consent of the owner of a leasehold, to redeem the lands from eviction under a judgment, he acquires an equitable lien, and may have a receiver for its protection when there is danger of eviction by the landlord for non-payment of rent due."^^ And on a bill against a tenant for life, to restrain the disposal of the property and to keep down assessments and taxes thereon, it is proper for the court, on being satisfied that the tenant for life in possession has permitted the taxes to be in arrears, to appoint a temporary receiver of so much of the rents and income as may be necessary to pay off the taxes due and in arrear, unless defendant shall within a specified time pay such taxes. '''^ § 579. Assignee of lease not entitled to receiver. Not- withstanding the aid of a receiver is thus freely granted for the preservation of leasehold interests, in proper cases, an as- signee of the lease is not entitled to a receiver, although en- titled to the rents accruing from the demised premises, since he acquires no lien by virtue of the assignment, and has no interest or title in the land sufficient to warrant the aid of equity. Nor is the right of such an assignee to have a receiver strengthened by the fact that he also claims to be the owner of the estate in remainder, since no legal or equitable claim to have the rents sequestered and put into the hands of a receiver can arise from an accidental union of the ownership of the term for years and the estate in remainder in the same person. ^^^ § 580. Not granted over house on leased ground be- cause of insolvency of defendant in possession. When the 77 Whitelaw v. Sandys, 12 Ir. Eq., vails in Michigan. See Jenks v. 393. Horton, 96 Mich., 13, 55 N. W., 372. 78 Fetherstone v. Mitchell. 9 Ir. 80 Huerstcl v. Lorillard, 7 Rob. Eq., 480. (N. Y.), 251, affirming S. C, 6 Rob. 79 Cairns v. Chabert. 3 Edw. Ch., (N. Y.), 260. 312. But a different doctrine pre- 744 RECEIVERS. [chap. XIV, litigation concerns the title to a chattel real, as in the case of a house standing upon leased ground, it is not sufficient cause for putting the property into the hands of a receiver, that the defendants, who are in possession under claim of title, are al- leged to be insolvent, and that they have suffered the ground rent to fall greatly in arrear.^i § 581. Landlord may re-enter on expiration of term; discharge of receiver. When a receiver has been appoint- ed over a leasehold interest in lands, on the expiration of the term for which the lands were demised the landlord is at liberty to re-enter into possession without obtaining leave of court for that purpose.^2 g^t when, in such a case, a motion is made to discharge the receiver as to that portion of the premises the lease of which has expired, defendant in the action should be served with notice of such motion. ^^ § 582. When same receiver extended to subsequent ap- plications. A court of equity will not, ordinarily, appoint different receivers over the same real estate, the proper course being, where one is already appointed and subsequent applica- tions are made for a receiver over the same estate, to extend the former receiver to the subsequent applications. And upon being so extended, he will be required to give additional se- curity, or, in default thereof, he will be removed and another appointment made.^* And when different receivers have been appointed, on the application of different creditors, over the 81 Kipp V. Hanna, 2 Bland, 26. turned out of possession, but must Bland, Chancellor, says, p. 31 : "A see some imminent danger to the receiver may be appointed against property and the intermediate rents the legal title in a strong case of and profits, from not acting rather fraud, combined with danger to the prematurely, and if the property property. In such case, the court should not be taken under the care may, on affidavits, interfere before of the court." And see Horner v. the hearing. But the court inter- Bell, 105 Md., 113, 66 Atl., 39. poses by appointing a receiver 82 Britton v. M'Donnell, 5 Ir. Eq., against the legal title with reluct- 275. ance. It must not only be morally 8.3 Johnston v. Henderson, 8 Ir. sure that at the hearing the party Eq., 521. would upon those circumstances be 84 Wise v. Ashe, 1 Ir. Eq., 210. CHAP. XIV.] REAL PROPERTY. 745 same estate and property of defendant, the hardship and ex- pense of such a state of facts, as against the owner of the estate, are sufficient grounds to warrant the court in removing all the receivers but one, and extending him over the entire estate.^^ But, while a receiver over real property, appointed for the pro- tection of creditors, is frequently extended in aid of other cred- itors, this will not be done before answer merely upon consent of defendant, when the effect of thus extending the receiver would be to prejudice rights of the creditors first obtaining a receiver of the rents of the premises.^^ § 583. Right to rents as affected by order extending re- ceiver. When a receiver over the real property of a de- fendant debtor is thus extended, for the benefit of other parties claiming an interest in the debtor's estate, the extension, as re- gards the parties on whose application it is made, is deemed a new appointment, and rents received before the extending order are for the benefit of those only who are entitled to relief in the proceeding in which the receiver was acting when such rents came to his hands. The extending order, therefore, attaches only the rents thereafter received, for the benefit of parties ob- taining relief in the proceeding to which the receiver is extend- ed.87 § 584. Receiver in behalf of cestui que trust as against trustees. When real estate has been conveyed to trustees, to hold and manage and receive the rents for the benefit of the cestui que trust, a child of the grantor, if disputes and dis- sensions arise among the trustees as to the management of the property, in consequence of which the rents are not collected, the cestui que trust is entitled to a receiver to secure the re- covery of arrears of rent due, and the punctual payment of the accruing rents. ^^ But when plaintiff seeks the appointment 85 Kelly v. Rutledge, 8 Ir. Eq., nauze v. Belfast, Holywood & 228. Bangor R. Co., id., 454. 86 Brown v. Nolan, 10 Ir. Eq., 57. »8 Wilson v. Wilson, 2 Keen, 249. 87 Agra & Masterman's Bank v. As to the circumstances which will Barry, Ir. Rep., 3 Eq., 443; La- warrant a receiver npon a bill to 746 RECEIVERS. [chap. XIV. of a receiver over property in the hands of defendants, aheging that they hold it in trnst for him, a denial of the trnst does not of itself render it necessary to appoint a receiver on the estab- lishment of the trust. Under such circumstances, if no ground of apprehension is shown that loss may occur by permitting the property to remain in its appropriate use in the occupancy of defendant, and his ability to respond for its use is admitted, and he has already been ordered by the court to account for the rents and prohts that he may have received, a receiver will be refused. ^^ § 585. Relief granted for protection of rent charge. Re- ceivers are sometimes granted over real property for the pro- tection of equitable .incumbrancers, or creditors whose de- mands are a charge upon the property, when the aid of equity is necessary for the protection of their rights. And when plaintiff in an action to raise the arrears of a rent-charge, due him out of defendant's real estate, obtains a decree for a sale of the property, but defendant obstructs the decree, and does not comply with the requirement of court to produce his deeds, thus preventing a sale of the property, a receiver may be al- lowed. ^0 So it would seem, where a person takes a conveyance of a legal estate, subject to certain prior equitable interests consisting of rent-charges thereon, if he refuses to satisfy such claims, that a receiver may be appointed upon application of the person entitled to the rent-charges.^l And when a re- ceiver is sought of the rents and profits of real property, by an equitable creditor or incumbrancer, having a charge upon the property, but having no right of entry or possession, if the court is satisfied in the preliminary stage of the cause that the relief sought by the bill will be given when the final decree is pronounced, it will not expose parties claiming such relief to set aside a deed of trust executed by v. Edsall. 3 Halst. Ch., 298; S. C, 4 an incompetent person, over whose Halst. Ch., 141. affairs a guardian has been ap- f>0 Shee z;. Harris, 1 Jo. & Lat., 91. pointed, see Hodges ?'. McDuff. 69 ^1 Pritchard V. Fleetwood, 1 Mich.. 76. 36 N. W., 704. Meriv., 54. 89 Hamburgh Manufacturing Co. CHAP. XIV.] REAL PROPERTY. 747 the danger of losing the rents by not appointing a receiver. But when, in such case, the amount due plaintiff from defend- ant is tendered and accepted, the receiver previously appointed will be discharged. ^2 § 586. Denied plaintiff in suit to enforce mechanic's lien. In New York, it is held that the plaintiff in an action for the foreclosure of a mechanic's lien, under the laws of the state, is not entitled to a receiver of the rents and profits of the property pendente lite, even though it is alleged that the owner of the premises is insolvent and is collecting the rents, and that there are prior incumbrances on the property, the interest on which the owner neglects to pay.^^ § 587. Granted in aid of proceedings in bankruptcy. A special receivership for the purpose of collecting rents accruing out of real estate, is sometimes necessary in aid of proceedings in bankruptcy. And although the courts seem to be averse to appointing receivers in such proceedings, yet if it is manifest that the apparent titles to property, in which the bankrupt estate is interested, are on their face such that the rents can not, under the usual warrant in bankruptcy, be efficiently and successfully collected, a receiver will be allowed.^* And a cir- cuit court of the United States, upon a bill for that purpose by the assignee in bankruptcy, will appoint a receiver to take charge of the real estate owned by the bankrupt to which there are conflicting claims and liens, which are before the court for 92 Davis V. Duke of Marlborough, Stone v. Taylor, 173 111., 147, 50 N. 2 Swans., 138. E., 688, it was held that in the ab- 03 Meyer v. Seebald, 11 Ab. Pr., sence of statutory authority the N. S., 326, note. But see, contra, plaintiff in a proceeding to foreclose Webb V. Van Zandt, 16 Ab. Pr., a mechanic's lien was not entitled to 314, note, which was a case in the a receiver and that the act of June New York Common Pleas, holding 26, 1895, which provided for rcceiv- that an injunction and a receiver ers in such proceedings, had no ap- might be granted in such an action, plication to an action instituted be- but that if plaintiff had instituted fore the passage of the act although another action to recover the same the action might be pending at the indebtedness, he would be allowed a lime of its passage, receiver only upon condition of his ^4 Kcenan v. Shannon, 9 Bank. tliscontinuinG; such other action. In Reg., 441. 74S RECEIVEKS. [chap. XIV. adjustment, such a case being- regarded as an eminently propcr one for a receiver to take charge of the property, until the validity of the liens may be determined, in order that the in- terests of all creditors may be properly secured.^s And in England, the assignee of an insolvent debtor, who is prevent- ed from recovering an estate owned and in possession of the debtor by reason of former proceedings in bankruptcy against him, may maintain a bill in chancery to recover the property, upon which he may procure a receiver of the rents pendente lite.^^ § 588. Granted in action to apply trust property in payment of debts equal in priority. When the purpose of the litigation is to apply certain trust property in payment of an indebtedness secured by deed of trust upon the property, and there are conflicting claims to be satisfied, which are of equal justice and merit in themselves, so that the question presented is as to who is entitled to prior satisfaction in the event of the property proving insufficient for all, a proper case is presented to warrant a receiver for the management of the property. ^''^ § 589. Nature of defendant's interest in real property; benefice of clergyman. With regard to the nature or ex- tent of a defendant's interest in realty necessary to warrant a court of equity in appointing a receiver thereof, at the suit of an incumbrancer, it is held in England, that where defend- ant's right or estate is such that his creditors may have execu- tion against it by writs of elegit, a sufficient interest is shown to justify the appointment of a receiver.^^ And under the former practice in England, receivers were allowed over the benefice of a clergyman of the established church, when he had made the debt on which the proceedings were instituted a charge upon his benefice.^^ ^5 }kIcLean v. Lafayette Bank, 3 98 Davis v. Duke of Marlborough, McLean, 503. 1 Swans., 74. OGHollis V. Bryant, 12 Sim., 492. 99 White v. Bishop of Peterbor- 9" Hamberlain u Marble, 24 Miss., cugh, 3 Swans., 109; Silver v. 586. Bishop of Norwich, id., 112, note. CHAP. XIV.] REAL PROPERTY. 749 § 590. When refused over ungathered crop; when al- lowed. As regards the right to a receiver of crops grown upon leased premises, it is held that a mere contract between the owner of land and a tenant, providing for the working of the land by the tenant for a specified time, and compensation to be paid the owner out of the crops raised thereon, does not give the owner such equities as to entitle him to an injunction against the removal of the crops by the tenant, or a receiver to manage the land and take possession of the ungathered crop.i But when by the terms of the lease the parties are, in effect, tenants in common of the crop, and the lessee denies the right of the lessor to any portion thereof and threatens to re- move and dispose of it for his own use, such facts, coupled with the insolvency of the lessee, will justify a receiver at the suit of the lessor. 2 And when the litigation concerns the title to land, which is claimed by both parties, both also claiming to- be in possession, and when they are interfering with each other in harvesting the crops grown by each respectively and threat- ening each other with assaults and with forcible resistance, an appropriate case is presented for a receiver until the rights of the parties can be finally determined.^ § 591. Refused in cases of marriage settlements; when allowed after divorce. When, upon her marriage, certain moneys are settled upon a wife for her separate use and benefit, being vested in trustees for that purpose, to be by them invested in securities, and the husband afterward induces the trustees, in violation of their trust, to invest the money in realty, upon which he expends money in improvements and repairs, the husband will not be allowed a receiver of the rents and profits on a bill filed by him against the wife and the trustees, to re- imburse him for his outlay."* And when plaintiff's rights were under a marriage settlement, whereby he claimed his wife's fortune to be a charge upon the fee of defendant's estate, and 1 Williams v. Green, 37 Ga., 37. 3 Hlawacek v. Bohman, 51 Wis., 2 Baughman v. Reed, 75 Gal., 319, 92, 8 N. W., 102. 17 Pac, 222. 4 wiles v. Cooper, 9 Beav., 294. 750 RECEIVERS. [chap. XIV. defendant had neglected to pay the interest due, it was held not to be such a case as to justify a receiver; since, if plaintiff should establish at the hearing that his claim was a charge upon the fee, he would be entitled to sell the inheritance, and the fund not being shown to be insufficient, the court refused to interfere i)i limine.^ But when husband and wife entered into an agree- ment that they should mutually enjoy and share certain real estate, and the wife afterward procured a divorce from the husband, upon a bill by her alleging that the husband was in the sole occupancy of the property and enjoying all the rents, and that he was insolvent and unable to respond in damages, a receiver was granted, and was directed to pay half the rents to the husband and to retain the other half to await the final decree.^ § 592. Difficulty in collection of rent no ground for re- ceiver. It has already been shown that a defendant's pos- session of real property, under claim of title, will not be dis- turbed by a receiver when adequate relief may be had in the usual forms of procedure at law. And the mere fact of diffi- culties existing in the way of enforcing the ordinary legal rem- edies to compel payment of rent due upon premises demised, is not, of itself, sufficient to give a court of equity jurisdiction to appoint a receiver, when those remedies are still open to the party aggrieved.'^ § 593. Plaintiff's acquiescence, and participation in fraud, a bar to relief. It is in all cases essential that a plaintiff, seeking the aid of a receiver over real property, should use due diligence in the assertion of his rights, since long acquiescence in defendant's possession may suffice to bar him from the relief to which he might otherwise be entitled. And when a shareholder in a corporation seeks a receiver over 5 Drought V. Percival, 2 Mol., 502. ceeding for alimony, see Holmes v. 6 Baggs V. Baggs, 55 Ga., 590. As Holmes, 29 N. J. Eq., 9. to the circumstances under which 7 Cremen v. Hawkes, 8 Ir. Eq., a receiver may be allowed over 153, affirmed on appeal, id., 503. property of the husband in a pro- CHAP. XIV.] REAL PROPERTY. 751 real property held by a defendant, alleging it to be the property of the corporation, but plaintiff has acquiesced in defendant's possession and use of the property for a number of years with- out question or remonstrance, and shows no danger on the ground of defendant's responsibility, he will not be allowed a receiver. And when, in such a case, it appears that the proper- ty over which a receiver is sought was accumulated through fraud on the part of the corporate authorities, of which plain- tiff, as a shareholder, was fully cognizant, and in which he had acquiesced without complaint for several years, his applica- tion is properly refused.^ § 594. Granted when property has escheated to state. A receiver may be appointed of the rents and profits of real estate which is found to have escheated to the state, upon a proceeding instituted by the state for that purpose, when it is shown that the relief is necessary for the purpose of collecting the rents forthwith, which would otherwise be lost.^ § 595. Refused on defendant paying rents and profits into court. It would seem to be proper, on an application for a receiver over real property, when the defendant, against whose possession the receiver is sought, consents to pay the rents and profits into court, to refuse the application for a re- ceiver. ^^ § 596. One not party to the cause can not object; re- mainder-man and tenants can not restrain receiver from turning them out of possession. One who is not a party to the action, although claiming certain lands which are subject to the receivership, can not be heard to show cause against making a conditional order for the receiver absolute, his proper method of redress being by application to the court to remove the receiver as to such lands as he claims.^ And a motion by a remainder-man and by tenants of premises, which had been placed in the hands of a receiver, to restrain him from SHager v. Stevens, 2 Halst. CIi., ^^Prcbble v. Boglnirst, 1 Swans., 374. 309. 9 People V. Norton, 1 Paige, 17. ^1 Creed v. Mootq, 4 Ir. Eq.. 684. 752 RECEIVERS. [chap. XIV. turning- them out of possession, was refused on the ground that their interest Avas insufticient to sustain the application. ^^ § 597. Practice in placing receiver in possession; who responsible for loss by owner remaining in possession. When a receiver is appointed over real property in the posses- sion of the owner, the proper course is to make application to the court for an order directing the owner to surrender pos- session to the receiver, since the latter can not distrain upon the owner in possession, who is not a tenant of the receiver. If, therefore, a loss occurs by reason of the receiver allowing the owner to remain in possession, it will be regarded as the fault of the parties in interest in the cause in not applying for an order upon the owner to deliver up possession.^^ § 598. When granted before answer. A receiver of the rents of real property may be appointed upon bill and affidavits in support thereof, before answer, in a case of emergency re- quiring the immediate interference of the court for the protec- tion of plaintiff's equities.^'* But the appointment will not be made when the person in possession is not a party to the cause and not before the court. ^^ § 599. Effect of appointing receiver over corporation upon title to its real estate. As regards the effect of the appointment of a receiver over a corporation upon the title to its real estate, it would seem that when the appointment is merely pendente lite, and no assignment is executed by the corporate body to the receiver, the title is not divested, the proceedings being regarded as inchoate, and the right of the receiver as only a possessory right for the purposes of the suit.^^ Where, however, a receiver is appointed upon the dis- solution of a corporation, it is held that the title to its realty vests in the receiver, for the benefit of creditors and share- holders.l''' 12 Wynne v. Lord Newborough, 1 15 Mays v. Wherry, 3 Tenn. Ch., Ves. Jr., 164. 34. 13 Griffith V. Griffith, 2 Ves., 400. 16 Montgomery v. Merrill, 18 i^Woodyatt v. Gresley, 8 Sim., Mich., 338. 180. 17 Owen v. Smith, 31 Barb., 641. CHAP. XIV.] REAL PROPERTY. 753 § 600. Order should state precisely over what property receiver is appointed ; appointment may be over part only. It is important that the order appointing a receiver over real property should state distinctly and clearly the particular prop- erty over which he is appointed. And when it is so indefinite in this respect that it does not appear what property is subject to the receiver's control, the court will not enjoin the real owner from interfering with the property or collecting its rents. 18 But cases are sometimes met with in the books, where a receiver has been appointed over a portion of the real estate in controversy, and not over the whole.^^ § 601. When plaintiff entitled to funds in receiver's pos- session. When a receiver is appointed to take charge of the proceeds arising from real estate, pending litigation con- cerning the right thereto, and judgment is finally rendered for plaintiff, he is entitled to an order of court directing the re- ceiver to deliver the funds into his possession. And upon an application for such order, the court will not presume that the receiver transcended his authority, and will not grant a refer- ence to a jury or referee, to determine how much of the fund rightfully belongs to plaintiff, or to ascertain who is entitled to the money in the receiver's hands. ^^ § 602. Real estate subject to judgment and execution on termination of receiver's functions. Since the right of a receiver can not outlast the action in which he was appointed, nor be used for any purpose not justified thereby, it is held that, upon the termination of the receiver's functions, when no as- signment was made of his real estate by the defendant to the receiver, the real estate is subject to the lien of a judgment and execution against the defendant to the same extent as if there had been no receivership.^i 18 Crow V. Wood, 13 Beav., 271. 21 Montgomery v. Merrill, 18 And see, ante, § 87. Mich., 338. 19 Calvert v. Adams, Dick., 478. 20 Whitney v. Buckman, 26 Cal., 447. Receivers — 48. 754 RECEIVERS. [chap. XIV. § 602(7. When receiver allowed against plaintiff suing in forma pauperis. The power of a court of equity to take possession, through a receiver, of property which is hable to waste and irremediable loss, if suffered to remain in the pos- session of a defendant pending a litigation as to its title, may also be exercised against a plaintiff who has taken possession from defendant and whose possession threatens similar injury to the property. And when plaintiff, suing in forma pauperis for the recovery of land, during the pendency of the action takes possession of a portion of the premises and resists their reoccupation by defendants claiming tide thereto, a receiver may be had upon the application of defendants to take pos- session of the usurped premises and to secure their rents until the determination of the cause. 22 22 Horton v. White, 84 N. C. 297. CHAP. XIV.] REAL PROPERTY. 755 II. Receivers as Between Tenants in Common. § 603. Courts averse to interfering as between tenants in common; ill-will and hostility. 604. Exclusion of co-tenants by insolvent tenant in possession, ground for relief. 605. When receiver allowed over part of joint property; injunction allowed; receiver in default of security by defendant. 606. Receiver granted over colliery because of difficulty between joint tenants as to its management; gold mine. 607. When granted in suits for partition. 608. Notice to under-tenants not to pay rents to co-tenants entitled thereto, no ground for receiver. § 603. Courts averse to interfering as between tenants in common; ill-will and hostility. As between tenants in common or joint owners of real property, courts of equity manifest the same aversion to the appointment of receivers as in other cases where the jurisdiction is invoked against a de- fendant in possession, under claim of title, in a controversy con- cerning the right to the disputed property. And it may be stat- ed as a general rule, that a receiver will not be appointed, as between tenants in common of realty, unless a case is presented amounting to an exclusion by the defendant of his co-tenants from the enjoyment or possession of the property.23 And when the application for a receiver was founded on an affidavit of improper management by the defendant, and of a reservation of the profits not amounting to an exclusion of his co-tenants, which was met by counter-affidavits of a balance due to de- fendant on an unsettled account, and an agreement for a refer- ence to arbitration, the charges of improper management be- ing also denied, it was held that no case was presented for a receiver.24 So a feeling of ill-will and hostility between ten- ants in common will not justify the appointment of a receiver where it does not result in depriving one or the other of the proper use and enjoyment of the property.^s 23 Milbank v. Revett, 2 Meriv., 24 Milbank v. Revett, 2 Meriv., 405 ; Vaughan v. Vincent, 88 N. C, 405. 116; Cassetty ?7. Capps, 3 Tenn. Ch., 25 Lamaster v. Elliott, 53 Neb., 524. And see Heinze v. Klein- 424, 73 N. W., 925. Schmidt, 25 Mont., 89, 63 Pac, 927. 756 RECEIVERS. [chap. XIV. § 604. Exclusion of co-tenants by insolvent tenant in possession, ground for relief. Where, however, one ten- ant in common is in possession of the property and in receipt of the entire rents and profits, exchiding his co-tenants from all participation therein, a stronger case is presented for relief in equity, especially when the defendant in possession is insolvent and unable to respond in damages ; and in such cases, the right to a receiver in behalf of the tenant excluded is regarded as well established. 26 Thus, where a tenant in common of valuable mill property, who, in addition to his interest as a co- tenant, also claims a vendor's Hen for a portion of the property sold by him to defendants, shows by his bill that the defend- ants, his co-tenants, are in possession and receiving the profits, which they refuse to share with the plaintiff, and that they are managing the property in so careless a manner that the mills are losing much of their custom, and that they are wholly in- solvent, except as to their interest in the property in question, a clear case is presented for the aid of a receiver. In such a case, the relief is based largely upon the inadequacy of the remedy at law for the protection of plaintiff in his right to the profits, while the property remains in defendant's possession. ^^ 26 Williams v. Jenkins, 11 Ga., in an undivided one-eighteenth of 595. And see Street v. Anderton, certain oil lands was entitled to a 4 Bro. C. C, 414; Sandford v. Bal- receiver pending a proceeding lard. 30 Beav., 109. But see Tyson brought to determine plaintiff's V. Fairclough, 2 Sim. & St., 142, rights to the property, where a doubt is expressed as to 27 Williams v. Jenkins, 11 Ga., whether even an actual exclusion of 595. Mr. Justice Warner for one tenant in common by another the court says, p. 598: "Do constitutes ground for a receiver, the allegations in this bill show since if the exclusion amounts to an that the discretion of the chan- ouster at law, the party aggrieved cellor in the appointment of a may assert his legal title at law; receiver was properly exercised? and if not such an exclusion, the The complainant is the owner court would compel the tenant in of one-third part of valuable common in receipt of the rents to property consisting of a saw and account to his co-tenant. In Hig- grist mill, as a tenant in common gins Oil & Fuel Co. v. Snow, 51 with the defendants, who are in C. C. A., 267, 113 Fed., 433, it was possession of the same, which is of held that the owner of a life estate the annual value of one or two CHAP. XIV.] REAL PROPERTY. 757 § 605. When receiver allowed over part of joint prop- erty ; injunction allowed ; receiver in default of security by defendant. As regards the extent of the receivership, in the class of cases under consideration, it is held that a plain- tiff, claiming a moiety of an estate as a tenant in common with defendant, may have a receiver of the rents and profits of such thousand dollars. The complain- ant alleges the bad management of the mills by the defendants; their intention to defraud him, as mani- fested by their various acts, which the complainant specifically alleges, and that they are insolvent, except as to their interest in the mill prop- erty ; that there is now due the complainant for the original pur- chase-money of said mills, from the defendants, the sum of $3,716. Assuming the original price paid for the property to be its true value, (to wit) $5,500, the two-thirds thereof, which the defendants now own, is worth about the sum of $3,666, which is less than the amount of the original purchase- money now due the complainant, so that when the original purchase- money shall be paid to the com- plainant (for which he asserts his vendor's lien), the defendant will have nothing to pay him for his share of the annual rents and profits thereof. The defendants are in the possession and enjoy- ment of the property, and refuse to allow the complainant to partici- pate in the same, in any manner whatever. The complainant shows that he has offered to take posses- sion of the mills, and give bond and security to the defendants, to account to them for their share of the profits; or to let them continue in possession on their doing the same, to account to him for his share of the profits, which they have refused. The plaintiff in error, however, insists that a court of equity will not interfere, and ap- point a receiver, at the instance of one tenant in common against an- other, who is in possession, because the party complaining may relieve himself at law, by a writ of parti- tion. Concede that the complain- ant in this case might have a writ of partition at law, for his share of the property, what adequate rem- edy has he at law, in the mean- time, for the profits of the mills, while in the possession of the de- fendants, who are insolvent? We entertain no doubt that a court of equity has jurisdiction to appoint a receiver, at the instance of one tenant in common against his co- tenants, who are in possession of undivided valuable property, re- ceiving the whole of the rents and profits and excluding their com- panion from the receipt of any por- tion thereof, when such tenants are insolvent. 2 Story's Equity, § 833; Street v. Anderton, 4 Brown's Chan. Rep., 415; Milbank v. Revett, 2 Merivale. 405. The discretion of the chancellor in appointing a re- ceiver, in this case, was, in our judgment, properly exercised ; there- fore, let the judgment of the court below be affirmed." 758 RECEIVERS. [CIIAP. XIV. moiety, when defendant is in possession of the whole; and he may also have an injunction to restrain defendant from receiving the rents of such moiety, as well as an order upon the tenants of that part of the estate to attorn to the receiver.28 So it has been ordered that a tenant in common in possession should give security to his co-tenant for the portion of rents due him, or in default thereof that a receiver be appointed. 29 And in the case of equitable tenants in common of realty, the legal title to which is in a trustee for the benefit of the co-ten- ants, the fact that the trustee has put one of the co-tenants in possession will justify a receiver in behalf of the other tenants over their own shares, but not over the entire property, since the tenant in possession is entitled to the possession of his own share of the property.^O But when the conduct of the defend- ant in possession is such as to amount to an exclusion of his co- tenants, they are entitled upon the hearing to a receiver of the whole property.^l § 606. Receiver granted over colliery because of diffi- culty between joint tenants as to its management; gold mine. While, as has already been shown, equity is gener- ally averse to extending the aid of a receiver, as between joint owners or tenants in common, yet in cases of mining property or collieries, there would seem, from the nature of the property, to be stronger reasons why the relief should be allowed when there is a disagreement as to the management of the property, than in cases of ordinary real estate. And where there are a large number of persons interested and owning shares in mining property, as in a colliery, upon a difficulty between them as to the management of the property, a receiver may be allowed, although the owners are tenants in common, 28 Hargrave v. Hargrave, 9 Beav., 29 Street v. Anderton, 4 Bro. C. 549. See Hoppe v. Fountain, 104 C, 414. Cal., 94, 37 Pac, 894, as to the ap- 30 Sandford v. Ballard, 30 Beav., pointment of a receiver over real 109. property in an action brought to 31 Sandford v. Ballard, 33 Beav., foreclose a mortgage given by a co- 401. tenant of his undivided interest. CHAP. XIV.] REAL PROPERTY. 759 the relief being granted to prevent the destruction of the sub- ject-matter.32 So in an action brought by plaintiffs claiming to be the sole owners of a gold mine, averring that defendants have unlawfully entered upon a mine and are taking away the gold, defendants claiming an interest as co-tenants, while the court may refuse to enjoin the working of the mine upon grounds of public policy and because of the peculiar nature of the property, a receiver may be allowed pendente lite, the de- fendants being of doubtful responsibility.^^ § 607. When granted in suits for partition. The aid of a receiver is sometimes granted in actions for the partition of real estate between tenants in common, when it is apparent to the court that the relief is necessary to protect all parties in interest.24 And in such an action, when defendants not only 32 Jefferys v. Smith, 1 Jac. & W., 298; Ames v. Ames, 148 IH., 321, 36 N. E., 110; Heinze v. Butte & B. C. M. Co., 61 C. C. A., 63, 126 Fed., 1. And see Higgins Oil & Fuel Co. V. Snow, 51 C. C. A., 267, 113 Fed., 433. In Jefferys v. Smith, 1 Jac. & W., 298, supra, Lord Eldon, refer- ring to a note of a case before Lord Hardwicke, in which he held that a colliery was in the nature of a trade, persons owning different interests in which were to be re- garded as in the nature of partners, and that the difficulty of manage- ment gave a court of equity juris- diction as to mesne profits which it would not assume with regard to other lands, observes: "On this ground, and on account of the pe- culiarity of this species of produce, the court gives an iniunctinn against trespassers, and allows a party to maintain a suit for the profits, which, in other cases, it would not do. Here there arc twenty shares; and if each owner may employ a manager and a set of workmen, you destroy the sub- ject altogether; it renders it impos- sible to carry it on. It appears to me, therefore, upon general princi- ples, without reference to the par- ticular circumstances of any case, that where persons are concerned in such an interest in lands as a mining concern is, this court will appoint a receiver, although there are tenants in common of it. Take the order for a receiver, and let every owner be at liberty to pro- pose himself as manager before the master." 33 Parker v. Parker. 82 N. C, 165. But see Stith v. Jones, 101 N. C, 360. 8 S. K, 151; Thomas v. Nantahala M. & T. Co., 7 C. C. A.. 330, 58 Fed., 485. As to the pro- priety of the court's directing a receiver of a coal mine appointed pendente lite, to work the mine ac- tively, see Bigbee v. Summerour, 101 Ga.. 201. 28 S. E., 642. 34 Pignolet v. Bushc, 28 How. Pr., 9; Duncan v. Campau, 15 Mich., 415; Weise v. Welsh. 30 N. J. F.q., 760 RECEIVERS. [chap. XIV. deny plaintiff's title, but have endeavored to entangle the whole title, and are not disposed to account for the rents and profits, equity may interfere by a receiver.^^ And when, in an action for partition, it is shown that a portion of the property can not be rented, in consequence of the refusal of one of the tenants in common to unite with the others, and that the rents of the re- maining portions can not be collected because of the interfer- ence of such co-tenant, a receiver may be appointed to pre- serve the property from loss pendente lite.^^ But a receiver will not be appointed merely because of the occupancy of the premises by the defendant, a tenant in common, since the right of possession is one of the incidents of such tenure.^"^ § 608. Notice to under-tenants not to pay rents to co- tenants entitled thereto, no ground for receiver. When one of several co-tenants has entered into an agreement with the others, whereby they are authorized to receive all the rents of the premises until they have repaid an amount due them, the fact that such co-tenant afterward notifies the tenants of the premises to pay their rents to him, and not to his co-ten- ants, affords no ground for interfering by the appointment of a receiver, such a notice not being regarded as equivalent to an exclusion. 38 431; Goodale v. Fifteenth District -"'S Duncan v. Campau, 15 Mich., Court, 56 Cal., 26; Mesnager v. 415. DeLeonis, 140 Cal., 403, 73 Pac, 36 pignolet v. Bushe, 28 How. 1052; Ames v. Ames, 148 111., 321, Pr., 9. 36 N. E., 110; Heinze v. Butte & 37 Varnum v. Leek, 65 Iowa, 751. B. C. M. Co., 61 C. C. A., 63, 126 23 N. W., 151. Fed., 1. And see Higgins Oil & 38 Tyson v. Fairclough, 2 Sim. & Fuel Co. V. Snow, 51 C. C. A., 267, St., 142. 113 Fed., 433. CHAP. XIV.] REAL PROPERTY. 761 III. Receivers as Between Vendors and Purchasers. § 609. When vendor entitled to receiver in action for specific perform- ance. 610. When vendee so entitled. 611. Vendor allowed receiver in suit to recover possession on show- ing defendant's insolvency and commission of waste. 612. Purchasers allowed receiver as against settlement made by husband upon wife after marriage. 613. When purchaser at sheriff's sale granted a receiver. 614. When purchaser of gold mine allowed a receiver. 615. When granted over colliery or mine; what required of the re- ceiver; when discharged; operation of mine by receiver. 616. Bill not entertained which will affect interest of purchasers not made parties. 617. When receiver required to return purchase-money and counsel fees. § 609. When vendor entitled to receiver in action for specific performance. The aid of equity by a receiver is sometimes necessary as between vendors and purchasers of real property, either in connection with proceedings to compel a specific performance of the contract of sale, or for the protec- tion of the rights of a purchaser after sale. And the vendor of real estate, upon a bill against the vendee for a specific per- formance of the contract of purchase, may have a receiver in aid of his action when it is shown that the defendant is in- solvent, and that all his property, real and personal, includmg the estate which is the subject of the contract, is about to be conveyed to trustees for the benefit of his creditors. The re- lief, under such circumstances, is warranted upon the ground that, if the contract can be enforced, the vendor has a lien upon the property for the unpaid purchase-money; while, if it can not be enforced, the purchaser has a lien to the extent of the amount already paid by him on account of his purchase; and upon the further ground that the purchaser's insolvency and attempt to convey the estate would embarrass the title. ^^ So 39 Hall V. Jenkinson, 2 Ves. & this case, the purchaser had never Bea., 125. It is to be noticed that in been let into exclusive possession 762 RECEIVERS. [CIIAP. XIV. when a person has contracted for the purchase of real estate, but is dissatisfied with the title, and refuses on that ground to conclude the purchase, in an action against him to enforce a specific performance of the contract, a receiver may be ap- pointed for the management of the property, pending a refer- ence to determine the validity of the title.^o When a receiver is appointed in aid of a bill against the purchaser for specific performance of his agreement, if defendant is compelled by the court to carry out the agreement and to complete his pur- chase, the receiver will be considered as his receiver, and the receiver's possession as his possession. ^i But since, in such an action, the receivership is merely ancillary to the principal re- lief sought, if the principal remedy is prematurely invoked, there being no default which would entitle the vendor to a sale, the order appointing a receiver should be revoked. ^^ And in Tennessee, the courts refuse the aid of a receiver, in an action to enforce a vendor's lien, upon the ground that it is no part of the contract of sale, either expressed or implied, that the vendor shall appropriate anything but the land itself by a sale to satisfy the unpaid purchase-money, and because by the con- tract the purchaser is entitled to possession until the land is sold in satisfaction of the debt.^s But in the same state, after a decree in favor of the vendor seeking to subject the land to the payment of the purchase-money, from which decree defendant has appealed, the failure of defendant to pay taxes has been held to be sufficient ground for a receiver pending the appeal. ^^ § 610. When vendee so entitled. The relief, in the class of cases under consideration, is not confined to actions for specific performance, brought by a vendor against the vendee, but the jurisdiction is also exercised in behalf of the vendee of the premises, the possession hav- ^2 Jones v. Boyd, 80 N. C, 258. ing been partly in the vendor and 43 Morford v. Hamner, 3 Baxter, partly in the purchaser. 391. 40 Boehm v. Wood, 2 Jac. & W., 44 Darusmont v. Patton, 4 Lea, 236. 597. 41 Boehm v. Wood, Turn. & R., 332. CHAP. XIV.] REAL PROPERTY. 763 instituting such an action. And upon a bill by the vendee to compel specific performance of the contract of sale, a receiver may be appointed to secure the property pendente lite, v^dien the vendor has fraudulently repossessed himself of the prop- erty.'*^ And the relief has been granted in such case although there was no showing of the insolvency of the defendant.^^ § 611. Vendor allowed receiver in suit to recover pos- session on showing defendant's insolvency and commission of waste. When a vendor of real estate, who has never parted with the legal title, having merely given the purchaser a title bond, sues to recover possession because of nonpayment of purchase-money, and seeks to have the property sold and its proceeds applied in payment of the purchase price, it is proper to appoint a receiver to take charge of the property, upon allegations of defendant's insolvency, and that he is com- mitting waste by cutting off the timber, w^hich constitutes the chief value of the property.^"^ But the appointment of a re- ceiver, in such a case, does not in law have the effect of chan- ging the possession, but only suspends the right of actual en- joyment pending the litigation. ^^ And when the vendor of real estate, having given a bond or contract to convey, upon de- fault of the purchaser, files a bill for the specific performance of the contract and for a sale of the land, if the premises are an 45 Dawson v. Yates. 1 Beav., 301. cutting down and removing of 46 Mead v. Burk, 156 Ind., 577, valuable timber from the land in 60 N. E., 338. controversy, and especially where 47 McCaslin v. State, 44 Ind., 151. defendant only claimed the title The court, Buskirk, J., say, p. 174: and possession of such land under "Nor do we think the court ex- a title bond, the purchase-money ceeded its power in appointing a being unpaid, and it being alleged receiver. The third clause of sec- and proved that the defendant was tion 199, 2 G. & H. (statutes), 152, insolvent, would be such material authorizes the appointment of a re- injury as would justify the court in ceiver 'in all cases when it is shown appointing a receiver to take charge that the property, fund, or rents of and preserve such land during and profits in controversy is in the litigation." But see Guernsey danger of being lost, removed, or v. Powers, 9 Hun, 78. materially injured.' There seems 48 McCaslin z/. State, 44 Ind., 151. to be no room to doubt that the 764 RECEIVERS. [CIIAP. XIV. inrulequate security for the unpaid pnrchase-moncy and the vendee is insohent, the vendor is entitled to a receiver of the rents and profits pendente lite, upon the same ground that a mortgagee is entitled, under like circumstances, to a receiver in aid of a foreclosure.'*^ So when the vendee is in possession under a bond to convey title, and receives the rents and profits for several years, permitting the premises to deteriorate in value through want of repairs and improper cultivation, so that they are insufficient to pay the amount due, and the vendee becomes insolvent and is adjudicated a bankrupt, a receiver of the rents and profits will be appointed until the final hearing, no part of the purchase-money, principal or interest, having been paid.^^ But the mere insolvency of the vendee, if known to the vendor at the time of sale, will not warrant a receiver upon a bill to rescind the contract of sale and for an accounting of rents, no fraud being charged in the bill, and the allegations of waste being fully denied. ^^ Nor, in such case, will a receiver be allowed when it is not shown that defendants were less solvent and able to pay when the debt for purchase-money matured than when it was created, and when it does not ap- pear that the depreciation in value, which is relied upon as a ground for relief, was caused by the waste or mismanagement of the purchasers.^2 And when it is not shown that the vendee is insolvent, and the amount of the indebtedness is disputed and undetermined, a receiver should not be appointed. ^^ But in Kentucky, the general doctrine under consideration does not prevail, and it is there held that when the vendor conveys real estate and delivers possession to his vendee, reserving a lien for the purchase-money, the lien attaches to the land and not to the rents and profits. The vendee, therefore, having the legal title and the right to the use and occupancy of the proper- 49 Phillips V. Eiland, 52 Miss., 51 Jordan v. Beal, 51 Ga, 602. 721 ; Smith v. Kelley, 31 Hun, 387. 52 Tnmlin v. Vanhorn, 77 Ga., 50 Tufts V. Little, 56 Ga., 139. 315, 3 S. E., 264. See, also, Gunby v. Thompson, 56 53 Hughes v. Hatchett, 55 Ala., Ga., 316; Chappell v. Boyd, 56 Ga., 631. 578 ; Worrill v. Coker, 56 Ga., 666. CHAP. XIV.] REAL PROPERTY. 765 ty, a receiver will not be appointed in an action to enforce tlie lien, in the absence of waste or improper cultivation, although it is shown that the vendee is insolvent and that the land is not worth more than the amount of the indebtedness.^^ § 612. Purchasers allowed receiver as against settle- ment made by husband upon wife after marriage. Pur- chasers of real estate, as against an adverse party in posses- sion claiming a paramount title, have been allowed the pro- tection of a receiver upon a bill to perfect their title against such adverse claimant ; although the relief is proper only when it is apparent that the purchaser seeking the aid of the court has a good equitable title, against which defendant's title can not prevail, and that the purchaser can compel the perform- ance of his contract of purchase. Thus, purchasers for value from a husband have been allowed a receiver, as against a voluntary settlement made by the husband upon his wife after marriage, upon the ground that such settlement gave no title as against the purchasers, who were, therefore, entitled to a specific performance of their contract. And the receiver may be appointed, under such circumstances, before answer.^^ § 613. When purchaser at sheriff's sale granted a re- ceiver. A purchaser of lands at a judicial sale, who ob- tains a sheriff's deed therefor, upon the expiration of the stat- utory period of redemption, is entitled to possession of the lands, and of the crops growing thereon as an incident to the realty. He may, therefore, in an action to obtain such posses- sion, have a receiver to take charge of the growing crops with a view to properly harvesting and preparing them for market, and holding the proceeds subject to the final order of the court, defendants being alleged to be in a condition of insolvency.^^ 54 Collins V. Richart, 14 Bush, 621. quired the title to the land, and the 55 Metcalfe v. Pulvertoft, 1 Ves. defendants are properly restrained & Bea., 180. from selling or incumbering the 56 Corcoran v. Doll, 35 Cal., 476. land, till the rights of the parties Sawyer, C. J., for the court, says, can be determined. So, also, we p. 479: "If the facts stated in the think the record shows a proper complaint are true, plaintiffs ac- case for restraining an appropria- 766 RECEIVERS. [chap. XIV. And it is an appropriate exercise of the jurisdiction to appoint a receiver in aid of the possession of a purchaser at a sheriff's sale, under judgment, upon a bill alleging that the defendant debtor has fraudulently conveyed his real estate with a view to delay and defeat his creditors. Such a state of facts, it is held, would clearly warrant a receiver in aid of the judgment creditor himself, and the right of a purchaser at a sale under the judgment to the same relief is deemed equally clear-^*^ § 614. When purchaser of gold mine allowed a receiver. While the courts are usually averse to taking possession of lands by a receiver pending litigation between conflicting claim- ants, it is held, in California, that the working of gold mines and the extraction of gold therefrom are something more than the ordinary use of real estate by one in possession, re- quiring more than the usual remedies for the protection of a purchaser. Such a use of the realty constitutes a waste or de- struction of the very property itself, or all that is of essential value. It is, therefore, held that a purchaser at a mortgage sale of an interest in a mining claim may have a receiver, when the mortgagor is still in possession, working the claim and refusing to pay the purchaser his interest in the dividends, it being alleged that the mortgagor is insolvent, and that the claim will be worked out and exhausted before the statutory period for redemption expires.^^ tion of the crops and for a receiver. pretended tenant in possession, as It is not a question of rents and well as the other defendants, was profits merely, during the time for a party. We think there is clearly redemption. That time had already a cause of action stated, both for expired, and the plaintiffs had ob- an injunction and a receiver. If tained the sheriff's deed and were the tenant in possession is entitled entitled to the possession of the to anything for his services in cul- land. The growing crops belonged tivating the land during the time to the plaintiffs as a part of the for redemption, he is a party to the land. The principal parties are al- suit, and his equities can be ad- leged to be insolvent, and all the justed when the affairs of the re- transactions on the part of the de- ceivership are settled up." fendants, on the theory of ihe com- 57 Mays v. Rose, Freem. (Miss.), plaint, constitute a scheme to de- 703. fraud the plaintiffs, to which the 58 Hill v. Taylor, 22 Cal., 191. It CHAP, XIV.] REAL PROPERTY. 767 § 615. When granted over colliery or mine; what re- quired of the receiver ; when discharged ; operation of mine by receiver. The aid of a receiver is sometimes granted in cases of mines or collieries pending a litigation which is to de- termine the title and rights of the parties, when, from the pe- culiar nature of the property, it is necessary that it should be kept in operation and preserved pendente lite. Thus, where purchasers of a colliery file a bill to set aside their purchase and to enjoin their notes given for purchase-money, on the ground of fraudulent representations made by defendants to induce them to purchase, if, on the case presented, there is much doubt as to the ownership of the colliery, and it is of importance that it should be worked to prevent flooding and other injury, and also to prevent a forfeiture to the landlord, a fit case is presented for the appointment of a receiver pendente lite. And the relief, in such a case, is founded upon the ne- cessity of preserving the property pending the controversy, in order that, when it is finally determined to whom it belongs, full and complete justice may be done. And plaintiffs may be required to supply the means of carrying on the colliery, re- serving the ultimate question of expense for future determina- tion. The receiver thus appointed will be required to keep the colliery going, and out of its receipts to pay all outgoings; and if the receipts are insufficient, plaintiffs may be required to supply him with the necessary funds for that purpose.^^ is to be observed that the Practice and profits are in danger of being Act of California, § 143, provides lost or materially injured or im- that a "receiver may be appointed paired." by the court in which the action is 59 Gibbs v. David, L. R., 20 Eq., pending, or by a judge thereof, 373. The doctrine of the text is first before judgment, provision- very clearly stated in the opinion ally, on the application of either of Vice-Chancellor Malins as fol- party, when he establishes a prima lows, p. 375: "As far as I know facie right to the property, or to of the case at present, although the an interest in the property which precise circumstances certainly is the subject of the action, and have not occurred before, I can which is in possession of an adverse not help thinking that, upon prin- party, and the property or its rents ciple, I shall not much err if I 768 RECEIVERS. [chap, XIV. But when the effect of appointing a receiver in a controversy as to the right to mining- property is to suspend the operation of the mines, the receiver having no funds with which to meet the necessary outlays, the appointment will be regarded as improvident, and the receiver will be discharged, when it is not alleged that defendants in possession are insolvent, or that they are unable to account for the mesne profits, or that the accede to the application of the plaintiffs. The question brought before the court is a very remark- able one. The two plaintiffs, Mr. Gibbs and Mr. Joachim, are, it is stated, merchants in the city of London, and their case is this : that, by representations made to them by the defendant Webb, they have been induced to purchase a colliery in South Wales. They al- lege that the representations made by Webb were entirely false, and that if they had known the false- hood of such representations they would not have purchased the col- liery. The persons from whom the colliery was bought are Mr. Cot- ton's clients, Charles William David and John Sloper, and, of course, if it turns out that, what- ever representations were made by Webb, they were made without the knowledge of these two defend- ants, they will not be answerable, and the suit will fail. But the bill alleges that, in point of fact, Webb was the bribed agent of these de- fendants to make these false repre- sentations; and if this turns out to be the truth, and is established at the hearing, the contract will be set aside, the suit will succeed, the plaintiffs will be entitled to be re- lieved from all further payments, and will take out of court all the moneys paid in and all that may be hereafter brought in. In other words, the contract will be undone. But the property is a colliery, and a going colliery, and both sides ad- mit that it must be kept going or the lease will be forfeited; and moreover, if it is not kept going, it will be drowned out, and, therefore, it is absolutely necessary it should be worked. In this state of things, I think it is clearly uncertain to whom the colliery belongs. If the plaintiffs are right in their allega- tions on the bill, the colliery does not belong to them, but to David and Sloper. If, on the other hand, the allegations are erroneous, then the colliery belongs to the plain- tiffs, and David and Sloper have nothing to do with it. It is accord- ing to the practice of the court to keep property in security until the right is decided, and therefore, it being totally uncertain •to which of these two parties this colliery be- longs, it does seem to me, in ac- cordance with practice and princi- ple, that the property shall, as far as possible, be kept in security. Then, it is asked, why should this be done? The plaintiffs are in pos- session ; they say that they were fraudulently induced to take pos- session, and, being in possession, they are incompetent to deal with the property in its present position, and if they should succeed in this CHAP. XIV.] REAL PROPERTY. 769 property is being injured under their management. ^'^ And a receiver of a coal mine should ordinarily not be authorized to operate the mine and carry on a general mining business, and where he has so operated the mine and has incurred large in- debtedness in so doing, it is error to charge up such obligations as preferred claims prior to mortgage liens upon the property.^! § 616. Bill not entertained which will affect interest of purchasers not made parties. Equity will not entertain a bill for a receiver of the rents and profits of real property which will affect the interests of purchasers of the property suit they will have a demand against the defendants for all mon- eys properly expended in working the colliery. It is of very great importance that the colliery should be so worked as to leave as little doubt as possible whether it was properly or improperly worked. If the court appoints an officer com- petent to manage a colliery, and he says, 'I have carried on the col- liery and made a gain,' then the gain will belong to the party to whom the mine belongs. If, on the other hand, he says, 'I have been obliged to carry on the col- liery at a loss,' that loss will have to be borne by the plaintiffs, if they fail in their suit, and by the defend- ants if the plaintiffs succeed. Now I will assume, in favor of the de- fendants, that all these charges are unfounded and that the suit will fail, and I will continue to act upon that assumption until the contrary is approved. If, therefore, the suit does fail, and a receiver is ap- pointed, and he is supplied with the means of carrying on the col- liery by the plaintiffs, what dam- age will be done to the defendants? It is impossible that they can be damaged to the extent of a farthing. Receivers — 49. If, on the other hand, the suit should succeed, then a very mate- rial benefit may arise to the plain- tiffs in the manner I have pointed out, on its being ascertained in this way what is the proper expenditure in carrying on the colliery. There- fore I shall do what this court is constantly in the habit of doing when property is in dispute, and as was done in Boehm v. Wood, 2 Jac. & W., 236. ... It seems to me, in this case, that the court should appoint a protector or man- ager of the estate, in order that, when it is decided to whom it be- longs, justice may be done. There- fore, upon principle, and, I think, upon authority, I shall accede to the application that a receiver be appointed. The plaintiffs must supply the means of carrying on the colliery, and, as in Bochm v. Wood, 2 Jac. & W., 236, the ques- tion at whose expense the receiver is to be appointed and the colliery is to be carried on will be reserved. If the suit succeeds, it will be at the expense of the defendants." 00 Carter v. Hoke, 64 N. C. 348. SlDalliba v. Winschell, 11 Idaho, 364, 82 Pac, 107, 114 Am. St. Rep., 267. 770 RECEIVERS. [chap. XIV. who are not made parties to the action, since all parties direct- ly interested in the subject-matter must be brought before the court. And when this is not done, a demurrer to the bill for want of proper parties will be sustained. ^^ § 617. When receiver required to return purchase-mon- ey and counsel fees. Where a receiver sold real estate at auction under an order of court, and the purchasers afterward refused to complete the purchase on the ground of an alleged defect of title, but the court ordered them to complete the pur- chase, and the receiver afterward consented that the order should be held void and that the purchase might be annulled, the receiver was required by the court to return the purchase- money, together with counsel fees to the purchasers for ex- amining the title and in resisting the proceeding to have the purchase perfected.^^ 62Lumsden v. Fraser, 1 Myl. & 63 Drake v. Goodrich, 6 Blatchf., Cr., 589, affirming S. C, 7 Sim., 555. 531. CHAP. XIV.] REAL PROPERTY. 771 IV. Functions of the Receiver. § 618. Control over rents and profits; tenants required to attorn to receiver; English practice. 619. Arrears of rent; future rents; Irish practice. 620. Motion to compel tenants to attorn; costs. 621. At what time liability of tenant to receiver attaches; when pay- ment to third person treated as payment to receiver. 622. Receiver's right to distrain, decisions unsettled; order of court to distrain. 623. Receiver not allowed to distrain when plaintiff still proceeds with his action. 624. Notice to tenant of appointment necessary before receiver can sue. 625. Attachment against tenant for failure to pay rent to receiver. 626. Attachment must be discharged before receiver can distrain, and vice versa. 627. Disputed title not determined by attachment; attachment not granted pending abatement of suit by death of plaintiff. 628. Order authorizing receiver to collect rents through defendant, effect of; not appealable. 629. Receiver should move to invest rents; rights of claimants. 630. Right to rents in case of receiver over corporation. 631. Receiver continued after sale until conveyances are executed. 632. Receiver of leasehold premises bound to pay head-rent. 633. Right to make repairs. 634. Duty of receiver in case of waste; injunction against waste. 635. Sale of property free from all liens. 636. What purchaser at receiver's sale bound to see; his title not affected by irregularities if court had jurisdiction. 637. Receiver may enjoin tenant from using premises for purpose prohibited by lease. 638. Leave to lease property; lease will not bind infant remainder- man. 638a. Rent due third parties; dilapidations. § 618. Control over rents and profits; tenants required to attorn to receiver ; English practice. The most impor- tant function of a receiver over real estate is the control of the rents and profits accruing from the property pending the re- ceivership, the right to such rents being generally vested in the receiver by his order of appointment. And in appointing a re- ceiver over real property of a defendant, the correlative rights of landlord and tenant subsisting between the defendant and 172 RECEIVERS. [chap. XIV. his tenants are not changed. The court, through its receiver, takes upon itself the possession previously existing in defend- ant, and while the court has additional and larger powers for enforcing the landlord's rights, the rights themselves remain unaltered.^'* In New York, it is held that the court may au- thorize its receiver to lease the premises for the customary term for which such premises are ordinarily leased, even though the term should extend beyond the termination of the litigation, and that such authority may be granted to the receiver upon an ex parte application. The court may, however, modify or vacate such order and annul the lease, in which event lessees who have taken the lease in good faith, relying upon the or- der of the court, are entitled to indemnity out of the funds arising from a sale of the premises in a partition suit in which the receiver was appointed. ^^ It was the practice of the Eng- lish Court of Chancery, on appointing a receiver of the rents and profits of realty, to direct that the tenants attorn to the re- ceiver, and if they refused so to do the proper course was to move that they be required to attorn, thus enabling them to be heard before the court as to whether they were actually tenants of the premises in controversy. And if no cause was shown by the tenants against such motion, the court would grant an order requiring them to deliver up possession to the receiver.66 When a tenant of a portion of the property under a former lease attorns to the receiver, and for a time pays him the rent, upon his subsequent refusal to pay rent to the re- ceiver the court will grant an order compelling him so to do.^"^ § 619. Arrears of rent; future rents; Irish practice. Under the practice of the Irish Court of Chancery, the receiver is entitled to all arrears of rent unpaid at the time of the order 64 Commissioners v. Harrington, 575. As to the right to set off im- 11 L. R., Ir., 127. provements, taxes and repairs paid 65 Weeks v. Weeks, 106 N. Y., for by one in possession of premises 626, 13 N. E., 96. over which a receiver is appointed, 66 Reid V. Middleton, Turn. & R., against rents due to the receiver, 455. see Jefferson v. Edrington, 53 Ark., 67 Hobson V. Sherwood, 19 Beav., 545, 14 S. W., 99, 903. CHAP. XIV.] REAL PROPERTY. 17^ of reference for his appointment.^S And although the ten- ants are only responsible from the service of the order requir- ing them to pay to the receiver, yet the person entitled to re- ceive the rent and arrears is bound from the date of the order of reference to appoint, when he has had notice of such order.^^ And when a receiver is appointed over the property of a judg- ment debtor, upon the application of his creditors, the debtor is not entitled to interfere with the receipt of rents after the order of appointment is made absolute.'^^ So where, as under the Irish practice, the functions of a receiver of rents and profits of real property have reference, not only to the future rents, but to rents already due and in arrears, a trustee, previously charged with the management of the estate, will not be held responsible for arrearages of rent at the date of appointment, since all control over and power of collecting them are taken away from the trustee by the appointment of the receiver.'^^ When a receiver is appointed in aid of a foreclosure suit, to take possession of, manage and rent the mortgaged premises, a tenant under the mortgagor, with constructive notice of the pendency of the action, may be required to attorn and pay his rent to the receiver, even though he may have paid rent to the mortgagor for the same period. '''^ § 620. Motion to compel tenants to attorn; costs. When a motion was made that tenants of a portion of the real estate in controversy be required to attorn to the receiver, and to pay him their arrears of rent, which was opposed by the tenants 68 McDonnell v. White, 11 H. L. is discharged as to a part before the Rep., 570; Hollier v. Hedges, 2 Ir. termination of the entire receiver- Ch., N. S., 370. As to the power of ship, see Beechey v. Smyth, 11 L. a court of equity to abate rent re- R., Ir., 88. served on a lease made before the 69 Hollier v. Hedges, 2 Ir. Ch., receivership over the lessor's estate, N. S., 370. see Harrison v. Fitzgerald, Ir. Rep., 70 M'Loughlin v. Longan, 4 Ir. 10 Eq., 394. As to the apportion- Eq., 325. ment of rent between that part of ^1 McDonnell v. White, 11 H. L. the premises over which the re- Rep.. 570. ceiver is continued and that part as "^2 Gaynor v. Blewett, 82 Wis., to which he is discharged, when he 313, 52 N. W., 313. 774 RECEIVERS. [chap. XIV. upon the ground that an action had been brought against them to recover the rent, which was still pending, and that if such action should be sustained they would, by attorning, subject themselves to payment of the arrears twice over, the motion was ordered to stand over until the action was tried. And the action being tried and plaintiffs being nonsuited, the motion to compel the tenants to attorn was allowed. But, under the English practice, costs were not allowed against tenants on granting such a motion. "^^ § 621. At what time liability of tenant to receiver at- taches ; when payment to third person treated as payment to receiver. The service of an order of court upon ten- ants, requiring them to pay their rents to the receiver appoint- ed in the cause, attaches all rents then in their hands, and all thereafter to become due. And until such order is revoked, or set aside by an order discharging the receiver, the tenant can not rightfully pay rent to any person other than the re- ceiver, and the death of the receiver will not justify the ten- ant in paying any other person before the appointment of an- other receiver. '^^ But when tenants have paid rent properly due the receiver to a third person, he having no authority or right to receive it, it will be treated as paid to such person for the receiver, and the party entitled thereto, under the first appointment of the receiver, will be allowed the money, al- though the receiver has been subsequently extended in behalf of another creditor.'^^ § 622. Receiver's right to distrain, decisions unsettled; order of court to distrain. As regards the receiver's right to distrain for unpaid rent, it is difficult to deduce any settled rule from the decided cases, and the decisions are far from harmonious upon this subject. Thus, it has been held, when the tenant has already attorned to the receiver, that he may T^ Hobhouse v. Hollcombe, 2 75 O'Callaghan v. O'Callaghan, 3 De G. & Sm., 208. Ir. Ch., N. S., 376. 74 Russell V. Baker, 1 Hog., 180. CHAP. XIV.] REAL PROPERTY. 775 distrain without obtaining leave of court for that purpose.*^^ So it is held that a tenant who has leased from a receiver may not question the right of his lessor to bring an action for the rent, and that such action may be maintained without special authority of the court therefor. '^'^ And it has been held, gen- erally, that a receiver may distrain whenever he deems it nec- essary, without applying for leave of court, since this would in many cases afford the tenant an opportunity to remove his goods from the premises before the order could be obtained.'^^ Again, it is said that the receiver may distrain at his own dis- cretion for rent in arrear within the year, but if in arrear more than a year, he should obtain an order of court before distrain- mg.'^^ If, however, there is doubt as to who has the legal right to the rent in question, the receiver should obtain an or- der of court before proceeding, since he must distrain in the name of the person having the legal right.^^ When permis- sion is given the receiver to distrain, it is regarded as indefinite in its operation, and not confined to any particular act or time.^^ And it is not necessary that the receiver should first procure the discharge of an order to distrain against tenants, before moving the court for leave to proceed in ejectment against the tenants for non-payment of rent.^^ § 623. Receiver not allowed to distrain when plaintiff still proceeds with his action. When plaintiff, after pro- curing the appointment of a receiver in equity, still proceeds by action at law concerning the same subject-matter, and the receiver takes no steps to restrain him from so doing, the latter will not be granted leave to distrain for rent due from the premises subject to his receivership. But upon plaintiff under- taking to proceed no further with his action at law, the re- 76 Raincock v. Simpson, cited in 79 Brandon v. Brandon, S Madd., note to Shelly v. Pelham, Dick., 120. 473, 1st American edition, 287. 77 Pouder v. Catterson, 127 Ind., 80 Pitt v. Snowden, 3 Atk., 750. 434 26 N E 66 ^^ Anonymous, 1 Hog., 335. 78 Pitt V. Snowden, 3 Atk., 750. «2 Sturgeon v. Douglas, 1 Hog., 400. 776 RECEIVERS. [chap. XIV. ceiver's application for leave to distrain may properly be grant- ed.83 § 624. Notice to tenant of appointment necessary be- fore receiver can sue. As a general rule, to entitle a re- ceiver to sue for and recover rents accruing from property of a debtor over whose estate he is appointed, he must give notice of his appointment to the tenant, and without such notice he can not maintain an action for the rent. The object of the no- tice is of a twofold nature : first, to protect the estate from pay- ment to the wrong person, and second, to prevent the tenant from dealing with the former owner in ignorance of the re- ceiver's appointment.^'* § 625. Attachment against tenant for failure to pay rent to receiver. The proper method of enforcing obedience to an order of court directing a tenant to pay rent to the receiver is by attachment. And upon the refusal or neglect of a tenant to comply with such order, an attachment may issue to compel obedience to the mandate of the court.^^ But before an at- tachment will issue against a tenant for non-payment of rent to the receiver, it should appear that he has been served with an order requiring him to make such payment.^^ If, however, the tenant has once paid his rent to the receiver, a personal de- mand by the receiver of the rent due is not necessary to lay the foundation for an attachment against the tenant for non- payment, and a demand by letter or by a third person is suffi- cient.^'^ And when, after appearance in the action or matter in which the receiver was appointed, a party to the cause in- terferes with the rents due the receiver, an order for an attach- ment against the person thus interfering may be made absolute in the first instance.^^ 83 Mills V. Fry, 19 Ves., 277; S. 86 Pope v. Pope, 2 Hog., 335. C, Coop., 107. 87 Brown v. O'Connor, 2 Hog., 77. 84 Hunt V. Wolfe, 2 Daly, 298. 88 Thomas v. Thomas, Flan. & K., 85 Armstrong v. Southwell, 1 If. 621. Eq., 32. CHAP. XIV.] REAL PROPERTY. TT7 § 626. Attachment must be discharged before receiver can distrain, and vice versa. When the receiver has ob- tained an order for an attachment against a tenant for non- payment of rent, this order must be discharged before the re- ceiver can be allowed to proceed by distress for the collection of the rent.^9 So when the receiver has first proceeded by distraint, the order to distrain must be discharged before he will be allowed to attach. ^<^ § 627. Disputed title not determined by attachment; attachment not granted pending abatement of suit by death of plaintiff. The court will not by a proceeding for attachment against a tenant, for not paying rent to the re- ceiver, determine the rights of a third person, not a party to the cause, to whom the tenant has paid his rent.^^ And when a person has been in possession of premises, paying rent there- for to a receiver for several years, and afterward disputes his liability to pay the receiver, on the ground of holding under another title, the receiver should not proceed by attachment against the tenant, since a question of disputed title can not be tried by an attachment for contempt, but must be tried in an action at law for that purpose.^2 ^^d when a receiver has re- ceived rent from an assignee of the tenant, he can not attach the tenant himself for non-payment, his only remedy against him being by proceedings at law.^^ Nor will the court issue an attachment against a party to the cause, for non-payment of rent to the receiver, pending the total abatement of the suit by the death of the sole plaintiff.^* § 628. Order authorizing receiver to collect rents through defendant, effect of; not appealable. When, in an action to determine the right to real property, a receiver of the rents and profits has been appointed, and he is authorized by 89 Nugent v. Nugent, 1 Hog., 169. 92 Pread v. Lewis. 2 Mol., 369. 90 Eyre v. Eyre, 1 Hog., 252. 93 Cane v. Bloomfield, 1 Hog., 345. 91 Nason v. Blennerhassett, 1 94 Brennan v. Kenny, 2 Ir. Ch., Hog., 402. N. S., 579. //i RECEIVERS. [chap, XIV, the court to permit the defendant to collect the rents until fur- ther order, upon giving bond with satisfactory surety for pay- ment to the receiver of all rents collected by him, such order will be construed as merely regulating the receiver's conduct, without affecting the rights of the parties. The fund is re- srarded as being still under control of the court as much as be- fore, the receiver collecting the rents by proxy instead of in person, and defendant being simply the receiver's agent, for the benefit of the fund under control of the court. An appeal, therefore, will not lie from such an order, since it does not af- fect the rights of the parties.^^ § 629. Receiver should move to invest rents; rights of claimants. A receiver over real property should not re- tain the money arising from rents, but should move to have it laid out and invested for the benefit of the parties entitled there- to. ^^ But when a receiver is appointed of the rents and profits of real estate pendente lite, the court will not usually order him to pay over or account for the rents to a person claiming them, when the land itself is not charged with payment of the de- mand. Claimants must, therefore, to entitle themselves to the rents and profits at the receiver's hands, show that they had a right to proceed against the land itself for satisfaction of their demands.^"^ And persons claiming liens upon rents col- lected by a receiver are entitled to intervene in the cause, in order that their rights may be determined. ^^ § 630. Right to rents in case of receiver over corpora- tion. In New Jersey, it is held that the statute author- izing the appointment of receivers over insolvent corpora- tions, and the appointment under the statute, operate as a conveyance of all the corporate property to the receiver, for the benefit of creditors, and to be distributed in accordance 95 Garr v. Hill, 1 Halst. Ch., 639. by agreement of the parties, Ford 96 Foster v. Foster, 2 Bro. C. C, v. Rackham, 17 Beav., 485. 616. See, as to liability of a re- 97 City of Baltimore v. Chase, 2 ceiver of rents and profits of realty G. & J., 376. to account, who has been appointed 98 McNair v. Pope, 104 N. C., 350, 10 S. E.. 252. CHAP. XIV.] REAL PROPERTY. 779 with the statute. It is held, therefore, that rents accruing from the corporate property subsequent to its sale by the re- ceivers belong to the purchaser at such sale, while rents ac- cruing after the appointment and before the sale belong to the receivers, for the benefit of creditors of the corporation.^^ § 631. Receiver continued after sale until conveyances are executed. When a receiver of the rents accruing; from real property has been appointed, and a decree is subsequently made for a sale of the premises, the receiver will be continued until the conveyances are executed, in order to collect arrears of rent, and the tenants will be compelled to pay arrears to the receiver.^ § 632. Receiver of leasehold premises bound to pay head-rent. The primary duty of a receiver of leasehold premises is to pay the head-rent, or principal rent due to the landlord of the premises, and this he is bound to do without any special order of court to that effect, and without com- pelling the landlord to resort to any proceedings for the pur- pose of enforcing payment.2 And when the title to leasehold premises becomes vested in a receiver, who continues in pos- session of and sub-lets the same, the lessor may recover the rent in an action against the receiver.^ So where a receiver has taken possession of real property under an order of court fixing the amount to be paid by him as rent, and he has con- tinued in possession for a considerable time paying the rental specified until the lessor has become insolvent, and has re- tained possession after such insolvency and while proceedings were pending to determine to whom the rental should be pay- able, he will be required to pay as rental for such period the rent specified in the order of court, and he can not insist that the party entitled thereto shall be limited to what he may be 99 Corrigan v. Trenton Delaware 1 Q"in v. Holland, Ca. temp. H., Falls Co., 3 Halst. Ch., 489. See, 295. also. Fish v. Potts, 4 Halst. Ch., 2 Balfe v. Blake, 1 Ir. Ch.. N. S., 277, affirmed on appeal, id., 909, 365 ; Walsh v. Walsh, 1 Ir. Eq., 209. upon the question of rents in such 3 Wells v. Higgins, 132 N. Y., 459, case. 30 N. E., 861. 780 RECEIVERS. [chap. XIV. able to show is a reasonable rental value of the premises in question.'* § 633. Right to make repairs. Upon the question of the receiver's right to make repairs, after recovery of the premises in ejectment, it has been held unnecessary for him to first ap- ply for leave of court to expend a part of the fund in his hands for repairs, prior to letting the premises; but that he is war- ranted in the first instance in laying out what he may deem necessary for repairs, and his disbursements, if reasonable and proper, will be allowed in passing his accounts. ^ But in an early English case, upon a bill by an administrator against a tenant for life, praying a decree that the tenant for life in pos- session should repair the premises, or that a receiver be ap- pointed with directions to repair, the master of the rolls re- fused the relief on the ground that there was no precedent for such an exercise of jurisdiction.^ And in New York it is held that a receiver in a foreclosure suit has no power, without the authority of the court, to make repairs, and that the allowance of claims for repairs made by a third person seeking repay- ment at the hands of the receiver is entirely within the discre- tion of the court, and that no appeal lies from its order re- fusing such an allowance.*^ § 634. Duty of receiver in case of waste; injunction against waste. Under the Irish chancery practice, the appropriate course for a receiver to adopt, when waste is com- mitted on lands subject to his control, is to apply to the court for a reference to a master, to inquire and report what pro- ceedings shall be taken by the receiver touching the waste. Or, if the case is so pressing as to admit of no delay, he may file a bill for an injunction to stay waste, and, at the same time with moving for the injunction, he may move for a reference to a master to inquire and report whether it is necessary that 4BlackalI v. Morrison, 170 111., 6 Wood t/. Gaynon, Amb., 395. 152. 48 N. E., 705. 7 W^yckoflf v. Scofield, 103 N. Y., 5 Macartney v. Walsh, Hayes, 29, 630, 9 N. E., 498. note b. CHAP. XIV.] REAL PROPERTY. 781 he should have adopted that proceeding, and whether it shall be continued.^ And the court may, upon the receiver's mo- tion, grant a conditional order restraining tenants from com- mitting waste, without requiring a bill to be filed for that pur- pose, leaving the case to be decided upon showing cause against the order. ^ § 635. Sale of property free from all liens. When a re- ceiver is in possession of real estate under and by virtue of his appointment, and proceedings are instituted in another court by parties claiming a lien upon the property, the court appoint- ing the receiver will entertain a bill filed by him for leave to sell the real estate free from all liens claimed by other parties, and to have so much of the proceeds of the sale set apart as shall be sufficient to pay the alleged liens, if they are finally sus- tained.lO But when a receiver is appointed over real estate in an action for the rescission of a contract, it is improper to authorize him to sell any part of the property in controversy for the benefit of plaintiff, before a final hearing upon the mer- its.ll A purchaser, however, from a receiver, who has given his note for the purchase money, having received and retained possession under the receiver's deed, may not, in the absence of fraud or mistake, deny the validity of the receiver's appoint- ment, in an action brought against him to enforce a vendor's lien for the unpaid purchase money.^^ And when liens upon 8 Mangle v. Lord Fingall, 1 Hog., while his right to possession and to 142 receive the rents remains unqnes- 9 Cronin v. McCarthy, Flan. & tioned, he has no concern with the ^ 49 legal title and can not maintain a 10 De Visser v. Blackstone. 6 suit to set aside a conveyance al- Blatchf., 235. ^eged to have been fraudulently 11 Eslerlund v. Dye, 56 Ga., 284. made by the husband after the re- Under a New York statute au- ceiver was appointed, or to set thori/ing a receiver in an action by aside an alleged fraudulent assign- a wife for divorce, it is held that ment by the husband of a mort- the receiver acquires no title to gage received upon such convey- property of the defendant, but is ance. or to restrain the foreclosure only entitled to possession as of such mortgage. Foster v. Town- against the defendant and all per- shend. 68 N. Y., 203. sons claiming under him. And 12 Stelzcr t;. La Rose, 79 Tnd., 435. 7S2 RECEIVERS. [chap. XIV. real estate are sought to be enforced in equity, and as a means of making the security available the land is placed in the hands of a receiver, the rents and profits received by him are the pri- mary fund which must first be applied to the extinguishment of the liens in the order of their priority.!^ § 636. What purchaser at receiver's sale bound to see; his title not affected by irregularities if court had jurisdic- tion. As regards the rights acquired by a purchaser of real property at a receiver's sale under order of court, it is sufficient for the purchaser to see that there was a suit in which the court appointed a receiver of the property ; that he was au- thorized by the court to sell, and that he sold in pursuance of such authority ; that the sale was confirmed by the court, and that the deed accurately recites the property sold. The title then passes to the purchaser, and he is not bound to inquire whether any errors occurred in the action of the court, or whether there were any irregularities in the action of the re- ceiver.^^ The court having properly acquired jurisdiction of the subject-matter, and having ordered its receiver to sell the 13 Milhous V. Dunham, 78 A!a., 48. would in that case pass to the pur- 14 Koontz V. Northern Bank, 16 chaser. He is not bound to inquire Wal., 196. "A purchaser under a whether any errors intervened in deed from a receiver," say the the action of the court, or irregu- court, Mr. Justice Field delivering larities were committed by the re- the opinion, "is not bound to ex- ceiver in the sale, any more than a amine all the proceedings in the purchaser under execution upon a case in which the receiver is ap- judgment is bound to look into the pointed. It is sufficient for him to errors and irregularities of a court see that there is a suit in equity, or on the trial of the case, or of the was one, in which the court ap- officer in enforcing its process. If pointed a receiver of property; that the receiver in the one case, or the such receiver was authorized by sheriff in the other, omit to perform the court to sell the property; that his Avhole duty, by which the par- a sale was made under such au- ties are injured, or commit any thority; that the sale was con- fraud upon the court, and the firmed by the court, and that the rights of third parties have so far deed accurately recites the property intervened as to prevent the court or interest thus sold. If the title from setting the proceedings aside, of the property was vested in the the injured parties must seek their receiver by order of the court, it remedy personally against those CHAP. XIV.] REAL PROPERTY. 783 real estate, no mere errors or irregularities in the exercise of the jurisdiction thus acquired can affect the title of a pur- chaser from the receiver, in a collateral proceeding. Thus, when a bill is filed in behalf of creditors against an adminis- trator to establish a lien upon the estate of the deceased, and on this bill a decree is had adjusting and fixing the rights of the creditors, removing the administrator and appointing a re- ceiver to wind up the estate, the court has full jurisdiction to order its receiver to sell the realty, and his deed in pursuance of such order will convey a good title. The court, in such case, having properly acquired jurisdiction for the purpose of settling the administration of the estate, retains its jurisdic- tion until the matter is fully and properly adjusted and the property sold.^^ It is held in Texas that a receiver, selling by order of the court, may convey the title of the defendant to the purchaser, although no conveyance had been executed by the defendant to the receiver, and that the title thus derived under the sale and conveyance by the receiver will prevail over that derived from a sale under a judgment against the defend- ant.l6 § 637. Receiver may enjoin tenant from using premises for purpose prohibited by lease. In case of the appoint- ment of a receiver over premises which are held by a tenant under a lease, with covenants against the use of the demised premises for a particular purpose, as for a shop, on pain of for- feiting the lease for a breach of the covenants, the receiver is entitled to the aid of an injunction to restrain the tenant from using the premises for the forbidden purpose.^*^ § 638. Leave to lease property; lease will not bind in- fant remainder-man. It is a common practice for receivers officers, or on their official bonds. 15 Walker v. Morris, 14 Ga., 323. The interest of parties in the con- 16 Russell v. Texas & Pacific R. troversy will generally induce such Co., 68 Tex., 646. attention to the proceedings as to 17 Mason v. Mason, Flan. & K., prevent great irregularities from 429. occurring, without being brought to the notice of the court." 784 RECEIVERS. [chap. XIV. in charge of real property, to apply to the court for leave to lease the premises under their control. And when an order is sought authorizing the receiver to let the property, it must be clearly shown who is in the actual possession, since otherwise a party in possession might be ejected without notice.^^ But a receiver will not be permitted to make a lease of real estate which will bind an infant remainder-man. ^^ § 638a. Rent due third parties; dilapidations. When receivers enter into possession of and receive the rents of real estate belonging to third persons not parties to the cause, but which had been held by defendants under lease, they may be required by petition in the cause in which they were appoint- ed to pay to the owners the rent due thereon. They may also be required, upon like petition, to reimburse such owners for dilapidations to the property, the lease requiring the lessee to keep the premises in the condition in which they were de- mised.2^ 18 Sealy v. Munns, 1 Ir. Eq., 332. affirming S. C, 15 Sim., 450. But 19 Gibbins v. Howell, 3 Madd., 1st see Brocklebank v. East London American edition, 242. Railway, 12 Ch. D., 839. 20 Neate v. Pink, 3 Mac. & G., 476, CHAPTER XV. OF RECEIVERS IN CASES OF MORTGAGES. I. Principles Governing the Relief o ^^q II. Inadequacy of Security and l^^soLvz^cvoTMoRiGAooK' ':.[''' 666 III. Receivers as Between Different Mortgagees ] g^ I. Principles Governing the Relief. § 639. The jurisdiction well established, but cautiously exercised; strong grounds must be shown. 640. English rule denying receiver to mortgagee having legal title I, Principles Governing the Relief. § 692. Principles referred to general jurisdiction of equity over trusts; scope of the present chapter. 693. Equity averse to displacing trustee under express trust. 694. Testamentary trusts; relief granted when trustees under will refuse to act. 695. Court will only consider probability of trust estate being wast- ed; bad habits and unfitness of trustee, when not sufficient ground. 696. Trust for management of public lands vested in state officers; court reluctant to interfere. 697. Receiver appointed pendente lite in action to remove trustee for unfitness; fraud; misconduct; breach of trust. 698. Mingling funds by trustee, when not sufficient ground; relief not granted because productive of no harm. 699. Receiver granted heir-at-law over lands fraudulently conveyed by trustee. 700. When devisee of personal property entitled to relief as against husband of a deceased wife. 701. Litigation to revoke probate of will no ground for receiver. 702. Refused as against trustee of persons interested under contract for public works. 703. Courts averse to appointing as receivers persons occupying fiduciary relations; when departure from rule permissible. 704. When management of estate transferred from receiver to new trustees. 705. When granted over pension. § 692. Principles referred to general jurisdiction of equity over trusts; scope of the present chapter. The ap- pointment of receivers is frequently necessary in cases of trusts, 847 848 RECEIVERS. [chap. XVI. either express or implied, as against trustees and persons oc- cupying fiduciary relations, and the principles governing this branch of the subject may be appropriately referred to the general jurisdiction of courts of equity over trusts. Strictly speaking, many of the cases in which relief is granted by ap- pointing a receiver over corporations are dependent to a con- siderable degree upon the doctrine of trusts, the officers of a corporation occupying a fiduciary relation toward its sharehold- ers and creditors, and the abuse of their trust constituting a frequent ground for the interference of equity by a receiver. The principles governing the relief, in such cases, have been elsewhere treated,^ and it is proposed, in the present chapter, to consider the subject only in its application to cases of express trust, such as those created under wills, cases of executors and administrators, of infancy and of lunacy. § 693. Equity averse to displacing trustee under express trust. It may properly be observed, at the outset, that the courts are averse to the displacement by a receiver of a trustee under an express trust, unless for good cause shown. ^ And equity will not, at the instance of one of several parties interested in an estate, displace a competent trustee in whom the estate has been vested by a testator, and take the possession from him and place it in the hands of a receiver, unless he wil- fully or ignorantly permits the property to be placed in a condi- tion of insecurity, which might be prevented by due care.^ So when a trustee has been in possession of the property in con- troversy in the administration of his trust for many years, upon a bill for his removal the court will not appoint a receiver be- fore answer when it is not shown that there is any great or impending danger to the property or fund, or that plaintiff will 1 See chapter X, ante. 3 Barkley v. Lord Reay, 2 Hare, 2 Barkley v. Lord Reay, 2 Hare, 306. And see Poythress v. Poy- 306; Hatcher v. Massey, 66 Ca., 66; thress, 16 Ga., 406; Orphan Asylum Latham v. Chafee, 7 Fed., 525 ; v. McCartee, Hopk. Ch., 429. Etowah Mining Co. v. Wills Valley M. & M. Co., 106 Ala., 492, 17 So., 522. CHAP. XVI.] TRUSTS. 849 suffer irreparable loss by delay.^ And in an action to set aside an assignment of his goods by a debtor to a trustee for the ben- efit of creditors, upon the ground of fraud, a receiver will not be appointed over the property held by such trustee pending a de- termination as to the good faith of such assignment, the fraud being denied and the trustee being solvent and able to respond to any judgment v^hich may be recovered against him.^ But if, in such a case, the defendants are insolvent, and there is probable ground for believing that the goods will be fraudu- lently disposed of before a hearing upon the merits, a receiver may be allowed, if plaintiff shows a reasonable probability that he will ultimately succeed in his action.^ § 694. Testamentary trusts; relief granted when trus- tees under will refuse to act. When a trust created by a will, to receive the rents and profits of real estate belonging to the testator, devolves upon a court of chancery, there being no person to manage the trust, one of the trustees having died and the others refusing to act, a proper case is presented for the ap- pointment of a receiver to take charge of the rents and profits of the realty, upon a bill filed by an heir-at-law and devisee under the will to have the question of its validity and of his rights thereunder determined. Under such circumstances, a receiver becomes necessary for the preservation of the rents and profits, in order that a proper decree may be made as to their disposition upon the final determination of the suitJ And when property, real and personal, has been devised to trustees, to be held upon certain trusts declared in the will, and some of the trustees refuse to act, a receiver may be appointed when all parties in interest are before the court and consent to the ap- pointment.^ § 695. Court will only consider probability of trust es- tate being wasted; bad habits and unfitness of trustee, when not sufficient ground. Upon a bill filed by the 4 Latham v. Chafee, 7 Fed., 525. 7 McCosker v. Brady, 1 Barb. Ch., 5 Levenson v. Elson, 88 N. C, 182. 329. 6 Ellett V. Newman, 92 N. C, 519. 8 Brodie v. Barry, 3 Moriv., 695. Receivers — 54. 850 RECEIVERS. [chap. XVI. cestui que trust against a testamentary trustee, seeking an ac- count of his trust and a receiver to take charge of the property ad interim, the only ground for rehef which the court will con- sider is, whether the trust estate is likely to be wasted before the termination of the litigation. And when this is not shown, the alleged bad habits of the trustee, and his unfitness to execute the trust devolved upon him by the testator's will, are not suffi- cient to warrant a court of equity in the exercise of its extra- ordinary powers by the appointment of a receiver.^ § 696. Trust for management of public lands vested in state officers; court reluctant to interfere. In the case of a trust created by an act of legislature and vested in certain public officers, who hold their trust ex officio, a portion of the duties required of them being of a public nature, equity is ex- tremely averse to interfering by a receiver, and it must be a very strong case which will justify the court in taking the property oyt of the control in which it has been placed by the legislature, and putting it into the hands of its own officers. Thus, when the legislature of a state has vested certain public lands belonging to the state in the governor and other state officers as trustees, to constitute an internal improvement fund, and to serve as a guaranty of bonds to be issued by certain rail- way companies, and the trustees are authorized to fix the prices of the lands, and to make provision for their drainage, settle- ment and cultivation, the court will not interfere by a receiver except for the most cogent reasons, nor until every other reme- dy has been tried in vain.^^ 9 Poythress v. Poythress, 16 Ga., the property out of their hands and 406. put it into the hands of its own 10 Vose V. Reed, 1 Woods, 647. officers. The legislature has seen Mr. Justice Bradley observes, p. 651, fit to intrust the chief officers of as follows : "Now these public and the state with these important du- political objects of the trust make ties, and it would show a great dis- it extremely fitting th?,t the chief respect to this co-ordinate branch executive officers of the state should of the government for the judiciary, administer the fund. And it must on light grounds, to displace these be a very strong case, indeed, officers from the trust, and to put which will induce the court to take appointees of its own in their stead. CHAP, XVI.] TRUSTS. 851 § 697. Receiver appointed pendente lite in action to re- move trustee for unfitness; fraud; misconduct; breach of trust. Notwithstanding the aversion already indicated, which courts of equity entertain toward the appointment of re- ceivers to displace trustees except for good cause shown, it has been held, when the object of the action was the removal of a trustee from his trust on the ground of unfitness, that the court might properly appoint a receiver pendente lite, the propriety of the relief, in such a case, being regarded as a matter resting in the discretion of the court to which the application was ad- dressed.ii And when land is devised to a trustee, to hold and manage it and to pay the rents and income to certain benefi- ciaries, the insolvency of the trustee and his misapplication of the proceeds of sales of the property, and his failure to apply the income in accordance with the terms of the trust, and his ap- If they are guilty of breach of duty they can be enjoined; they can be made personally responsible; the fund can be followed in the hands of persons getting hold of it in a fraudulent manner. It would be very strange if the courts could not in some way secure the rights of parties having an interest in the fund, without removing from the trust those official personages to whose administration it has been intrusted by the legislature. The court will not shut its eyes to the fact that these officers are con- stantly being changed by the suf- frages of the people of the state and the constituted power of appoint- ment; and it would be very incon- venient and awkward for the court, by the appointment of a receiver, to withhold the property from the possession and management of new state officers, fresh from the confi- dence of the people, and against whom no charges of incapacity or want of integrity have been made. To my mind it seems to be a case in which, if a receiver can be ap- pointed at all, the appointment ought not to be made until every other remedy has been tried in vain. Besides, looking at the pecu- liar and important duties attaching to the trust, how could a receiver, how could a court, without the greatest embarrassment, adminis- ter the trust? How could the court take cognizance of the require- ments of a vast political territory in reference to drainage, develop- ment, pre-emption and population? It would be a Herculean task for a court, or the receiver of a court, to perform. I do not feel that I ought to take the trust fund out of the hands of the state officers, in this case, and place it in the hands of a receiver. The motion for a receiver is therefore denied." 11 Janeway v. Green, cited in note to Darrow v. Lee, 16 Ab. Pr, 215. 852 RECEIVERS. [chap. XVI. propriation of such income to his own use, constitute sufficient ground for an injunction and a receiver in an action by the beneficiaries for an accounting.i^ So the failure of trustees, to whom leasehold property is devised upon certain specified trusts, to keep the premises in proper repair, and thereby to prevent a forfeiture of the leasehold, has been held to be suffi- cient ground for appointing a receiver of the rents for the pur- pose of applying them to needed repairs. ^^ And when a trustee violates the express conditions of his trust by loaning funds contrary to the provisions of the instrument by which the trust is defined, and by loaning a portion of such funds to a bankmg firm of which he is a member, and which soon afterward be- comes insolvent, sufficient ground is afforded to justify the ap- pointment of a receiver. Nor can the conduct of the trustee, in such case, be justified by the fact that he took securities for the loan which he regarded as good and sufficient at the time.^* So when lumber is sold to be used in a building upon particular premises, the seller being ignorant that such premises are held in trust by the purchaser, but believing them to be his indi- vidual property, and the building erected with such lumber proves beneficial to the trust estate, adding to its permanent value and increasing its rentals, if the trustee is insolvent, a re- ceiver may be appointed to collect the rents, nothing having been paid for the material or for the erection of the building.^^ So the withholding of trust funds by defendant is sufficient ground for a receiver upon a bill by the beneficiary for an ac- counting as to such funds. 16 And under the Supreme Court of Judicature Act in England, when a defaulting trustee has been ordered to pay money into court which is due from him in respect to an alleged breach of trust, and he has gone beyond the jurisdiction of the court, so that the order can not be enforced 12 Albright v. Albright, 91 N. C, 15 Malone v. Buice, 60 Ga., 152. 220. 16 Hagenbeck v. Hagenbeck Z. A. 13 In re Fowler, 16 Ch. D.. 723. Co., 59 Fed., 14. 14 North Carolina R. Co. v. Wil- son, 81 N. C, 223. CHAP. XVI.] TRUSTS. 853 by attachment, the appointment of a receiver over his property is an appropriate remedy for enforcing the order.^'^ § 698. Mingling funds by trustee, when not sufficient ground ; relief not granted because productive of no harm. Where by his will a testator devises real estate to trustees for the purpose of carrying out the provisions of the will, it is not sufficient ground for appointing a receiver to take the property from the custody of the trustees, that one of them has mingled the trust fund with his own private funds, when it is not al- leged that the fund is in danger, and when it is not denied that he keeps a proper account of the fund. And the court will not, in such a case, appoint a receiver merely upon the ground that it can be productive of no harm.^^ i § 699. Receiver granted heir-at-law over lands fraudu- lently conveyed by trustee. Upon a bill by an heir-at-law as cestui que trust, against a trustee and others to whom the trustee has conveyed real estate in which the plaintiff claims an equitable interest, the object of the bill being to set aside the conveyance as a fraud upon the cestui que trust, it is proper for the court to decree that defendants convey the property to a re- ceiver to be appointed by the court, and that such receiver be authorized to sell and convey the lands, and out of the proceeds to pay the amount due to the plaintiff under a former decree against the trustee. And while such a remedy may justly be regarded as a summary one, it is yet a proper exercise of the discretionary powers of a court of equity as against a wrong- doer, and the court will not compel the cestui que trust to resort to a sale by execution.!^ § 700. When devisee of personal property entitled to relief as against husband of a deceased wife. When per- sonal property has been bequeathed to defendant's wife, with an executory devise over to plaintiff upon the death of defend- 17 /n re Coney, 29 Ch. D., 993. 18 Orphan Asylum v. McCartce, See, also, Stanger Leathes v. Stan- Hopk. Ch., 429. ger Leathes, Weekly Notes, 1882, 19 Gunn v. Blair, 9 Wis., 352. p. 71. 854 RECEIVERS. [chap. XVI. ant's wife without issue, and upon such death defendant, the husband, takes possession of the property, the devisee is en- titled to a receiver, in an action for an accounting and to re- cover possession of the property, upon showing that the de- fendant in possession is irresponsible, having conveyed away his real estate and having no property subject to execution. Under such circumstances, the danger to the fund in contro- versy is regarded as sufficient ground for the interposition of a court of equity pendente lite.^^ § 701. Litigation to revoke probate of will no ground for receiver. While there are frequent instances where the English Court of Chancery allowed receivers, pending liti- gation as to the probate of a will, when the relief was necessary for the preservation of the estate, the fact that, after a will has been duly admitted to probate, litigation is instituted to recall or revoke the probate, does not of itself constitute sufficient ground to justify a court of equity in interfering by a receiver with the possession of the parties entitled thereto under the probate.21 § 702. Refused as against trustee of persons interested under contract for public works. Where there are differ- ent parties in interest in the profits of a contract for the per- formance of certain public work, and a trustee has been ap- pointed to receive the money due thereon and to pay it over to the parties in interest, a receiver will not be appointed to take charge of the contract upon the application of one only of the parties, who holds but a small interest, when it is mani- fest to the court that the appointment may result in destroy- ing the value of the contract, and when no misconduct is shown against the trustee.^^ 20Ladd V. Harvey, 21 N. H., 514. 21 Newton v. Ricketts, 10 Beav., As to the circumstances which will 525. justify a court in appointing a re- 22 Devlin v. Hope, 16 Ab. Pr., ceiver over real estate held in trust 314. for a wife who is entitled to a por- tion of the annual income there- from, see Robert v. Tift, 60 Ga., 566, CHAP. XVI.] TRUSTS. 855 § 703. Courts averse to appointing as receivers persons occupying fiduciary relations; when departure from rule permissible. Courts of equity have always been extremely averse to the appointment as receivers of persons occupying fiduciary relations toward the property or estate forming the subject-matter of the receivership, and as a general rule a trus- tee of an estate will not be appointed receiver for its manage- ment.23 fhg reason for the rule is found in the fact that the court- expects a trustee to watch the proceedings with an ad- verse eye, to see that the receiver does his duty.24 Where, however, considering the trustee's knowledge of the estate, it seems advisable and for the best interests of the estate that he should be appointed, a departure from the rule is allowable, but only upon condition that he shall receive no compensation for his services as receiver.^s § 704. When management of estate transferred from re- ceiver to new trustees. When real estate has been de- vised to trustees upon certain specified trusts, and a receiver of the estate is appointed upon the ground of their misconduct and incapacity, it is proper, upon the appointment of new trustees, that the management of the estate should be trans- ferred from the receiver to such new trustees, and the court will so order, if satisfied that it may be done without injury to the legatees under the will, and when it is apparent that it will result to the advantage of the estate by doing away with the expense of the receivership.-^ § 705. When granted over pension. A receiver has been appointed over a government pension, which had been paid through a trustee, when the trustee had refused payment, and had put a stop to the pension and had then gone beyond the 23 V. JoHand, 8 Ves., 72; Sykes v. Hastings, 11 Ves., 363. Sykes V. Hastings, U Ves., 363; See. also, Newport v. Bury, 23 Sutton V. Jones, 15 Ves., 584. Beav.. 30. 24 Sykes z;. Hastings, 11 Ves., 363. 26 Bainbrigge v. Blair, 3 Beav., 25 Hibbert v. Jenkins, cited in 421. 856 RECEIVERS. [chap. XVI. jurisdiction of the court. 2" And a receiver has been allowed in behalf of a judgment creditor over a civil-service pension due to the debtor in monthly instalments.^^ And a receiver has been appointed by way of equitable execution upon be- half of a judgment creditor over the pension of a retired officer of the Royal Irish Constabulary.29 But a receiver was refused over a pension granted by the government to de- fendant, when he had conveyed his interest therein, with oth- er property, to secure an annuitant.^^ 2" Noad V. Backhouse, 2 Y. & C. 30 Davis v. Duke of Marlborough, C. C, 529. 1 Swans., 74; S. C, 2 Wils. Ch., 28 Molony v. Cruise, 30 L. R., In, 130. See S. C, 2 Swans., 113. 99. 29 Manning v. MuIIins, (1898) 2 L. R. Ir., 34. CHAP. XVI.] TRUSTS. 857 II. Receivers Over Executors and Administrators. § 706. Courts averse to interference; doctrine of quia timet; imminent danger must be shown. 707. Executor not displaced upon slight grounds; nor upon charges made on information and belief; must be shown to be irre- sponsible. 708. Serious waste and mismanagement ground for relief; inca- pacity of husband of executrix; breach of trust. 709. Receiver not allowed because of executor's poverty; nor when charges of bill are denied by answer. 710. Misconduct in addition to insolvency ground for relief; re- ceiver may act with solvent executor; executors required to surrender books and assets. 711. Actual bankruptcy ground for receiver. 712. Removal of executor from state sufficient cause. 713. Receiver allowed by English Court of Chancery over foreign executors or estates. 714. Receiver granted in England pending litigation in ecclesiasti- cal court concerning probate or administration. 715. When receiver allowed judgment creditors of estate as against executor. 716. Not allowed when it would interfere with administration. 717. Receiver of administratrix in personal capacity not entitled to rents due in representative capacity; action to recover such rents. 718. Death of one executor and refusal of another to act, ground for receiver; misunderstanding between executors not ground. 719. Plaintifif equitably interested in real estate devised to executors may have receiver to effect sale. 720. Court will not look into executor's account rendered to probate court. 721. Surety on administrator's bond can not have receiver on default of administrator to secure him; surety for intestate. 722. When receiver allowed in behalf of ward against administrator. 723. On removal of receiver from country, executors may again act. 724. Appointment of receiver does not remove executor. § 706. Courts averse to interference; doctrine of quia timet; imminent danger must be shown. The jurisdiction of equity by the appointment of receivers over executors and administrators, upon the ground of an abuse of their trust, although well established, is nevertheless exercised with ex- 858 RECEIVERS. [chap. XVI. treme caution, and the courts are exceedingly averse to grant- ing the reHef unless in pressing cases, since it is for the tes- tator to say in whom the management of his estate shall be vested after his decease.^! And while courts of equity have unquestioned power, in a proper case, to take the adminis- tration of the estate of a decedent out of the hands of his administrator or executor, and to manage it by a receiver, this summary relief should only be granted in cases of mani- fest danger of loss, destruction or material injury to the es- tate. It is only under extraordinary circumstances that equity will thus wrest the administration from the hands of the legal representative, and place it in the hands of a receiver, and the interference can be justified only by evidence of gross mis- conduct or personal disability.^^ And the principle on which the relief is granted, in this class of cases, is said to rest on the doctrine of quia timet, the interference being justified for the prevention of a future and probable injury, and not to redrsss a grievance which has already occurred.^^ It is, therefore, necessary that a strong case should be shown of imminent danger to the estate unless a receiver is appointed. And when the bill fails to show any immediate danger of waste, or of any wrong which the probate court may not ef- fectually prevent, and the charges of the bill are wanting in certainty, a court of equity will not interpose its extraordi- nary aid by appointing a receiver.34 "1 See Powell z>. Quinn, 49 Ga., Dougherty v. McDougald, 10 Ga., 523; Harrup v. Winslet, 37 Ga.,655; 121; Brooker v. Brooker, 3 Sm. & Dougherty v. McDougald, 10 Ga., G., 475. See, also, Shannon v. 121 ; Stairley v. Rabe, McMul. Eq., Davis. 64 Miss., 717, 2 So., 240. 22; Brooker v. Brooker, 3 Sm. & 33 Dougherty v. McDougald, 10 G., 475; Hervey v. Fitzpatrick, Ga., 121. See, also, Perrin v. Lep- Kay, 421 ; Middleton v. Dodswell, per, 56 Mich.. 351, 23 N. W., 39. 13 Ves., 266; Kendall v. Kendall, 1 34 Powell v. Quinn, 49 Ga., 523; Hare, 152; Steele v. Cobham, L. K., Wanneker v. Hitchcock, 38 Fed., 1 Ch. App., 325 ; Haines v. Carpen- 383. In Powell v. Quinn, 49 Ga., ter, 1 Woods, 262; West v. Mercer, 523, McCay, J., observes, p. 529: 130 Ga., 357, 60 S. E., 859. "It ought to be a very strong case 32 Harrup v. Winslet, 37 Ga., 655 ; indeed to justify a chancellor in CHAP. XVI.] TRUSTS. 859 § 707. Executor not displaced upon slight grounds ; nor upon charges made on information and belief; must be shown to be irresponsible. An executor, duly appointed by the will of a testator, who has qualified in the proper court and given bond for the faithful performance of his duties, and who has entered upon the performance of his trust and is in possession of the estate, will not be displaced upon slight grounds, and a strong case must be made out to warrant equity in interfering if the executor is willing to act. It does not follow, because a suit is instituted against him by a per- son claiming an interest in the estate, that the trust created by the testator is to be set aside. And when a devisee, claim- ing an interest in the estate, files a bill against the executor, to enforce the trusts of the will, and seeks a receiver upon the ground of the executor's incompetency and mismanagement, and alleges that he is endeavoring to defeat the bequest to plaintiff, and that he has confederated with others to insti- tute fictitious suits against the estate to swallow up the assets, the court will not appoint a receiver if these charges are made only upon information and belief, and are not supported by appointing a receiver and taking or of any wrong which the ordi- the assets of an estate out of the nary may not effectually grapple hands of an administrator duly ap- with and prevent. The charges in pointed by the court of ordinary. the bill are wanting in certainty, The ordinary has constitutional ju- and it would be dangerous to use risdiction over the subject-matter, the extraordinary power of ap- and special reasons should appear pointing a receiver on such allega- why that jurisdiction does not an- tions. Fraud is charged, and mis- swer the ends of justice. The or- representation in obtaining the dinary may discharge an adminis- letters, but no specification is made, trator and appoint another; he no facts detailed. This is entirely may require new security, and he too loose and indefinite." But see may compel the delinquent admin- Knight v. Knight, 75 Ga., 386. For istrator to account and deliver up circumstances which justify the the property as well as a court of appointment of a receiver over chancery can do it. There is no property which an administrator charge in this bill, as far as the as- seeks to administer, the title to sets of Mrs. Victoria Quinn's estate which is in another, see Hill v. are concerned, that shows any im- Arnold, 79 Ga., 367, 4 S. E., 751. mediate imminent danger of waste, 860 RECEIVERS. [chap. XVI. affidavits. And even though a danger to the trust property is estabhshed, that alone will not suffice, but it must also ap- pear that the defendant executor in possession is irresponsible.^^ § 708. Serious waste and mismanagement ground for relief ; incapacity of husband of executrix ; breach of trust. W'hile, as is thus seen, a strong case of abuse of trust or mis- management must be made out to warrant a court of equity in granting a receiver, as against an executor of an estate 35 Haines v. Carpenter, 1 Woods, 262. The principles governing, in such case, are very clearly stated in the opinion of Mr. Justice Woods, as follows, p. 265: "The party in possession of the property for which a receiver is asked is the executor named in the will of the testatrix, who has qualified in the probate court and given bond for the faith- ful discharge of his trust. Under these circumstances, the court should not displace him upon light grounds. And though a suit be in- stituted by a party having an inter- est in the estate, it does not follow that the trust created by the testator is to be set aside. A strong case must be made out to induce the court to dispossess a trustee or ex- ecutor who is willing to act. The grounds upon which this court is asked to dispossess the executor and turn over the property of the suc- cession to a trustee, are that Car- penter, the executor, is unfit and in- competent to manage and success- fully control the estate; that he has only cultivated a part of the land susceptible of cultivation, when, in the opinion of the complainants, all of it should have been cultivated; that he is endeavoring to defeat the bequest to the said Baptist church by depreciating the value of the es- tate, and that he is confederating with said Elias S. Dennis to insti- tute fictitious suits against the es- tate, in order to sweep away its assets. These charges are not di- rectly made, but are stated on the information and belief of complain- ants, and they are not supported by a single affidavit to any fact. The application to appoint a receiver must be supported by evidence showing that the appointment is necessary. There is absolutely no testimony to support the applica- tion in this case. It is true that one of the complainants swears to the bill, but in doing so he only swears that he has been informed of and believes certain statements in his bill. This is not evidence, and gives no support to the application. The fact is that the court is asked to appoint a receiver, in this case, on mere rumor, without any proof showing the necessity of the ap- pointment. But even if the fact were established that the trust property was in danger, that, of itself, would not be sufficient. It must be further shown that the party in possession is irresponsible. There is no proof that the executor is irresponsible, or his bond insuffi- cient, nor is there any averment in the bill to that effect. The motion for a receiver must, therefore, be overruled." CHAP. XVI.] TRUSTS. 861 designated by the testator's will, yet when the abuse of the trust is manifest, and it is plainly apparent that there have been serious waste and misappropriation of the funds, equity may properly interfere by a receiver.36 Especially is this true when the mismanag-ement is shown not in a single in- stance, but from an habitual course of dealing, involving the property in danger, and when the other executors consent to the appointment. The court, in such case, treats an executor like any other trustee, and will take from his hands the man- agement of the trust if he has been guilty of waste and gross mismanagement. And in such case, the appointment may be made before defendant has answered.^"^ So when, after the death of a testator, his widow becomes executrix under the will, and she afterward marries and intrusts the management of the estate to her husband, who is incapable of properly con- ducting it, and under whose supervision the funds are mis- appropriated, and the estate is involved in debt, an appropriate case is presented for a receiver upon application of the minor heirs of the deceased.^^ And when an executor has, upon his own admission, wasted and misappropriated the trust funds in his hands, and refuses to disclose how and where he has done so, and has permitted a co-executor also to misappro- priate the funds, such a breach of trust is shown as to clearly require the court to take the management of the estate out of the executor's hands by placing it in the hands of a receiver. In such case, the assets of the estate will be delivered to the receiver, and the debts will be paid to him, but this only ex- tends to assets and property within the state and debts due from residents of the state, or secured upon property therein. 39 So if the conduct of an administrator is such as to hinder and impede the collection of the debts due to the estate, a re- 36 Middleton v. Dodswell, 13 Ves., 37 Middleton v. Dodswell, 13 Ves., 266; Stairley v. Rabe, McMnl. Eq., 266. 22; Harmon v. Wagener, 33 S. C, 38 Stairley v. Rabe, McMul. Eq., 487, 12 S. E., 98. And see Thomp- 22. son V. Orser, 105 Ga., 482, 30 S. E., 39 Price's Executrix v. Price's 626. Executors, 8 C. E. Green, 428. 862 RECEIVERS. [chap. XVI. ceiver may be appointed to collect and liold the assets, and the court, in such case, may retain jurisdiction for the purpose of finally settling the estate.'*^ And when an executor converts both the real and personal estate into money and notes, thus giving rise to a reasonable apprehension that the estate is not sufficiently secured, in an action against him for an account- ing and settlement of his trust, the court may properly order that he give a bond for the protection of the estate, and to secure the performance of whatever decree may be finally re- covered against him, or, in default thereof, that a receiver be appointed.^^ § 709. Receiver not allowed because of executor's pov- erty ; nor when charges of bill are denied by answer. Equi- ty will not interfere by a receiver with the management of an estate in the hands of executors merely upon the ground of their poverty, or because they are not in affluent circum- stances, when no suggestion is made of improper conduct, especially when this was the condition of the executor at the time of his appointment; since the interference upon such ground would have the effect of changing the trust created by the will, although no misbehavior is shown. Unless, there- fore, some misconduct or negligence is shown on the part of the executor, or some danger of a loss for which he will not be able to respond by reason of his poverty, the court will not transfer the management of the estate from his hands to those of a receiver.'*^ Nor will a receiver be allowed over an 40 Du Val V. Marshall, 30 Ark., other property than an annuity of 230. £20, given to her by the testator. 41 Gray v. Gaither, 74 N. C., 237. Sir William Grant, Master of the 42 Knight V. Duplessis, 1 Ves., 324 ; Rolls, observes, p. 5 : "There is no Howard v. Papera, 1 Madd., 141, doubt that in several instances, as 1st American edition, p. 86; Fair- if the executor has wasted the bairn v. Fisher, 4 Jones Eq., 390; effects, or in other respects misoon- Johns V. Johns, 23 Ga., 31; Anony- ducted himself, this court will in- mous, 12 Ves., 4 The case last terfere; but has the court ever cited was a motion made before taken the disposition out of the answer for a receiver, upon the hands of the executor on account ground that the executrix had no of his mean circumstances; for it CHAP. XVI.] TRUSTS. 863 estate in the hands of executors because of their right to re- tain assets in satisfaction of a mortgage indebtedness due to them from the testator to the prejudice of general creditors, when it is not shown that the executors have been guilty of waste or improper conduct in the management of the estate."*^ And when the charges of the bill, as to insolvency and mis- management of the business by the defendant executor, are fully and completely denied by his answer, a receiver should not be allowed.^"* § 710. Misconduct in addition to insolvency ground for relief; receiver may act with solvent executor; executors required to surrender books and assets. Where, however, in addition to insolvency, serious misconduct is shown on the part of the executor, as well as danger of loss to the estate, a different case is presented, and the court may properly in- terfere by a receiver to prevent the assets from being wasted. Thus, upon a bill filed in behalf of the heirs of an estate, showing great and unnecessary delay by the executors in settling the estate; that some of the heirs have received large sums in excess of their just proportion ; that some of the ex- ecutors have misapplied funds; and that three of the four executors are insolvent, a fitting case is presented for the in- terference of equity by a receiver. Under such circumstances, the receiver is appointed in lieu of the insolvent executors, to act with the solvent executor if the latter will consent so to act; otherwise he is appointed generally, to act in lieu of them all. And the executors will be required to deliver over comes to that? You must prove but at present no case is made for the unfitness of the person. In a receiver." See as to the effect of this case, the only ground is that an executor having engaged in a she is not a person of property. hazardous business as ground for a . . . The allegation goes no fur- receiver pendente lite, Bowling v. ther than this executrix is in mean Scales, 2 Tenn., Ch., 63. circumstances. If any miscon- 43 /„ r? Wells, 45 Ch. D., 569. duct, waste, or improper disposi- 44 Fairbairn v. Fisher, 4 Jones tion of the assets were shown, the Eq., 390. court would instantly interfere; 864 RECEIVERS. [chap. XVI. to the receiver, under oath, all books, vouchers, securities, title deeds, property and money belonging to the estate.*^ § 711. Actual bankruptcy ground for receiver. While, as already shown, mere insolvency of an executor is not of itself sufficient ground for a receiver, an actual adjudication in bankruptcy presents much stronger ground for the relief. And where a sole executor and trustee of the estate of a de- ceased testator has been adjudged bankrupt, upon his own pe- tition, and assignees of his estate have been appointed, a re- ceiver may be allowed on the ground that there is no person to protect the assets, the assignees of the bankrupt executor having no power to interfere with the trust estate. And it is not a sufficient objection to the relief, in such a case, that the assignees have not been brought before the court.^^ So where an executor had become bankrupt, a receiver was ap- pointed of the rents and profits of the real estate, but without prejudice to an application by the next of kin for a receiver of the personalty when the will should be proven. ^"^ § 712. Removal of executor from state sufficient cause. The removal of an executor from the state, leaving both his cestui que trust and the trust estate within the state, is suffi- cient ground for the interference of equity by a receiver, upon the application of the cestui que trust. The court proceeds, in such a case, upon the ground that there is an abandonment of his trust on the part of the executor, and as his removal places him beyond the jurisdiction of the court and out of reach of its process, he is no longer liable to account. It is, therefore, the duty of the court to see that such removal or abandonment does not prejudice the beneficiaries of the estate, and for this purpose to grant them the aid of a receiver.^^ 45 Jenkins v. Jenkins, 1 Paige, 243. a. See, also, Langley v. Hawk, 5 46 Steele v. Cobham, L. R., 1 Ch. Madd., 46, 1st American edition, 36. App., 325. 48 Ex parte Galluchat, 1 Hill Eq., 47 Gladdon v. Stoneman, 1 Madd., 148. The court, O'Neall, J., say, 141, 1st American edition, 86, note p. 151: "As long as the executor CHAP. XVI,] TRUSTS. 865 § 713. Receiver allowed by English Court of Chancery over foreign executors or estates. The aid of a receiver was sometimes granted by the EngHsh Court of Chancery, as against executors or administrators of an estate situated in a foreign country. Thus, when a person claiming to be the administrator of an estate situated in a foreign country had come within the jurisdiction of the court of chancery, and had brought with him a portion of the estate, a receiver was ap- pointed pendente lite, upon a bill by the English administrator to prevent the removal of the assets beyond the jurisdiction of the court, although no misconduct was alleged against the ^' Rendall v. Kendall, 1 Hare, pendix, Ixxi. 152; Wood v. Hitchings, 2 Beav., 52 See Rendall v. Rendall, 1 Hare, 289. See S. C, 3 Beav., 504. 152; Wood v. Hitchings, 2 Beav., 54 Wood v. Hitchings, 2 Beav., 289 ; Anderson v. Guichard, 9 Hare. 289. See S. C, 3 Beav.. 504. 275. CHAP. XVI.] TRUSTS. 867 for discovery. ^5 g^j^ when a controversy was pending be- tween different executors of the same estate, and the right to probate the estate was in contest in the proper court, and an apphcation was made for a receiver pendente lite, who was appointed, it was held that there was no necessity for bring- ing such apphcation to a final hearing, and that such a prac- tice was without precedent.^^ § 715. When receiver allowed judgment creditors of es- tate as against executor. The aid of a receiver is some times invoked in belialf of judgment creditors against execu- tors. And when judgment creditors of the estate of a de- ceased person show by their bill that the executor, who has been removed from his trust, has, by false and fraudulent repre- sentations, possessed himself of a large fund belonging to the estate, which he has misapplied, and that he is wholly irre- sponsible and insolvent, they are entitled to a receiver to take charge of the fund. Such a case is regarded as presenting strong grounds for the interposition of equity under its gen- eral power over trusts and trust estates, in the exercise of which power a receiver is frequently indispensable.^''^ And when a judgment creditor of a deceased debtor files a bill against the executor, showing that he has given no security, 55 Wood V. Hitchings, 2 Beav., for the appointment of a receiver, 289. See S. C, 3 Beav., 504. as against an executor, yet where 56 Anderson v. Guichard, 9 Hare, it is coupled v^-ith other facts or 275. circumstances, showing that he has 57 £;r parte Walker, 25 .Ma., 81. proceeded not in accordance with "Nothing is more common in chan- law (as where he has made private eery practice," say the court, Chil- sales of the property of the estate, ton, C. J., p. 104, "than the ap- or is dealing with it on his private pointment of receivers in suits account), especially where it is against executors, where there is doubtful whether he is, in fact, llic danger to the fund without such legal representative, or is not shorn appointment ; so, also, if he has of his authority by removal, the wasted the effects, or in other re- court, in all such cases, should •spects has misconducted himself. promptly secure the effects by Although mere poverty, of itself, placing them in the hands of a may not furnish sufficient ground receiver." 868 RECEIVERS. [chap. XVI. that he is insolvent and of extravagant habits, and that he is mismanaging the estate and is about to leave the country, and praying an injunction and a receiver, it is error to dismiss the bill, no answer being filed and its equities not being denied.^S § 716. Not allowed when it would interfere with admin- istration. Where, however, a judgment is obtained against a debtor and a creditor's bill is filed thereon during his life- time, and after his death the creditor's suit is revived against his administrator, a receiver will not be appointed over the effects of the deceased on the application of plaintiff in the creditor's suit. In such case the assets are to be disposed of in due course of administration, according to the laws of the state, and the priority which plaintiff may have gained by fil- ing his bill dies with the defendant, and a receiver, in such case, is both unnecessary and would interfere with the due course of administration.59 But it is held that if a receiver had already been appointed, and had obtained possession of property or money belonging to the debtor, before his death, the court appointing him, having possession through its offi- cer, would not part with that possession to the executor or administrator, but would apply the fund in payment of the debt, due regard being had to the statutory rights of other creditors. ^^ § 717. Receiver of administratrix in personal capacity not entitled to rents due in representative capacity ; action to recover such rents. When a judgment is obtained against an administratrix in her personal capacity, and a re- ceiver is appointed over her effects in aid of the judgment creditor, such receiver is not entitled to the rents due to the administratrix in her representative capacity. And in such case, tenants of the estate have a right of action to recover back money thus improperly paid, and having assigned such right 58 Chappell r. Akin, 39 Ga., 177. 60 Mathews v. Neilson, 3 Edw. 59 Sylvester v. Reed, 3 Edw. Ch., Ch., 346. 296; Mathews v. Neilson, id., 346. CHAP. XVI.] TRUSTS. 869 of action to the administratrix, she may maintain the action for the benefit of the estate.^! § 718. Death of one executor and refusal of another to act, ground for receiver; misunderstanding between ex- ecutors not ground. The death of one of two executors, and the refusal of the other to act, afford sufficient ground for the interference of equity by appointing a receiver to take charge of the assets, upon the appHcation of persons beneficial- ly interested in the estate.^^ g^^- ^j^g rnere fact of a misun- derstanding existing between two executors, as to the man- agement of the estate intrusted to their charge, is not suffi- cient ground for a receiver to take the control of the estate out of their hands.^^ If, however, a receiver is appointed up- on the ground of the misconduct of one of two executors, his co-executor not having qualified as such until after such mis- conduct, but before the appointment of the receiver, the man- agement of the estate will not be restored to such co-execu- tor when he has acquiesced in the appointment without ob- jection or appeal.^'* § 719. Plaintiff equitably interested in real estate de- vised to executors may have receiver to effect sale. A receiver has been allowed for the purpose of effecting a sale of real estate of a deceased person, which he had devised to his executors, but in which plaintiff was equitably interested under an agreement with the deceased for a proportion of the profits arising from a sale of the premises. And in such a case, the ground for relief would seem to be, that the executors occupy to a certain extent a possession adverse to that of the plaintiff, rendering it necessary that an impartial person be appointed to make the sale.^^ 61 Barker v. Clark, 12 Ab. Pr., 64 Praser v. City Council, 19 S. N. S., 106. C, 384. 62 Palmer v. Wright, 10 Beav., 65 Marvine v. Drexcl's Executors, 234. 68 Pa. St., 362. 63 Fairbairn v. Fisher, 4 Jones Eq., 390. 870 RECEIVERS. [chap. XVI. § 720. Court will not look into executor's account ren- dered to probate court. Upon a bill filed against an execu- tor for a receiver, upon the ground of his alleged waste and mismanagement of the estate, it is not competent for the court to look into the accuracy of the executor's account rendered to the probate court, with a view to support the grounds made by the bill for a receiver. In such case, the probate court be- ing the appropriate tribunal to act upon the executor's ac- count, a court of chancery will not base any action upon such account, having no control or jurisdiction in the premises. ^^ § 721. Surety on administrator's bond can not have re- ceiver on default of administrator to secure him ; surety for intestate. Equity will not entertain a bill in behalf of a surety upon the official bond of an administrator, to compel the administrator to give security to plaintiff for his obliga- tion of suretyship, or in default thereof that a receiver be ap- pointed of the estate in the administrator's hands. Such a case presents no ground for the aid of a receiver, unless the relief should become necessary for the protection of minor heirs of the estate upon the refusal of the probate court to appoint guardians of such minors. ^^ And a surety for a debt due from one who has died intestate can not maintain an ac- tion for a receiver to collect the assets and to administer the estate of the deceased, against persons improperly controlling or managing the assets, without authority. ^^ § 722. When receiver allowed in behalf of ward against administrator. When a ward, through her guardian, files a bill against the administrator of the estate, showing that she is entitled, under a previous decree, to a specific interest in certain lands held by the administrator, a receiver may be ap- 66 Simmons v. Henderson, Freem. which has once been sold by an (Miss.), 493. administrator, upon a bill by sure- ST Delaney v. Tipton, 3 Hayw. ties upon a bond given for the piir- (Tenn.), 14. chase-money at such sale, the ad- 68 Walker v. Drew. 20 Fla., 908, ministrator being insolvent and in As to the circumstances which will possession of the land, see Sten- warrant a receiver over real estate house v. Davis, 82 N. C, 432. CHAP. XVI.] TRUSTS. 871 pointed to take charg-e of the land, the bill showing that the administrator is committing- waste, and that he and his sur- eties are wholly insolvent.^^ But a receiver will not be al- lowed over an estate in the hands of an administrator mere- ly because of alleged misconduct of the deceased touching the property in his life-time, in the absence of any showing of waste or improper conduct by the administrator."^^ § 723. On removal of receiver from country, executors may again act. When a receiver had been appointed be- cause of the refusal of executors to act under the will of the testator, but he subsequently removed from the country, and the executors w^ere willing to act, instead of appointing a new receiver the court ordered the executors to act, and directed the receiver to pass his accounts. "^^ § 724. Appointment of receiver does not remove execu- tor. While a court of equity, as has been shown, may, in proper cases, enjoin an executor from proceeding further with his duties, and may appoint a receiver to take charge of the G^ Ware z^. Ware, 42 Ga., 408. The difficulties to refuse now to e.xam- conrt, Lochrane, C. J., say, p. 411: ine the jurisdiction invoked and "The decree gives a specific inter- interposed by proper process to est in this property to the com- compel a settlement of the interest plainant to the amount of $2,850, by decree vested in this ward, and operates as a conveyance to And we therefore reverse the juds- that effect. The character of the ment of the court below dismissing litigation now develops just such a the bill for want of equity, and case as belongs particularly to a direct him to appoint a proper re- court of equity to take jurisdiction ceiver, who shall take custody of of and determine. This ward may the property, protect the same be delayed in the recovery of her from waste and injury, and that rights, after adjudication by the all parties in interest be cited to courts, interminably by the intro- appear, and be made parties to this duction of new matters arising out bill, and the property sold for the of the facts disclosed by the record, purpose of division among the unless the chancellor lays his hands claimants." on this property and compels all ''^ Perrin 7'. Lepper. 56 Mich., parties in interest to come forward 351. 23 N. W., 39. and present their respective claims 71 Davy v. Gronow, 14 L. J., N. for adjudication and settlement. S. Ch., 134. Tt would end in a multiplicity of 872 RECEIVERS. [chap. XVI. estate, to be administered under the direction of the court, such appointment does not have the effect of removing the executor, since the power of removal is not within the juris- diction of equity, but rests in the probate courts.'^^ And a receiver appointed over the estate of a deceased person has no authority to interfere with suits pending against the executor at the time of such appointment, unless authorized by the court so to do ; and, in the absence of such authority, he will be treated as a stranger to such suits.'^^ 72 Leddel's Executor v. Starr, 4 '^3 Gadsden v. Whaley, 14 S. C.» C. E. Green, 159. 210. CHAP. XVI.] TRUSTS. 873 III. Receivers Over Estates of Infants. § 725. Jurisdiction founded on general doctrine of trusts; misappro- priation of funds by husband of executrix ground for re- ceiver. 726. Relief under the English practice; infant tenant in tail allowed receiver on absconding of executor. 727. Refusal of one of several trustees to act no ground for re- ceiver; may be allowed on refusal of one of two. 728. When receiver allowed on behalf of infant as against mort- gagee in possession of infant's store. 729. Trustee of infant ineligible as receiver; next friend ineligible; when executor allowed to act. 730. When receiver of infant's estate chargeable with interest on failing to invest funds. 731. When receiver authorized to expend money for relief of ten- ants. 732. Receiver not discharged on one infant coming of age before the other. § 725. Jurisdiction founded on general doctrine of trusts; misappropriation of funds by husband of execu- trix ground for receiver. The appointment of receivers for the protection of the property rights of infants, as against executors or other persons occupying fiduciary relations to- ward the infant's estate, rests upon the general doctrine of trusts already discussed, and is governed by the same general principles. And while courts of equity are averse to inter- fering with the management of estates by executors, even in behalf of infants, a receiver will be granted in a clear case of mismanagement and misappropriation of the funds, or of hazard to the infant's estate. Thus, when an executrix in- trusts the control of the estate to her husband, who is in- capable of properly managing the trust, and under whose supervision the funds are misappropriated and the estate is involved in debt, a fitting case is presented for a receiver upon the application of minor heirs of the deceased testator.'''* 74 Stairley v. Rabe, McMul. 'Rq., of a receiver over (he estate of a 22. As to the powers and functions ward upon the removal of a guard- 874 RECEIVERS. [CH,\P. XVI. § 726. Relief under the English practice; infant tenant in tail allowed receiver on absconding of executor. The relief, in this class of cases, has been more frequently grant- ed under the English practice than in this country, and the jurisdiction has been well settled in that country from an early period. And upon a bill by an infant tenant in tail of an estate which had been in possession of an executor, it ap- pearing that the executor had absconded for a period of over two years, and that there was danger of the property being lost for want of management, it was regarded as a strong case for a receiver.'^-^ § 727. Refusal of one of several trustees to act no ground for receiver; may be allowed on refusal of one of two. \\'hen a testator has devised his property to sev- eral trustees to carry out certain trusts specified in his will, a receiver of the estate will not be appointed in behalf of in- fant heirs merely because one of the trustees has disclaimed or refused to act, since the court will not presume misconduct on the part of the other trustees. '^^ But where there were two trustees of an estate, one of whom had never acted and de- clined so to do, a receiver was appointed of the rents and profits in behalf of infant cestuis que trnstcnt, although the other trustee was desirous of acting.''"^ § 728. When receiver allowed on behalf of infant as against mortgagee in possession of infant's store. The necessity of protecting an infant's property and estate, when it is not vested in a trustee, but is in the adverse possession of a person hostile to the infant's interests, may afford suffi- ian, under the statutes of North receiver of the rents and profits of Caroh'na, see Temple v. Williams, an infant's estate, when there was 91 N. C, 82. no bill depending in court; but that '^^ Pitcher v. Helliar, Dick., 580. if it were only filed, there might be And Lord Thurlow observed, in this an application for a receiver on be- case, that he would have ordered a half of the infants. See, also, Ex receiver, even if there had been no parte Whitfield, 2 Atk., 315. bill filed. But in Anonymous, 1 70 Browell v. Reed, 1 Hare, 434. Atk., 489, it was said that there 77 Tait v. Jenkins, 1 Y.'& C. C. was no instance of appointing a C, 492. CHAP. XVI.] TRUSTS. 875 cient gToiind for the interference of equity by a receiver. Thus, when an infant has purchased a stock of goods for pur- poses of trade, and has mortgaged them to secure payment of a portion of the purchase-money, and the mortgagee upon defauh takes possession of all the goods in plaintiff's store, including other goods not covered by the mortgage, in an action by the infant to disaffirm the contract, although the mortgagee is entitled to the goods which he had sold to the infant, yet there being a mixture of the property, and de- fendant being in possession and claiming a right to sell the whole for his own benefit, a receiver may be allowed until the respective rights of the parties can be ascertained.'^^ § 729. Trustee of infant ineligible as receiver; next friend ineligible; when executor allowed to act. As re- gards the selection of a proper person to be appointed receiver of an infant's estate, it is generally held that one who sustains a relation of trust toward the infant is ineligible as receiver, the two characters being incompatible.'^^ Thus, when a bill is filed by the next friend of infants against the executors of an estate for an accounting and a receiver, the next friend is not regarded as a proper person to be appointed, since it is his duty to watch the accounts and conduct of the receiver, and the two characters are incompatible, and can not be united in the same person. 80 So a trustee and executor of an estate devised to an infant is not ordinarily eligible as receiver of the estate; and this is so, regardless of whether he is a sole trustee, or whether there are others joined with him as co- trustees.81 g^^t where a testator had appointed as trustee and executor of his will a person who had for many years acted as receiver of a portion of his property, he was regarded as a 78 Skinner v. Maxwell, 66 N. C, «" Stone v. Wishart, 2 Madd.. 63. 45. See S. C, 68 N. C, 400. 1st American edition. .174. 79 Stone V. Wishart, 2 Madd., 63, 81 v. Jolland, 8 Vcs., 72. l.st American edition, 374; See, also, Sykes v. Hastings. 11 V. Jolland, 8 Ves.. 72. See, also, Ves., 363. Sykes v. Hastings, 11 Ves., 363. 876 RECEIVERS. [chap. XVI. proper person to be continued as receiver for the protection of an infant tenant for life.^^ § 730. When receiver of infant's estate chargeable with interest on failing to invest funds. When a receiver is ap- pointed over the estate of an infant during- liis minority, the infant having no guardian, and the receiver is directed by the decree to place the surplus rents and profits during infancy at interest, as fast as they amount to a sufficient sum for in- vestment, if he fails thus to invest the funds he will be liable for interest. And in such a case, the fact that the infant, im- mediately on coming of age, has a settlement with the re- ceiver, and, after looking over the accounts, admits the bal- ance in the receiver's hands to be correct, and receives it with- out objection, is no bar to charging the receiver with the in- terest.^^ § 731. When receiver authorized to expend money for relief of tenants. In the Irish Court of Chancery, a re- ceiver of a minor's estate has been authorized by order of court to expend money belonging to the estate for the relief of tenants who were in destitute circumstances, and where, ow- ing to the failure of their crops, they were in an impoverished condition. ^^ § 732. Receiver not discharged on one infant coming of age before the other. A receiver appointed for the protec- tion of the estate of infants will not be discharged until the object of his appointment has been fully attained. Thus, as between tenants in common of real estate, two of whom are infants, when a receiver is appointed for the protection of the infants, with directions to pay to the adults their share, he will not be discharged upon the application of one of the in- fants on his coming of age, the other not yet having attained his majority.^5 82 Newport v. Bury, 23 Beav.. 30. 84 Jackson v. Jackson, 2 Hog., 83 Hicks V. Hicks, 3 Atk., 274. 238. 85 Smith v. Lyster, 4 Beav., 227. CHAP. XVI.] TRUSTS. 877 IV. Receivers Over Estates of Lunatics. § 733. Jurisdiction unquestioned, but seldom exercised; when receiver appointed on death of lunatic; must surrender to adminis- trator. 734. Relief a matter of discretion; when refused, there being rival heirs. 735. Solicitor under commission of lunacy ineligible as receiver. 736. When receiver ordered to account; reference to master to ascertain condition of property and income. § 733. Jurisdiction unquestioned, but seldom exercised ; when receiver appointed on death of lunatic ; must surren- der to administrator. A receiver is sometimes necessary for the preservation of the estate of a lunatic, and while there are but few reported cases bearing upon this subject, the power of a court of equity to thus interfere is unquestioned.^^ Up- on the death of a lunatic or insane person whose property has been managed by a trustee or committee appointed by the court in conformity with the laws of the state, since the trus- tee's functions terminate with the death of the lunatic, it is proper for a court of chancery to appoint a receiver to take charge of the assets and estate until it may be determined who is entitled thereto. ^"^ But the object of the appointment, in such case, being the protection of the estate until it rt^y be determined who is properly entitled to possession, the re- ceiver will be continued only while such necessity exists. And when the proper court of probate has acquired jurisdiction over the estate of the deceased, and has appointed an admin- istrator pendente lite, the court of chancery will surrender the possession of its receiver, and will deliver the property to the administrator pendente lite.^^ § 734. Relief a matter of discretion ; when refused, there being rival heirs. The relief, in this class of cases, would 86 See as to facts held to consti- 87 /,i re Rachel Colvin, 3 Md. Ch., tute a prima facie case for the ap- 288. pointment of an interim receiver 8S /« re Rachel Colvin, 3 Md. Ch., over the estate of a lunatic, In re 288. Fountain, 37 Ch. D., 609. 878 RECEIVERS. [chap. XVI. seem to be largely a question of judicial discretion. And after the death of a lunatic, whose estate had been in her life- time managed by a committee, there being two rival claim- ants as heirs of the estate, each of whom filed a bill for a re- ceiver of the estate pending the litigation as to their rights, the English Court of Chancery declined to interfere by the exercise of its original jurisdiction for the appointment of a receiver, treating the case as if there had been no lunacy, and allowing the application to be made in the first instance before the vice-chancellor.^^ § 735. Solicitor under commission of lunacy ineligible as receiver. One who sustains such a relation toward the es- tate of a lunatic as to make it his duty to call the receiver to an account is not, upon general principles of equity, eligible as a receiver. Hence a solicitor under a commission of lun- acy should not be appointed receiver of the lunatic's estate. ^^ § 736. When receiver ordered to account; reference to master to ascertain condition of property and income. In the case of a receivership over the estate of a lunatic, when the receiver has never made a full or complete report of the income and disbursements of the estate committed to his charge, any party to the cause is entitled to move for such an account, which it is the receiver's plain duty to make in his capacity as an officer of the court. And the court may there- upon order a full account to be taken msfantcr on proper no- tice. And it may also order a reference to ascertain and re- port as to the situation of the lunatic's property ; the liens, if any, upon it; the existing debts; the probable income for the ensuing year, and the probable charges thereon. The refer- ence may also be directed to ascertain what amount of the income from the estate will be needed for the comfortable support of the lunatic, whose interests are to . be first giiarded.^^ 89 /„ re Ferrior, L. R., 3 Ch. "0 Ex parte Pincke, 2 Meriv.. 452. App., 175. See Carrow v. Ferrior, 91 Lowe v. Lowe, 1 Tenn. Ch.. 515. id.. 719. CHAPTER XVII. OF RECEIVERS IN CONNECTION WITH INJUNCTIONS. I. The Remedies Compared § 737 II. The Remedies as Applied to Corporations 749 III. Creditors' Suits 755 IV. Partnerships 760 V. Real Property 772 I. The Remedies Compared. § 1Z7. Points of resemblance; both remedies branches of the preventive jurisdiction of equity; neither changes title; discretionary nature. 738. Auxiliary nature of the remedies; do not determine ultimate rights of parties. 739. Principal difference consists in effect on possession. 740. Provisional remedies under Nev\r York code; when injunction a bar to receiver in another court. 741. Neither remedy granted vt-hen relief may be had at law. 742. Long acquiescence a bar to either form of relief. 743. Distinct nature of the remedies; one not a necessary incident of the other; no receiver where injunction affords ample protection. 744. Neither remedy applicable to determine disputed questions of title to public offices. 745. Either may be granted although property in a foreign coun- try. 746. Conflict of jurisdiction between state and federal courts a ground for both remedies. 747. Injunctions to protect receiver's possession, 748. When receiver enjoined from litigation. § 737. Points of resemblance; both remedies branches of the preventive jurisdiction of equity; neither changes title; discretionary nature. The dLscussion of the law of receivers, as thus far developed, has shown many strikinof points of resemblance between this branch of the extraordinary jurisdiction of equity, and that which is invoked in the "grant- ing- of preliminary or interlocutory injunctions. The two 879 880 RECEIVERS. [chap. XVII. remedies are alike branches of the general preventive jurisdic- tion of courts of equity, and are prospective rather than re- trospective in their operation, being invoked on suitable occa- sions for the prevention of future injuries, rather than for the redress of grievances already committed. Thus, the object of an interlocutory injunction is to preserve the subject in controversy in its then condition, and, without determining the questions of right involved, it seeks to prevent the fur- ther perpetration of wrong, or the doing of any threatened act which may result in injury to the rights of the party complaining.! go the object sought in appointing a receiver pendente lite is to prevent injury to the thing in controversy, the res, and to preserve it unimpaired for the security of all parties in interest, that it may be disposed of in accordance with the final decree of the court. 2 Both are extraordinary remedies in the strict sense of the term, as distinguished from the usual and accustomed modes of procedure at law and in equity, since they seize upon and control the subject-matter of the litigation in limine, and without awaiting the final deter- mination of the court, or its final process. Neither remedy has the effect of changing the title, or of creating any special lien upon the property, their common object being only to se- cure its preservation, until the rights of all parties in inter- est may be fully ascertained and judicially determined.^ And both remedies rest, to a considerable extent, in the sound ju- dicial discretion of the court to which the application is ad- dressed, to be governed by a consideration of all the circum- stances of the case.'* 1 See Murdock's Case, 2 Bland, tory injunctions, United States v. 461; Bosley v. Susquehanna Canal, Duluth, 1 Dillon's C. C, 469; Red- 3 Bland, 63. dall v. Bryan, 14 Md., 444; Hay- 2 Mays V. Rose, Freem. (Miss.), wood v. Cope, 25 Beav., 151. See, 703. as to the application of the same 3 Ellis v. Boston, Hartford & Erie doctrine to applications for receiv- R. Co., 107 Mass., 1. ers, Owen v. Homan, 3 Mac. & G., 4 See, as to this element of discre- 378, affirmed on appeal to the House tion on applications for interlocu- of Lords, 4 H. L. Rep., 997; Ham- CHAP. XVII.] INJUNCTIONS. 881 § 738. Auxiliary nature of the remedies; do not deter- mine ultimate rights of parties. Another point of resem- blance between these extraordinary equitable remedies, when invoked in limine, is that they are of a provisional or auxiliary nature, and frequently employed merely as an adjunct to the principal relief sought by the action, and not always or neces- sarily the ultimate or principal object of the action. And the granting of either species of relief, upon an interlocutory ap- plication, is not a final determination of any questions of right or title which may be involved in the litigation ; and the court, in passing upon the application, in no manner antici- pates its ultimate judgment upon the rights of the parties, the fundamental idea upon the preliminary application be- ing only to preserve the. fund or property in litigation in statu quo, for the benefit of whoever may finally be determined to be entitled thereto. The court, in granting the relief, only recognizes that sufficient cause is presented to warrant its summary interference in limine, and until a final hearing on the merits, without expressing, and frequently without having the means of forming an opinion as to the ultimate rights of the parties.^ Indeed, upon an interlocutory ap- plication for a receiver, if plaintiff shows an apparent title to the thing in controversy, and presents a prima facie case, and if the court is satisfied that there is imminent danger of loss unless it shall interpose the aid of a receiver, it may grant the relief without further investigation into the mer- burgh Manufacturing Co. v. Edsall, 80; Blakeney v. Dufaur, 15 Beav., 4 Halst. Ch., 141; Pullan v. Cincin- 40; Leavitt v. Yates, 4 Edw. Ch., nati & Chicago R. Co., 4 Bisscll, 162; Brown z-. Northrup, 15 Ab. Pr., 47; Mays v. Rose, Freem. (Miss.), N. S., 333; Ex parte Walker, 25 703 ; Whelpley v. Erie Railway Co., Ala., 104. The doctrine is very 6 Blatchf., 271. clearly expressed by McCoun, Vice- 5 See this doctrine applied to in- Chancellor, in Leavitt v. Yates, 4 tcrlocutory applications for receiv- Edw. Ch., 162. For its application ers, in Hottenstein v. Conrad, 9 to cases of preliminary injunctions, Kan.. 435; Cooke v. Gwyn, 3 Atk., see Great Western R. Co. v. Bir- 6S9; Huguenin v. Baseley, 13 Vcs., nnngham h Oxford Junction R. 105; Ellicott V. Warford, 4 Md., Co., 2 Ph., 597. Receivers — 56. SS2 RECEIVERS. [CIIAP. XVII. its.^ And since the court is bound to express its opinion on- ly so far as to show the grounds upon which it determines the apphcation, it will usually confine itself to the point which it is called upon to decide, without going into the merits of the case at large. "^ § 739. Principle difference consists in efEect on posses- sion. In instituting a comparison between these principal extraordinary remedies of equity, the most striking point of difference between them is found in their effect or operation upon the possession of the fund or property in litigation. An injunction never operates to change possession ; a receiver always and necessarily has this direct and immediate effect. An injunction can not be used to take property out of the custody and control of one party and place it in the posses- sion of another ; ^ while in appointing a receiver, a court of equity at once wrests possession from the defendant ; assumes and continues by its officer the entire management and con- trol of the property or fund ; frequently changes its form, or absolutely disposes of it, and usually retains this exculsive possession until the rights of all persons in interest are final- ly adjusted. An injunction merely restrains action, and aims at preserving the subject-matter, as well as the attitude of all parties in interest thereto, m statu quo; while a receiver- ship changes at once the attitude of all parties toward the subject-matter of the litigation; divests defendant's posses- sion, and interposes the officer of the court as a custodian of the property or fund, for the common benefit of all parties concerned. § 740. Provisional remedies under New York code; when injunction a bar to receiver in another court. Under the code of procedure prevailing in New York, the granting SLeavitt v. Yates, 4 Edw. Ch., 8 Murdock's Case, 2 Bland., 461; 162; Brown v. Northrup, 15 Ab. Bosley v. Susquehanna Canal, 3 Pr., N. S., 333. Bland, 63. ~ Skinners Company v. Irish So- ciety, 1 Myl. & Cr., 162. CHAP. XVII.] INJUNCTIONS. 883 of injunctions and the appointment of receivers, in limine, are known as provisional remedies, and are treated by the courts of that state as of equal weight and importance. And while the two remedies are frequently administered in one and the same action, the granting of an injunction by a court of com- petent jurisdiction operates as a bar to the appointment of a receiver, in a subsequent proceeding between the same parties in another court. The jurisdiction of the court, and its con- trol over all subsequent proceedings, being regarded as attach- ing upon the service of process, or the allowance of a provi- sional remedy, when the court first moving has acquired ju- risdiction by the granting of an injunction, another court will decline to interfere.^ § 741. Neither remedy granted when relief may be had at law. From the points of resemblance between these remedies, which have been already indicated, it necessarily fol- lows that certain well-defined and elementary principles by which courts of equity are governed in the exercise of their extraordinary jurisdiction, are equally applicable in determin- ing applications for both species of relief. A controlling prin- ciple of this class, and one which is believed to be of general application, is, that the existence of an adequate remedy at law is ahvays a bar to the aid of equity by granting either of the remedies under consideration. Courts of equity will al- ways refuse to lend their aid for the protection of rights, or for the prevention of wrongs, when the ordinary legal rem- edies are adequate to afford redress ; and when it does not ap- pear that the remedy at law is insufficient, or that the party aggrieved is entitled to more speedy relief than may be had by the ordinary and accustomed modes of procedure at law, an injunction will be refused. ^^ Legal rights are left to the J' McCarthy v. Peake, 18 How. v. Seldcn, I Barb., 316; Sliernian v. Pr., 138; S. C, 9 Ab. Pr., 164. Ciark, 4 NdV., 138; Mullen v. Jen- lOCoughron J/. Swift, 18 111., 414; niiiKs. 1 Slockt., 192; Hart v. Winkler v. Winkler, 40 111.. 179; MarMiall, 4 Minn., 294; Wooden v. Poage V. Boll, 3 Rand., 586; Web- Wooden, 2 Green Ch., 429. ster V. Couch, 6 Rand., 519; Akrill S84 RECEIVERS. [chap. XVII. decision of a legal forum, and in the absence of special cir- cumstances warranting- the interposition of the extraordinary aid of courts of equity by an injunction, such courts will not interfere for the protection of a strictly legal right which may be properly tried at \awM And upon similar principles, equity refuses to extend the aid of a receiver in all cases where the persons aggrieved may obtain ample redress in the usual course of proceedings at law, or where courts of law afford a safe and expedient remedy for the particular grievance.^*^ And when the person aggrieved has had ample opportunity of asserting his rights in an action at law, but has negligently omitted so to do, he is barred from obtaining relief in equity by an injunction.!^ So, too, when a person having an ade- quate remedy at law for the redress of a particular grievance, loses that remedy by his own laches, he can not come into a court of equity and obtain a receiver upon the same grounds which should have been asserted in the action at law.^^ § 742. Long acquiescence a bar to either form of relief. It is also to be noticed, that long acquiescence in a particular grievance, without effort to redress it, is usually held to be a complete bar to relief in equity either by a receiver or an in- junction. And plaintiffs, who have quietly acquiesced in de- fendant's possession of property for a long period of years, without attempting to assert their rights to the property, and who then seek to change such possession by a receiver, will be denied the aid of the court in limine. '^^ And when the ap- plication for a receiver is based upon the alleged misconduct of defendant, but it is shown that the state of affairs com- plained of has existed for many years, with full knowledge of plaintiffs and without their objection, equity will refuse to 11 Wooden v. Wooden, 2 Green How. Pr., 497; S. C, 12 Ab. Pr., Ch., 429. N. S., 427. 12 Sollory V. Leaver, L. R., 9 Eq., 13 Tapp v. Rankin, 9 Leigh, 47& 22; Cremen v. Havvkes, 2 Jo. & Lat., 14 Drewry v. Barnes, 3 Riiss., 94. 674; Parmly v. Tenth Ward Bank. 15 Gray v. Chaplin, 2 Russ., 126. 3 Edw. Ch., 395 ; Corey v. Long, 43 CHAP. XVII.] INJUNCTIONS. 885 lend its aid by a receiver.i^ The same principle prevails in administering relief by interlocutory injunction, and the courts have almost uniformly held that long-continued acquiescence by the plaintiff in any particular grievance or violation of his rights, which he afterward seeks to redress by the preventive aid of an injunction, operates as a bar to relief in equity, and courts of equity will decline to interfere in behalf of persons thus negligent in the assertion of their rights. ^"^ § 743. Distinct nature of the remedies; one not a neces- sary incident of the other ; no receiver where injunction af- fords ample protection. From the points of resemblance already indicated between these remedies, and from the appli- cation of certain fundamental principles of equity in admin- istering both, it is not to be inferred that the appointment of a receiver necessarily follows the granting of an injunction in all cases, or that an injunction is a necessary incident to a receivership, or that the two remedies are always inseparable. And while there are cases where an injunction follows a re- ceivership almost as of course,!^ or where a receiver is a nec- essary incident to an injunction; ^^ and while it frequently happens that the courts are called upon to administer both remedies in one and the same action and at one and the same time, it by no means follows that the one is a necessary in- cident of the other, and the two are to be regarded as separate and independent remedies. In other words, while both are branches of the extraordinary preventive jurisdiction of equi- ty, they are yet distinct and separate branches, used for the attainment of different results, and a court of equity may prop- erly refuse a receiver, although an appropriate case is pre- 16 Skinners Company v. Irish So- N. S., 91 ; Maythorne v. Palmer, 11 ciety, 1 Myl. & Cr., 162. Jnr., N. S.. 230. 17 Wood V. Sutcliffe, 2 Sim., N. 18 See Seigliortncr v. Wcisscn- S., 163; Payne v. Paddock, Walk. born, 5 C. E. Green. 172. rivrich.). 487; Jacox v. Clark, id., 19 Sec Penn v. Whiteheads, 12 249 ; Powell v. Allarton, 4 L. J. Ch., Grat., 74. 886 RECEIVERS. [chap. XVII. sented for an injunction.^O So the appointment of a receiver is properly denied where an injunction will afford ample pro- tection for the rights of the plaintiff.^l So, upon the other hand, it is regarded as proper to appoint a receiver, if the facts showing the necessity for the relief and the proper par- ties are before the court, although the application was made for an injunction, and did not specify the appointment of a receiver.22 But if the injunction is a mere adjunct of the re- ceivership, the reversal of the order appointing the receiver will also operate as a reversal of the in j unction. ^^ § 744. Neither remedy applicable to determine disputed questions of title to public offices. Neither of the remedies under consideration is regarded as an appropriate means, nor is a court of equity the proper forum, for determining dis- putes or controversies concerning the title to public offices, all such questions properly pertaining to courts of law, to be determined by proceedings in quo warranto, or other appro- priate remedies prescribed by law for that purpose. And while there are cases where both receivers and injunctions have been allowed in aid of litigation to determine the right to the fees or emoluments of public offices, considered merely as property and when only contract rights have been involved,^* equity will refuse to lend its extraordinary aid, either by an injunction or by a receiver, for determining controversies con- cerning the title to public offices, and will leave all such ques- tions to the decision of courts of law, to which forum alone they properly pertain. ^5 20 Rawnsley v. Trenton Mutual 23 Merrell v. Pemberton, 62 Ga., Life & Fire Insurance Co., 1 Stockt., 29. 347; Oakley v. Paterson Bank, 1 24 palmer v. Vaughan, 3 Swans., Green Ch., 173. And see, ante, % 16. 173; Cheek v. Tilley, 31 Ind., 121. 21 Empire Hotel Co. v. Main, 98 25 Tappan v. Gray, 9 Paige, 507. Ga., 176, 25 S. E., 413; Tarvin v. And see People v. Draper, 24 Earb., Walker's Creek C. & C. Co., 109 265; Stone v. Wetmore, 42 Ga., 601, Ky.. 579, 60 S. W., 185. 22 Whitney v. Buckman, 26 Cal., 447. CHAP, XVII.] INJUNCTIONS. 887 § 745. Either may be granted although property in a foreign country. It is not essential to the exercise of either branch of the extraordinary jurisdiction of equity under con- sideration, that the property constituting the subject-matter of the litigation should be within the jurisdiction of the court, provided the parties are within its control and amenable to its process. And there are frequent cases where injunctions have been granted against parties within the jurisdiction of the court, although the subject-matter in controversy was beyond reach of its process.^^ So there are frequent instances where equity has appointed receivers, although the estate or property which it was sought to protect was beyond the jurisdiction of the court, being situated in a foreign country, the parties in interest, however, being within its control and subject to its process. 27 And it would seem to be competent for a court of equity, in one country, to grant an injunction and appoint a receiver in aid of the enforcement of a decree rendered in a foreign country.28 g^t the exercise of such a power is re- garded as improper when it is doubtful, upon the record, whether plaintiffs will be ultimately entitled to a decree in the second action. ^9 § 746. Conflict of jurisdiction between state and federal courts a ground for both remedies. The existence of a conflict of jurisdiction between state and federal courts has been made the foundation for relief in equity, both by grant- ing an injunction and by appointing a receiver over the prop- erty in controversy. Thus, when there were actions pending in both tribunals between adverse claimants to certain prop- 26 Bunbnry v. Bunbury, 1 Beav., 27 Davis v. Barrett, 13 L. J., N. S. 320; Beckford v. Kemble, 1 Sim. Ch., 304; Langford v. Langford, 5 & Stu., 7. See, also, Cranstown v. L. J., N. S. Ch., 60; Sheppard v. Johnston, 3 Ves., 182; Porlarling- Oxenford, 1 Kay & J., 491; v. ton V. Soiilby, 3 Myl. & K.. 104; Lindsey, 15 Ves., 91. Dehon V. Foster, 4 Allen, 545; Vail 28 Ronlditch v. Lord Donegal, 8 V. Knapp, 49 Barb., 299; Vermont Bligh (N. S.), 301. & Canada R. Co. v. Vermont Cen- 29 Houlditch v. Lord Donegal, tral R. Co., 46 Vt., 792. Beat., 146. 888 RECEIVERS. [chap. XVII. erty of a perishable nature, and there was a probabihty of a bitter and long-continued litigation, as well as imminent dan- ger of collision between the executive officers of the two courts in the enforcement of the process of their respective courts, the case was regarded as an appropriate one for an injunction and a receiver, the property being liable to become entirely valueless unless taken possession of and sold.^^ § 747. Injunctions to protect receiver's possession. The aid of an injunction is sometimes a necessary adjunct to a receivership for the purpose of protecting the receiver's pos- session, and to prevent any unauthorized interference, by suit or otherwise, with the property or fund intrusted to his care. Indeed, so jealous are courts of equity of any unauthorized interference with the possession of their receivers, that they usually require all adverse claimants to come in and assert their rights in the action in which the receiver was appointed. And when parties asserting a right to property which is sub- ject to a receivership attempt any unauthorized interference therewith, or institute actions for its recovery against the re- ceiver, without first obtaining leave of the court by which he was appointed, that court may enjoin them from proceeding", and thus compel them to assert their rights in the same forum in which the receiver was appointed. ^^ And this may be done, even though the claimant has an apparently clear right to the property, since he can not be permitted to disturb the receiver's possession until he has established his right by appropriate 30 Crane v. McCoy, 1 Bond C. C. of the receiver of the corporation to 422. resort to an ancillary bill and the 31 Tink V. Rundle, 10 Beav., 318; aid of an injunction for the purpose Attorney-General v. St. Cross Hos- of protecting his possession, see, pital, 18 Beav., 601 ; Johnes v. ante, § 342a. As to the right of a Ciaughton, Jac, 573 ; Evelyn v. receiver of an insolvent corporation Lewis, 3 Hare, 472; Woodburn v. to enjoin the enforcement of a judg- .■^mith, 96 Ga., 241, 22 S. E., 964; ment against the corporation where Virginia, T. & C. S. & I. Co. v. he has no remedy by certiorari or Bristol Land Co., 88 Fed., 134. And by motion to vacate, see Rogers v. see. ante, § 140. As to the right Haines, 114 Ala., 50, 21 So., 411. CHAP. XVII.] INJUNCTIONS. 889 proceedings for that purpose. ^2 Sq ^ receiver's possession may be protected by injunction, although the party enjoined is proceeding in the exercise of a statutory right, as in the case of a railway company attempting to condemn land in accordance with statute for the use of its road, but without obtaining leave of the court by which a receiver has been appointed over the land.^s So a person asserting a right of common, in real estate in a receiver's possession, was enjoined from trespassing upon the property when the alleged right of common had been abandoned for several years, although leave was given to be examined before a master, pro interessc siw, as to the right claimed. ^^ So, too, a receiver who was en- titled to possession of and to collect wharfage from a wharf or landing upon a river, connected with the property intrusted to his care, was allowed to maintain a bill for an injunction against the authorities of a municipal corporation, who were interfering with his possession and attempting to collect the wharfage.^s And when tenants of premises subject to a re- ceivership have, without leave of court, instituted actions of trespass or of replevin against the receiver, who has dis- trained for rent due from such tenants, they may be enjoined from proceeding with such actions. ^^ It is held, however, that an action against a receiver in his official capacity will not be enjoined, on the receiver's application, upon the ground that the matters in controversy have been determined by the court in other proceedings, since this would be a complete de- fense to the action which the receiver seeks to enjoin, and he should avail himself of it in that action. ^"^ § 748. When receiver enjoined from litigation. It has been shown in the preceding section, that courts of equity frequently interfere by injunction to prevent the prosecution 32 Evelyn v. Lewis, 3 Hare, 472. 36 /„ re Persse, 8 Ir. Eq., Ill; 33 Tink V. Rundle, 10 Beav, .318. Parr v. Bell, 9 Ir. Eq., 55. 34 Johnes v. Claiighton, Jac, 573. •"'" Jay's Case, 6 Ab. Pr., 293. 3-"> Grant v. City of Davenport, 18 Iowa, 179. 890 RECEIVERS. [chap. XVII. of unauthorized suits against their receivers, such rehef being necessary for the protection of the receiver's possession, which is, in fact, the possession of the court itself. It is also to be observed, that the receiver himself may be enjoined from pros- ecuting unauthorized suits against third persons, under pre- tense of authority derived from the court. And when a re- ceiver brings an action in the name of a third person, without his authority and without the sanction of the court, the par- ties to such suit are entitled to the aid of the court by an in- junction to restrain such unauthorized proceedings.^^ If, how- ever, the receiver has been duly authorized by the court to bring a particular action, it will not permit him to be enjoined from proceeding, the proper course for persons who may be dissatisfied being to apply to the court appointing him for re- lief, instead of seeking to enjoin him in another suit.^^ 38 In re Merritt, 5 Paige, 125. 39 Winfield v. Bacon, 24 Barb., 154. CHAP. XVII.] INJUNCTIONS. 891 II. The Remedies as Applied to Corporations. § 749. Tendency of legislation; receiver over corporation does not necessarily follow^ injunction. 750. Injunction may be granted as an adjunct of a receivership. 751. Application of the remedies to proceedings in quo warranto in New York. 752. Injunctions in actions by receivers to recover unpaid subscrip- tions and illegal dividends. 753. Injunctions in aid of receivers over railways; mortgagees of tolls of turnpike; injunction on behalf of receiver of national bank against illegal taxes; receiver may enjoin unfair compe- tition. 754. Receiver over railway entitled to injunction against diversion of earnings. § 749. Tendency of legislation; receiver over corpora- tion does not necessarily follow injunction. Questions of considerable interest have sometimes arisen as to the extent to which the remedies of an injunction and a receiver may be appHed, in connection with each other, in cases affecting civil corporations and the rights of shareholders and creditors. It frequently happens that the extraordinary aid of equity is in- voked against corporate bodies, under circumstances such as to warrant an injunction against the corporation or its officers, while the court is not justified in extending the aid of a receiv- er. Indeed, the general jurisdiction exercised by courts of equity over corporations, independent of statute, does not ex- tend to the power of dissolving the corporation and destroying its franchise, or of sequestrating the corporate property for the benefit of creditors and shareholders. The tendency of modern legislation, however, has been toward an enlargement of the powers of courts of equity in this regard, and in many of the states the power of appointing receivers over corporations has been expressly conferred by legislative enactment. But, in the absence of statutory authority, the courts frequently decline to assume control by a receiver over the affairs of a corporation, upon a bill by a shareholder alleging fraud and mismanagement on the part of its officers, and limit the relief 892 RECEIVERS. [chap. XVII. to the granting of an injunction.'*^^ Even though the jurisdic- tion of tlie court, as enlarged by statute, extends to appointing a receiver over a corporation in a proper case, it by no means follows, because an injunction has been granted against the corporation, that a receiver should be allowed; since the cir- cumstances of the case may be such as to justify a suspension of the business of the corporation, while its officers are not in fault and are the most proper persons to wind up its affairs. And if it is apparent to the court that a receiver is not required to protect the interests either of shareholders or of creditors, and that a stranger to the corporate business and affairs can not wind them up as satisfactorily as the directors, a receiver will not be appointed and the management will be left in the hands of the directors. ^1 § 750. Injunction may be granted as an adjunct of a receivership. While, as is thus seen, courts of equity are generally more reluctant to interfere with the management of a corporation by a receiver than by an injunction, j^et when a receiver has been appointed, an injunction may follow as a nec- essary adjunct to the relief already granted. And upon ap- pointing a receiver of all the assets and effects of a corporation, in a proceeding to sequestrate its property and wind up its affairs, the court may, in connection with such receivership and as a part of its order, enjoin the officers and directors from disposing of or incumbering any of the property, and from collecting any demands due to the corporation, such an injunc- tion being treated as a necessary adjunct or incident of the receivership.42 Indeed, the appointment of a receiver over a 40 Waterbury v. Merchants Union Perry Patent Arm Co., 3 Stockt., Express Co., 50 Barb., 157; Neall 126. As to the power of the court V. Hill, 16 Cal, 145 ; Howe v. Deuel, to appoint a receiver for the pur- 43 Barb., 504; Belmont v. Erie R. pose of compelling obedience to its Co., 52 Barb., 637. injunctions, see Stockton v. Central 41 Rawnsley v. Trenton Mutual R. R. Co., 50 N. J. Eq., 489, 25 Atl., Life and Fire Insurance Co., 1 942. Stockt., 347 ; Oakley v. Paterson 42 Morgan v. New York & Alba- Bank. 1 Green Ch., 173 ; Nichols v. ny R. Co., 10 Paige, 290. CHAP. XVII.] INJUNCTIONS. 893 corporation is frequently equivalent to a suspension of its corporate functions, and to an injunction against its agents and officers, restraining them from intermeddling with the property or with its management.^^ § 751. Application of the remedies to proceedings in quo warranto in New York. Under the code of procedure in New York, in proceedings by the attorney-general of the state in the nature of a quo ivarranto, having for their object the dissolution of a corporation and the forfeiture of its fran- chises, while the court may properl} grant an injunction to restrain the corporation from disposing of its funds, or from doing any illegal act, it will not appoint a receiver before judg- ment of forfeiture.^* § 752. Injunctions in actions by receivers to recover unpaid subscriptions and illegal dividends. Under the statutes of some of the states, receivers appointed to wind up the affairs of insolvent corporations are empowered to collect from delinquent shareholders the amounts due for unpaid sub- scriptions to capital stock. When a receiver, in the discharge of this duty, has obtained a decree against a shareholder for the payment of a balance due on account of his subscription, such shareholder is not entitled to an injunction against the receiver to restrain him from collecting the amount until all the debts can be ascertained, and the amount due from each shareholder be determined, since such objection should have been urged in defense of the action brought by the receiver, and will not avail after a decree in that action.'*^ But when a receiver of a corporation, occupying for the purposes of such suit the position of a trustee for all its creditors, institutes an action to recover back from the shareholders illegal dividends, which they have received from the corporation while it was in a state of insolvency, such shareholders are entitled to the pro- 43 Gravenstine's Appeal, 49 Pa. 4.5 Pentz v. Hawley, 1 Barb. Ch., St., 310. 122. 44 People v. Washington Ice Co., 18 Ab. Pr.. 382. 894 RECEIVERS. [chap. XVII. tection of an injunction against individual creditors of the cor- poration, to restrain them from prosecuting Hke actions. "^^ So a receiver of a corporation, who is invested with a right of ac- tion against dehnquent shareholders for the recovery of their unpaid subscriptions to the capital stock may enjoin the credi- tors of the company from proceeding with separate actions of the same nature for satisfaction of their individual demands. '^'^ And when the receiver of an insolvent bank is proceeding in equity concurrently and in the same action with some of its creditors to enforce an additional liability of the stockholders under the charter of the bank for the benefit of all creditors entitled thereto, the court may enjoin individual creditors from pursuing separate actions at law to enforce such liability for their own benefit. ^^ § 753. Injunctions in aid of receivers over railways; mortgagees of tolls of turnpike; injunction on behalf of receiver of national bank against illegal taxes; receiver may enjoin unfair competition. The aid of an injunction is sometimes necessary in behalf of a receiver, as an adjunct to the original action in which he was appointed, and for the purpose of more effectually preserving the subject-matter over which his appointment extends. For example, when a receiver is appointed over a railway company, and is empowered by the order of court to secure and protect the assets, franchises and rights of the company, and a land grant to which it is entitled from the state, he may maintain a bill in equity to en- join the state officers from granting the same lands to other persons. Such an action is regarded as an adjunct of the original suit, and is analogous to a petition by the receiver to the court, asking that it protect his possession and the property under his control. ^^ So when a receiver is appointed over a 46 Osgood V. Laytin, 3 Keyes, 521. 48 Eames v. Doris, 102 111., 350. affirming S. C, 48 Barb., 464. 40 Davis v. Gray, 16 Wal., 203, af- 47 Calkins v. Atkinson, 2 Lans., firming S. C, 1 Woods, 420. 12; Rankine v. Elliott, 16 N. Y., 377. CHAP. XVII.] INJUNCTIONS. 895 railway company in behalf of its mortgage bondholders, in proceedings for foreclosure when the security is inadequate to the payment of the mortgage indebtedness and the corporation is shown to be insolvent, it is proper to accompany the receiv- ership with an injunction against the railway company and its agents, to prevent any interference with the receiver, or with the property intrusted to him.^^ And as between different mortgagees of the tolls of a turnpike company, all of whom are entitled to payment out of the tolls pari passu, and without priority, a mortgagee who receives the entire tolls, and applies them in discharge of his own demand, may be enjoined and a receiver of the tolls may be appointed on the application of an- other mortgagee.^l And a receiver of a national bank appoint- ed by the comptroller of the currency may maintain a bill to enjoin the collection of taxes illegally assessed against the bank where the case is one which otherwise justifies the interposition of equity by injunction.^2 go a receiver of an insolvent cor- poration may have an injunction to protect the business under his control against injuries resulting from unfair competi- tion.^2 § 754. Receiver over railway entitled to injunction against diversion of earnings. A receiver of a railway company, who is directed to operate and manage the road sub- ject to the orders and direction of the court, is entitled to an injunction to prevent an improper diversion of the earnings or an attempt to divest the receiver's control over them, since his successful management of the road depends upon his con- trol over its income and earnings. And the injunction may be granted, although the attempt to divert the earnings is made 50 Ruggles V. Southern Minnesota corporation to resort to an ancil- Railroad, U. S. Circuit Court, Dis- lary bill and the aid of an injunc- trict of Minnesota, 5 Chicago Legal tion for the purpose of protecting News, 110. his possession from the assertion of 51 Dumville z/.Ashbrooke, 3 Russ., hostile and conflicting claims, see, 99. note c. ante. § 342(j. 52 Brown :;. French, 80 Fed., 166. 53 Brookficld v. licckcr, 118 Fed., As to the right of the receiver of a 942. 896 RECEIVERS. [chap. XVII. by suit in another state, the parties, however, being- within the jurisdiction of the court by which the receiver was appointed, and whose aid he seeks by injunction. The court, under such circumstances, does not attempt by its injunction to operate upon the court in the other state, but only acts in personam upon the parties within its own jurisdiction, in accordance with well-estabhshed principles of equity, and restrains them from interfering with or diverting the earnings to which the receiv- er is entitled. 5^ 64 Vermont & Canada R. Co. v. Vermont Central R. Co., 46 Vt., 792. CHAP. XVII.] INJUNCTIONS. 897 III. Creditors' Suits. •§ 755. Creditors without judgment not entitled either to injunction or receiver. 756. Exception to the rule in partnership cases. 757. Lien upon vessel; action by creditors of married woman to charge her individual property. 758. Judgment creditors entitled to both remedies; former practice under New York chancery system. 759. When receiver denied injunction and receiver in action to set aside assignment by debtor. § 755. Creditors without judgment not entitled either to injunction or receiver. Courts of equity are frequently called upon to interfere, both by a receiver and an injunction, for the protection of judgment creditors seeking the enforce- ment of their judgments out of the property and equitable as- sets of the debtor. Neither remedy, however, will be adminis- tered in behalf of mere general creditors, without lien upon the debtor's property, and whose rights have not been judicially established by a judgment. Any interference with the prop- erty of the citizen, or with his right to manage and dispose of it, before judgment recovered against him, is beyond the ju- dicial power, and courts of equity will not enlarge or extend their extraordinary jurisdiction beyond the well-defined limits iixed by law. And whatever hardships or embarrassments may result to creditors from the enforcement of the doctrine, by reason of the slow procedure in courts of law or otherwise, are regarded as evils which should properly be redressed by legislative rather than by judicial authority.^^ And the rule is applied even where the bill alleges gross fraud upon the 55Uhl V. Dillon, 10 Md., 500; Stockt., 465; Phelps v. Foster, 18 Blondheim v. Moore, 11 Md., 365; 111., 309; Bigelow v. Andress, 31 Nusbaum v. Stein, 12 Md., 315; 111., 322. See contra, Haggarty v. Hubbard v. Hubbard, 14 Md., 356; Pittman, 1 Paige, 298; Cohen v. Bayaud v. Fellows, 28 Barb., 451; Meyers, 42 Ga., 46; Thompsen v. Wiggins V. Armstrong, 2 Johns. Diffcnderfer, 1 Md. Ch., 489; Ros- Ch., 144; Holdrege v. Gwynne, 3 enberg z/. Moore, 11 Md., 376. C E. Green, 26; Young v. Frier, 1 Receivers — 57. 898 . RECEIVERS. [chap. XVII. part of the debtor, and that he has transferred his effects to defrand his creditors, and that plaintiff has bronght suit upon his demand, but can not obtain judgment and execution before defendant's assets are wasted. ^^ § 756. Exception to the rule in partnership cases. Un- der the New Ygrk code of procedure, however, a departure from the rule is allowed in proceedings for the enforcement of demands due from partnership debtors. And it is held, in such cases, when the insolvency of the firm and of its individual members is conceded, and the indebtedness is admitted to be justly due, that a creditor of the firm, even before judgment, may have an injunction and a receiver, as against the partners and third persons to whom they have attempted to assign their property for the purpose of hindering their creditors. In such cases, there being no advantage to be derived from a prelimi- nary judgment and execution, the courts extend all the relief sought in one and the same action, without compelling the creditor to submit to the delay of obtaining judgment by a separate suit.^'^ § 757. Lien upon vessel; action by creditors of married woman to charge her individual property. So a creditor may have such a special or equitable lien upon the debtor's property as to entitle him both to a receiver and an injunction, although his demand is not yet reduced to judgment. Thus, persons advancing money for supplies and repairs of a vessel, and receiving from the master an assignment of all the earn- ings of the vessel upon her voyage, and of all lien or interest which he as master has therein, are entitled to an injunction against any interference with the collection of the earnings, as well as a receiver to collect them, upon showing the insolv- ency of the owners and that such relief is necessary to protect their lien.^^ So in an equitable action by creditors of a mar- 56 Rich V. Levy, 16 Md. 74. How. Pr., 461; Jackson v. Sheldon, 57 Mott V. Dunn, 10 How. Pr., 9 Ab. Pr., 127. 225. And see Levy v. Ely. 15 How. 58 Sorley v. Brewer, 18 How. Pr., Pr.. 395; La Cliaise v. Lord, 10 276. CHAP. XVII.] INJUNCTIONS. 899 ried woman who is doing business as a trader, the creditors seeking to charge her individual property with the payment of her debts, it has been held proper to appoint a receiver and grant an injunction, when it is apparent that there is danger of the assets being wasted or placed beyond reach of the creditors, the relief, in such cases, being based upon the same grounds as in ordinary cases of creditors' bills for the enforcement of judgments. ^^ § 758. Judgment creditors entitled to both remedies; former practice under New York chancery system. After creditors have established their demands against a debtor by judgment, and have thus acquired a lien upon his property, they may properly invoke the aid of equity both by a receiver and an injunction, as a necessary means of enforcing payment of their judgments, and preventing the debtor from Avasting or disposing of his assets until their judgments are satisfied. For example, creditors who have obtained judgment and levied upon a stock of goods in their debtor's possession may have an injunction and a receiver, as against the debtor and a third per- son claiming the goods as mortgagee, upon a bill alleging that the goods are more than sufficient to pay the mortgage indebt- edness ; that a portion of the stock is not covered by the mort- gage; that the debtor has no other property out of which to satisfy the judgment, and that the mortgagee has permitted the debtor to use and dispose of the goods covered by the mort- gaged^ And under the former chancery practice in New York, receivers and injunctions were allowed almost as of course upon creditors' bills, after return of execution against the debtor nulla bona. And it was held to be the duty of the judg- ment creditor, after filing his bill and obtaining an injunction to restrain the debtor from interfering with his assets, to apply to the court within a reasonable time for a receiver over the assets, to prevent them from being wasted or destroyed, and to secure the collection of debts due the defendant.^l In 59 Todd V. Lee, 15 Wis., 365. '"'l Bank of Monroe v. .Schcrmer- 60 Rose V. Bevan, 10 Md., 466. horn, Clarke Ch., 214; Osborn v. 900 RECEIVERS. [chap, XVII. such cases, the courts proceed upon the theory that the defend- ant debtor, after being enjoined from interfering with or dis- posing of his property, can have no honest motive in resisting the appointment of a receiver; and that if he has property it is for his own interest that it should be preserved pendente lite, while if he has none, no harm can result from the appointment, and plaintiff proceeds at the risk of his costs.^^ § 759. When receiver denied injunction and receiver in action to set aside assignment by debtor. When a receiv- er in a creditor's suit institutes an action to recover property transferred by the debtor, under a voluntary assignment for the benefit of his creditors, he is not entitled to an injunction and a receiver as to the property assigned, if he fails to show that the transfer was made to hinder or defraud creditors.^s Heyer, 2 Paige, 342. And see 63 Bostwick v. Elton, 25 How. Bloodgood V. Clark, 4 Paige, 574. Pr., 362. 62 Fitzburgh v. Everingham, 6 Paige, 29. CHAP. XVII.] INJUNCTIONS. ' 901 IV. Partnerships. § 760. The remedies dependent upon the same conditions; case as presented must warrant a dissolution. 761. Actual partnership must be shown; when defendant allowed to give security in lieu of injunction and receiver. 762. Grounds for injunction and receiver in partnership cases; want of confidence; irreconcilable disagreement; defendant's in- solvency and fraud. 763. Injunction and receiver do not necessarily follow dissolution; defendant's insolvency after dissolution. 764. Violation of articles ground for relief; lumber business; courts averse to appointing receiver ex parte. 765. Partnership in farm; mining business in foreign country. 766. Receiver does not necessarily follow injunction; when in- junction dependent on fate of receivership. 767. Denial by answer a bar to relief. 768. Assignment by insolvent partners after dissolution ground for relief. 769. Receiver and injunction on death of partner. 770. Receiver allowed when defendants enjoined from collecting debts; receiver not enjoined from managing fund. 771. Sale of good-will by receiver and injunction against con- tinuing business in same locality. § 760. The remedies dependent upon the same condi- tions; case as presented must warrant a dissolution. In actions for the dissolution of partnerships and for an account- ing between partners, courts of equity are frequently called upon to administer relief both by granting an injunction and appointing a receiver, in one and the same action. Substan- tially the same conditions are necessary, in this class of cases, to justify the interposition of a receiver, as are requisite to warrant an injunction. The relief will not be granted merely because of a quarrel between partners, but there must be some actual abuse of partnership property, or of the rights of a member of the firm, and a mere temptation to such abuse will not suffice. And to warrant a court in granting either of these remedies, the case as presented must appear to be such as to justify a decree for a dissolution of the firm, since, in interpos- ing its extraordinary aid, equity generally looks to the winding 902 RECEIVERS. [chap. XVII. up of the business, and not to its continuation or management by the court. If, therefore, a dissokition has actually taken place, or if it is apparent that it will be decreed because of a breach of contract or of duty by one partner, equity may proper- ly interfere.^"^ And when, upon the dissolution of a partner- ship, the partners are unable to agree upon the adjustment of its affairs, the courts will usually appoint a receiver, with a view to protecting the rights of all parties in interest, and will grant an injunction as a necessary adjunct of the receivership.^^ But when the allegations of the bill on which a preliminary in- junction has been granted are fully and positively denied by the answer of the defendant partner, the injunction will be dis- solved and a motion for a receiver will be denied. ^^ § 761. Actual partnership must be shown ; when defend- ant allowed to give security in lieu of injunction and re- ceiver. It is also to be borne in mind, that it is indispens- able to the granting either of an injunction or of a receiver in partnership cases, that there should actually be an existing part- nership between the parties, since, otherwise, the individual property of a defendant might be interfered with, and it might appear in the end that plaintiff had no right. When, therefore, the partnership is merely nominal, the parties acting under an agreement that one shall be employed by the other, his com- pensation to be paid by a share of profits either with or without additional salary, the contract expressly stating that they are not partners, although using a firm name, the person thus em- ployed has no such lien upon the assets as to warrant a court of equity in entertaining a bill in his behalf for an injunction and a receiver, 6'^ even though the conduct of the parties has been such as to render them liable as partners to third persons, the rights of third persons or of creditors not being involved 64Henn v. Walsh, 2 Edw. Ch., 6G Rhodes v. Lee, 32 Ga., 470; 129. Henn v. Walsh, 2 Edw. Ch., 129. 65 Van Rensselaer v. Emery, 9 67 Kerr v. Potter, 6 Gill. 404; How. Pr., 135. Nutting v. Colt. 3 Halst. Ch., 539. CHAP. XVII.] INJUNCTIONS. 903 in the litigation. ^^ And when the plaintiff partner, in an action for the dissolution of a firm, has obtained a receiver and an in- junction, but defendants deny the existence of a partnersliip, and it is apparent to the court that plaintiff's interest in the firm, if any, is very small, and that the business will be greatly endangered, if not ruined, by continuing the receiver, it is prop- er to permit defendants, in lieu of the injunction and receiver, to give plaintiff security for any sum to which he may ulti- mately be found entitled. ^^ § 762. Grounds for injunction and receiver in partner- ship cases; want of confidence; irreconcilable disagree- ment; defendant's insolvency and fraud. It has already been shown that equity will not extend the aid of an injunction and a receiver in partnership cases because of a mere quarrel between the partners, but that some actual abuse or injury must be shown. '^'^ But the fact that a partner's conduct has been such as to destroy that feeling of mutual confidence which should exist between co-partners may properly be taken into consideration by the court, and is an important element in de- termining whether plaintiff is entitled to an injunction and a receiver.'^^l And when, by reason of the improper conduct of one of two partners, such a want of confidence exists between them as to justify the court in dissolving the firm, a receiver may be appointed and an injunction granted, the injimction following the receiver almost as of course, under such circum- stances.'^2 /^^d when the case, as presented upon the pleadings, discloses a serious and apparently irreconcilable disagreement between the partners as regards the control and disposition of their assets and their respective claims against each other, a court of equity may properly grant an injunction and a receiver, 68 Kerr v. Potter, 6 Gil!, 404. Green, 388; Williamson v. Wilson, 69 Popper V. Sclieider, 7 Ab. Pr., 1 Bland, 418; Boyce v. Burchard, N. S., 56. 21 Ga.. 74. 70 See § 760, anlc. "- Sieghorfncr v. Weissenborn, 5 71 Smith V. Jeyes, 4 Bcav., 50."?. C. E. Green, 172. See, also. Sutro v. Wagner, 8 C. E. 904 RECEIVERS. [CIIAP. XVII. the relief, in such a case, being regarded as a provident exer- cise of the extraordinary jurisdiction of equity 7^ So when plaintiff shows that the defendant partner is insolvent and has disposed of part of the property with intent to defraud credit- ors, an injunction and a receiver may be allowed, although there is a dispute as to wiiether property in defendant's posses- sion is firm property, if it appears that it was received as part payment upon a sale of property belonging to the firm.'^* So, too, a failure by one partner to contribute his portion of the capital stock as agreed upon by the partnership articles, cou- pled with his insolvency and refusal to pay any portion of the firm debts, and the sale of his interest to a third person with- out the knowledge or consent of his partner, afford sufficient grounds for an injunction and a receiver, when such purchaser has taken possession of the firm property and threatens to ex- clude the other partner therefrom. '^^ § 763. Injunction and receiver do not necessarily follow^ dissolution; defendant's insolvency after dissolution. As has already been shown, equity will seldom lend its aid by a receiver and an injunction in partnership matters, unless such a case is presented as to justify a dissolution of the firm. But it is not to be inferred from this general doctrine, that be- cause a firm has been dissolved and plaintiff is entitled to an accounting, he is necessarily entitled to an injunction and a receiver ; and there must, in all cases, be some actual abuse of partnership rights, or of partnership property, to warrant a court of equity in interfering.'^^ when, however, in an action between partners for a settlement of their firm affairs after dissolution, defendant is shown to be insolvent, the court may properly grant an injunction and a receiver for the protection of plaintiff's rights, the insecurity of the partnership assets, 73 Whitman v. Robinson, 21 Md., "^5 Heathcot v. Ravenscroft, 2 30. Halst. Ch., 113. '4 Saylor v. Mockbie, 9 Iowa, "6 Renton v. Chaplain, 1 Stockt, 209. 62. CHAP. XVII.] INJUNCTIONS. _ 905 if left to the control of an insolvent defendant, affording strong ground for relief in equity.'^'^ § 764. Violation of articles ground for relief; lumber business; courts averse to appointing receiver ex parte. Violations of the copartnership articles are sometimes made the foundation for an injunction and a receiver in controver- sies between partners. Thus, when a partnership is formed* for the purpose of sawing lumber, and by the articles of agree- ment the partner intrusted with the management of the busi- ness is to take the necessary timber for use in the business from land belonging to his copartner, a violation of this part of the contract has been held to constitute sufficient ground for a re- ceiver and an injunction, the firm being shown to be in a de- clining condition and its indebtedness increasing. '^^ But when an injunction has already been granted in a controversy be- tween partners, which affords ample protection from loss until a motion for a receiver can be regularly heard, the court will decline to appoint a receiver without notice to defendant and before service of process. "^^ § 765. Partnership in farm; mining business in foreign country. Where plaintiffs, who were the owners of a farm, had entered into an agreement with defendant in the nature of a partnership for working the farm and for a division of the profits, plaintiffs reserving the right to terminate the partner- ship on six months* notice if the profits should not reach a speci- fied amount, they were allowed an injunction and a receiver, upon showing that the profits had not reached the prescribed amount.80 And when an association in the nature of a partner- ship was organized in England, to conduct the business of mining in a foreign country, and the property of the associa- tion in the foreign country was vested in a trustee for manage- ment, a member of the association in England, upon a bill in behalf of himself and all others for an accounting and a dis- 77 Randall v. Morrell, 2 C. E. 7ft McCarthy v. Peake. 18 How. Green 343. ^''■- ^■^^• 78 New V. Wright, 44 Miss., 202. 80 Dunn v. McNaught, 38 Ga., 179. 906 RECEIVERS. [chap. XVII. tribution of the profits, was allowed a receiver and an injunc- tion to restrain the trustee from selling, the trustee having ab- sconded and having threatened to sell the property.^l § 766. Receiver does not necessarily follow injunction; when injunction dependent on fate of receivership. Al- though a preliminary injunction is granted upon an ex parte ►application, on a bill by one partner seeking a dissolution of the tirm, it does not necessarily follow that a receiver must be appointed. And if the court is satisfied, upon the case as pre- sented, that plaintiff is not entitled to a dissolution, it will re- fuse to appoint a receiver and will leave the injunction to be dissolved upon motion for that purpose.^^ g^^t the continuance of an injunction which has been granted to preserve partner- ship property from waste pending an application for the ap- pointment of a receiver, is dependent upon the fate of such application, and if the receiver is denied the injunction must be dissolved.8^ If, however, the court has appointed a re- ceiver, and has also allowed an injunction as a necessary ad- junct to the receivership, under the circumstances of the case, upon overruling a motion to rescind the appointment of the receiver it will continue the injunction until the hearing, or until the further order of the court. ^"^ § 767. Denial by answer a bar to relief. A full denial by defendant's answ^er of all the equities of plaintiff's bill will usually operate as a bar to relief by an injunction and a receiver, in partnership as in other cases. And w^hen the plain- tiff partner seeks a dissolution, upon the ground that de- fendant has drawn from the business more than the sum to which he w^as entitled under the partnership articles, but the answ^er denies this and denies all the allegations of the bill, the court will not grant either an injunction or a receiver.^^ 81 Sheppard v. Oxen ford, 1 Kay 84 Williamson v. Wilson, 1 Bland, & J., 491. 428. 82 Garretson v. Weaver, 3 Edw. 8.5 Henn v. Walsh, 2 Edw. Ch., Ch., 385. 129. 83 Walker v. House, 4 Md. Ch., 39. CHAP. XVII.] INJUNCTIONS. 907 § 768. Assignment by insolvent partners after dissolu- tion ground for relief. When a partnership is dissolvable at the will of either partner, and does, in fact, become dissolved by the insolvency of some members of the firm, an assignment of the firm assets by the insolvent members for the payment of their private debts, is sufficient ground for a receiver and an injunction, which should extend to all the firm assets in the hands of the defendants and of their assignee. ^^ § 769. Receiver and injunction on death of partner. In case of the deatl]_ of one partner, there being no partnership articles, and no provision for continuing the business by repre- sentatives of the deceased partner, if the survivor refuses to close up the business within a reasonable time, but continues to manage it for his own benefit and in his own name, the court \vill enjoin him from continuing and will appoint a receiver, upon a bill by the administrator of the deceased partner, equity, under such circumstances, regarding the survivor as a trustee for the creditors and representatives of the deceased.^" And upon appointing a receiver, upon a bill by the administrator of a deceased partner against the survivors, the court will require them to deliver to the receiver all unexpended money in their hands, with all personal property, evidences of debt, and choses in action, and will enjoin them from collecting any debts due to the firm.^^ § 770. Receiver allowed when defendants enjoined from collecting debts; receiver not enjoined from managing fund. Upon a bill by a partner for a dissolution of the firm, when the defendant partners have been enjoined from collecting debts, the court should appoint a receiver to collect the debts.89 And when a receiver is appointed over partrier- ship effects, in proceedings under judgments against the firm. it is improper to enjoin him from the management of the 86 Davis V. Grove, 2 Rob. (N. 88 Miller z'. Jones, 39 111.. 54. Y.), 134; Same v. Same, id., 635. 89 Mahcr v. Bull, 44 111., 97. 87 Holden's .Administrators V. McMakin, Par. Eq. Cas.. 270. 908 RECEIVERS. [CHAr. XVII. fund or property, since this would be equivalent to enjoining the court itself from disposing of the funds which may come into the hands of its officer, the receiver.^^ § 771. Sale of good-will by receiver and injunction against continuing business in same locality. When the business of a partnership is of such a nature that it is impos- sible for a receiver to conduct it, and the court, therefore, di- rects a sale of the lease and good-will of the firm, it is proper, for the purpose of giving efficacy to the sale of the good-will, to permit either party to purchase, and to enjoin the others from conducting the same business in the same locality.^^ 90 Van Rensselaer v. Emery, 9 ^i Williams v. Wilson, 4 Sandf. How. Pr., 135. Ch., 379. CHAP. XVII.] INJUNCTIONS. 909 V. Real Property. § 772. Equity averse to interfering by injunction and receiver with possession of real property under claim of title. nZ. Long acquiescence in possession may bar relief. 774. Injunction and receiver refused in proceeding by lessor against lessee. 775. Refused heir-at-law and devisee on bill to determine widow's dower. 116. Purchaser at judicial sale allowed both remedies. 111. Receiver my enjoin waste; may enjoin breach of covenant by tenant. 778. When receiver and injunction granted in equitable action to recover realty; tenant for life permitting taxes to be in ar- rears; contract between owner and tenant. 119. Remainder-man and tenants not allowed to enjoin receiver from dispossessing them. 780. The relief as between tenants in common. § 772. Equity averse to interfering by injunction and receiver with possession of real property under claim of title. In considering the appHcation of the extraordinary remedies under consideration in cases affecting real property, the most noticeable feature to be observed is the extreme aver- sion manifested by courts of equity to any interference in limine with the possession of real estate, as against a defendant in possession and claiming under a legal title. Indeed, it may be asserted as a general proposition, sustained by both the English and American authorities, that in a controversy con- cerning the title to real property, in which plaintiff asserts a legal title in himself, against a defendant who is in possession under claim of legal title, and in receipt of the rents, courts of equity decline to lend their extraordinary aid either by a re- ceiver or by an injunction in limine, and leave the rights of the parties to be determined by a court of law. And while there may be special circumstances of fraud or of imminent danger, sufficient in extreme cases to warrant a departure from the rule, the general doctrine as here stated remains unquestioned, and equity will decline to interfere by the exercise of either branch of its extraordinary jurisdiction, before plaintiff has es- 910 RECEIVERS. [chap. XVII. tablished his title at law.^- Indeed, the rule as stated necessa- rily follows from the established doctrine that equity will not interfere when adequate relief may be had at law. Hence courts of equity will refuse to grant an injunction and to ap- point a receiver, in a contest concerning the possession of real property, when redress may be had at law by the usual methods of procedure, and will leave the parties aggrieved to pursue their legal remedy. For example, a devisee of realty, claiming by his bill the title and right of possession, and that defendant has unlawfully usurped possession and continues to hold with- out right, receiving income and depriving plaintiff of his means of support, can not have the aid of an injunction and a re- ceiver in liininc, even though he alleges the insolvency of de- fendant in possession, but will be left to assert his title by pro- ceedings at law.^^ § 773. Long acquiescence in possession may bar relief. It may also be a sufficient objection to disturbing the posses- sion of real property by an injunction and a receiver, that such possession has been long acquiesced in and has remained undis- turbed for many years. And when the property in controversy has been held and managed and its proceeds have been applied by a corporation in a particular manner for a long term of years, the possession will not be disturbed by an injunction and a receiver upon the ground that such application of the proceeds is a breach of trust, unless the court is satisfied that defendant is a mere naked trustee, without right or discretion as to the management of the property.^^ 92 Lloyd V. Passin-ham, 16 Ves., 93 pfdtz v. Pfeltz, 14 Md., 376. 59; S. C, 3 Meriv., 697; Schlecht's 94 Skinners Company v. Irish So- Appeal, 60 Pa. St., 172; Pfeltz v. ciety, 1 Alyl. & Cr., 162. See, also, Pfeltz, 14 Md., 376. See, also, Clark Municipal Commissioners of Car- V. Ridgely, 1 Md. Ch., 70; Willis v. rickfergus v. Lockhart, Ir. Rep., 3 Corlies, 2 Edw. Ch., 281 ; Owen v. Eq., 515. Homan, 3 Mac. & G., 378, affirmed on appeal to the House of Lords, 4 H. L. Rep., 997. CHAP. XVII.] INJUNCTIONS. 911 § 774. Injunction and receiver refused in proceeding by lessor against lessee. The general rule already stated, de- nying the aid of a receiver and an injunction as against a de- fendant in possession under claim of title, is applicable as be- tween a lessor and his lessee, the latter being clothed with a le- gal title and a right to possession thereunder. And when the -owner of premises executes a lease thereof, under which the lessee is authorized to bore for and take oil from the premises, returning one-fourth of the product as rental, equity will re- fuse an injunction and a receiver in a proceeding by the lessor in aid of an action at law for a forfeiture of the lease.^^ § 775. Refused heir-at-law and devisee on bill to deter- mine widow's dower. When an heir-at-law^ and devisee under a will files a bill to determine a widow's dower in the estate, and prays an injunction to prevent a transfer of the property and a receiver of the rents and profits, the court will not interfere merely upon an allegation that the rents are in jeopardy, but it must appear how they are endangered. And when the bill does not allege that the rents and profits will be lost by reason of insolvency of the persons who are receiving them, or that plaintiff has not an adequate remedy at law for whatever portion of the rents he may be entitled to, the relief will be refused. ^^ § 776. Purchaser at judicial sale allowed both remedies. A purchaser of lands at a judicial sale, who has obtained a sheriff's deed of the premises upon the expiration of the statutory period of redemption, has been allow'ed a receiver and an injunction in aid of an action to obtain possession. And when, in such an action, it was alleged that defendants were insolvent and were endeavoring to defraud plaintiff of his rights, the court granted an injunction and appoint- ed a receiver to take charge of the growing crops, in order «^> Chicago & Allegheny Oil & "« Knighton v. Young, 22 Md., Mining Co. v. The United States 359. Petroleum Co., 57 Pa. St., 83 ; S. C, 6 Phila., 521. 912 RECEIVERS. [chap. XVII. that they might be harvested and prepared for market, and tlie proceeds held subject to the final order of the court. ^"^ § 777. Receiver may enjoin waste; may enjoin breach of covenant by tenant. A receiver may be allowed the aid of an injunction, in a proper case, to restrain the commission of ■.vaste on premises subject to his control. And it is held under the Irish practice, that the receiver may, in a pressing case, file his bill to enjoin the waste, and that at the same time with moving for the injunction he may move a reference to a master to report as to the necessity of such proceeding and whether it shall be continued. ^^ So it has been held proper for the court, upon motion of the receiver, to grant a conditional restraining order against the commission of waste by tenants, without any bill being filed for that purpose, leaving the question to be determined by the court when cause is shown against the re- straining order.^^ So when premises subject to a receivership are held by tenants under a lease, with a covenant against their use for a particular purpose, as for a shop, on pain of forfeiture, in case of a breach of the covenant, the receiver may have the aid of an injunction to restrain a tenant from using the prem- ises for the purposes prohibited by the covenant.^ § 778. When receiver and injunction granted in equit- able action to recover realty; tenant for life permitting taxes to be in arrears ; contract between owner and tenant. In an equitable action for the recovery of real property, upon the ground that the proceedings by which plaintiff's ancestor had been divested were void by reason of fraud and mistake, and also for want of jurisdiction in the court in which such proceedings were had, it is proper to allow a receiver and an injunction, when it appears that defendants in possession and collecting the rents are irresponsible, and that the premises are in a ruinous condition and will continue to deteriorate if left 97 Corcoran v. Doll, 35 Cal., 476. 1 Mason v. Mason, Flan. & K., 98 Mangle v. Lord Fingall, 1 429. Hog., 142. 99Cronin v. McCarthy, Flan. & K., 49. CHAP. XVII.] INJUNCTIONS. 913 in defendant's possession during the litigation. ^ And on a bill against tenant for life, seeking an injunction to restrain him from disposing of the property, if the tenant for life in possession has permitted the taxes to be in arrears, the court may appoint a temporary receiver of so much of the rents and income as will suffice to pay the taxes due and in arrear, un- less defendant shall pay them within a specified time.^ But a mere contract between the owner of land and a tenant, pro- viding for the working of the land by the tenant for a given time, the owner to receive compensation out of the crops grown thereon, does not entitle the owner to an injunction to restrain the tenant from removing the crops, or to a re- ceiver to manage the land and take possession of the ungath- ered crop.* § 779. Remainder-man and tenants not allowed to en- join receiver from dispossessing them. When property has been placed in the hands of a receiver, a remainder-man and tenants of the premises have been refused an injunction to restrain the receiver from turning them out of possession, the court holding that their interest was insufficient to sustain such an application.^ § 780. The relief as between tenants in common. While courts of equity are usually averse to the exercise of their ex- traordinary jurisdiction as against tenants in common of real- ty, there are cases where the relief is proper upon the ground of exclusion of his co-tenant by a tenant in possession, who is in insolvent circumstances.^ And a plaintiff, claiming a moiety of an estate as tenant in common with defendant who was in possession of the whole, has been allowed a receiver of the rents and profits of such moiety, and an injunction to re- strain defendant from collecting the rents thereof.'^ 2 Rogers v. Marshall, 6 Ab. Pr., 6 See Wiljiams v. Jenkins, 11 Ga., Isf_ s., 457. 595; Street v. Anderton, 4 Bro. C. 3 Cairns v. Cliahert, 3 Edw. Ch., C, 414; Sandford v. Ballard. .30 312. Beav., 109. 4 Williams v. Green, 37 Ga.. Z7. "^ Hargrave v. Hargravc, 9 Beav., 5 Wynne v. Lord Newborough, 1 549. Ves. Jun., 164. Receivers — 58. CHAPTER XVIII. OF THE RFXEIVER'S COMPENSATION. § 781. Compensation regulated by court in the absence of legislation; court may act on own knowledge. 782. English practice; no settled rule; reference to master to deter- mine. 783. No fixed rule in this country; compensation dependent upon circumstances of case; no compensation after reversal of ap- pointment; court may hear evidence; final compensation; practice as to partial compensation ; compensation after removal. 784. The rule in Massachusetts; reasonable pay for person of ordi- nary ability allowed; rule in Maryland. 785. Receivers sometimes allowed same rates as guardians, execu- tors or administrators; commissions on receipts and disburse- ments; New York doctrine. 786. Receivers in lieu of executors allowed same compensation. 787.' Receiver over railway allowed more liberal compensation than in ordinary cases. 788. Entitled to compensation for work performed by others; farms managed by overseers; commission on receipts and disbursements. 789. When receiver allowed to make rests. 790. Extra compensation; receiver's mismanagement ground for re- fusal of compensation. 791. When receiver of insurance company allowed commissions on premium notes surrendered. 792. Payment into court to avoid receiver's compensation. 793. Receiver over minor denied extra compensation for attending survey of estate. 794. Doctrine of the Irish Chancery; receiver appointed bv consent. 795. Partner appointed receiver not allowed compensation. 796. Receiver can not have judgment against the parties on motion; practice in fixing compensation; part of compensation taxed as costs against plaintiff; chargeable on fund; compensation should not be allowed without notice; where compensation not subject to set-off. 796a. Appeals from allowance or refusal of compensation. 796b. Right of receiver to retain compensation out of fund before surrendering it to trustee in bankruptcy. 914 CHAP. XVIII.] COMPENSATION. 915 § 796c. Agreement by party to pay receiver's compensation against public policy; agreement by receiver to serve without com- pensation. § 781. Compensation regulated by court in the absence of legislation; court may act on own knowledge. The power of courts of equity to fix the compensation of their own receivers is well established, and results necessarily from the relation which the receiver sustains to the court, he being its officer or agent, deriving his functions only from that source. In the absence, therefore, of any legislation regu- lating the receiver's salary or compensation, the matter is left entirely to the determination of the court from which he derives his appointment.^ And in making an allowance, the court is not confined to evidence formally introduced but may 1 Gardiner v. Tyler, 3 Keyes, 505 ; S. C, 2 Ab. Ct. Ap. Dec, 247; Baldwin v. Eazler, 34 N. Y. Supr. Ct, 275 ; Magee v. Cowper- thwaite, 10 Ala., 966; Stretch v. Govvdey, 3 Tenn. Ch., 565; Martin V. Martin, 14 Ore, 165, 12 Pac, 234; Union National Bank v. Mills, 103 Wis, 39, 79 N. W, 20; Crum- lish's Adm'r v. Shenandoah V. R. Co., 40 West Va, 627, 22 S. E., 90; Kilpatrick v. Horton, 15 Wyo, 501, 89 Pac, 1035. See, also, Unit- ed States V. Church, 6 Utah, 72; Preston National Bank v. Smith M. P. Co., 102 Mich., 462, 60 N. W., 981 ; Simmons v. Allison, 119 N. C, 556. 26 S. E., 171 ; Strain v. Palmer, 86 C. C. A., 618, 159 Fed., 628. As to the allowance of compensation to a surviving receiver after the death of his co-receiver, see Bur- roughs V. Bunnell, 70 Md., 18, 16 Atl., 447. As to the allowance to a receiver of an insolvent bank for his own compensation, for clerk hire, expenses of receivership and on account of moneys collected and misappropriated by an attorney, see Union Bank Case, 37 N. J. Eq., 420, affirmed on appeal sub nom. Sand- ford V. Clarke, 38 N. J. Eq., 265. As to the commissions allowed to receivers of insolvent life and fire insurance companies under the laws of New York, the basis upon which such commissions are computed, and the liability of such receivers to pa3'ment of interest upon their balances, see Attorney-General v. North America Life Insurance Co., 26 Hun, 294. See, also, Attorney- General V. Continental Life Insur- ance Co, 27 Hun, 524; In re Se- curity Life Insurance & Annuity Co., 31 Hun. 36; In re Common- wealth Fire Insurance Co, 32 Hun, 78. As to the allowance to a re- ceiver for carrying on a hotel busi- ness, see Cake v. Mohun, 164 U. S, 311, 17 Sup. Ct. Rep, 100. af- firming Cake V. Woodbury, 3 App. D. C. 60, and distinguished in In- ternational Trust Co. V. Llnited Coal Co., 27 Colo, 246. 60 Pac, 621. .\s to the lia1)ility of defend- 916 RECEIVERS. [chap. XVIII. act on its own knowledge and judgment as to the reasonable- ness of the charge in connection with what has been done by the receiver in the discharge of his duties. ^ And in passing upon the compensation of a receiver, an appellate court will ordinarily defer much to the judgment of the court below by which the receiver was appointed, that court having had the supervision of his conduct.^ ants for a receiver's compensation and that of his counsel in an ac- tion brought by the receiver against the shareholders of a corporation to recover their unpaid stock sub- scriptions, see Berry v. Rood, 209 Mo., 662, 22 S. W., 108. As to facts held to constitute a waiver of the right to object to a receiv- er's compensation, see Dillingham V. Moran, 26 C. C. A., 596, 81 Fed., 759, 52 U. S. App., 425. The de- cree of the court of appeals in the case last cited was afterward set aside by the supreme court of the United States upon the ground that one of the judges before whom the case was heard in the court of appeals was not qualified to sit in the case. Moran v. Dillingham. 174 U. S., 153, 19 Sup. Ct. Rep., 620. 43 L. Ed., 930. As to the right of a leceiver to compensation under a void order of appointment, see Tabor v. Bank of Leadville, 35 Colo., 1, 83 Pac, 1060. In Davy v. Scarth, (1906) 1 Ch., 55, it was held that a partner who was ap- pointed receiver of the firm assets was entitled to his compensation and expenses out of the funds in his hands although he was indebted to the estate and unable to pay <:ucH obligation. In Campau v. Detroit Driving Club, 144 Mich., 80, 107 N. W., 1063, it was held that a receiver appointed on a creditors' bill should be denied compensation where he discovered no property or assets of the debtor which could not have been reached by execution. Where a receiver has recovered a judgment for the amount due him as compen- sation and also for an indebtedness for which he has incurred individ- ual liability, upon his death such judgment passes to his personal representative and may be enforced by the latter. Cake v. Mohun, 164 U. S., 311, 17 Sup. Ct. Rep., 100, affirming Cake v. Woodbury, 3 App. D. C, 60, and distinguished in In- ternational Trust Co. V. United Coal Co., 27 Colo., 246, 60 Pac, 621. 2 State V. Nebraska S. & E. Bank, 61 Neb., 496, 85 N. W., 391 ; In re State Bank, 57 Minn., 361, 59 N. W., 315. 3 Morgan v. Hardee, 71 Ga., 736; Hinckley v. Railroad Co., 100 U. S., 153; Cake v. Mohun, 164 U. S., 311, 17 Sup. Ct. Rep., 100, affirm- ing Cake V. Woodbury, 3 App. D. C, 60, and distinguished in Inter- national Trust Co. V. United Coal Co., 27 Colo., 246, 60 Pac, 621; Northern Alabama Ry. Co. v. Hop- kins. 31 C. C. A., 94, 87 Fed., 505, 59 U. S. App., 74; Wilkinson v. Washington Trust Co., 42 C. C. A., 140, 102 Fed., 28; Braman v. Farm- ers' L. & T. Co., 51 C. C. A. 644, 114 Fed., 18; Heffron v. Rice, 149 CHAP. XVIII.] COMPENSATION. 917 § 782. English practice; no settled rule; reference to master to determine. Under the practice of the English Court of Chancery, there seems to have been no settled or established rule as to the amount of compensation to be allowed receivers for their services. In an early case in that court, it was ordered by the terms of the decree appointing the re- ceiver, that he should be allowed a reasonable salary for his care and trouble in the management of the estate, such salary to be determined by the master in chancery.'* And the usual practice seems to have been to leave the matter to the deter- mination of a master, and these officers were governed in their allowance by the degree of difficulty or labor involved in the case, increasing the compensation when there was ex- traordinary difficulty in collecting the funds, or diminishing it if there was any extraordinary facility in their collection. ^ 111., 216, 36 N. E., 562, 41 Am. St. Rep., 271 ; Culver v. Allen Medical Assn., 206 111., 40, 69 N. E., 53; Baxter v. Hewes, 45 La. An., 1065, 13 So., 864 ; State v. People's U. S. Bank, 197 Mo., 605, 95 S. W., 867 ; First National Bank v. Oregon Paper Co., 42 Ore., 398, 71 Pac, 144, 971 ; State v. Nebraska S. & E. Bank, 61 Neb., 496, 85 N. W., 391 ; Union National Bank v. Mills, 103 Wis., 39, 79 N. W., 20. And see Graham v. Cnrr, 133 N. C, 449, 45 S. E., 847. 4 Carlisle v. Berkley, Amb., 599; Special Bank Commissioners v. Franklin Institution, 11 R. I.. 557. And when a receiver was appointed for the management of real estate, and to collect the rents during the minority of an infant tenant for life, and the rental was stated to be about £2,000 per year, the receiver's compensation was fixed by the court at a salary of i60 per year. New- port V. Bury, 23 Beav., 30. 5 Day V. Croft, 2 Beav., 488. The considerations involved in deter- mining the amount of compensa- tion to be allowed receivers, under the English practice, are very clear- ly stated in this case by Lord Lang- dale, Master of the Rolls, as fol- lows, p. 491 : "Various representa- tions having been made at the bar, as to the principle and the practice adopted in the offices of the differ- ent masters in respect of receiver's allowances, I thought it right, be- fore disposing of the case, to in- quire of the masters what were the principles upon which they acted, and the practice adopted on this point in their several offices. The masters have each of them been good enough to furnish me with a certificate, and I find that there is no general rule, which universally prevails, as to the allowance of a receiver. Where the receipts consist of rents of freehold and leasehold estates, 5/. per cent, upon the 918 RECEIVERS. [ClIAl'. XVllI. But it is competent for the court at any time to summarily order all proceedings before the master or referee to cease, although unfinished, and to order a report to be made forth- with and to conclude the entire matter itself in a summary way.^ § 783. No fixed rule in this country; compensation de- pendent upon circumstances of case ; no compensation aft- er reversal of appointment; court may hear evidence; final compensation; practice as to partial compensation; compensation after removal. In this country, as in Eng- land, no established rule has been fixed for determining the amount of compensation to be allowed receivers, and it is from the nature of the case quite impracticable to establish an inflexible rule. The compensation is, therefore, usually de- termined according to the circumstances of the particular case, rather than by any fixed principles or established rate of per- amount received is most frequently allowed. If there be any special difficulty in collecting the rents, on account of the sums being extreme- ly small, or of the payments being very frequent, as weekly payments, then the allowance is increased ; on the other hand, if there should be very great facility in receiving the rents, then less than 5/. per cent, is allowed. One of the masters has certified to me a case, where, after consideration, he allowed only 41. per cent, for the receipts of rents and profits of freehold and lease- hold estates. Another master has certified to me a case in which the sum paid to the receiver amounted to 300/. a year for the first year; the receiver was afterward allowed 150/. only for a succession of years, which was afterwards reduced to 50/. a year, for the receipt of the same rents. It can not, therefore, be considered as an universal or gen- eral rule, that 5/. per cent, should be allowed even upon the receipts of rents and profits. It may be in- creased if there be any extraordi- nary difficulty, or diminished if there be any extraordinary facility in the collection. With respect to other receipts, each master consid- ers himself bound to have regard to the degree of facility or difficulty there may be in receiving them. They have sometimes allowed two and one fourth per cent., but for gross sums of money this has been very much reduced, and one and ' one-fourth per cent, has been al- lowed upon many occasions. It ap- pears, therefore, that the masters, as they ought, consider upon each occasion, what is fit or proper to be allowed, having regard to the de- gree of difficulty or facility experi- enced by the receiver." 6 Harrigan v. Gilchrist, 121 Wis., 127, 414, 99 N. W., 909, 1000. CHAP. XVIII.] COMPENSATION. 919 centage."^ It may be said in general terms, that a receiver's compensation should correspond with the degree of business capacity, integrity and responsibihty required in the man- agement of the affairs intrusted to him, and that a reasonable and fair compensation should be allowed according to the •circumstances of the particular case.^ And when a statute "^ Abbott V. Baltimore & Rappa- hannock Steam Packet Co., 4 Md., Ch., 310; Schwartz v. Keystone Oil ■Co., 153 Pa. St., 283, 25 Atl., 1018; Lichtenstein v. Dial, 68 Miss., 54, ■8 So., 272 ; Tompson v. Huron L. Co., 5 Wash., 527, 32 Pac, 536; In re Sheets Lumber Co., 52 La. An., 1337, 27 So., 809 ; Hickey v. Parrott S. & C. Co., 32 Mont, 143, 79 Pac, 698; Crumlish's Adm'r v. Shenan- doah V. R. Co., 40 West Va., 627, 22 S. E., 90; Harrigan v. Gilchrist, 121 Wis., 127, 435, 99 N. W., 909, 1007; Boston Safe-Deposit & T. Co. V. Chamberlain, 14 C. C. A., 363, 66 Fed., 847, 25 U. S. App., 251 ; Montgomery v. Petersburg S. & I. Co., 17 C. C. A., 360, 70 Fed., 746, 30 U. S. App., 511. And see French v. Gifford, 31 Iowa, 428; Cowdrey v. The Railroad Co., 1 Woods, 331 ; Martin v. Martin, 14 Ore., 165, 12 Pac, 234; In re An- gell, 131 Mich., 345, 91 N. W. 611; Berry v. Rood, 209 Mo., 662, 22 S. W., 108. See Davis v. Atkinson, 75 Ark., 300, 87 S. W., 432, where, upon the particular facts of the case, the court refused to allow a re- ceiver any compensation. See Drey V. Watson, 71 C. C. A., 158, 138 Fed., 792, where the compensation of a receiver and of his counsel were held excessive. 8 French v. Gifford, 31 Iowa, 428; Jones v. Keen, 115 Mass., 170; Stuart V. Bouhvare, 133 U. S., 78, 10 Sup. Ct. Rep., 242; Tompson v. Huron L. Co., 5 Wash., 527, 32 Pac, 536; Central Trust Co. v. Wabash, St. L. & P. R. Co., 32 Fed., 187 ; Heflfron v. Rice, 149 111., 216, 36 N. E.. 562, 41 Am. St. Rep., 271 ; Culver v. Allen Medical Assn., 206 111., 40, 69 N. E., 53 ; Union Na- tional Bank v. Mills, 103 Wis., 39, 79 N. W., 20. In French v. Gif- ford, 31 Iowa, 428, supra, the case came up on exceptions to the re- port of a referee fixing the amount of compensation to be allowed the receiver of a banking institution. Mr. Justice Miller, delivering the opinion, says : "While we concede that the receiver should receive a compensation corresponding to the high degree of business capacity, integrity and responsibility required in cases of this character, and which was secured in the person of the receiver in this case, yet we feel it our duty to allow only such sum as will be such reasonable compensa- tion. There can be no reasonable grounds to doubt that the receiver in this case, or some other person possessing equal qualifications, could have been employed by pri- vate contract to perform the serv- ices rendered in this case for half the amount allowed by the referee. This, it seems to us, is the fair and reasonable test by which the amount of compensation to be allowed should be determined. While it 920 RECEIVERS. [chap. XVIII. under which a receiver is appointed authorizes the payment of a reasonable compensation, it is held that such compensa- tion may be best determined, not by a percentage upon his re- ceipts, but by considering the responsibility assumed, the skill and labor expended, and the amounts usually paid for similar services. It is also proper to allow the receiver compensation from time to time before^ the close of his receivership, without requiring him to wait until its determination. But the allow- ance for one year's services is not necessarily a precedent for a subsequent year, and in proportion as his responsibility is lightened and the degree of skill and labor required of him is diminished, should his compensation be decreased.^ Upon the other hand, although his compensation may have been fixed by a salary, yet if his duties prove to be more arduous and onerous than originally expected either by the receiver or by the court, it is proper to grant him an allowance in addition to his salary.lO The controlling considerations in fixing a receiver's compensation are the fair value of the time and labor required in the perfDrmance of his duties, as measured by or- dinary business standards, and the degree of activity, integ- rity and dispatch with which the work has been performed.^! may be true that an individual of of the litigation was settled by an the required qualifications, if en- agreement of the parties by which gaged in a lucrative private busi- each was to pay one-half of the ness, could not be induced to fees, costs and expenses of the re- abandon such business for a tern- ceivership, the defendant would not porary appointment of this char- be heard to say that the receiver acter without extraordinary com- was not entitled to compensation pensation, yet one of wealth and because his original appointment leisure may readily be found (as in was improper. this case), who would undertake 9 Special Bank Commissioners v. the trust for a reasonable and ordi- Franklin Institution, 11 R. I., 557. nary compensation. We would not 10 Farmers' Loan & Trust Co. v. be warranted in allowing extraordi- Central Railroad, 8 Fed., 60. nary compensation, unless in a case H Schwartz v. Keystone Oil Co., of imperative necessity." In Kim- 153 Pa. St., 283, 25 Atl., lOlS; merle v. Dowagiac Mfg. Co., 105 Hickey v. Parrott S. & C. Co., 32 Mich.. 640, 63 N. W., 529, it was Mont., 143, 79 Pac, 698. held that where the subject-matter CHAP. XVIII.] COMPENSATION. 921 If there has been delay in closing his accounts, inattention to his duties, and the use of funds of the receivership in his personal business, his compensation may be reduced accord- ingly.l2 And a receiver should not be allowed compensation for work performed by him after the reversal of the order of appointment and the filing of the mandate in the lower court, since it is his duty in such case to immediately present his final account and ask for his discharge. ^^ And in fixing his compensation, the court should consider the responsibilities assumed by the receiver and the labor actually involved, due regard being had to the prices usually paid for similar serv- ices.l^ And in determining the amount of his compensation, the court should consider not the value of his services in larger and more important affairs but their value in connec- tion with the particular business of which he has charge. ^^ And it has been held that in the matter of compensation, the standard to be followed should be that of public and not of private service, and that all doubts should be resolved in favor of the trust.l^ And if the court is in doubt as to what will be a reasonable allowance, he should take the testimony of persons of experience in such matters and from their own testimony and his own knowledge of the situation, should fix the proper amount of compensation. ^'^ Final compensation should be allowed only at the termination of the receivership, and it is improper before such final determination to set aside a sum to cover all past and future services of the receiver. And where a receiver has been appointed to wind up the af- fairs of an insolvent corporation with all reasonable and con- 12 Schwartz v. Keystone Oil Co., 1^ Speiser v. Mcrcliants' Ex- 153 Pa. St., 283, 25 Atl., 1018. change Bank, 110 Wis., 506, 86 N. 13Hickey v. Parrott S. & C. Co., W., 243; Harrigan v. Gilchrist, 121 32 Mont., 143, 79 Pac, 698. Wis., 127, 436, 99 N. W., 909, 1007. 14 Tompson v. Huron L. Co., 5 l" Union National Bank v. Mills, Wash., 527, 32 Pac, 536. 103 Wis., 39, 79 N. W.. 20. 15 Stearns Paint Mfg. Co. v. Comstock, 121 Iowa, 430, 96 N. W., 869. 922 RECEIVERS. [CIFAP. XVIII. venient speed, a partial or intermediate allowance for his serv- ices should be considerably less than the value of the services rendered up to the time of the allowance, and, upon the hnal allowance, the matter should be so adjusted that the receiver will receive a fair and just allowance, although the partial al- lowance was inadequate considered by itself. ^^ And since a receiver's compensation is regarded as part of the costs of the proceeding, it is proper to give it a preference over prior liens, and this is so, although the appointment was made without prejudice to prior liens.l^ When the court has fixed the com- pensation after the hearing of testimony and the allowance made is warranted by such testimony and appears to be reason- able, the exercise of the discretion of the court will not be in- terfered with on appeal. 20 Especially will the action of the lower court in making an allowance not be disturbed upon appeal where the evidence upon which the court acted is not presented to the reviewing court.^i And a receiver may pre- sent his claim for compensation and for the settlement of his accounts although he has been previously removed by the court.22 § 784. The rule in Massachusetts; reasonable pay for person of ordinary ability allowed ; rule in Maryland. It is held in Massachusetts, that the governing principle in fixing the compensation to be allowed receivers for services rendered by them in the management of their trust is to allow them such a sum as would be a reasonable compensation for the services of a person of ordinary ability, and competent to perform the duties of the receivership. And in fixing this amount the court is not governed by the special qualifications and standing of the person who may be appointed, but will only allow what 18 Maxwell v. Wilmington D. M. dent Savings Bank, 103 Mo., 212, 15 Co., 82 Fed., 214. S. W., 429. 19 Gallagher v. Gingrich, 105 21 Van Brocklin v. Queen City P. Iowa, 237, 74 N. W., 763. Co., 21 Wash., 447, 58 Pac., 575. ^0 Lichtenstein v. Dial, 68 Miss., 22 Young v. Irish, 104 Minn., 54, 8 So., 272; Greeley v. Provi- 367, 116 N. W., 656. CHAP. XVIII.] COMPENSATION". 923 would be a reasonable amount for a person of ordinary abil- ity performing the work, and this amount will not be fixed upon the basis of a percentage or fixed commission on the amount of funds collected by the receiver.23 And when a master in chancery, to whom the receiver's accounts have been referred, has fixed the amount to be allowed the receiver for his own compensation, as well as for counsel fees, and the testimony is not preserved, the court will not pass upon the question upon exceptions to the master's report.24 But in Maryland, it is regarded as proper to allow the same rates of compensation which are fixed by rule of court on sales made by trustees, under decrees and orders of the court. 25 -3 Grant v. Bryant, 101 Mass., 567. See, also, Jones v. Keen, 115 Mass., 170. And see Battery Park Bank v. Western C. Bank, 126 N. C, 531, 36 S. E., 39. But see Lich- tenstein v. Dial, 68 Miss., 54, 8 So., 272. Grant v. Bryant, 101 Mass., 567, was the case of a receiver upon a bill in equity to wind up a part- nership which had been dissolved. The receiver, in submitting his ac- counts, charged as compensation for his services a commission of two and a half per cent, upon the gross amount of assets coming into his hands by the sale of stock, collec- tions of notes and accounts, and otherwise. In support of this charge testimony was introduced as to the usual rates of charge upon commercial transactions by commis- sion merchants and others, and as to the experience, capacity and mer- cantile standing of the receiver. The court held that the compensa- tion should be limited to a reason- able amount for the services re- quired and rendered by a person of ordinary standing and ability com- petent for such duties, and that it should not be based upon the usages or rates of profit in any branch of commercial or other business, or up- on the special qualifications and standing of the person who may happen to perform the services. The question of compensation being re- served for the full court, it was held that this rule was the correct one. The court, Ames, J., say, p. 570: "The rule adopted as to the com- pensation of the receiver was en- tirely correct. The court does not regulate the compensation of its officers upon the basis of a fixed commission upon the amount of money passing through their hands, but allows them such an amount as would be reasonable for the services required of and rendered by a person of ordinary ability, and competent for such duties and serv- ices." But see Cowdrey v. The Railroad Co., 1 Woods, 331. 24 Jones V. Keen, 115 Mass., 170. 25 Abbott V. Baltimore & Rappa- hannock Steam Packet Co., 4 Md. Ch., 310; Tome v. King, 64 Md., 166, 21 Atl., 279. 924 RECEIVERS. [chap. XVIII. § 785. Receivers sometimes allowed same rates as guardians, executors or administrators; commissions on receipts and disbursements; New York doctrine. In some instances, the courts have seen fit to fix the compensation of receivers by analogy to the cases of guardians, executors, or other persons occupying fiduciary relations. Thus, in Ala- bama, it has been held to be the more appropriate method of determining the compensation to allow a percentage upon re- ceipts and disbursements, as in the case of guardians, although such allowance is not considered as fixing an imperative rule.^^ And in New York, it has been held that in the absence of proof as to the amount of labor performed by a receiver in the dis- charge of his trust, it was reasonable and proper to fix his compensation in accordance with the rates or commissions pre- scribed by law for the payment of executors or administra- tors, and that this course might be pursued when it did not appear that there was any peculiar difficulty in the duties per- formed. ^"^ And it has been held, when this method was adopt- ed, that the receiver was entitled to commissions upon the value of all the assets taken out of his hands and delivered to the parties by an order of court settling the suit by consent of the parties,28 and also entitled to commissions upon both his re- ceipts and disbursements.29 The courts of New York, how- ever, although sometimes following the method above indicat- ed, do not consider themselves bound by the rates fixed by law for executors and administrators, and still regard the question as one to be determined by the court, in the absence of any legislation regulating the subject.^^ 26 Magee v. Cowperthwaite, 10 28 Bennett v. Chapin, 3 Sandf., Ala., 966; First National Bank v. 673. Oregon Paper Co., 42 Ore., 398, 71 29 Howes v. Davis, 4 Ab. Pr., 71. Pac, 144, 971. so Gardiner v. Tyler, 3 Keyes, 27'Muller V. Pondir, 6 Lans., 481. 505; S. C, 2 Ab. Ct. Ap. Dec, 247; See, also, Bennett v. Chapin, 3 Baldwin v. Eazler, 34 N. Y. Supr. Sandf., 673; Howes v. Davis, 4 Ab. Ct. R., 275. See Bennett v. Chap- Pr., 71. in, 3 Sandf., 673. CHAP. XVIII.] COMPENSATION. 925 § 786. Receivers in lieu of executors allowed same com- pensation. Where receivers have been appointed in place of executors of the estate of a deceased, and have acted in conjunction with a remaining executor appointed under the will of the deceased, it has been regarded as a fair and equit- able mode of making compensation for their services to deal with them as trustees or executors under the will, having real and personal estate in charge, and to allow them the same rate of compensation or the same commissions upon their dis- bursements as are paid to such executors.^^ And when a trustee under a will is made receiver of the estate, it rests wholly in the discretion of the court whether to allow him compensation as receiver, and a reasonable allowance having been made by the court, its discretion will not be interfered with upon appeal.^2 § 787. Receiver over railway allowed more liberal com- pensation than in ordinary cases. In the case of a receiver over a railway company, intrusted with the management and operation of the road, since his duties and responsibilities are much greater than those of an ordinary receiver appointed merely to take and hold money, a more liberal rate of com- pensation would seem to be permissible than in ordinary cases. And it is not regarded as a proper test, in such case, to inquire what another competent person would have been willing to do the work for, since the office is not put up at auction. The amount of such a receiver's compensation will, therefore, be graduated according to the peculiar duties and responsibil- ities resting upon him in the control and management of the road.32 And in determining the compensation to be paid to 31 Holcombe v. Executors of case, to inquire what another even Holcombe, 2 Beas., 417. competent person would have been 32 /„ re Bignell, (1892)1 Ch., 59. willing to do the work for. The 33Cowdrey v. The Railroad Co., receiver's office is not put up at 1 Woods, 331. Mr. Justice Bradley, auction. His compensation is not in his learned opinion in this case, fixed on that principle at all. The says, p. 345: "It would hardly be chancellor selects a person wlmm a proper rule for governing this he regards competent and trust- 926 RECEIVERS. [CIIAP. XVIII. receivers of railways for their services, it is proper to con- sider tlieir titness for their duties, their business and financial experience, the time devoted to their trust, and the diHgence worthy, and the amount of com- pensation is graduated somewhat by the duties and somewhat by the responsibilities of the situation. Where a receiver is a manager as well as a mere receiver, his duties and responsibilities are largely in- creased; and the management of a business like that of a railroad is one of the most difficult and re- sponsible duties that a receiver is charged with. It requires a man of first rate qualities and attain- ments. Now, w-e have it in proof that the railroad presidents of the country receive various sums from $3,000 to $20,000 a year, many of $5,000. some of $10,000, a few above $10,000. Most of the defendant's witnesses think that $5,000 a year would be ample compensation to the receiver for his services, whilst most of the witnesses called for the receiver think that $15,000, coin, is not any too much ; that he saved much more than that to the road, etc. The receiver's income before his appointment was, by the esti- mation of one witness, about $7,000 a year, said to be of a permanent character; all of which he was obliged to give up when he assumed the duties of the receivership; and he himself says, that he would not have consented to take the office for less than $15,000 a year. The previous salaries given by the de- fendant railroad company have been referred to as being only $5,000; ?.nd sometimes not so much as that. In view of all this evidence, of the assistance which the receiver had around him, and of the princi- ples which the law lays down with regard to the compensation of a re- ceiver, I am inclined to think that $10,000 in coin per annum would be a fair rate of compensation in this case. It seems to me that $15,000 is large, larger than what any (ex- cept two or three) of the presidents of our most important railroads in the country receive. It also seems to me that the peculiar duties, re- .sponsibilities and accountability of a receiver entitle him to a larger amount than would be demanded by the head officer of an ordinary rail- road of this size and business. Ait allowance of $10,000 coin per annum will, therefore, be made for the re- ceiver Walker's compensation dur- ing the time he was such receiver." But see Central Trust Co. v. Wa- bash, St. L. & P. R. Co., 32 Fed.. 187, where for three and one- half years' services as receivers over a large railway system, extending through several states, Mr. Justice Brewer allowed $70,000 to each of two receivers in full for service? to the date of the order. See, further, as to allowance of compensation to receivers of railways and to their counsel, and to counsel for mort- gage bondholders in railway fore- closures and receiverships. Easton v. Houston & T. C. R. Co.. 40 Fed., 189. And see Braman v. Farmers' L. & T. Co., 51 C. C. A., 644, 114 Fed., 18. CHAP. XVIII.] COMPENSATION. 927 and thoroughness displayed in the discharge of their duties.^"* So it is proper to allow a railway receiver additional compen- sation for services rendered by him as superintendent and as attorney, when he has performed such services in addition to those of receiver, thereby saving the expense of employing such additional services.^^ And in general it may be said, that the courts are inclined to treat the compensation of a re- ceiver over a railway as resting largely in the discretion of the court appointing him, and when the testimony is conflict- ing as to the value of his services, an appellate court is not in- clined to interfere with the exercise of such discretion. ^^ If, however, the receiver resides in another state and does not as- sume the active excutive management of the railway, which is intrusted to others, he will not be allowed the compensation which is usually paid to receivers having charge of the active management of such property and who devote their entire time to such management.^'^ And when the same person is ap- pointed receiver over a railway in two different suits brought by different parties in a state court, one of which is removed to the federal court, which court fixes the amount of the receiv- er's compensation in that case and finds a balance due from him, which he is ordered to pay into court, he is not entitled to have such amount refunded to him in payment of his com- pensation afterward fixed in the suit in the state court, the parties to the former suit not having been heard as to the amount of sucli compensation in the latter suit."^ § 788. Entitled to compensation for v^^ork performed by others; farms managed by overseers; commission on receipts and disbursements. A receiver is entitled to com- pensation for his services, although the actual work of mana- 34 McArthur v. Montclair R. Co., ■" Central Trust Co. v. Cincin- 27 N. J. Eq., 77. nati. J. & M. R. Co., 58 Fed.. 500. 33 Farmers' Loan & Trust Co. v. 38 /„ re Hinckley, 3 Fed., 556. Central Railroad, 8 Fed.. 60. 36 Hinckley v. Railroad Co., 100 V. S.. 153. 928 RECEIVERS. [chap. XVIII. g-ing the property intrusted to him is performed by others, as in the case of farms or plantations in the receiver's custody, which he manages by overseers appointed and employed by himself, and for whose management he is responsible.^^ But if his compensation is limited by statute to a commission upon his receipts and disbursements, such commission will be com- puted only upon the amount actually received and disbursed by him. And if, under the order of the court, he has per- mitted the business to be principally conducted by the parties in interest, who have transacted the business as before the re- ceivership, making purchases and sales and receiving and dis- bursing moneys, the receiver will not be allowed commissiofis upon their receipts and disbursements.^^ So when the com- pensation is fixed by statute by a commission upon receipts and disbursements, a second receiver, appointed upon the death of a former one, who succeeds to his duties and receives the funds which were in his hands at the time of his death, is not entitled to a commission thereon when such commission had been paid to the former receiver. In such case, it is the service or duty of collecting the fund which entitles the receiver to a commission, and not the mere receipt of money from his prede- cessor who had already received a commission for its collec- tion.'*^ So when a receiver, by virtue of his office, holds stock in a corporation and acts as its nominal president by reason of such holding, the actual duties of the office being- performed by a vice-president, when he has been fully com- pensated for his services as receiver he will not be permitted to recover for services as president of the corporation.^^ Aj^^j where a corporation is appointed receiver and for its own con- 39 Price v. White, Bail. Eq., 240. 40 /„ re Woven Tape Skirt Co., And it was held that, in such a case, 85 N. Y., 506. receivers being paid by commis- 41 Attorney-General v. Continen- sions, the receiver was entitled to tal Life Insurance Co., 32 Hun, 223. the usual commissions, although 42'phompson v. Willamette S. M. they might seem to be more than a L. & M. Co., 15 Ore., 604, 16 Pac, reasonable compensation for the 647. ^ services rendered. CHAP. XVIII.] COMPENSATION. 929 venience employs an agent to perform the duties which would ordinarily fall upon the receiver himself, no extraordinary compensation should be allowed such agent.'^^ § 789. When receiver allowed to make rests. While the courts, in cases where receivers have been paid by a commis- sion or percentage upon the funds received, have sometimes allowed them to make annual rests, and to charge their com- missions upon the amounts as thus ascertained, a receiver will not be allowed to make a new rest every time he makes a de- posit in bank, or to begin with full commissions from the date of such rest,'^'* § 790. Extra compensation; receiver's mismanagement ground for refusal of compensation. A receiver will not be allowed extra compensation for his services and for ex- penses incurred by him in making journeys to a foreign coun- try, for the purpose of prosecuting legal proceedings to re- cover money due to the estate, when such journeys have not been expressly authorized by the court, even though author- ized and approved by many of the parties interested in the estate. And in passing upon the question of compensation in such a case, the court will not consider any agreements made by the parties in interest with the receiver, with regard to his undertaking such journeys, or his compensation therefor.^^ And where the order of appointment specifically defines the powers and duties of the receiver and prescribes the amount of compensation to be paid him, he will not be allowed extra compensation unless he can show that extraordinary labor has been required which was entirely unforeseen at the time of his appointment. "i^ And extra allowances should not be made to a receiver in the absence of extraordinary services render- ing such allowances just and reasonable.^'^ But where a re- 43 Kimmerle v. Dowagiac Mfg. 46 Henry v. Henry, 103 Ma., 582, Co., 105 Mich., 640, 63 N. W., 529. 15 So., 916. 44 Bennett V. Chapin, 3 Sandf., 47 Weigand v. Alliance S. Co., 673. 44 West Va., 133. 28 S. E., 803. 45 Malcolm v. O'Callaghan, 3 And see, post, § 805. Myl. & Cr., 52. Receivers — 59. 930 RECEIVERS. [chap. XVIII. ceiver, in addition to rendering his services as such, has vol- untarily performed extra work outside of his duties as re- ceiver which he was not bound to do and which has resulted in the benetit of the estate in his possession, he is entitled to extra compensation for the work thus performed by him.^s But where a receiver has been guilty of gross negligence and has greatly mismanaged the estate in his hands, the court may properly refuse him compensation altogether.^^ § 791. When receiver of insurance company allowed commissions on premium notes surrendered. When, un- der the laws of a state, the compensation of receivers is fixed at a certain percentage upon their receipts and disbursements, and the receiver of an insolvent insurance company holds premium notes due to the company from its stockholders, in trust for the double purpose of paying the creditors of the cor- poration and of distributing the surplus among the stockhold- ers, if he surrenders a portion of the notes to the sharehold- ers by order of the court, it may be regarded as so much money received and paid over for the purposes of the trust, and he will be allowed his commission thereon. In such case, how- ever, the commission will be allowed only upon the actual value of the notes and not upon such notes as were not collect- ible.50 § 792. Payment into court to avoid receiver's compen- sation. It would seem that a receiver has no vested right, by virtue of his appointment, to collect the entire estate over which he is appointed, when persons indebted are willing and offer to pay money due into court, thereby avoiding a large ■iS Harris v. Sleep, (1897) 2 Ch., 651; United States National Bank 80. V. National Bank of Guthrie, 6 49Speiser v. Merchants' Ex- Okla., 163, 51 Pac, 124; Nowell v. change Bank, 110 Wis., 506, 86 N. International Trust Co., — C. C. A., W., 243; Dalliba v. Winschell, 11 — , 169 Fed., 497. And see, post, Idaho, 364, 82 Pac, 107, 114 Am. § 805. St. Rep., 267 ; Pangburn v. Amer- ^0 Van Buren v. Chenango Couu- ican v., S. & L. Co., 205 Pa. St., ty Mutual Insurance Co., 12 Barb., 93. 54 Atl., 508; State v. Germania 671. Bank, 103 Minn., 129, 114 N. W.. CHAP. XVIII.] COMPENSATION. 931 compensation or poundage to which the receiver would be en- titled if the money passed through his hands. ^^ § 793. Receiver over minor denied extra compensation for attending survey of estate. When a receiver over the estate of a minor voluntarily and without an order of court at- tended a survey of the estate, the expenses of which were paid out of the estate, it was held that he was not entitled to any extra remuneration for his own services in the matter.^^ § 794. Doctrine of the Irish Chancery ; receiver appoint- ed by consent. Under the practice of the Irish Court of Chancery, it is held that if the court, in appointing a receiver, does not intend that he shall receive any compensation or poundage, it should be so expressly provided in the order of appointment, and if not thus provided, he is entitled to his compensation ex dcbito justitice.^^ But when, as is frequently the practice in that court, a receiver is appointed by consent of the parties, the consent should fix the amount of salary which he shall receive, since otherwise the court will not al- low him any compensation. ^^ § 795. Partner appointed receiver not allowed compen- sation. While there are some cases to be met with in the reports in which the plaintiff partner, in an action for a dis- solution of a partnership and for a receiver, has been him- self appointed receiver, the practice may be regarded as an unusual one, and only to be upheld on the implied condition that he will discharge the duties of the office free of charge to the fund or estate. Such a receiver will not, therefore, in passing his accounts, be allowed any compensation for his services.55 And when a surviving partner is made a receiver of the firm at his own request, he is not entitled to compen- sation for his services in the absence of any stipulation to that effect, since his duties as receiver, in such case, are no more than would have been his duties as surviving part- 51 Haigh V. Grattan, 1 Beav., 201. ^4 Burke v. Burke, Flan. & K., 89. 52 /„ re Ormsby, 1 Ball & B., 189. 55 Brien v. Harriman, 1 Tenn. 53 Bevan v. White, 8 In Eq., 675. 932 RECEIVERS. [chap. XVIII. ner, for which he would have been entitled to no compensation, in the absence of any contract to that effect.^^ And when one of the parties to the cause, who claims a lien upon the prop- erty in controversy, is by consent of all parties made receiver, with the understanding that he shall make no charge for his services, and he continues to act as receiver without claiming compensation until he is removed from the receivership, an order of the court refusing him compensation for his serv- ices will not be disturbed upon appeal.^''' § 796. Receiver can not have judgment against the par- ties on motion; practice in fixing compensation; part of compensation taxed as costs against plaintiff; chargeable on fund ; compensation should not be allowed without no- tice ; when compensation not subject to set-off. A receiv- er can not recover judgment for his services against the parties to the original suit in which he was appointed, by a motion made in that suit, and it is error to so enter judgment against them, there being no action pending in which such a judgment is proper. The appropriate method of procedure is to have his compensation fixed by the court, to be allowed out of the assets in his hands, and the amount thus determined to be due him may be taxed as costs in the action. ^^ But, while the receiver's compensation is usually paid out of the fund placed in his hands, a different course may be adopted when the order appointing him is revoked, and when he is directed to return the property to the persons entitled thereto. And it is proper, under such circumstances, for the court, in its dis- cretion, to require the payment of part of the compensation out of the fund in the receiver's hands, and to tax the bal- ance as costs against the plaintiff, the unsuccessful party in the cause.^^ The court is governed, in such case, by the con- Ch., 467. See, also, Todd v. Rich, 58 Hutchinson v. Hampton, 1 2 Tenn. Ch., 107. Mont., 39. 56 Berry v. Jones, 11 Heisk., 206. 59 French v. GifiFord, 31 Iowa, 57 Steel V. HoUaday, 19 Ore., 517, 428; State v. People's U. S. Bank, 25 Pac, n. 197 Mo., 605, 95 S. W., 867; Ogden CHAP. XVIII.] COMPENSATION. 933 sideration of the injustice of allowing a receiver his compen- sation, in all cases, from the funds in his hands, regardless of the legality of his appointment; since, if such a rule were to be rigorously applied, innocent persons might frequently sustain great loss.^*^ Thus, where a receiver has been ap- pointed at the instance of an attaching creditor to take pos- City V. Irrigation Co., 18 Utah, 279, 55 Pac, 385; Brundage v. Home S. & L. Assn., 11 Wash., 288, 39 Pac, 669. And see, post, § 809a. And see Crumlish's Adm'r v. Shen- andoah V. R. Co., 40 West Va., 627, 22 S. K, 90; Tobin v. Portland Flourhig Co., 42 Ore., 117, 68 Pac, 749; Ford v. Gilbert, 42 Ore., 528, 71 Pac, 971. French v. Gifford, 31 Iowa, 428, supra, was the case of a receiver of a savings bank, whose appointment had been revoked and who had been ordered to deliver back the money and assets received. The court. Miller, J., say: "It is insisted by plaintifif's counsel that the compensation of the receiver should be paid out of the fund of which he had the custody and charge, and that he should be per- mitted to retain the same therefrom. Numerous cases have been cited to show that such is the uniform prac- tice. Upon an examination of these cases it will be found that, in every case, there was no question made as to the legality or propriety of the appointment of the receiver ; that, in each case, the receiver closed up the business and settled his accounts in pursuance of his appointment. The receivership, in each case, was for the benefit of those interested in the fund, and he was paid therefrom, which is only another method of apportioning the costs upon those entitled to the fund. The only case which has been brought to our at- tention, in which the order appoint- ing the receiver was set aside, is the case of Verplanck v. The Mer- cantile Insurance Co., 2 Paige, 438, and in that case the chancellor or- dered the receiver to turn over all the property, without allowing him any commissions therefrom. We think it would be an unjust and in- equitable rule if, in all cases, the re- ceiver should be entitled to his com- pensation from the fund in his hands, without reference to the le- gality of his appointment. Under the operation of such a rule, inno- cent persons might be made to suf- fer great loss. The general rule as to costs, both at law and in equity, is that they shall be adjudged to the successful, and against the unsuc- cessful, party. Rev., § 3449. And they will be so adjudged, unless there exists some equitable consid- eration to justify a different dispo- sition, or the case is otherwise pro- vided for by law. In cases like the one under consideration, we may ad- judge the costs to one or either of the parties, or apportion them." The court accordingly directed that the fund be charged with one-third of the receiver's compensation, and the plaintiff with the remaining two- thirds. 60 French v. Gifford, 31 Iowa, 428. And see, post, § 809, 934 RECEIVERS. [chap. XVIII. session of property which is subject to the lien of a prior mortgage, which is finally held to be superior to the lien of the attachment, the compensation of the receiver should not come out of the proceeds of the sale of the property but he must look to the plaintiff for his payment.^^ So where the appoint- ment of a receiver is upon an application which is adverse to the defendant and it subsequently turns out that such appoint- ment was unwarranted and without authority of law, the re- ceiver will be required to turn back to the defendant all funds in his possession unimpaired by deductions for the receiver's compensation and that of his counsel, the receiver being re- quired in such case to look to the plaintiff upon whose applica- tion he was appointed. ^^ And as against third persons assert- ing valid liens upon the property, who were not parties to the receivership proceeding and who never consented to the ap- pointment, the compensation of the receiver and the expenses of the receivership which have in no way inured to their ben- efit should not be allowed as a proper charge upon the fund.^^ And where a receiver is authorized to carry on a business and to sell property of an insolvent, he will not be allowed to di- minish the fund due to the creditors who are secured by prior liens by retaining an allowance for his compensation and that of his counsel; and in such case, he must look to the other property of the insolvent.64 If, however, the appointment of the receiver was proper in the first instance, even though plain- tiffs do not ultimately prevail in the suit, it is within the dis- cretion of the court to allow the receiver payment for his services and expenses out of the proceeds of the litigation, and an appellate court will not not interfere with the exercise of such discretion when it has not been abused. ^^ And since a 61 Frick V. Fritz, 124 Iowa, 529, 64 Lane v. Washington Hotel Co., 100 N. W., 513. 190 Pa. St., 230, 42 Atl., 697 ; Moore 62 McAnrow v. Martin, 183 111., v. Lincoln P. & S. C. Co., 196 Pa. 467, 56 N. K, 168. St., 519, 46 Atl., 857. 63 First National Bank v. Cook, 6.5 Hembree v. Dawson, 18 Ore., 12 Wyo., 492, 76 Pac, 674, 78 Pac, 474, 23 Pac, 264 ; Clark v. Brown, 1083. 57 C. C. A., 76, 119 Fed., 130. CHAP. XVIII.] COMPENSATION. 935 receiver is the officer of the court which appoints him, it is for that court to fix his compensation, and accordingly a re- viewing court will not entertain an application to make him an additional allowance pending the time of the appeal.^^ And when a receiver obtains possession of money under an order which is afterward reversed upon appeal, he may be required to restore the money to the person entitled thereto, undimin- ished by any claim for his own compensation or for counsel fees.67 When no question is made as to the legality or pro- priety of appointing the receiver, and he closes up his receiv- ership in pursuance of the order appointing him, his compensa- tion should be paid from the funds in his hands, and no part of it should be taxed as costs against the plaintiff.^s So when a court of equity takes property under its charge by appoint- ing a receiver, the property itself is chargeable with the neces- sary expenses of the receivership, including the compensation of the receiver. And, in such case, the person who, under the final decree of the court, acquires the property or its pro- ceeds, acquires it cum oncre and chargeable with the amounts due to the receiver for services and advances.69 But if the appointment of the receiver is for the equal benefit of both parties to the action, as in a suit for the settlement of partner- ship affairs, the receiver's compensation should be borne by both parties equally.'^^ And while his compensation is usu- ally allowed out of the fund or property in the receiver's pos- session, yet when he has been appointed over mortgaged prem- ises, but not at the suit nor with the consent of the mort- gagee, he may be refused compensation out of the proceeds of a foreclosure sale of the premises.'^i And in such case it 66McKenzie v. Coslett, 28 Nev., 276, 7 N. W., 604; Jaffray v. Raab, 220, 80 Pac, 1070. 72 Iowa, 335, 33 N. W., 337. 67 Pittsfield National Bank v. 69 Beckwith v. Carroll, 56 Ala., 12. Bayne, 140 N. Y., 321, 35 N. E., 70 Johnson v. Garrett, 23 Minn., 630; McAnrow v. Martin, 183 III, 565. 467, 56 N. E., 168. '^^ Lammon v. Giles, 3 Wash. 68 Radford I/. Folsom, 55 Iowa, Terr., 117, 13 Pac, 417; Ephraim 936 RECEIVERS. [chap. XVIII. is error to make the charge for the receiver's compensation and expenses a lien upon the mortgaged premises but they should be made a lien only upon the equity of re- demption,'^2 jf there are no assets in his hands applicable to the payment of his compensation, it is proper to discharge him without making payment of his charges by the persons procuring his appointment a condition precedent to his dis- charge, leaving the matter for subsequent determination in the cause J^ And an order allowing compensation to a re- ceiver should be entered only after notice and a hearing at which all parties interested may appear and contest the al- lowance.''^ And where an order allowing the compensation of a receiver has been made without notice to the parties in interest and under an erroneous impression upon the part of the court that the receiver has served for a much longer time than he actually has, the order of allowance is properly set aside.''^ Where the proceeds of a receiver's sale have been paid by the receiver into a bank and the court afterward enters an order allowing the receiver compensation for his services in making the sale and authorizing him to retain from the proceeds the amount of such allowance, a debt due from the receiver in his individual capacity to the bank can not be set off against the fee of the receiver.'''^ § 796a. Appeals from allowance or refusal of compensa- tion. While an order which merely fixes the amount of a receiver's compensation is not appealable because no one can be injuriously affected thereby, yet if, in addition to fixing the amount, the court directs it to be paid out of the fund in the receiver's hands, an appeal will lie from such an order upon V. Pacific Bank, 129 Cal., 589, 62 74 Ruggles v. Patton, 74 C. C. A., Pac, 177. 450. 143 Fed., 312. 72Makeel v. Hotchkiss, 190 111., "5 joralmon v. McPhee, 31 Colo., 311, 60 N. E., 524, 83 Am. St. Rep., 40, 76 Pac, 922. . 131. '6 Polk V. Carver C. & M. Co., 91 ■ 73Joslyn v. Athens C. & C. Co., Iowa, 570, 60 N. W., 111. 43 Minn., 534, 46 N. W., 77. CHAP. XVIII.] COMPENSATION. 937 behalf of any person interested in the fund.'^^ So creditors and others interested are entitled to appeal from an order fix- ing the compensation of a receiver when it is claimed the al- lowance is excessive^s And where a receiver has taken pos- session of the property of an insolvent debtor, the latter is entitled to appeal from an order fixing his compensation and directing its payment out of the fund7^ So an insolvent over whose property a receiver is appointed may appeal from an or- der allowing the receiver compensation in excess of the amount fixed by statute. ^^ Ai-,^ ^ defendant out of whose property a receiver's compensation is to be paid is entitled to appeal from the order of allowance.^l So an order authorizing a receiver to withdraw certain funds and pay himself at a fixed rate per annum is a final order and appealable.^2 ^^d if the litigation is likely to be long protracted, it is proper, upon pe- tition of the receiver, to fix his compensation in whole or in part, and such an order is a final one from which an appeal will lie, independent of the main cause. ^^ And the receiver himself is entitled to appeal from an adverse order affecting 77 Grant v. Superior Court, 106 ment in the cause has been per- Cal., 324, 39 Pac, 604; Grant v. fected, a receiver has been appoint- Los Angeles & P. R. Co., 116 Cal., ed to collect the rents of the prop- 71, 47 Pac, 872. And see City of erty involved pending the appeal, Los Angeles v. Los Angeles C. W. and after the appeal is at issue, an Co., 134 Cal., 121, 66 Pac, 198. order is entered by the lower court 78 Battery Park Bank v. Western allowing the receiver compensation C. Bank, 126 N. C, 531, 36 S. E., and making it a first lien upon the 39; Ogden City v. Irrigation Co., property, such order may be brought 18 Utah, 279, 55 Pac, 385. And see to the reviewing court by supple- In re Burguieres Planting Co., 122 mental record and may be consid- La., 602, 48 So., 121. ered upon the appeal. Joralmon v. 79 Polk V. Johnson, 167 Ind., 548, McPhee, 29 Colo., 135, 66 Pac, 882. 78 N. E., 652, 79 N. E., 491. 82 Ruggles v. Patton, 74 C. C. A., 80 Reeves v. Hastings, 61 Minn., 450, 143 Fed., 312. 254, 63 N. W., 633. 83 Tompson v. Huron L. Co., 5 81 Forrester v. B. & M. C. C. & Wash., 527, 32 Pac, 536. To the S. M. Co., 30 Mont., 181, 76 Pac, 2. same effect, see Battery Park Bank Under the provisions of the code of v. Western C. Bank, 126 N. C, 531, Colorado, it is held that where, 36 S. E., 39. after an appeal from a final judg- 938 RECEIVERS. [chap. XVIII. his compensation or from an order denying him compensa- tion altogether.^4 § 796/?. Right of receiver to retain compensation out of fund before surrendering it to trustee in bankruptcy. Where, after the appointment of a receiver of an insolvent corporation by a state court, bankruptcy proceedings are in- stituted against the corporation in the United States district court and a trustee in bankruptcy is appointed, the receiver is entitled to his compensation and other expenses already in- curred out of the fund in his possession before surrendering it to the trustee in bankruptcy, and no considerations of com- ity require the state court in such case to order the entire fund surrendered to the trustee in bankruptcy and to send its re- ceiver to that court for his compensation.^^ § 796c. Agreement by party to pay receiver's compen- sation against public policy; agreement by receiver to serve without compensation. Since a receiver is bound to maintain an attitude of strict impartiality as between the par- ties to the cause, any agreement which might tempt him to sacrifice or jeopardize the interests of one party for the bene- fit of another is contrary to public policy and void. Accord- ingly, an agreement between the receiver and a purchaser at the receiver's sale by which the latter undertakes to pay the receiver his fees for services is void and will not be enforced by the courts. The receiver, in asking for his compensation 84 Bosworth v. St. Louis Tenni- Hanson v. Stephens, 116 Ga., 722, nal R. Assn., 174 U. S.. 182, 19 Sup. 42 S. K, 1028. But in State v. Ct. Rep., 625, 43 L. Ed., 941, modi- German Exchange Bank, 114 'Wis., fying and affirming S. C., 26 C. C. 436, 90 N. W., 570, the question A., 279, 80 Fed. 969, 53 U. S. App., was held to be one resting largely 302; Herndon v. Hurter, 19 Fla., in the discretion of the lower court, 397; McAnrow v. Martin, 183 111., and they accordingly affirmed an 467, 56 N. E., 168; Union National order directing the receiver to turn Bank v. Mills, 103 Wis., 39, 79 N. over the entire fund to the trustee W., 20. And see Kilpatrick v. in bankruptcy subject to whatever Horton, 15 Wyo., 501, 89 Pac, 1035. claims he might have for services 85 Mauran v. Crown C. L. Co., 23 and expenses incurred in the re- R. I., 344, 50 Atl., 387. And see ceivership proceeding. CHAP. XVIII.] COMPENSATION. 939 should look to the court, and the court alone may determine the amount of such compensation and by whom it shall be paid.^^ But an agreement between a creditor and his debtor by which the former agrees to serve as receiver without compensation provided the debtor will make no objection to his appointment is valid and enforcible.^'^ 86 Hall V. Stulb, 126 Ga., 521, 55 87 Polk v. Johnson, 160 Ind., 292, S. E., 172. 66 N. E., 752, 98 Am. St. Rep., 274. CHAPTER XIX. OF THE RECEIVER'S ACCOUNTS. § 191. Duty of receiver to account to court; held to great strictness; consent of parties to delay; required to account without proc- ess of court; not entitled to jury; bill should not be dis- missed without settling of account; degree of diligence re- quired. 798. Not allowed to make expenditures without sanction of court; must show vouchers; when reimbursed; reward paid to re- cover assets; unauthorized payment of taxes; watching property; premium of surety company on official bond; ref- erence to master; when payments allowed, though unauthor- ized. 799. Not allowed expenses for services which he might have per- formed himself; should report facts to court. 800. Master's report on receiver's account and exceptions thereto; English rule; Irish practice; New York rule. 801. Distinction between master's report on receiver's account, and on account taken by himself; court may investigate prin- ciple on which account allowed, but not details; exceptions, when taken. 802. Not compelled to account by stranger; nor to a party, but only to court; party may move for account; duty to account once a year; allowance should be to receiver and not to party; when otherwise. 803. Should keep funds distinct from his own; liable for interest on mingling funds; when interest not allowed on claim of creditor. 804. General liability of receivers for interest on funds. 805. When and to what extent allowed for counsel fees. 806. When allowed counsel fees paid to counsel of the parties. 807. Receiver in suit against administrator not allowed for services rendered as solicitor for the administrator. 808. Not allowed counsel fees paid to himself; receiver, an attorney, not bound to render legal services. 809. What costs and expenses allowed in receiver's accounts; pref- ference for costs; allowance discretionary; expense of taking care of property. 940 CHAP. XIX.] ACCOUNTS. 941 § 809a. When costs and expenses charged against plaintiff. 810. When defendant in suit by receiver entitled to costs; motion for receiver to pay judgment for costs. 811. When receiver allowed costs of unsuccessfu llitigation. 811a. Taxes on property in receiver's hands payable as expenses of administration. 812. English practice as to costs. 813. When chargeable for hire of property; not allowed for pay- ment of charges against predecessor in arrears. 814. May account pending bill of interpleader; plaintiff can not have receiver discharged without passing accounts; court should not render final judgment without passing account. 815. Plaintiff should not be delayed by litigation concerning receiv- er's accounts. 816. Receiver irregular in accounts ordered to present account yea'-- ly and to verify by affidavit. 817. Executors of receiver not compelled to pass his accounts; executor denied petition for account of payment into court; court should not pass account of deceased receiver without notice to personal representative. 818. When salary forfeited for delay in payment into court; when delay excusable. 819. Receiver of minor compelled to account from beginning, on minor coming of age. 819a. How receiver's accounts may be questioned. Sl9b. Right of appeal from order settling receiver's accounts. 819c. Appeal by one creditor resulting in benefit to all; entitled to expenses and counsel fees. § 797. Duty of receiver to account to court; held to great strictness; consent of parties to delay; required to account without process of court ; not entitled to jury ; bill should not be dismissed without settling of account; de- gree of diligence required. Receivers being officers of the court appointing them, they are required to account to the court for all receipts and disbursements in the course of their receivership. And it is the duty of a receiver to file his ac- counts when required by the court, in order that all claims for compensation or disbursements out of the fund in his hands may be properly considered by the court. ^ Courts of equity 1 Adams ?/.Wood, 8 Cal., 306. .See, 286. As to the presumptions to be also, Mabry v. Harrison, 44 Tex., indulged in favor of the correctness 942 RECEIVERS. [chap. XIX. are disposed to hold receivers to great strictness in rendering their accounts, and while it would seem to be competent for a receiver to delay passing his accounts at the required time, by consent of all parties in interest, when they are capable of giving consent, yet if some of the parties are minors he will not be justified in delaying, even with their consent. 2 And it is held to be the receiver's duty to come in and account to the court at the proper times, without any process or rule upon him for that purpose, and the rules regulating proceedings between litigant parties afford no analogy to the case of a re- ceiver, the latter being an officer of the court and not a party litigant.^ So a receiver being an ofiicer of the court, and the fund in his hands being regarded as in the custody of the court itself, he is not entitled to a jury to pass upon his ac- counts.'* And where a bill is held to be without equity, it is error to dismiss the bill without first requiring the receiver to report and settle his accounts.^ And a receiver is bound to exercise the same degree of diligence in keeping down ex- penses and in caring for the estate in his possession that a pru- dent man would observe in connection with his own property under similar circumstances.^ of a receiver's account, see State v. 2 Dease v. Reilly, 2 Con. & Law., Nebraska S. & E. Bank, 61 Neb., 441 ; S. C, 4 Dr. & War., 284. 496, 85 N. W., 391. See Kirker v. 3 McBride v. Clarke, 1 Mol., 233. Owings, 39 C. C A., 132, 98 Fed., And see Felton v. Felton, 47 West 499, in which a receiver was held Va., 27, 34 S. E., 753. personally liable for certain debts 4 Akers t;. Veal, 66 Ga., 302; Tin- incurred by him as receiver. See dall v. Nisbet, 113 Ga., 1114, 39 S. Northern Alabama Ry. Co. v. Hop- E., 450, 55 L. R. A., 225. kins, 31 C. C. A., 94, 87 Fed., 505, 5 Simmons v. Shelton, 112 Ala., 59 U. S. App., 74, as to an allowance 284, 21 So., 309, 57 Am. St. Rep., 39. for expenses incurred by a receiver 6 State Central Savings Bank v. in a trip to Europe taken at the Bail-Bearing Chain Co., 118 Iowa, instigation of the parties to a suit 698, 92 N. W., 712; Ripley v. Mc- and other expenses incurred while Gavic, 120 Iowa, 52, 94 N. W., 452; traveling about in the interest of State v. Germania Bank, 106. Minn., the property in his possession. 164, 118 N. W., 683. CHAP. XIX.] ACCOUNTS. 943 § 798. Not allowed to make expenditures without sanc- tion of court ; must show vouchers ; when reimbursed ; re- ward paid to recover assets; unauthorized payment of taxes; watching property; premium of surety company on official bond; reference to master; when payments al- lowed, though unauthorized. A receiver will not ordi- narily be permitted to make any expenditures which will seriously diminish the fund intrusted to his charge, with- out the sanction and authority of the court, and it is his duty to apply to the court for instructions as to the expenditures, and to keep regular accounts of all items of receipts and expenditures. He can not in these mat- ters act upon his own discretion, but is held to a strict account- ability to the court, and must produce satisfactory vouchers and proof for all his charges against the fund intrusted to his keeping."^ And even in the absence of objections by the par- 7 Hooper v. Winston, 24 111., 353; Standish v. Musgrove, 223 111., 500, 79 N. E., 161 ; Henry v. Henry, 103 Ala., 582, 15 So., 916; State Central Savings Bank v. Bali-Bearing Chain Co., 118 Iowa, 698, 92 N. W., 712. And see Schwartz v. Rosetta G. P. & I. Co., 110 La., 619, 34 So., 709. Hooper v. Winston, 24 111., 353, supra, was a writ of error to re- verse a decree regulating the dis- tribution of a fund in the hands of a receiver over certain hotel proper- ty. The general principles regulating the disbursements of receivers are very clearly stated by Mr. Justice Breese, as follows, p. 365 : "The other claim set up by the receiver, to be allowed such expenses as he has chosen to set down, to keep the house in operation, we are con- strained to say we see no ground upon which to base it. The re- ceiver claims that in this matter he was vested with a discretionary power, and therefore the court had no authority to examine into the mode or manner of its exercise; that he was merely the private agent of these parties, that whole subject being left to his own judg- ment. We do not deny that he had some discretion in this matter, but it was very limited. We hold, being an officer of the court, he should have applied to the court for leave to make these expendi- tures, and he is amenable to the court for the exercise of all his powers. As receiver and trustee for parties litigant, it was his mani- fest duty to have kept regular ac- counts, item by item, of all the expenses of the house and of the receipts arising from it, and from all other sources from which money might have come into his posses- sion. He should show an account 944 RECEIVERS. [chap. XIX. ties interested, the court will carefully scrutinize the receiver's report.^ And where there are no vouchers and no evidence as to the propriety of the items, the report should not be al- lowed. ^ It does not, however, follow that in every case in which he neglects to obtain an order of court authorizing a particular payment out of the fund in his possession, he will be denied reimbursement. And when a receiver of the effects of a partnership is authorized by the court to prosecute suits for the recovery of the assets, a sum paid by him as a reward for the recovery of lost books of the partnership has been re- garded as a necessary and appropriate expenditure, in the prosecution of suits for the protection of creditors, and has been allowed in his accounts.i^ So when a receiver finds the current of the house, embracing therein the stock he found on hand, the purchases of every description for the house, and the receipts of the house. That there were large receipts is unquestionable, yet no account has been rendered of any. That a bar furnished with more than fifteen hundred dollars worth of liquors should not, in Chicago, produce any returns, is incompre- hensible. Failing to show any ac- count current, every presumption ought to be against him, and for all his charges against the fund in- trusted to his keeping, he should show satisfactory vouchers and proofs. He has shown none in the several reports he has made to the court. His judgment was not the limit of the expenditures, but the court, he being one of its offi- cers, has a supervisory power over his acts, and he is amenable to its judgment as to the necessity of these expenditures, in order to keep the house in operation, and he is certainly accountable for the re- ceipts. ... In the management of the McCardel House, although the receiver was required to keep it in operation until the sale, he had, as an officer of the court, but very little discretion allowed him, and should have applied to the court, by a brief petition, setting out the facts and asking for a ref- erence, whether such and such ex- penditures would be for the benefit of the interested parties, and neces- sary to keep the house in operation, or for whatever other purpose the expenditure may have been de- sired. No single act calculated to diminish seriously the fund could the receiver do on his own mere motion, and in the exercise of his discretion." 8 Standish v. Musgrove, 223 111., 500, 79 N. E., 161. 9 Standish v. Musgrove, 223 111., 500, 79 N. E., 161. 10 Adams v. Woods, 15 Cal., 206. In Heflfron v. Rice, 149 111., 216, 36 N. E., 562, 41 Am. St. Rep., 271, it was held that where a receiver had been appointed to take posses- sion of, and run a hotel, and, in so CHAP. XIX.] ACCOUNTS. 945 property insured and continues such insurance, the court, in passing his accounts, may allow such insurance, if paid in good faith and if necessary for the protection of the property, even though such expenditure has not been authorized by any order of the court.^^ So the unauthorized payment of taxes upon the property in the possession of a receiver will be rati- fied where it appears that the claim is a valid one against the estate.i2 And a receiver is entitled to charge in his account for the necessary watching of the property in his custody.^^ So a receiver is entitled to a credit for the amount paid by him in procuring a surety company as surety upon his offi- cial bond.^'* And where a receiver, upon his own responsibil- ity, incurs an expense in the discharge of his duties which he shows to have been necessary and such as would have been authorized by the court had application been previously made, he will be reimbursed for such outlay as if previous authority doing, had cashed a check for twen- ty-five dollars for a guest, which had proved to be worthless, and it appeared that it was the custom of hotels to cash such checks for small amounts, and the receiver had acted in good faith in the matter, the receiver was entitled to a credit for the amount lost upon the check. It was further held that while a re- ceiver ordinarily has no power to borrow money, yet where he does so for the purpose of paying a valid charge against the property in his possession, acting in good faith, and the debtor receives the benefit of such payment, he is entitled to a credit for the amount of the pay- ment. And it was further held that while a receiver ordinarily should immediately file an inventory of the property coming into his possession, yet where, although there has been a delay in so doing, it appears that Receivers — 60. the inventory finally filed is correct and there is no showing that the re- ceiver has converted any of the property to his own use, no sub- stantial ground for complaint is shown by such delay. 11 Brown v. Hazlehurst, 54 Md., 26. See, also, Thompson v. Phenix I. Co., 136 U. S., 287, 10 Sup. Ct. Rep., 1019; Rochat v. Gee, 137 Cal, 497, 70 Pac, 478. 12 Hamacker t;. Commercial Bank, 95 Wis., 359, 70 N. W., 295. 13 Howes V. Davis, 4 Ab. Pr., 71. 14 Hamacker v. Commercial Bank, 95 Wis., 359, 70 N. W., 295. See Grabbe v. Moffit, 133 Iowa, 54, 110 N. W., 142, as to the compensation of an expert accountant employed by a receiver under the authority of the court, where he exceeds the receiver's instructions as to the na- ture of the report to be submitted. 946 RECEIVERS. [CH^P. XIX. had been given.15 Under the English chancery practice, when a receiver had laid out money without a previous order of court for that purpose, the matter was referred to a master to ex- amine whether the transaction was beneficial to the parties in interest, and if found to be so, the receiver was allowed the amount thus expended. ^^ § 799. Not allowed expenses for services which he might have performed himself; should report facts to court. It may be said generally, that a court, in passing upon the accounts of its receiver, will not ratify any expend- iture which has not been necessarily incurred for the benefit of the estate committed to his charge. And when a receiver has stepped outside the order of his appointment and as- sumed the role of actor, and has incurred large and unwar- ranted expenses for services which he might properly have performed himself, and has done this without the consent of or notice to either of the parties to the action or to the court, he will not be allowed such expenses.!"^ So when he has, without authority from the court, appointed a deputy receiver to perform duties which he himself might and should have performed, he will not, in passing his accounts, be allowed the compensation paid to such deputy.i^ Sq where the serv- ice in question was to aid and supplement the superintendence of the business of the receivership which was due from the re- ceiver himself, a charge for such service should not be al- lowed.19 So where a receiver of the property of a mining company has incurred large expenses in the operation of the mine without the authority or permission of the court, such expenses are not taxable as costs in the suit, nor can the ques- tion of the liability of some party to the suit therefor be liti- gated in the receivership proceeding over the receiver's ob- is Henry v. Henry, 103 Ala., 582, 18 Corey v. Long, 43 How. Pr., 15 So., 916. 504. 16 Tempest v. Ord, 2 Meriv., 55. 19 Joost v. Bennett, 123 Cal., 424, 17 Corey v. Long, 43 How. Pr., 56 Pac, 43. 504. CHAP. XIX.] ACCOUNTS. 947 jection.20 When the receiver has paid no money for particular services, but has arranged with the person performing such services that he shall receive such compensation as the court may allow, the facts should be so reported by the receiver in his account, and parties in interest who are dissatisfied with the account, in whole or in part, may appeal from the final or- der of the court thereon. 21 § 800. Master's report on receiver's account and excep- tions thereto ; English rule ; Irish practice ; New York rule. Under the practice of the English Court of Chancery, a mas- ter's report upon a receiver's account did not require con- firmation by the court, and did not, therefore, admit of ex- ceptions. And the court would not enter into a consideration of any particular items of the account, but would, upon the petition of any person aggrieved, examine any principle upon which the master had proceeded which was alleged to be er- 20 Hendrie & Bolthoff Co. v. Par- ry, Z7 Colo., 359, 86 Pac, 113. 21 Adams v. Woods, 8 Cal., 306. "It is the duty of the receiver," says Mr. Justice Burnett, p. 316, "to file his accounts when required by the court, and if he fail in this, the court, upon application of a party in interest, or upon its own motion, will compel him to do so. When his account is filed, all claims against the fund for disbursements or engagements made by the re- ceiver would properly come before the court for consideration. When the receiver has paid no money, but has made an arrangement with a party to receive such compensation as the court may allow, he should report the facts, leaving a blank for the sum that may be allowed. If any of the parties employed by the receiver should not be satisfied with the account, in whole or in part, they could then make their objections. And if any one or more of them should feel aggrieved by the final order of the court, they should all appeal, and all the ques- tions should come up before this court in one case. However ex- tensive the record and numerous the parties might be, the labor of this court and expense to the par- ties would not in this way be in- creased but diminished. But if a separate reference and separate ap- peal were allowed in regard to each separate claim upon the fund, then the proceedings would be greatly prolonged, to the injury of all par- ties. And when the appeal should be taken, it would only be necessary for the court below to order the re- ceiver to retain so much of the fund in his hands as might be nec- essary to pay the disputed items, if finally allowed, and order the dis- tribution of the remainder." 948 RECEIVERS. [chap. XIX. roneous.22 Under the Irish chancery practice, however, a more Hberal rule prevails and the court will investigate the items of the receiver's account.23 fhe English rule prevailed under the New York chancery system, and when a reference was had to a master for the purpose of settling the receiver's accounts, no order of confirmation of the master's report was required, nor were exceptions allowed to such report. And if a party in interest was dissatisfied with the allowance made by the master, his proper course was to apply to the court to review the account in such particulars as were objectionable, and the court would then consider objections as to the general principles on which the master had proceeded in taking the re- ceiver's accounts, but would not take cognizance of objections to particular items.^^ § 801. Distinction between master's report on receiver's account, and on account taken by himself; court may in- vestigate principle on which account allowed, but not de- tails; exceptions, when taken. A distinction is recognized between a master's report upon a receiver's account, and his report containing an account taken and stated by himself, or a report upon a matter referred to him for investigation. The distinction is based upon the fact that the receiver is himself an officer of the court, as well as the master, and that he states his own account and submits it to the master for inspection under order of the court, the master acting in place of the 22 Shewell v. Jones, 2 Sim. & St., counts. In re Browne's Estate, 19 170. affirmed 3 Riiss., 522. L. R., Ir., 132; S. C, ib., 183, af- 23 Beytagh v. Concannon, 10 Ir. firmed on appeal, ib., 423. Eq., 351. But under the Irish chan- 24 Brower v. Brower, 2 Edw. Ch., eery practice a receiver was held to 621. And see, as to the practice in a strict accountability as to pay- New Jersey in regard to entertain- ments of money ordered by the ing exceptions to receiver's ac- court. And when, instead of pay- counts, and the time and manner ing to the principal, a receiver made of presenting such exceptions, Me- payment to solicitors who were not chanics Bank of Philadelphia v. duly authorized to receive it, the Bank of New Brunswick, 2 Green receiver was not allowed the Ch., 437; Richards v. Morris Canal amounts so paid, in passing his ac- & Banking Co., 3 Green Ch., 428. CHAP. XIX.] ACCOUNTS. 949 court, and in a judicial rather than a ministerial capacity. If the master adopts any erroneous principle in allowing the re- ceiver's accounts, the court, on petition of the proper par- ties, may refer the matter back to him for correction. And in determining such question the court will investigate the principles and rules adopted by the master in allowing the re- ceiver's accounts, without examining the items in detail, or the evidence on which they rest, the latter duty being more especially within the province of the master, and being analo- gous to the province of a jury upon questions of fact. If it is desired to take exceptions to the master's report upon the receiver's accounts, they should be first taken before the mas- ter; otherwise they will not be considered by the court. The object of the rule is twofold, being to afford the master an op- portunity to reconsider his decision, and to enable the receiv- er to sustain his accounts by additional evidence, or to make such explanation as the case may require. And while the rule would not deter the court from directing an account to be reformed, if it contained manifest errors or improper charges, yet such errors should be clearly shown to exist, and their character should be such as to be shown by the proofs in the case, or by their intrinsic nature.25 But a receiver is not entitled to an order of reference to examine and pass upon his accounts until he has presented a full and definite state- ment, itemizing the various matters, and verifying the account under oath. 26 § 802. Not compelled to account by stranger; nor to a party, but only to court ; party may move for account ; duty to account once a year; allowance should be to receiver and not to party; when otherwise. A court of equity will not ordinarily entertain an application from a stranger to the cause to have the receiver pass his account, when no special 25 Cowdrey v. The Railroad Com- operating a railway. And see Fel- pany, 1 Woods, 331. And see this ton v. Felton, 47 West Va., 27, 34 case as to principles governing the S. E., 753. court in allowing a receiver's ac- 26 People v. Columbia Car Spring counts for expenses incurred in Co., 12 Hun, 585. 950 RECEIVERS. [chap. XIX. ground is shown for such order.27 And a receiver can not be compelled, pending litigation, to account to a party to the suit, or to furnish him with statements of the condition of his accounts. Being an officer of the court and not of the par- ties litigant, he is only required to account to the court from which he derives his appointment. ^8 But when the receiver in a cause has never made a full or complete report of the in- come and disbursements of the estate committed to his care, any party to the cause may move for such an account; and it IS the duty of the receiver himself, as an officed of the court, to make a full report and to pass his accounts at least once a year, since in no other way can the parties to the cause be informed as to their rights or the court act understandingly.29 And ordinarily expenses incurred in the receivership should be allowed directly to the receiver by the court and not to the persons by whom the services were rendered. ^^ But while an allowance for the costs and expenses of the receivership should ordinarily be allowed directly to the receiver himself and not to the person who made the advances, yet where the receiver has been discharged and is no longer subject to the jurisdiction of the court, the allowance may properly be made directly to the person who made the advances. ^^ § 803. Should keep funds distinct from his own; liable for interest on mingling funds ; when interest not allowed on claim of creditor. In the absence of any special direc- tions of the court, it is the duty of a receiver to keep the fund intrusted to him entirely separate and distinct from his in- dividual funds. If he deposits the money in bank for safe keeping, it should be deposited to a separate account in his name as receiver, so that the fund may at all times be traced 27 Colburn v. Cooper, 8 Ir. Eq., of Chancery upon this subject, the 510. opinion of Chancellor Cooper in 28 Musgrove v. Nash, 3 Edw. Ch., this case. 172. 30 Henrdie & Bolthoff Co. v. Par- 29 Lowe V. Lowe, 1 Tenn. Ch., ry, 37 Colo., 359, 86 Pac, 113. And 515 ; Stretch v. Gowdey, 3 Tenn. Ch., see, post, § 805. 565. And see, as to the rules and 31 German National Bank v. Best, orders of the English High Court 32 Colo., 192, 75 Pac, 398. CPIAP. XIX.] ACCOUNTS. 951 and identified.^2 And when, in disregard of this duty, the receiver violates his trust by mixing the trust fund with his own money, keeping the whole in one common bank account in his own name, and using large sums as temporary loans from time to time, he is guilty of such a breach of trust as to render himself liable for interest upon the fund, x^nd such interest will be charged him in the final settlement of his accounts, regardless of whether he himself derived profit from the fund or interest from the loans.^^ So if without author- ity of the court he deposits funds of the receivership in his own bank in his individual name, he will be charged with interest upon the money thus deposited. ^^ So when he with- draws funds from his account as receiver and deposits them in another bank in his private account, and in the settlement of his accounts he declines to explain the matter, or to state what sums he has thus deposited in his individual account, he is properly chargeable with interest.^^ So, too, if he deposits the funds of his receivership in bank with his personal funds in his private account, against which he draws his individual checks from time to time, thereby deriving individual benefit from the funds of the receivership, he may be charged with interest. ^^ But the fact that the receiver has deposited the funds of his receivership with his own private funds in bank will not render him liable to pay interest thereon, when it is not shown that he has used any part of the funds pertain- ing to the receivership, or in any manner acquired any profit therefrom. 2"^ And where delay has been occasioned in the payment of the claim of a creditor because of an appeal by the receiver to the court for instructions, interest on the claim should not be allowed since such delay is the delay of the law 32 Utica Insurance Co. v. Lynch, 34 Schwartz v. Keystone Oil Co., 11 Paige, 520; Hinckley v. Railroad 153 Pa. St., 283, 25 Atl, 1018. r- lAA TT o ic-> r /- 35 Hinckley v. Railroad Co., 100 Co., 100 U. S., 153; In re Common- ,, ^ ,_^ -^ U. S., 153. wealth Fire Insurance Co., 32 Hun, 36^^ ^^ Commonwealth Fire In- '°- surance Co., 32 Hun, 78. 33 Utica Insurance Co. v. Lynch, 37 Radford v. Folsom, 55 Iowa, 11 Paige, 520. 276, 7 N. W., 604. 952 RECEIVERS. [chap. XIX. and is incidental to all litigation. ^^ It is held in Georgia, that a receiver should not deposit money in bank without the au- thority of the court. And if he makes such a deposit without authority, although not in his individual name, and a loss oc- curs through failure of the bank, he will be liable for such loss.^^ § 804. General liability of receivers for interest on funds. In general it may be said that receivers will not be allowed to make interest for their own benefit upon funds in their hands, and will be answerable for interest upon their bal- ances.^^ And a receiver is chargeable with interest upoil funds derived from a sale of property, either when he receives inter- est or when he might have done so.'^l If he retains funds in his hands after the time when they should be paid over, he may be required to pay interest thereon at the time of ren- dering his next account.'*^ And when he is guilty of negli- gence in not passing his accounts at the time required, he will be compelled to pay interest upon the balance in his hands from the time when it was his duty to account, or to pay the money into court.^^ He will not usually be required, however, to pay interest from the very moment of receiving the money, but only from the time when it should have been paid into court.^^ But in the interval between receiving the money and the time of passing his accounts, he can not make interest on the fund for his own benefit, and if he receives a sufficient sum to be invested, he should apply for an order to have it paid into court, in order that it may be made productive to the 38 Malcomson v. Wappoo Mills, 353 ; Rosenthal v. McGraw, 71 C. 99 Fed., 633. To the same effect, C. A., 277, 138 Fed., 721. see Solomons v. American B. & L. 42 Harman v. Forster, 1 Hog., Assn., 116 Fed., 676. And see, ante, 318; Speiser v. Merchants' Ex- § 394^. change Bank, 110 Wis., 506, 86 N. 39 Ricks V. Broyles, 78 Ga., 610, 3 W., 243. S. E., 772. 43 Fletcher v. Dodd, 1 Ves. Jiin., 40 Lonsdale v. Church, 3 Bro. C. 85; v. Jolland, 8 Ves., 72; C, 41 ; Shaw v. Rhodes, 2 Riiss., Potts v. Leighton, 15 Ves., 273. 539. 44 Potts V. Leighton, 15 Ves., 273. 41 Hooper v. Winston, 24 111., CHAP. XIX.] ACCOUNTS. 953 estate.^^ And where a receiver is ordered by the court to make a particular investment of the funds in his hands but fails to do so, he is chargeable with interest upon the fund from the time when the investment should have been made, but the liability in such case is not for compound interest but for simple interest only.^^ When receivers have illegally appro- priated a balance in their hands, they are chargeable with in- terest on such balance, and if one of them has made the mis- appropriation and the other has negligently permitted it, they will be held jointly liable therefor in the final settlement of their accounts.'*'^ And when a receiver had retained the funds in his hands for a long period for his own benefit, he was charged interest on his yearly balances, and the interest was computed by annual rests, that is upon the balance in his hands at the end of each year.'^^ So if a receiver, acting in good faith, but without the direction or authority of the court, loans the funds belonging to his receivership, and charges himself with the amounts received for interest, no losses oc- curring by reason of such loans and the estate being benefited thereby, he should not be charged with interest beyond the amount actually received by him.'*^ But it is improper to re- quire a receiver to pay interest upon the money in his hands in the absence of any evidence upon the question of his liability to pay such interest. ^^ And while a receiver is not allowed to make any personal profit out of his office, aside from his 45 Shaw V. Rhodes, 2 Russ., 539. compensation should be disallowed, 46 Roller v. Paul, 106 Va., 214, 55 and they should be required to pay S. E., 558. interest on their balances at the rate 47 Commonwealth v. Eagle Fire of five per cent, per annum. See Insurance Co., 14 Allen, 344. General Order, 15 Ves., 278. And 48 Foster v. Foster, 2 Bro. C. C, see comments thereon by Lord 616. In 17% a general order was Eldon in Potts v. Leighton, id., 273. entered by the English Court of 49 Attorney- -General v. North Chancery, requiring receivers to America Life Ins. Co., 89 N. Y., pass their accounts and pay the 94, affirming in part S. C, 26 Hun, balances in their hands into court 294. annually, and it was ordered that 50 How v. Jones, 60 Iowa, 70, 14 in default thereof their salary or N. W., 193. 954 RECEIVERS. [chap. XIX. compensation, the rule will not be extended to require him to account for money which he has realized, not by any act done or omitted as receiver, but by reason of the opportunity afford- ed by his receivership. Thus a receiver, who had been en- gaged in business as a broker before his appointment, and who while acting as receiver of an insolvent bank is paid by mortgage debtors of the bank a commission for procuring new loans with which to pay their indebtedness to the bank, will not be required to account for such commissions when he has acted in good faith and without neglecting his duties as receiver 51 § 805. When and to what extent allowed for counsel fees. Receivers are entitled, in the settlement of their ac- counts, to payments made on account of legal services and counsel fees.^^ And such fees, when paid by the receiver in good faith in collecting moneys to which he is entitled, the disbursements being necessary and beneficial to the parties ultimately entitled to the fund, should be paid from such fund in the settlement of the receiver's accounts. ^^ The allowance of counsel fees is regarded as being made to the receiver as an item in his account, and not directly to counsel, the allowance 51 Special Bank Commissioners v. So., 916; Berry v. Rood, 209 Mo., Franklin Institution, 11 R. I., 557. 662, 22 S. W.. 108. And see Perry- 52 Howes V. Davis, 4 Ab. Pr., 71 ; Mason Shoe Co. v. Sykes, 72 Miss., Cake V. Mohun, 164 U. S., 311, 17 390, 17 So., 171, 28 L. R. A., 277; Sup. Ct. Rep., 100, affirming Cake Pittman v. Hopkins, 74 Miss., 563, V. Woodbury, 3 App. D. C, 60, and 21 So., 606. A plaintiff at whose distinguished in International Trust instance a receiver is appointed is Co. V. United Coal Co., 27 Colo., not entitled to counsel fees for his 246, 60 Pac, 621; Boston Safe-De- attorney from a fund which, at his posit & T. Co. V. Chamberlain, 14 instance, has come into the posses- C. C. A., 363, 66 Fed., 847, 25 U. S. sion of the receiver to which an- App., 251 ; Montgomery v. Peters- other has a superior claim, when it burg S. & I. Co., 17 C. C. A., 360, appears that the bringing of the 70 Fed., 746, 30 U. S. App., 511; fund into court in no way operated Elk Fork Oil & Gas Co. v. Foster, for the benefit of the latter. Buck- 39 C. C. A., 615, 99 Fed., 495; Amer- waiter v. Whipple, 115 Ga., 484, 41 ican Loan & Trust Co. v. South S. E., 1010. Atlantic & O. R. Co., 81 Fed., 62 ; 53 How v. Jones, 60 Iowa, 70. 14 Henry v. Henry, 103 Ala., 582, 15 N. W., 193. But counsel fees CHAP. XIX.] ACCOUNTS. 955 being made in his accounts in order that he may make com- pensation for such services.^'^ And where the value of the services rendered by counsel for the receiver of an insolvent is clearly established, the court has no authority to reduce the amount of such allowance upon the ground that by so do- ing the amounts to be distributed among creditors will there- by be increased. 55 And since counsel fees are to be regarded as part of the costs of the proceeding, it is proper to give them a preference over prior liens, and this is so although the ap- pointment of the receiver was made without prejudice to prior should not be allowed out of the fund for an attorney who is em- ployed by the debtor and represents him to resist the claims of the cred- itors at whose instance the receiver has been appointed. Ford v. Gil- bert, 44 Ore., 259, 75 Pac. 138. See Stone V. Omaha Fire Ins. Co., 61 Neb., 834, 86 N. W., 468. As to the effect of the individual interest in the receivership proceeding of coun- sel employed by a receiver upon the amount of his fees, see Villere v. New Orleans P. M. Co., 122 La., 717, 48 So., 162. 54 Stuart v. Boulware. 133 U. S., 78, 10 Sup. Ct. Rep., 242; First National Bank v. Oregon Paper Co., 42 Ore., 398, 71 Pac, 144, 971 ; Har- rigan v. Gilchrist, 121 Wis., 127, 439, 99 N. W.. 909, 1008; Crumlish's Adm'r v. Shenanddah V. R. Co., 40 West Va., 627, 22 S. E., 90. As to the right to counsel fees out of a fund in court derived from the fore- closure of a railway mortgage and the operation of the road by a re- ceiver, when counsel have rendered ■services for bondholders and other parties in interest, and as to counsel fees to the receiver in such case, see Hand v. Railroad Co., 21 S. C, 162. And see, ante. § 802. As to the right to counsel fees incurred in resisting the application for the ap- pointment of a receiver, see Com- monwealth V. Penn G. B. k L. Assn., 204 Pa. St., 29, 53 Atl., 516. As to the allowance of counsel fees for a receiver appointed under a void or- der of the court, see Sullivan v. Gage, 145 Cal., 759, 79 Pac, 537. In Barber v. International Co., 74 Conn., 652, 51 Atl., 857, 92 Am. St. Rep., 246, it was held improper to authorize a receiver, in an action in which he might be plaintiff and the corporation of which he was such receiver a defendant, to employ counsel to represent such corpora- tion. In Kimmerle v. Dowagiac Mfg. Co., 105 Mich., 640, 63 N. W., 529, it was held that where the sub- ject-matter of the litigation was settled by an agreement of the par- ties by which each was to pay one- half of the fees, costs and expenses of the receivership, the defendant could not be heard to say that coun- sel fees should not be paid because incurred in an attempt to maintain the appointment which was irregu- lar. 55 Stone v. Omaha Fire Ins. Co., 61 Neb., 834, 86 N. W., 468. 956 RECEIVERS. [chap. XIX. liens.^^ But ex parte orders for the payment of fees to the counsel for the receiver, who is his law partner, such orders being obtained by the receiver or by the counsel himself with- out notice to the parties in interest, are not conclusive upon a reference to settle the receiver's accounts, and he will still be required to show that such payments were justified by services rendered. ^'^ And since all administrative and executive work in the handling of an estate is to be performed by the receiv- er, he will be allowed counsel fees only for work requiring special legal skill. ^^ And upon a petition by the attorney for the receiver for an allowance for his services, the court should not allow more than the amount claimed in the petition, al- though there may be testimony in the case which would war- rant a larger allowance. ^^ And the courts are usually indis- posed to allow a receiver any payments made to counsel for services when the employment has not been authorized by the court.^^ And in fixing the compensation of counsel, the proper consideration is not the work actually done by the attor- 56 Gallagher v. Gingrich, 105 59 Richter v. Schroeder, 110 111., Iowa, 237, 74 N. W., 763. 112. 57 In re Commonwealth Fire In- 60 Corey v. Long, 43 How. Pr., surance Co., 32 Hun, 78. As to 504; Dalliba t/. Winschell. 11 Idaho, allowances for counsel fees out 364, 82 Pac, 107, 114 Am. St. Rep., of the funds of a receivership to 267; Crumlish's Adm'r v. Shenan- claimants against such funds, and doah V. R. Co., 40 West Va., 627, to intervening creditors, see People 22 S. E., 90. And see Hulings v. V. Security Life Insurance and An- Jones, 63 West Va., 696. In Henry nuity Co., 23 Hun, 596; Attorney- v. Henry, 103 Ala., 582, 15 So., 916, General v. Continental Life Insur- the court use the following lan- ance Co., 27 Hun, 195 ; Attorney- guage in regard to the allowance of General v. Continental Life Insur- counsel fees in cases where not ance Co., 31 Hun, 623. As to the previously authorized by the court: practice in fixing the amount of "In no case, except when the cestui counsel fees for services rendered a que trust are sui juris and waive receiver of an insolvent life insur- it, should a court suffer a credit to ance company under the statutes stand, or be entered upon the ac- of New York, see People v. Knick- count of any trustee, for expenses erbocker Life Insurance Co., 31 incurred without a previous order, Hun, 622. whether for attorney's fees or other- 58 Olson V. Bank, 72 Minn., 320, wise, until he satisfies the court by 75 N. W., 378. proof, 1. That the expense was a CHAP. XIX.] ACCOUNTS. 957 ney based upon the time spent and the amount customarily charged for such work, but the allowance should be based upon what appears to be proper for the work which was reasonably necessary for the due administration of the trust.^i And a receiver is not entitled, in settling his accounts, to an allow- ance for counsel fees paid by him out of a particular fund, in an unsuccessful defense of an action brought against him by a person entitled to that fund, and in an appeal taken in such action ; especially when the original action is brought against him and the appeal is prosecuted by him in his personal ca- pacity, and not as receiver.62 And when a person, not in in- terest in the controversy, has fraudulently procured his own reasonably necessary one, and for a service not within the ordinary du- ties which the trustee should him- self perform. 2. That the amount claimed is the fair and reasonable value of the service ; and, 3. That the amount has been actually paid, in good faith, by the trustee. If the courts would vigorously enforce this rule, trust estates would not suffer, as many have suffered in the past. The loose practice of execu- tors, administrators, guardians and other trustees, of employing coun- sel, generally, without regard to cost; without effort to obtain the best terms practicable for the es- tate; with no thought of personal responsibility, or expectation of pay- ment until allowance is made, but, too often, upon the assumption, ex- pressly or impliedly indulged by both, that the attorney shall receive only what he may induce the court to allow from the funds in hand, after the service has been rendered, is fraught with evil, and should not be encouraged. Under its influence, estates have, not infrequently, been, in large measure, swallowed up in cost, and, in some instances, courts. created to protect the helpless, ac- tually brought into public disfavor. We mean no reflection upon any one connected with this cause. Our observations are to emphasize the wisdom of the rule we re-affirm. We will not be understood as hold- ing that when the chancery court has a fund in gremio legis—s. fund in the hands of its officer — it may not direct a claim shown to have been properly incurred by the trus- tee, although without previous au- thority, to be paid, from the funds in court, directly to the party in whose favor it was incurred. Cases may arise where this course will best conserve the rights of all. That is a question, however, which con- cerns the creditor. The trustee or receiver, who has had the receipt and disbursement of the funds of the estate, can not complain of the court's refusal to exercise this power. If the claim is a proper one, he should have paid it himself and asked allowance for it." 61 Harrigan v. Gilchrist, 121 Wis., 127, 438, 99 N. W., 909, 1008. 62Utica Insurance Co. v. Lynch, 2 Barb. Ch., 573. 958 RECEIVERS. [chap. XIX. appointment as receiver of a fund in litigation, and has ob- tained possession of the fund, in opposition to the wishes and under protest of all the parties in interest and of all parties to the cause, he will not be allowed to charge upon the fund pay- ments made to counsel employed by him in defending his ap- pointment, the order being reversed on appeal. ^^ Nor will counsel fees be allowed for services rendered in resisting an application for the removal of a receiver, when the applica- tion is sustained. ^^ Nor will fees be allowed in such case upon behalf of counsel who were employed to assist in re- sisting such application by creditors and without leave of court. ^^ Nor will counsel fees be allowed except for legal as- sistance rendered the receiver, and they will not be allowed for services which he himself was equally capable of performing.^^ Nor should such fees be allowed for making a report to the court which is a mere narration of his acts and an account of his receipts and disbursements.^'^ And where a receiver has grossly mismanaged the property in his possession resulting in great loss to the estate, counsel fees will not be allowed. ^^ And where a receiver has been appointed in a state court over the same property as that over which a receiver is subsequently appointed in a federal court, counsel fees claimed to have been earned in the state court under a contract with the receiver therein appointed will not be allowed as a preferred charge upon the property in the federal court ; nor will such charges be al- lowed among the claims of general creditors where they have not been ascertained and allowed by the state court for whose 63 O'Mahoney v. Belmont, 62 N. 67 Wilkinson v. Washington Trust Y., 133, affirming S. C, 37 N. Y. Co., 42 C. C. A., 140, 102 Fed., 28; Supr. Ct. R., 223. Dalliba v. Winschell, 11 Idaho, 364, 64 /„ re Colvin, 4 Md. Ch.. 126. 82 Pac., 107, 114 Am. St. Rep., 267. 65 Anderson v. Fidelity & Deposit 68 State Central Savings Bank v. Co., 100 Ga., 739, 28 S. E., 463. Ball-Bearing Chain Co., 118 Iowa, 66 Henry v. Henry, 103 Ala., 582, 698, 92 N. W., 712. And see, ante,] 15 So., 916; Saulsbury v. Lady § 790. Ensley C, I. & R. Co., 110 Ala., 585, 20 So., 72. CHAP. XIX.] ACCOUNTS. 959 receiver they were rendered. ^^ But the receiver's expenses and fees for counsel and witnesses, in defending himself against a motion for his removal, have been allowed him when the court was satisfied that he had acted with entire good faith and strict integrity; and when the charges against him have been withdrawn by an amicable arrangement between the parties, and when he has then voluntarily surrendered his trust to the courtJ^ And a receiver of a lunatic's estate may be allowed proper and reasonable counsel fees, for advice and assistance rendered him in the discharge of his official duty, and in aiding him to protect the estate^^ And since the com- pensation of the receiver forms a necessary element in his ac- count, it is proper to allow counsel fees incurred in defending this item of the account. "^^ And although the allowance of com- pensation to a receiver and his counsel as fixed by the act of appointment may generally be considered as sufficient to fully compensate them for their services, the court may, in its dis- cretion, grant additional allowances for extraordinary serv- ices made necessary in the progress of the receivership pro- ceeding.'^^ And an allowance of counsel fees will not be dis- turbed upon appeal where there is nothing in the record to show the reviewing court what such services or their value were, since in such case it will be presumed that the lower court acted properly in making the allowance.'''* In the absence of settled practice or general rules to the contrary, motions for the allowance of counsel fees should not be heard ex parte but only upon notice to the parties in interest or their solicit- ors.'^5 69 American Loan & Trust Co. v. Minn., 129, 114 N. W., 651. And South Atlantic & O. R. Co., 81 Fed., see, ante, § 790. 62. '^4 St. Paul Title, I. & T. Co. v. 70 Cowdrey v. The Railroad Co., Diagonal Coal Co., 95 Iowa, 551, 1 Woods, 331. 64 N. W., 606. 71 In re Colvin, 4 Md. Ch. 126. 75 Merchants' Bank v. Crysler, 14 72 Baxter v. Hewes, 45 La. An., C. C. A., 444, 67 Fed., 388, 32 U. 1065, 13 So., 864. S. App., 187. 73 State v. Germania Bank, 103 960 RECEIVERS. [chap, XIX. § 806, When allowed counsel fees paid to counsel of the parties. The courts are usually averse to allowing a re- ceiver to employ as his counsel the counsel of either party to the cause, when there are conflicting interests. And when counsel for the plaintiff, in an action for the dissolution of a partnership, had also acted as associate counsel to the re- ceiver, the court refused to allow a claim for compensation for such services. '^^ But where the counsel of one of the par- ties has been employed by the receiver, not adversely to either of the parties, but to advance the common interest of both, such employment does not fall within the principle of the rule prohibiting the receiver from employing the counsel of either party. In such case, therefore, it is proper to allow the receiver, in passing his accounts, a reasonable sum for coun- sel fees.'''^ But compensation will be allowed in such case only when it is entirely clear that the necessarily and proper- ly prejudicial attitude of counsel can not have affected their services to the receiver.'^s And in the settlement of his ac- counts, a receiver has no authority to credit himself with counsel fees paid for or in behalf of either of the parties to the cause. If, however, upon final settlement, sufficient funds remain belonging to the parties for whom he has made such advances, he may be reimbursed out of such funds if the amounts so advanced were reasonable and proper, or made at the request of the party charged.'^^ And where it is sought to have an allowance of fees upon behalf of counsel of an in- tervening creditor, it must appear that the intervention re- sulted in a direct benefit to the fund and to the parties in interest; and such an allowance should not be made where the only questions raised must inevitably have arisen without the intervention, and the interests of the receiver were identical 76 Adams v. Woods, 8 Cal., 306. 78 Speiser v. Merchants' Ex- And see Bennett v. Chapin, 3 change Bank, 110 Wis., 506, 86 N. Sandf., 673. W., 243. 77 Bennett v. Chapin, 3 Sandf., 79 Drake v. Thyng, Z7 Ark., 228. 673. See Ryckman v. Parkins, 5 Paige, 543. CHAP. XIX.] ACCOUNTS. 961 with those of the intervener and it appeared that the receiv- er and his counsel were entirely competent to present such questions.^^ § 807. Receiver in suit against administrator not al- lowed for services rendered as solicitor for the adminis- trator. When a receiver is appointed in a suit in chancery against an administrator to recover property of the deceased, he will not be allowed to credit himself in his account with an amount due him for services which he has rendered as solicitor for the administrator in defending the suit, since this is properly a claim against the administrator, which should be allowed by the court of probate.^^ § 808. Not allowed counsel fees paid to himself; receiv- er, an attorney, not bound to render legal services. A re- ceiver, in stating his accounts, will not be allowed to charge for counsel fees paid to himself for services rendered, he be- ing an attorney, in addition to the legal costs properly tax- able in suits prosecuted or defended by him. And it is deemed as unsafe to permit a receiver to contract with and to pay himself for such extra services, as it would be to permit him to become a purchaser of the trust property, which it is his duty to sell to the best advantage of the estate.^2 ^nd since the duties of a receiver are administrative and executive, he is not required, because of the fact that he is an attorney, to render legal services for the estate. ^^ § 809. What costs and expenses allowed in receiver's accounts; preference for costs; allowance discretionary; expense of taking care of property. The costs of the ap- pointment of a receiver are entitled to priority of payment out of the fund realized by him, before all other demands.^'* 80 Weed V. Central of Georgia 83 Olson v. Bank, 72 Minn., 320, Ry. Co., 40 C. C. A., 319, 100 Fed., 75 N. W., 378. 162. 84 Read v. Corcoran, 1 Ir. Ch., N. 81 Battaile v. Fisher, 36 Miss., 321. S., 235. 82 Jn re Bank of Niagara, 6 Paige, 213. And see State v. Butler, 15 Lea, 113. Receivers 61. 962 RECEIVERS. [chap. XIX. And the costs of a receivership are properly given a prefer- ence over prior Hens aUhough the appointment of the re- ceiver was made without prejudice to prior Hens.^^ And in general it may be stated that the allowance of costs in receiv- ership proceedings rests largely in the discretion of the lower court and that, in the absence of a manifest abuse of such dis- cretion, the action of that court in allowing or rejecting items of costs will not be disturbed upon appeal.^^ If the receiver permits costs to accrue which he ought to have prevented, as if he neglects to pay rent due to the landlord upon premises sub- ject to the receivership, he will be required to pay such costs out of his own pocket.^"^ But a receiver who is discharged because of his inability to procure new sureties, will not be charged with the costs of appointing a new receiver.^^ And when it does not appear that a receiver has been guilty of any fraud or bad faith in his accounts, the costs of a reference for their settlement should not be charged against him, even though some items in his accounts are not allowed.^^ And where a receiver was properly appointed by the court to take possession of the property in controversy and operate it pend- ing the determination of the proceeding, the expense of taking care of the property and operating it becomes a charge upon it and is properly payable out of the fund in the hands of the receiver.^0 But where the appointment of a receiver is wrong- 85 Gallagher v. Gingrich, 105 see the case first cited as to the Iowa, 237, 74 N. W., 763. allowance of advances made by a 86 Pennsylvania Co. v. Jackson- party to the suit and the receiver ville, T. & K. W. R. Co., 13 C. C. pending the receivership. And in A., 550, 66 Fed., 421, 30 U. S. App., Buster v. Mann, 69 Ark., 23. 62 S. 188. W., 588, it was held that where the 87 Cook z;. Sharman, Sir. Eq., 515. receiver of an insolvent concern, 88 Lane v. Townsend, 2 Ir. Ch., together with several of the cred- N. S., 120. itors, had advanced money with 89 Radford v. Folsom, 55 Iowa, which to carry on the business, the^ 276, 7 N. W., 604. receiver was not entitled to a pref- 90 Ferguson v. Dent, 46 Fed., 88; erence over such creditors in case Elk Fork Oil & Gas Co. v. Foster, of a deficiency after the sale of the 39 C. C. A., 615, 99 Fed., 495. And property. See, ante, § 36, as to the CHAP. XIX.] ACCOUNTS. 963 ful, only such items of expense should be allowed as would necessarily have been incurred had no receiver been appoint- ed.9i § 809a. When costs and expenses charged against plain- tiff. As a general rule where a plaintiff has sought and procured the appointment of a receiver in a case where the jurisdiction is properly exercised, persons dealing with the receiver must look for their reimbursement solely to the fund or property in the charge of the court without any personal liability upon the part of the plaintiff. The mere inadequacy of the property and its failure to realize at a sale a sufficient amount to cover the costs and expenses of the receivership will not render the plaintiff personally liable for such deficiency, where he has been guilty of no irregularity and has properly invoked the jurisdiction of the court in the first instance.^^ If, however, the appointment is improperly rriade in the first instance, without notice to the defendant and without suffi- cient averments in the bill to warrant the relief, and the re- ceiver is continued against the objections of the defendant, the costs and expenses of the receivership should not be charged against him, but against the plaintiff in the action, by whom they were caused. ^^ So where a receiver has been appointed upon a bill which contained no cause of action in a case where such appointment was held improper and the fund upon which the defendant held a lien has been thereby depleted, it is proper for the court, in settling the receiver's accounts, to allow the defendant to recover from the plaintiff a part of the fees and expenses which have been allowed the re- ceiver out of the property upon which the defendant held liens.^* allowance of the expenses of the S. C, 76 C. C. A., 396, 145 Fed., carrying on of a business by a re- 820. ceiver. 93 Moyers v. Coiner, 22 Fla., 422 ; 9iOgden City v. Irrigation Co., Horn v. Bohn, 96 Md., 8, 53 Atl.,. 18 Utah, 279, 55 Pac, 385. 576. And see, ante, § 796. 92 Atlantic Trust Co. v. Chap- 94 Cutter v. Pollock, 7 N. Dak.,, man, 208 U. S., 360, 28 Sup. Ct. 631, 76 N. W., 235. Rep., 406, 52 L. Ed., 528, reversing 964 RECEIVERS. [chap. XIX. And where it appears that the order appointing a receiver was unwarranted and without authority of law, the costs are prop- erly taxed against the plaintiff upon whose application the receiver was appointed.^^ So where the necessity for the re- ceivership resulted from the assertion by the plaintiff of a cause of action which was finally shown to be unwarranted and fraudulent, the costs of the proceeding should be charged against the plaintiff and are not payable out of the fund in the hands of the receiver.^^ So where a receiver was appoint- ed improperly and without notice and upon motion is after- ward discharged, he is not entitled to recover his expenses out of the fund but must look, if at all, to the person at whose instance he was appointed. ^"^ So if a receiver is improperly granted over property belonging to third persons, who are not parties to the action and who derive no benefit from the re- ceivership, as against such persons the receiver will not be allowed to retain any portion of the fund derived from such property in payment of his compensation and costs, and he must look to the person who procured his appointment for such payment.9^ And where a receiver has been appointed im- properly and without authority of law, as subsequently held by the court, and after exhausting all the funds in his hands, there remains a balance due for rent of the premises occupied for the purpose of carrying on the business of the receiver- ship, the lessor to whom such balance is due is entitled, by pe- tition in the receivership proceeding, to compel the payment of such balance by the plaintiff upon whose application the receiver was appointed. And especially is this so where the plaintiff has greatly prolonged the receivership and the pos- session of the lessor's property by contesting the latter's claim of priority in the payment of his rent.99 And it is held that 95 McAnrow v. Martin, 183 111., 97 Couper v. Shirley, 21 C. C. A., 467, 56 N. E., 168; Wills Valley 288, 75 Fed., 168, 44 U. S. App., 586. Mining & Mfg. Co. v. Galloway, 155 98 Howe v. Jones, 66 Iowa, 156, Ala., 628, — So., — . 23 N. W., 376. 96 Highley v. Deane, 168 111., 266, 99 Link Belt Machinery Co. v. 48 N. K, 50. Hughes, 195 111., 413, 63 N. E., 186. CHAP. XIX.] ACCOUNTS. 965 where the plaintiff procures the appointment of a receiver, he acts at his peril and is chargeable with knowledge of the fact that if the fund of which the receiver takes possession is not adequate to defray the costs and expenses of the receiver- ship, he may be compelled to pay such expenses himself ; and in such case it is not incumbent upon the persons who make such advances to notify the plaintiff that they look to him for payment.! -q^^ it is improper to tax the costs against the unsuccessful plaintiff where no objection was made by the de- fendant to the receiver's report in which he asks for compensa- tion and costs.2 § 810. When defendant in suit by receiver entitled to costs; motion for receiver to pay judgment for costs. In an action prosecuted by the receiver of a corporation for the collection of money demands, when the action is carried on for the enhancement of the fund in the receiver's hands, for the benefit of those who shall be finally determined to be en- titled thereto, if the receiver is unsuccessful in his suit, the defendant is entitled to costs. And such defendant will not be required to await the final distribution of the assets and to share pro rata with other creditors or parties interested, but he is entitled to an immediate order for payment of the costs out of any funds in the receiver's hands.^ But it has been 1 German National Bank v. Best, prosecuted by receivers for the col- 32 Colo., 192, 75 Pac, 398. And lection of alleged money demands, see Bradford v. Cooledge, 103 Ga., instituted or carried on for the en- 753, 30 S. E., 579. hancement of the fund, for the 2 Harrington v. Foley, 108 Iowa, benefit of those to whom it is ulti- 287, 79 N. W., 64. mately to be paid, is the defendant 3 Columbian Insurance Co. v. Ste- entitled to costs to be paid to him vens, 37 N. Y., 536. The action immediately, or must he stand as was an ordinary suit at law by the a general creditor to await the final receivers for the recovery of a administration and receive only (as money demand. Defendants had the case may be) his distributive judgment for their costs of suit, share of the fund pro rata, with and applied by motion for an order those for whose benefit he has been that the receiver pay such costs subjected to a groundless litiga- out of funds in his hands. "Wood- tion? ... It was conceded on the ruff, J., says, p. 537 : "In an action argument that the costs in ques- 966 RECEIVERS. [chap. XIX. held to constitute no ground for sustaining a motion to re- quire a receiver to pay a judgment for costs, that he has re- cently been in possession of funds sufficient to pay the judg- ment, or that he has paid other and larger demands, since the receiver is not bound to render a general account of his trust to each creditor who may assail him with such a motion.'* § 811. When receiver allowed costs of unsuccessful liti- gation. Under the English chancery practice, it was held that while a receiver could not be allowed his costs and ex- penses in defending actions without leave of court, if he failed in such defense, yet if he was successful he was entitled to his costs, although he had defended without the sanction of the court.5 But a receiver of an infant's estate will not be allowed his costs and expenses incurred in defending actions without the sanction of the court, since it is improper for him to incur any expense to the estate without leave of court.^ And when a receiver has improvidently instituted proceedings at law in a certain form of action, which he has afterward abandoned tion are chargeable upon and are to be collected out of the fund. This could not well be denied, and yet, in a case in which it does not appear by anything stated in the papers that there are other claims on that fund, of any sort, except the interests of the stockholders of the company, it would seem to fol- low, as of course, that the receiver should have been directed to pay those costs. Such an order is the appropriate mode of reaching funds in the receiver's hands. Not being in form a party to the action, no execution could reach the prop- erty he holds, and being the custo- dian of the fund as an officer of the court, he is subject to imme- diate direction to pay it to a party entitled. . . . The receiver is, pro hac vice, the representative of the company, its creditors and stock- holders. The action is prosecuted for the increase of a fund which is to be paid to them. It is not ac- cording to any rule of justice or equity toward third parties that actions like the present should be prosecuted by the company or such representative, otherwise than at the expense and risk of the fund which it is sought thereby to in- crease." 4 Devendorf v. Dickinson, 21 How. Pr., 275. See, as to liability of receivers for costs under the New York code of procedure, Marsh V. Hussey, 4 Bosw., 614. 5 Bristowe v. Needham, 2 Ph., 190. 6 Swaby v. Dickon, 5 Sim., 629. GHAP. XIX.] ACCOUNTS. 967 under the advice of counsel, and has brought his action in another form, in which he is successful, it would seem that he can not be allowed the costs of the former proceeding, but must bear them himself.'^ Where, however, an applica- tion was made and proceedings were had against a receiver, but the application was refused with costs, which the applicant was wholly unable to pay, the receiver was allowed his costs, as between solicitor and client, out of the fund in his hands.^ § 811a. Taxes on property in receiver's hands payable as expenses of administration. Taxes levied upon personal property in the hands of a receiver become a charge upon the estate, and are properly payable by the receiver as a part of the costs and expenses of the administration of the trust. And the fact that the tax is assessed in the name of the insolvent over whom the receiver is appointed rather than in the name of the receiver constitutes no objection against the validity of the tax, nor will it avail against the tax that there is no averment or proof that there are sufficient funds in the hands of the receiver to pay the tax in question.^ § 812. English practice as to costs. Under the English chancery practice, a receiver was not allowed his costs for ap- pearing in response to a petition for his final discharge, since he need not have appeared, being merely an officer of the court, and not a party interested. i*^ And a receiver was not usually allowed to take any steps, by petition or otherwise, for the satisfaction of his costs and expenses, this being left to the action of the parties to the cause. If, however, the par- ties had been guilty of long-continued negligence and delay in moving for the taxation and payment of the receiver's costs, he was held to be justified in presenting a petition himself for their allowance and payment. ^^ 7 In re Montgomery, 1 Mol., 419. 10 Herman v. Dunbar, 23 Beav., 8 Courand v. Hanmer, 9 Beav., 3. 312. 9Wiswall V. Kunz, 173 111., 110, H Ireland v. Eade, 7 Beav., 55. 50 N. E., 184. 968 RECEIVERS. [chap. XIX. § 813. When chargeable for hire of property; not al- lowed for payment of charges against predecessor in ar- rears. When a receiver has used property intrusted to his care in and about his private business, thereby deriving profit to himself, he is properly chargeable in his account for the hire of the property.i2 But he will not be allowed to charge in his account for money advanced by him in payment of charges against his predecessor in office, who was largely in arrears on account of the funds intrusted to him as receiver, so that he himself would not have been entitled to the credit on his own account.12 § 814. May account pending bill of interpleader; plain- tiff can not have receiver discharged without passing ac- counts; court should not render final judgment without passing account. In case of rival claimants to a fund in the hands of a receiver, he may institute an action in the na- ture of a bill of interpleader, to compel them to interplead and determine their rights ; and pending such action he may proceed to render his accounts and pay over the fund into court, to abide the result of the interpleader.^^ But a plaintiff who has procured the appointment of a receiver can not dismiss his bill and have the receiver discharged without first requiring him to pass his accounts.^^ And it is improper for the court to render final judgment in the cause without passing upon the receiver's account, nor should the court direct that the fees and expenses of the receivership should be taxed by the clerk of the court as costs. The proper practice is for the court, after it has reached its conclusion and upon notice to all parties in interest, to order the receiver to render his account, and, having passed upon the various items in the account, to enter a decree providing for the amount of the receiver's compensa- 12 Battaile v. Fisher, 36 Miss., 321. 13 Battaile v. Fisher, 36 Miss., 321. And see as to liability of a receiver 14 Winfield v. Bacon, 24 Barb., of rents and profits to account, 154. when he has been appointed by 15 White v. Lord Westmeath, 2 agreement of the parties, Ford v. Hog., 33. Rackham, 17 Beav., 485. CHAP. XIX.] ACCOUNTS. 969 tion and the other items of his expenses and to direct the manner in which the receiver shall pay the items in the ac- count.^6 § 815. Plaintiff should not be delayed by litigation con- cerning receiver's accounts. A receiver being an officer of the court, and neither party to the litigation being responsible for his misfeasance or malfeasance, it is held that plaintiffs in the action in vv^hich he is appointed should not be delayed in the collection of the amounts due them, until the close of a litigation concerning the receiver's accounts, which may extend over a considerable period of time, since this would be a manifest injustice and hardship upon plaintiffs. ^"^ § 816. Receiver irregular in accounts ordered to pre- sent account yearly and to verify by affidavit. When a re- ceiver had been very irregular and careless in his accounts, so that it was impossible to determine from them what were the balances in his hands for which he was chargeable, it was deemed proper that he should be specially ordered to bring in his accounts every year within a specified time, and that he verify by affidavit the amount of his receipts and disbursements and the balances in his hands at the date of his reports. ^^ § 817. Executors of receiver not compelled to pass his accounts ; executor denied petition for account of payment into court; court should not pass account of deceased re- ceiver without notice to personal representative. In case of the death of a receiver, equity has no jurisdiction, upon a petition in behalf of parties interested, to order the executors of the deceased receiver to bring in and pass his accounts, and to pay the balance found due out of his assets. ^^ If, however, the receiver dies pending proceedings against him for an ac- counting, the court has power to make an order against his executors reviving and continuing the accounting as against 16 Cutter V. Pollock, 4 N. Dak., 18 Bertie v. Lord Abingdon, 8 205, 59 N. W., 1062, 25 L. R. A., Beav., 53. ZTJ, 50 Am. St. Rep., 644. 19 Jenkins v. Briant. 7 Sim., 171. 17 Milwaukee & Minnesota R. Co. V. Soutter, 2 Wal., 510. 970 RECEIVERS. [chap. XIX. them.20 But after the death of a receiver and the appointment of his successor, the court has no power to finally pass upon his accounts without giving his personal representative an op- portunity to be heard. 2^ But when a receiver, appointed for the benefit of a tenant for life, never acted, but permitted the solicitor in the cause to act as receiver and to collect all the rents, and after many years the executor of the receiver was compelled to pay into court the amount found to be due, not- withstanding the solicitor had previously paid a portion to the tenant for life, it was held that the executor could not main- tain a petition for an accounting of what was paid, and for a lien upon the estate for the amount which should be found due upon the accounting.22 § 818. When salary forfeited for delay in payment into court; when delay excusable. When a receiver, after his discharge, had not paid into court the balance found due upon his account within the time required, he was ordered to pay the same, together with the amount which had been allowed him for his salary, with interest on both sums from the date first appointed for payment.23 But when a receiver had de- layed passing his account in order to obtain additional rent from a tenant, thereby benefiting the estate, he was allowed his commission or poundage thereon and the costs of passing his account ; ^4 so, also, when the receiver had delayed passing his account at the request of the parties, in order to save expense pending a compromised^ § 819. Receiver of minor compelled to account from be- ginning, on minor coming of age. It has been held that a receiver over a minor's estate may, upon the minor coming of age, be properly required to account to him from the begin- ning concerning the management of his affairs, although he 20 /m r^ Columbian Insurance Co., 23 Harrison v. Boydell, 6 Sim., 30 Hun, 342. 211. 21 Overholt v. Old D. Mfg. Co., 24 Flood v. Lord Aldborough, 8 98 Va., 654, 37 S. E., 307. Ir. Eq., 103. 22 Gurden v. Badcock, 6 Beav., 25 Purcell v. Woodley, 10 Ir. Eq., 157. 422. CHAP. XIX.] ACCOUNTS. 971 has before presented his accounts from time to time to the coiirt.26 § 819a. How receiver's accounts may be questioned. When a receiver is charged with having allowed and paid, un- der an order of court, claims which are fictitious and unfound- ed, the proper practice for a creditor desiring to contest such allowances is to apply to be made a party to the suit in which the order was made and to have such order vacated. 27 But when a receiver's accounts have once been passed and approved by the court, they may be questioned only by a direct proceed- ing or petition, calling attention to some error, fraud or mistake in the accounts. And when there have been several receivers in the same cause, some of whose accounts have been passed and approved, and a general order is then made requiring the receivers to account before the master, such order does not re- quire that the accounts already approved shall be reopened. 28 § 819&. Right of appeal from order settling receiver's accounts. While a receiver, being a mere officer or custo- dian of the court, can not appeal from an order directing him to turn over the property or money in his hands, yet, if the order erroneously fixes the amount of property or money in his hands, and directs him to turn over more than is in his posses- sion, he is entitled to an appeal from such order.29 So he may appeal from a final decree settling his accounts and fixing the balance due from him, and for this purpose he occupies sub- stantially the position of a party to the cause.^^ Upon the 26 Wildridge v. McKane, 2 Mol., 29 How v. Jones, 60 Iowa, 70, 14 545. N. W., 193; JMerriam v. Victory 2TSchenck v. Ingraham, 4 Hun, Mining Co., 37 Ore., 321, 56 Pac, 67; S. Q, 5 Hun, 397. 75, 58 Pac, 37, 60 Pac, 997. 28 Farmers' Loan & Trust Co. v. 30 Hinckley v. G., C. & S. R. Co.. Central Railroad, 2 Fed., 751, 1 Mc- 94 U. S., 467; Henry v. Henry, 103 Crary, 352. As to the effect of Ala., 582, 15 So., 916; Saulsbury v. laches upon the right of a party in- Lady Ensley C, I. & R. Co., 110 terested to set aside an order di- Ala., 585, 20 So., 72. recting the payment of funds by a receiver, see Lombard v. Wade, Zl Ore., 426, 61 Pac, 856. 972 RECEIVERS. [chap. XIX. same principle, where an order has been entered approving a receiver's report and account and finally discharging him and a writ of error is sued out to review such order of discharge, the receiver is a necessary party to the proceeding and it is error for the reviewing court to proceed without him.^^ So the par- ties to the cause in which he is appointed, and who are interested in the fund in his hands, may appeal from a final decree settling the receiver's accounts.^^ And where a receiver's account em- braces every transaction in his trust relation and covers the entire period for which he was originally appointed, an order settling his account is final and therefore appealable at the in- stance of any party in interest and this is so although he has, by a subsequent order, been continued in his trust.^^ But an order approving a receiver's accounts, which is not final and which directs the receiver to continue the management of the property until the further order of the court, is not appealable, and an appeal therefrom will be dismissed.24 So an ex parte order making an allowance of counsel fees is interlocutory and is therefore not appealable.^^ § 819c. Appeal by one creditor resulting in benefit to all; entitled to expenses and counsel fees. Where a fund in the hands of a receiver has been increased as the result of an appeal by a particular creditor, such augmented fund belongs 31 Haigh V. Carroll, 197 III., 193, to sue out another writ of error to 64 N. E., 375. In this case the ap- which the receiver should be made pellate court reversed the lower a party. court and remanded the cause to 32 Hovey v. McDonald, 109 U. that court with directions to dis- S., 150, 3 Sup. Ct. Rep., 136; Chand- allow the expenditures made by the ler v. Gushing- Young S. Co., 13 receiver during the period of re- Wash., 89, 42 Pac, 548. demption, and to order the payment 33 Patterson v. Ward, 6 N. Dak., of the money collected by him to 359, 71 N. W., 543. the owner of the equity of redemp- 34 Rochat v. Gee, 91 Gal., 355, 27 tion. Upon writ of error to review Pac, 670. And see Illinois Trust the judgment of the appellate court, & Savings Bank v. Pacific R. Co., i the supreme court, after holding as 99 Gal., 407, 33 Pac, 1132. indicated in the text, reversed and 35 Wilder v. Reed, 46 Ore., 54, 78 remanded the cause to the lower Pac, 1027. court without prejudice to the right CHAP. XIX.] ACCOUNTS. 973 to the creditors generally and not alone to the one who prose- cuted the appeal. Such creditor, however, is entitled out of the fund to all his costs and expenses incurred upon the appeal, as well as to counsel fees earned in thus increasing the fund.^^ 36 Schwartz v. Keystone Oil Co., 164 Pa. St., 415, 30 Atl., 297. CHAPTER XX. OF THE RE^IOVAL AND DISCHARGE OF RECEIVERS. I. Removal for Cause § 82Q II. Final Discharge 832 I. Removal for Cause. § 820. Power of removal or discharge a necessary incident to power of appointment. 821. Discretionary nature of power of removal; effect of relation- ship to the parties as ground for removal; want of notice of appointment of successor no ground for removal. 822. Receiver not removed to make way for agent of the parties. 823. Employing counsel of the parties no ground for removal. 824. Power of removal in vacation; vacating order of appointment;. notice of motion for removal requisite; notice to creditors unnecessary. 825. Removal not appealable; may be made after plaintiff is non- suited and pending motion for new trial. 826. Analogy between removing receiver and dissolving injunc- tion; removed when equities of bill denied by answer. 827. Removal and substitution by consent; extending one receiver in place of several. 828. Receiver's interest as stockholder and director in plaintiff bank;. employment of debtor by receiver in creditor's suit. 829. Required to restore fund on removal. 830. Receiver not heard on motion to vacate his appointment. 831. When defendants estopped from seeking removal. 831a. Diligence essential to application for removal. § 820. Power of removal or discharge a necessary inci- dent to power of appointment. The subject of the removal or discharge of receivers, although to a considerable degree regarded as a matter of practice and to be discussed as such, is, nevertheless, deemed of sufficient importance to merit sep- arate treatment. The power of a court of equity to remove or discharge a receiver whom it has appointed may be regarded as 974 CHAP. XX.] REMOVAL AND DISCHARGE. 975 well settled,^ and it may be exercised at any stage of the liti- gation.2 Indeed, it would seem to be a necessary adjunct of the power of appointment, and to be exercised as an incident to or consequence of that power ; the authority to call such officer into being necessarily implying the authority to terminate his functions when their exercise is no longer necessary, or to re- move the incumbent for an abuse of those functions, or for other cause shovvn.^ And the cases upon this branch of the sub- ject will be found to resolve themselves into two classes, viz., cases of removal or substitution for cause, and cases of dis- charge because of the necessity for the appointment having ceased to exist. § 821. Discretionary nature of power of removal; ef- fect of relationship to the parties as ground for removal; want of notice of appointment of successor no ground for removal. As regards the power of a court of equity to re- move a receiver for cause and to substitute another in his stead, it is to be observed that the exercise of the power is regarded as a matter properly resting in the sound discretion of the court, 1 Ferry v. Bank of Central New attorney-general to ask for the re- York, 15 How. Pr., 446. For the moval of a receiver of an insolvent distinction between "vacation of or- corporation under the statutes of der of appointment," "removal" and New York, and as to the practice "discharge," see Pagett v. Brooks, in such cases, see Attrill v. Rock- 140 Ala., 257, 37 So., 263. As to the away Beach Improvement Co., 25 proper practice upon a petition for Hun, 509. And see S. C, 25 Hun, the discharge of a receiver for cause, 376. But the removal of a receiver see Farmers' Loan & Trust Co. v. over a corporation, upon the appli- Northern Pac. R. Co., 61 Fed., 546. cation of its stockholders, has been 2/m re Colvin, 3 Md. Ch., 300. denied when it appeared that a And see Crawford v. Ross, 39 Ga., majority of the directors were in 44. As to the removal of a receiver sympathy and co-operation with appointed through collusion, and to such stockholders, upon the ground the point that the proper method of that the stockholders might be questioning such an order of re- heard through the corporation or moval is by appeal, and not by its directors. Fifth National Bank injunction to restrain the new v. P. & C. S. R. Co., 1 Fed., 190. receiver from interfering with the 3 Wehrs v. Sullivan, 217 Mo., 167, former one, see Wilson v. Barney, 116 S. W., 1104. 5 Hun, 257. As to the right of the 976 RECEIVERS. [chap. XX. and hence to be governed by the circumstances of the particular case.^ It is difficult, therefore, to frame any definite rules susceptible of general application, and the power of removal for cause is referred to the broad and undefined region of the discretionary jurisdiction of courts of equity. It may be re- garded as settled, however, that the mere fact of relationship between the receiver and the plaintiff in the action in which he was appointed, is not, of itself, sufficient ground for his remov- al, such relationship affording, at the most, merely a circum- stance to be taken into consideration at the time of his appoint- ment.5 A receiver will not, therefore, be removed solely be- cause of his relationship to the plaintiff, when no improper con- duct has been shown on his part, and when he is in every way qualified for the office and has given ample security, especially when his appointment was requested by a large majority of the creditors of the fund in litigation.^ But when the person ap- pointed was the brother of one of the parties to the litigation, and the son of one claiming to be largely interested as a credit- or, and was admitted by the plaintiff to have taken an active part in the controversy as his agent and friend, he was regarded as too far enlisted in the cause to permit of his being an unbiased and impartial receiver, and he was, therefore, removed."^ And since absolute impartiality as between the parties to the litiga- tion is an indispensable qualification of a receiver, upon an ap- plication for his removal the court may properly consider his past relations to the parties, as well as his present sympathies. And when it is shown that he was the nominee of one hostile party and bitterly opposed by the other, and that he was ap- 4 Siney t;. New York Consolidated 5 Wetter v. Schlieper, 7 Ab. Pn, Stage Co., 28 How. Pr., 481 ; S. C, 92 ; Shainwald v. Lewis, 8 Fed., 878. 18 Ab. Pr., 435; First National 6 Wetter v. Schlieper, 7 Ab. Pr., Bank v. Barnum Wire & Iron 92. Works, 58 Mich., 315, 24 N. W., T Williamson v. Wilson, 1 Bland, 543, 25 N. W., 202; State v. Rey- 418. nolds, 209 Mo., 161, 114 S. W., 1097; In re Angell, 131 Mich., 345, 91 N. W., 611. CHAP. XX.] REMOVAL AND DISCHARGE. 977 pointed under the mistaken belief that all interests had united in his selection, and that by reason of his interest his efficiency as an officer of the court is impaired, it is proper to remove him.S But it constitutes no ground for the removal of a re- ceiver that by his advice and suggestion he has favored and given aid to a particular scheme of the reorganization commit- tee of the insolvent concern over which he w^as appointed.^ And where, upon the resignation of one receiver, the court of its own motion appoints another to fill the vacancy, it is no ground for the removal of such receiver that a party interested in the ownership had no notice of his appointment, where there is no showing of incompetence or unfitness.io And if the only right of the creditor seeking the removal of a receiver is to have his claim paid in full and a sufficient fund is reserved in the receiver's hands, to be applied to such payment when the claim shall be established, it is proper to refuse the application for his removal, all other creditors being satisfied with the re- ceiver 11 § 822. Receiver not removed to make way for agent of the parties. It is to be observed that a court of equity will not remove its own receivers, in order to make way for agents or receivers who may be selected by private persons interested in the litigation. And when the court has appointed its receiv- er, who has entered upon the duties of his office, it will not re- move him upon the application of another creditor of the de- fendant, who is entitled, under his security, to appoint an agent or receiver to collect the rents and profits of defendant's estate for the payment of such creditor.^^ § 823. Employing counsel of the parties no ground for removal. While it has been held to be improper for the counsel of either party to the litigation to act as counsel for 8 Wood V. Oregon Development H First National Bank v. Barnum Co 55 Fed 901. Wire & Iron Works, 58 Mich., 315, s'ciarke v. Central R. & B. Co., 24 N. W., 543, 25 N. W., 202. 66 Fed., 16. ^- Sanders v. Lord Lisle, Ir. Rep., 10 Fowler v. Jarvis-Conklin M. T. 4 Eq., 43. Co., 66 Fed., 14. Receivers — 62. 9~8 RECEIVERS. [chap. XX. the receiver, yet the mere fact of the receiver having employed as his own counsel the counsel of one of the parties does not, of itself, unless shown to be collusive, furnish sufficient ground for his removal after he has entered upon the discharge of his duties.^^ § 824. Power of removal in vacation ; vacating order of appointment; notice of motion for removal requisite; no- tice to creditors unnecessary. It is held in Georgia that courts of equity are to be regarded as being always open for the purpose of removing receivers, and that the power of removal, like the power of appointment, may be exercised by the court upon due notice in vacation. i^ And under the statute of Con- necticut it is held that the court has the power to remove its re- ceiver in vacation upon due notice to him.^^ And since the appointment is itself a matter resting largely in the sound dis- cretion of the court to which the application is addressed, if the court at a subsequent stage of the cause becomes satisfied that the appointment was improvidently made, it has undoubted power to vacate its order, thus in effect removing the receiv- er, i^ But before the court will entertain a motion for the re- moval of a receiver, due notice must be given of the motion in writing, which notice should set forth specifically the grounds upon which the removal is sought. And a failure to give such notice will warrant the court in refusing to hear the motion. ^'^ Nor will the rule requiring notice be relaxed, even though suffi- cient grounds are shown for removal, and an order of removal made without such notice will be reversed upon appeal. ^^ But notice to every creditor who has filed his claim is not neces- 13 Bank of Monroe v. Schermer- ing Co., 31 Hun, 195; Campbell v. horn, Clarke Ch., 366. Spratt, 5 N. Y. Weekly Digest, 25. 14 Crawford v. Ross, 39 Ga., 44. And a notice to the receiver of five 15 In re Premier Cycle Mfg. Co., days has been held sufficient. In re 70 Conn., 473, 39 Atl., 800. Premier Cycle Mfg. Co., 70 Conn., 16 Copper Hill Mining Co. v. 473, 39 Atl., 800. Spencer, 25 Cal., 11. IS Campbell v. Spratt, 5 N. Y. 1" Dougherty v. Jones, 37 Ga., Weekly Digest, 25. 348; Bruns v. Stewart Manufactur- CHAP. XX.] REMOVAL AND DISCHARGE. 979 sary.19 It is, however, proper for the court to revoke or rescind its order appointing a receiver without notice to him. 2*^ § 825. Removal not appealable; may be made after plaintiff is nonsuited and pending motion for new trial. Since the removal of a receiver is a matter addressed to the sound discretion of the court, its decision removing the incum- bent and substituting another in his stead can not ordinarily be reviewed upon appeal to an appellate court.^i Nor has a re- ceiver any such interest in, or title to his office as will enable him to maintain an appeal from an order of removal. ^2 But where the order of removal is in effect a settlement of the re- ceiver's accounts and a refusal to make him proper compensa- tion, an appeal will lie at the instance of the receiver.23 And when, upon the final trial of the cause, judgment of nonsuit is rendered against the party on whose application the appoint- ment was made, the court may vacate the order of appointment, thus removing the receiver, notwithstanding the pendency of a motion for a new trial. ^4 § 826. Analogy between removing receiver and dissolv- mg injunction ; removed when equities of bill denied by an- swer. The jurisdiction of a court of equity, wdiich is ex- ercised in the removal of receivers, bears a striking resemblance to that which is called into action upon the dissolution of an interlocutory injunction, and in both cases the power to termi- 19 In re Premier Cycle Mfg. Co., Ct. Rep., 625, 43 L. Ed., 941, modi- 70 Conn., 473, 39 Atl., 800. fying and affirming S. C, 26 C. C. 20 Howard v. Lowell Machine A., 279; 80 Fed., 969, S3 U. S. App., Co., 75 Ga., 326. 302 ; In re Premier Cycle Mfg. Co., 21 Siney v. New York Consoli- 70 Conn., 473, 39 Atl., 800; Young dated Stage Co., 28 How. Pr., 481; v. Irish, 104 Minn., 367, 116 N. W., S. C, 18 Ab. Pr., 435 ; Milwaukee & 656 ; State v. Superior Court, 36 Minnesota R. Co. v. Soutter, 154 Wash., 80, 78 Pac, 202. And see U. S., 540, 14 Sup. Ct. Rep., 1158; post, § 836. Coolbaugh v. Herman, 221 Pa. St., 23 Young v. Irish, 104 Minn., 367, 503, 70 Atl., 830. And see Crawford 116 N. W., 656. V. Ross, 39 Ga., 44. 24 Copper Hill Mining Co. v. 22 Bosworth v. St. Louis Termi- Spencer, 25 Cal., 11. nal R. Assn., 174 U. S., 182, 19 Sup. 980 RECEIVERS. [chap. XX. nate seems to flow naturally and as a necessary sequence from the power to create. And as an interlocutory injunction is us- ually dissolved upon the coming in of defendant's answer, de- nying under oath the allegations of the bill,^^ so in the case of a receivership, if the answer under oath fully and satisfactorily denies the equities of the bill, or the material allegations upon which the appointment was made, and these allegations are not sustained by any testimony in the case, the order of appoint- ment will be reversed and the receiver will be removed.26 Nor is it necessary, in all cases, to secure the removal that the equities of the bill should be entirely negatived, if it be satis- factorily made to appear to the court that there is no necessity for its intervention. And if the court is satisfied, upon the coming in of the answer, that there is no imminent danger and no pressing or urgent necessity for a receiver, it is proper to re- voke the appointment. 27 § 827. Removal and substitution by consent; extending one receiver in place of several. It is competent for the court to remove one receiver, and to substitute another in his stead, by consent of all parties, when the proceedings are bona Me, and when there is no attempt to traffic in the receiver- ship. ^8 And when different receivers have been appointed over the estate of a defendant, upon the application of different cred- itors, the hardship and expense of such a state of facts, as against the owner of the estate, will justify the court in remov- ing all the receivers but one, and extending him over the entire estate.29 But the removal of a receiver and the appointment of 25HoIIister v. Barkley, 9 N. H., 394; Kaighn v. Fuller, 1 McCart., 230 ; Armstrong z/. Sanford, 7 Minn., 419; Schoeffler v. Schwarting, 17 49; Anderson v. Reed, 11 Iowa, Wis., 30. 177; Stevens v. Myers, id., 183; 26 Voshell t;. Hynson, 26 Md., 83; Taylor v. Dickinson, 15 Iowa, 483; Drury v. Roberts, 2 Md. Ch., 157. Hatch V. Daniels, 1 Halst. Ch., 14; 27 Crawford v. Ross, 39 Ga., 44. Washer v. Brown, id., 81 ; Suffern 28 Farran v. Morris, 1 Ir. Ch., N. V. Butler, 3 C. E. Green, 220; Park- S., 680. inson v. Trousdale, 3 Scam., 367; 29 Kelly v. Rutledge, 8 Ir. Eq., Roberts v. Anderson, 2 Johns. Ch., 228. 202; Harris v. Sangston, 4 Md. Ch.. CHAP. XX.] REMOVAL AND DISCHARGE. 981 another in his stead does not have the effect of invalidating claims against the former receivership, since the management of the estate by the court is one and the same, although it be- comes necessary to change the receiver.^^ § 828. Receiver's interest as stockholder and director in plaintiff bank; employment of debtor by receiver in creditor's suit. It has elsewhere been shown, that the courts are always averse to the appointment of receivers who are in any manner interested in the cause, the office being re- garded as one requiring the strictest impartiality.^! While this is true, yet in a case where the fact of the receiver's interest, he being a stockholder and director in the plaintiff bank, was not known to the court at the time of his appointment, and he had entered upon the discharge of his duties and had spent much time in making himself familiar with the property intrust- ed to his charge, and no objection was shown to his fidelity or honesty, and no complaint was made of any improper discharge of his duties, or misconduct, it was held that he should not be removed immediately upon motion, and he was allowed to act until a new reference could be had to a master in chancery, to make a new appointment.^^ ^nd it is not sufficient cause for removing a receiver of a judgment debtor, appointed in a creditor's suit, that he has employed the debtor to assist him in collecting a portion of the indebtedness assigned to the re- ceiver, when no part of the fund has been used for the debtor's benefit, and he has had no possession of or control over the property after its assignment to the receiver, and when the solvency of the receiver is unquestioned and his security ample.^^ § 829. Required to restore fund on removal. When a person not in interest in the controversy has fraudulently pro- 30 Ex parte Brown, 15 S. C, 518. the grounds of removal, under the 31 See chapter III, ante. statutes of Ohio, Lafayette Bank v. 32 Bank of Monroe v. Schermer- Buckingham, 12 Ohio St., 419; State horn, Clarke Ch., 366. See, as to v. Claypool, 13 Ohio St., 14. the power of removing receivers of 33 Ross v. Bridge, 24 How. Pr., insolvent banking corporations and 163; S. C, 15 Ab. Pr., 150. 982 RECEIVERS. [chap. XX. cured himself to be appointed receiver, contrary to the wishes of all parties in interest, but the appointment is reversed upon appeal, thus removing him from the trust, he will be compelled to make restitution of the fund received by him to the person rightfully entitled thereto, and will not be allowed to make any deduction from such fund.^* And when a receiver appointed in behalf of incumbrancers has been guilty of gross negligence in the discharge of his duties, he may be removed upon their application, and may be required to pay interest upon the balances from time to time in his hands, and to pay the costs of the proceeding for his removal. ^^ § 830. Receiver not heard on motion to vacate his ap- pointment. Upon a motion to vacate an order appointing a receiver, the motion being made by defendant and assented to by plaintiff, the receiver himself should not be heard in oppo- sition, since he is not a party in interest, and has no standing in court to oppose the motion, and can not interfere in ques- tions affecting the rights of the parties or the disposition of the property in his hands. ^^ § 831. When defendants estopped from seeking re- moval. When defendants in the cause have agreed with plaintiffs that, upon the latter giving security in a specified amount, they may have possession and management of the property in controversy, and may nominate a receiver, defend- ants occupy a somewhat different attitude toward the receiver from that in the case of an ordinary appointment by the court. And in such a case, it does not lie with defendants to object to the person of the receiver and to obtain his removal, unless he commits some overt act of unfaithfulness to his trust. Nor will the court, under such circumstances, permit defendants to go into the previous acts of the receiver in his capacity as plain- 34 O'Mahoney v. Belmont, 62 N. 35 /„ re Estate of St. George, 19 Y., 133, affirming S. C, 37 N. Y. L. R., Ir., 566. Supr. Ct. R., 223. 36 L'Engle v. Florida Central R. Co., 14 Fla., 266, CHAP. XX.] REMOVAL AND DISCHARGE. 983 tiff, before his appointment as receiver, to furnish grounds for his removal. ^"^ § 831a. Diligence essential to application for removal. If the removal of a receiver is sought because of informalities in his appointment, as for insufficiency of the notice of the applica- tion, due diligence should be used by the parties seeking such removal. And when they delay making application for the re- moval for a considerable period, during which the receiver makes large expenditures in the completion of a railway over which he is appointed, they will be held to have so far ac- quiesced in the appointment as to be estopped from asking for the removal upon the ground of such irregularities.^^ STCowdrey v. The Railroad 38 Allen v. D. & W. R. Co., 3 Company, 1 Woods, 331. Woods, 316. 984 RECEIVERS. [chap. XX. 11. Final Discharge. § 832. Receiver discharged when necessity terminates; receiver of estate of deceased lunatic discharged on appointment of ad- ministrator. 833. Functions usually terminate with the litigation; not discharged ipso facto by termination of suit, or reversal on appeal; when jurisdiction retained notwithstanding dismissal of bill. 834. Effect of final decree as to receiver's discharge. 835. Receiver over two infants not discharged on one attaining ma- jority. 836. Appeal from discharge not allowed; when receiver punished by attachment. 837. Right to have receiver discharged on plaintiff's demand being satisfied; conflict of authority; the better doctrine averse to such right. 838. Receiver not entitled to discharge as of course on his own ap- plication; must show cause; not discharged on giving bond. 839. Mortgagee may apply for discharge of receiver appointed to enforce trusts of mortgagor's will. 840. Owner of mortgaged premises has absolute right to discharge of receiver on paying amount due. 841. Interests of all parties kept in view; receiver of corporation discharged when corporation shown to be solvent. 842. Receiver on creditors' bill discharged when bill denied by an- swer. 843. Plaintiff's delay in prosecuting his suit ground for discharging receiver. 844. Placing purchaser in possession of lands held by receiver equiv- alent to discharge. 845. Bankruptcy of receiver as ground for discharge. 846. Defendant may move for; practice on application; costs; notice. 847. Order of discharge not appealable in Michigan. 848. Discharge no bar to action against receiver for liability in- curred; notice to general creditors unnecessary. 848a. Effect of discharge on appeal from order of appointment. § 832. Receiver discharged when necessity terminates; receiver of estate of deceased lunatic discharged on ap- pointment of administrator. As regards the question of the final discharge of a receiver, as distinguished from his re- moval for cause, it may be laid down as a general proposition, that when the necessity for the office ceases to exist, the office CHAP. XX.] REMOVAL AND DISCHARGE. 985 itself must terminate and the receiver be discharged. And when a court of equity has temporarily taken possession of property by the hands of its receiver, until the proper person may be determined who is entitled to take it, the court will not continue such possession after this necessity ceases.^^ Thus, when a receiver is appointed to take charge of the assets and property of a deceased lunatic, until it may be determined who is entitled thereto, upon the appointment of an administrator pendente lite by the proper court of probate jurisdiction, the receiver will be discharged and directed to turn over the assets to the administrator pendente liteA^ And when a receiver has been improperly appointed over property belonging to a person not a party to the cause, the court will order the discharge of the receiver, although the cause has abated by the death of the sole defendant.^^ § 833. Functions usually terminate with the litigation; not discharged ipso facto by termination of suit, or re- versal on appeal; when jurisdiction retained notwith- standing dismissal of bill. The functions of a receiver usu- ally terminate with the termination of the litigation in which he was appointed. "^2 And when the bill upon which the appoint- ment was made is afterwards dismissed upon demurrer, the duties of the receiver cease as between the parties to the ac- tion. ^^ So when defendant in the action in which the receiver was appointed finally obtains judgment therein in his favor, the entry of judgment would seem to have the effect of termi- nating the receiver's functions, although plaintiff in the action perfects his appeal to an appellate court.44 It is to be observed, however, that the abatement of the action, or the entry of final 39 /m re Colvin, 3 Md. Ch., 297. Hickox v. Holladay, 12 Sawyer, 40 /n re Colvin, 3 Md. Ch., 297. 204. 41 Lavender v. Lavender, Ir. 43 Field v. Jones, 11 Ga., 413. Rep., 9 Eq., 593. 44 Ireland v. Nichols, 40 How. 42 Field V. Jones, 11 Ga., 413; Pr., 85; S. C, 9 Ab. Pr., N. S., 71; Ireland v. Nichols, 40 How. Pr., Harris v. Root, 28 Mont., 159, 72 85 ; S. C, 9 Ab. Pr., N. S., 71 ; Bev- Pac, 429. eriey v. Brooke, 4 Grat., 220; 986 RECEIVERS. [chap. XX. judgment therein, does not have the effect of discharging the receiver ipso factoA^ So the reversal of an order appointing a receiver does not resuU, ipso facto, in the discharge of the re- ceiver's And although as between the parties to the litiga- tion his functions have terminated with the determination of the suit, he is still amenable to the court as its officer until he has complied with its directions as to the disposal of the funds which he has received during the course of his receivership. And when the bill is dismissed upon demurrer, it is the plain duty of the court to direct the receiver to restore the funds re- ceived to the person from whom they were taken.^'^ But an or- der of discharge does not necessarily follow, in all cases, be- cause of the determination of the suit, and the court may, upon sufficient cause shown, either discharge or continue the re- ceiver, according to the exigencies of the case.'S And where, after the appointment of a receiver, plaintiff dismisses his bill but the receiver is not discharged and subsequently claimants to the fund in the receiver's hands intervene in the receivership suit, it is proper for the court to retain jurisdiction for the purpose of disposing of the fund in the receiver's hands, al- though it is not the proper practice to reinstate the original cause upon the application of such interveners.49 § 834. Effect of final decree as to receiver's discharge. Since the final decree in the cause is generally decisive of the subject-matter in controversy, and determines the right to the possession of the fund or property held by the receiver, it is usually the case that such decree supersedes the functions of the receiver, since there is then nothing further for him to act upon, although it would seem to be still necessary that a formal appli- cation be made for his discharge. But when the court by its 45McCosker v. Brady, 1 Barb. 46 ElHs v. Warsaw, 92 Minn., Ch., 346; Ireland v. Nichols, 40 444. How. Pr., 85; S. C, 9 Ab. Pr.. N. 47 Field v. Jones, 11 Ga., 413. S., 71; Pagett v. Brooks, 140 Ala., 48 Ireland v. Nichols, 40 How. 257, 37 So., 263. See, also. White- Pr., 85, S. C, 9 Ab. Pr., N. S., 71. side V. Prendergast, 2 Barb. Ch., 49 Fountain z/. Mills, HI Ga., 122, 471. 36 S. E. 428. CHAP. XX.] REMOVAL AND DISCHARGE. 987 decree does not attempt to decide the main question in contro- versy, and leaves the receiver's possession undisturbed, it can not be held to have the effect of operating as a discharge, or of superseding his functions. ^^ § 835. Receiver over two infants not discharged on one attaining majority. In general, a receiver will not be discharged until the object for which he was appointed has been fully accomplished, or until the court is satisfied that the exigency calling for a receiver has ceased.^^ For example, where, as between tenants in common of real estate, two of whom are infants, a receiver is appointed for the protection of the infants, with directions to pay over to the adults their share, he will not be discharged upon the application of one of the infants on coming of age, the other not having attained his ma- jority. In such case, the object sought by invoking the extra- ordinary powers of a court of equity being the protection of the property during the infancy of both, the discharge will not be allowed until this object is fully accomplished.^^ § 836. Appeal from discharge not allov<^ed; v^hen re- ceiver punished by attachment. It follows from the well- established doctrine that a receiver is not the agent or repre- sentative of either party to the litigation, and in no manner in- terested in its result, that he can not properly appeal from an order of the court discharging him from his trust and direct- ing him to turn over the property received to another person. Being merely the officer or representative of the court, with- out personal interest or personal rights in the litigation, the right to discharge him rests with the court at any stage of the controversy, and from the exercise of this right he can not ap- peal.^2 The court will, therefore, continue to execute its or- 50 Beverley v. Brooke, 4 Grat., 52 Smith v. Lyster, 4 Beav., 227. 220. But see Visage v. Schofield, 53 /„ re Colvin, 3 Md. Ch., 300; 60 Ga., 680. Ellicott v. Warlord, 4 Md., 80; 51 Smith V. Lyster, 4 Beav., 227; Bosworth v. St. Louis Terminal R. In re Long Branch & Sea Shore R. Assn., 174 U. S., 182, 19 Sup. Ct. Co., 9 C. E. Green, 398. Rep., 625, 43 L. Ed., 941, modify- 988 RECEIVERS. [chap. XX. der, and will compel the receiver to turn over the property as directed in the order of discharge, notwithstanding he has prayed an appeal, and has filed an appeal bond. And in case of refusal on the part of the receiver to comply with the direction in the order of discharge as to the disposition to be made of the property, the court may, if necessary, enforce obe- dience by attachment.^^ And because the appointment of a re- ceiver determines no rights between the parties litigant, his possession being merely that of the court, a party to the cause can not appeal from an order discharging a receiver.^^ § 837. Right to have receiver discharged on plaintiff's demand being satisfied; conflict of authority; the better doctrine averse to such right. With reference to the question of the right of a defendant, against whom a receiver has been appointed, to have him discharged upon extinguish- ing or satisfying plaintiff's demand, there being other parties interested in having the receiver continued, a direct conflict of authority exists in the reported cases. The doctrine of the English Court of Chancery, as laid down by Lord Eldon, was, that with the right of the plaintiff to a receiver must fall the rights of all other parties to the action ; and that a receiver ap- pointed in behalf of a plaintiff should be discharged when plain- tiff's right to maintain the action failed, notwithstanding other parties to the litigation might insist on their right to have the receiver retained as their receiver.^^ The better doctrine, bow- ing and affirming S. C, 26 C. C. A., he claimed to have a charge. De- 279, 80 Fed., 969, 53 U. S. App., 302. fendant having paid and plaintiff And see, ante, § 825. having received the amount claimed 54 In re Colvin, 3 Md. Ch., 300. to be due, the receiver was dis- 55 Washington City & P. L. R. charged, although other defendflnts, Co. V. S. M. R. Co., 55 Md., 153. claiming to have annuities or in- 56 Davis V. Duke of Marl- cumbrances upon the same prop- borough, 2 Swans., 168. This was a erty, objected and asked to be heard case where plaintiff, claiming to be against the discharge. Lord Eldon an equitable creditor or incum- observes : "I apprehend that with brancer of defendant, had obtained (he right of the plaintiff* to have a receiver of the rents and profits of the receiver must fall the rights defendant's real estate upon which of the other parties. It would be CHAP. XX.] REMOVAL AND DISCHARGE. 989 ever, as deduced from the clear weight of authority and from the better legal reasoning, is directly the reverse. And since the appointment of a receiver is regarded as being made for the benefit of all parties in interest in the litigation, he will not be discharged merely upon the application of the party at whose instance he was appointed, after his demand against the defend- ant is satisfied, when the rights of other parties are involved. The duty of the court being to protect the rights of all parties in interest, and not merely those of the plaintiff at whose suit the extraordinary aid of the court has been invoked, it will not permit the receiver to be discharged upon the consent of the plaintiff, when it appears that the discharge may prejudice the rights of other parties to the action who do not consent there- to.57 Thus, when a legatee under a will has filed a bill in behalf of himself and of such other creditors and legatees as may come in under the decree, to obtain satisfaction of his legacy, and has joined as a defendant an incumbrancer having a charge upon the estate, the receiver will not be discharged upon the consent of plaintiff, without the consent of such incumbrancer.^^ So where a receiver is appointed over a corporation at the in- stance of a creditor, such appointment is for the benefit of all creditors and the plaintiff procuring the appointment can not have him discharged against the protest of any unsatisfied cred- itor who might be damaged by such discharge.^9 And in any event, a plaintiff who has procured the appointment of a re- ceiver can not dismiss his bill and have the receiver discharged, without the receiver being first required to pass his accounts.^^ most extraordinary if, because a Largan v. Bowen, 1 Sch. & Lef., receiver has been appointed on be- 296; Lenoir v. Linville I. Co., 117 half of the plaintiff, any defendant N. C, 471, 23 S. E., 442. is entitled to have a receiver ap- 58 Largan v. Bowen, 1 Sch. & pointed on his behalf. My decided Lef., 296. opinion is that the order for the re- 59 Lenoir v. Linville L Co., 117 ceiver must be discharged, and that N. C, 471, 23 S. E., 442. all falls together." 60 White v. Lord Westmeath, 2 5T Fay v. Erie & Kalamazoo Rail- Hog., 33 ; Hoffman v. Bank, 4 N. road Bank, Harring. (Mich.), 194; Dak., 473, 61 N. W., 1031. Bainbrigge v. Blair, 3 Beav., 421; 990 RECEIVERS. [chap. XX. § 838. Receiver not entitled to discharge as of course on his own application; must show cause; not discharged on giving bond. A receiver, being appointed for the inter- est of the parties to the action rather than his own, is not en- titled to his discharge as of course upon his own apphcation, since the court will not permit the parties to be put to the ex- pense and inconvenience of a change simply because the re- ceiver desires to be relieved from the trust. When, therefore, a receiver seeks to be relieved from his duties and to have another appointed in his place, he will be required to show some reason- able cause for the application, especially when his discharge and the substitution of another person might result in inconvenience to the parties in interest and to third parties.^^ And it will not suffice to sustain such an application, that the receiver alleges his inability, because of other engagements, to properly close up the business of his receivership, since such reasons, while sufficient to excuse him from accepting the trust in the first in- stance, are not sufficient ground for discharging him from his obligation after it has once been accepted. ^^ And where a claim has been allowed against the fund in the hands of a receiver from which an appeal is pending and undetermined, the re- ceiver is not entitled to his discharge against the objection of the claimant ; and in such case, the giving by the receiver of a bond, with sureties, running to the clerk of the court for the use of the claimant and all other persons whose claims may be ad- judged valid will not justify his discharge and the releasing of the fund.63 § 839. Mortgagee may apply for discharge of receiver appointed to enforce trusts of mortgagor's will. When a receiver has been appointed over mortgaged premises in an ac- tion to enforce and carry into execution the trusts of the mort- 61 Beers v. The Chelsea Bank, 4 62 Beers v. The Chelsea Bank, 4 Edw. Ch., 277; Smith v. Vaughan, Edw. Ch., 277. Ca. temp. H., 251. 63 Johnson v. Central Trust Co., 159 Ind., 605, 65 N. E., 1028. CHAP. XX.] liEMOVAL AND DISCHARGE. 991 gagor's will, it would seem that a mortgagee, who was not a party to the suit, is entitled to apply for the receiver's dis- charge. And this is regarded as the proper course for him to pursue, since he has no power to divest the receiver's possession merely by notice to the tenants of the mortgaged premises to pay their rents to him.^'* § 840. Owner of mortgaged premises has absolute right to discharge of receiver on paying amount due. While the propriety of discharging a receiver, like that of appointing him, is to some extent a matter of judicial discretion, yet in some cases the right to a discharge becomes an absolute right, which the court has no discretion to refuse. Thus, when a receiver of mortgaged premises is appointed and takes possession, in an action for the foreclosure of the mortgage, upon the owner of the equity of redemption offering to pay the mortgage indebt- edness, or so much thereof as is due, his right to have the re- ceiver discharged is an absolute right, the denial of which is judicial error.^^ § 841. Interests of all parties kept in view; receiver of corporation discharged when corporation shown to be solvent. In passing upon an application for a receiver's discharge, the court should have in view the interests of all parties, and if satisfied that the rights of all parties in interest will be best promoted by granting the discharge, it should be allowed. Thus, when a receiver is appointed over a corpora- tion, under a law of the state authorizing receivers of insolvent corporations, it is proper for the court to discharge him upon motion of the defendant corporation, upon being satisfied that it is in solvent circumstances and able to resume business, and that the interests of the creditors will be best secured by this course. 66 64 Thomas v. Brigstocke, 4 Russ., 66 Ferry v. Bank of Central New 64. York, 15 How. Pr., 445. 65 Milwaukee & INIinnesota R. Co. V. Soutter, 2 Wal., 510; S. C, Woolworth's C. C, 49. 992 RECEIVERS. [chap. XX. § 842. Receiver on creditors' bill discharged when bill denied by answer. When, upon a creditor's bill filed against a judgment debtor and a mortgagee to whom he has mortgaged his personal property, in trust for the payment of various debts, an injunction is granted and a receiver is ap- pointed, upon allegations in the bill that the debtor is in pos- session of the property and converting the proceeds of sales to his own use, the bill also alleging the debtor's insolvency and consequent danger of plaintiff losing his debt, if these charges are expressly and fully denied by the answer, the court should dissolve the injunction and discharge the receiver.^^ § 843. Plaintiff's delay in prosecuting his suit ground for discharging receiver. The negligence and delay of a plaintiff, at whose instance a receiver has been appointed, may be sufficient ground for discharging the receiver.68 Thus, when the plaintiff, after moving for the appointment of a re- ceiver of his debtor's property, consents that the proceedings may lie dormant, and takes no further steps therein for a period of over a year, and until another creditor has procured the ap- pointment of a receiver, the court will not allow the one thus appointed upon the subsequent application to be displaced, but will discharge the other. ^^ § 844. Placing purchaser in possession of lands held by receiver equivalent to discharge. The putting a purchaser into possession of lands held by the receiver in a cause, and sold under the final decree, is equivalent ipso facto to a discharge of the receiver, and is sufficient ground for vacating his recog- nizance.'^^ § 845. Bankruptcy of receiver as ground for discharge. A receiver appointed in a cause, having filed his petition in bankruptcy and compromised with his creditors, which corn- er Furlong v. Edwards, 3 Md., 99. 69 National Mechanics Banking 68 National Mechanics Banking Association v. Mariposa Co., 60 Association v. Mariposa Co., 60 Barb., 423. Barb., 423 ; Cohen t/. Gold Creek M. 70 Anonymous, 2 Ir. Eq., 416; Co., 95 Fed., 580. Ponsonby v. Ponsonby, 1 Hog., 321. CHAP. XX.] REMOVAL AND DISCHARGE. 993 promise was approved by the court, it was ordered that he be discharged from his receivership and pass his final accounts,'''^ § 846. Defendant may move for; practice on applica- tion; costs; notice. A defendant in the action in which a receiver has been appointed has the undoubted right to move for his discharge pendente lite, and upon such motion the court will not enter upon the question whether the order of appointment was originally opposed by the defendant at the time it was made.'^2 And when a receiver is appointed upon the application of plaintiff for purposes ancillary to the action, and judgment is afterward rendered for defendant from which plaintiff ap- peals, the court below has jurisdiction, pending the appeal, to entertain a motion by defendant for the discharge of the re- ceiver. A writ of prohibition, will not, therefore, lie to pre- vent the court from entertaining such motion."^^ Under the English practice, the receiver, although served with the petition for his discharge, need not appear upon the hearing of the peti- tion, since he is merely the officer of the court. Nor will he be allowed his costs when he has appeared upon such application.'^^ But while it is regarded as the proper practice to notify all parties in interest of an application for the discharge of a re- ceiver, the fact that he has been discharged without such no- tice to the defendants in the cause may be treated as a mere ir- regularity, which will not justify a reversal of the order upon appeal. "^5 But in Iowa, it is held that the court has no power to make an order of final discharge without notice to the parties in interest, and that such order, when entered, is properly set aside."^^ 71 Ellard v. Cooper, 17 Ir. Ch., N. English practice upon applications S., 151. to discharge receivers and vacate 72 Grenfell v. Dean and Canons their recognizances, Lawson v. Rick- of V^indsor, 2 Beav., 544. etts, 11 Beav., 627. 73 Baughman v. Superior Court, 75 Coburn v. Ames, 57 Cal., 201. 72 Cal., 572, 14 Pac, 207. 76 Williams v. Des Moines L. & 74 Herman v. Dunbar. 23 Beav., T. Co., 126 Iowa, 22, 101 N. W., 312. And see generally as to the 277. Receivers — 63. 994 RECEIVERS. [chap. XX. § 847. Order of discharge not appealable in Michigan. It is held, in Michigan, that an order discharging a receiver and providing for passing his accounts and cancehng his bond, and for paying into court any surplus in his hands, and restor- ing the property of which he had taken possession as receiver, is not such a final order as is appealable under the laws of the state.'^? § 848. Discharge no bar to action against receiver for liabiHty incurred ; notice to general creditors unnecessary. When a receiver has been properly discharged and has sur- rendered all assets pertaining to his receivership, the court will refuse to entertain an application by a creditor for payment out of the fund. In such case, the receiver being functus officio and no longer the representative of the court, and having no funds in his hands, the remedy of such creditor should be sought by an application to vacate the order of discharge."^^ And in such case the receiver may be discharged and the suit dismissed with- out the necessity of giving notice to general creditors.'^^ But when a receiver is discharged pending an appeal from a judg- ment recovered against him, which judgment is affirmed upon the appeal, his discharge is no bar to the final entry of the judg- ment against him as affirmed.^^ 77 Colgate V. Michigan Lake gun against co-receivers to recover Shore R. Co., 28 Mich., 288. damages for personal injuries sus- 78 New York & W. U. T. Co. v. tained by one of their employees, Jewett, 115 N. Y., 166, 21 N. E., and afterward the co-receivers were 1036. But see, contra, Miller v. discharged and the corporation over Loeb, 64 Barb., 454. which they were appointed was sub- 79 Rockwell v. Portland Savings stituted as defendant, and afterward Bank, 31 Ore., 431, 50 Pac, 566. the court again took possession of 80 Woodruff V. Jewett, 115 N. Y., the property and appointed one of 267, 22 N. E., 156. But the court the co-receivers receiver and he was decline to pass upon the question thereupon made a defendant in his of the efifect of such discharge new capacity, no judgment could when the receiver is finally called be rendered against him upon the upon to pay the judgment. In Lee theory that his discharge was con- V. Powell Bros. & Sanders Co., 122 ditional upon the payment of the La., 639, 48 So., 134, it was held debts of the receivership by the that where an action had been be- corporation. CHAP. XX.] REMOVAL AND DISCHARGE. 995 § 848a. Effect of discharge on appeal from order of ap- pointment. When an appeal has been taken or writ of error or other process sued out to review an order appointing a receiver, and, pending the hearing of the appeal, it is brought to the attention of the reviewing court that the receiver has been finally discharged by the court of his appointment, the correctness of the order of appointment thereby becomes merely a moot question and the appeal should be dismissed.^^ 81 Visalia City Water Co. v. Superior Court, 120 Cal., 219, 52 Pac, 485. INDEX A. ACCOUNTABILITY, Section of receiver, strictness exacted 38 ACCOUNTS, failure of receiver to render, fixes liability on bond 129 of receiver of railway, what expenditures allowed 392 of executor, not examined on application for receiver against ... 720 receiver's accounts 797-8l9c duty of receiver to file 797 held to great strictness 797 when delay not justifiable 797 receiver not entitled to jury to pass on 797 bill should not be dismissed without settling 797 degree of diligence required 797 expenditures must be authorized by court 798 receiver must produce vouchers 798 reward paid for lost books allowed 798 payment for necessary taxes allowed 798 procuring surety on official bond 798 when payments allowed, though unauthorized 798 entitled to charge for watching property 798 reference to master as to whether expenditure beneficial 798 not allowed expenses for services which he might have per- formed himself 799 unnecessary expenses not ratified 799 refused compensation paid deputy 799 when facts of employment should be reported to court 799 master's report on 800 801 review of gQQ courts investigate principles of, but not items 800, 801 distinction as to 801 exceptions to 801 application from stranger to pass not entertained 802 receiver not compelled to account to party 802 party may move for account 802 duty to account once a year 802 allowance is to receiver and not to person entitled thereto. .. 802 otherwise after discharge of receiver 802 997 998 INDEX. ACCOVNTS— Continued. Section receiver's accounts ; should keep funds separate 803 liability for interest 803, 804 on mixing funds 803 on claim of creditor 803 on balances 804 on funds derived from sale 804 on failure to invest funds as ordered by court 804 from what time required to pay 804 on illegal appropriation 804 counsel fees 805-808 receivers entitled to payments for 805 preference for, allowed 805 employment of counsel should be authorized 805 not allowed for unsuccessful defense 805 for defending fraudulent appointment 805 for work requiring no legal skill 805 test as to allowance 805 allowance is to receiver and not to counsel 805 not allowed for services which could have been per- formed by receiver 805 where receiver has grossly mismanaged the estate . 805 when allowed for defending motion for removal 805 allowed for defending item for fees in account 805 when allowance of, not disturbed on appeal 805 when extra compensation allowed 805 should be allowed only on notice 805 allowed receiver of lunatic's estate 805 fees to counsel for parties, when disallowed 806 when allowed 806 services by receiver as solicitor for administrator 807 not allowed counsel fees paid to himself 808 receiver, an attorney not bound to render legal services. . 808 costs ' 809-812 of appointment, entitled to priority 809 when receiver required to pay 809 when not charged with, of new appointment 809 allowance of, discretionary 809 expenses of receivership entitled to priority 809 when, and expenses charged against plaintiff 809a when defendant in suit by receiver entitled to 810 when dependent on receiver's success 811 of unauthorized litigation, receiver not allowed 811 of improvident litigation, not allowed 811 when tax on personalty allowed as 811a for appearing on motion to discharge, not allowed 812 when receiver may move for allowance of 812 INDEX. 999 ACCOUNTS — Continued. Section when receiver charged with hire of property 813 when not allowed payments made for predecessor 813 receiver may render, pending interpleader 814 plaintiff can not have receiver discharged without passing . . 814 court should not render final judgment without passing 814 plaintiff should not be delayed pending litigation concern- ing 815 when ordered to bring in yearly and verify by affidavit 816 executors of receiver, not ordered to bring in 817 not entitled to petition for account of payments 817 entitled to notice of passing of accounts 817 when receiver deprived of salary for default in 818 when allowed commission after delay 818 receiver over minor attaining majority must account from first 819 how receiver's accounts questioned 819a appeal from settlement of accounts 819& appeal by one creditor resulting in benefit to all 819c expenses of, and counsel fees allowed in receiver's ac- counts 819c ACCOUNT BOOKS, receiver required to produce before master 544 ACQUIESCENCE, bars right to receiver 14 in appointment, effect of 37 bar to receiver over corporation on behalf of shareholder 295 in debtor's possession of property, when bars receiver in aid of j udgment creditor 402 in defendant's possession of real property, bars receiver 560 iCTIONS. (See Right of Action, Suits.) ADMINISTRATION, (See Administrator.) receiver not granted to interfere with 427 ADMINISTRATIVE ORDERS, court may make, to preserve property, notwithstanding appeal and supersedeas 190a appeal from, by receiver will not lie 264& ADMINISTRATORS, (See Executors.) receiver against, when order appealable 27 of receiver, when ordered to pay over 285 of deceased partner, eligible as receiver 78 when entitled to receiver as against surviving partner 532, 533 receivers over 706-724 not allowed when it would interfere with due course of ad- ministration 716 1000 INDEX. ADMINISTRATORS— Con/JHMfd. Section receiver of, in personal capacity, not entitled to rents in admin- istrative capacity 717 receiver refused on bill by surety on bond of 721 granted in favor of ward 722 ADMINISTRATRIX. (See Administrators, Executors.) ADMISSIONS, receiver may make 175 ADVERSE PARTY, receiver not an 175 AFFIDAVITS, copies of, should be served 84 admissible for plaintifif after answer 85 for defendant before answer 85 admissible to explain doubtful passage in answer 85 must be entitled in cause 85 may be presented on hearing of motion 88 when copies of should go to appellate court 88 should be distinct and precise 89 as to insolvency of bank, need not be positive 89 of defendant, when regarded as an appearance 103 as to insolvency, receiver refused when insufficient 106 interlocutory application before answer, heard on 107 facts may be verified by affidavit of plaintifif alone 107 admissible for defendant in opposition to motion 107 of receiver, on information and belief, sufficient for attachment for interference with rents 167 general allegations of fraud in, not sufficient to warrant receiver over corporation 292 as to insolvency of bank on information and belief, when insuffi- cient 346 when sufficient 353 when receiver required to verify account by 816 AGENT, receiver not an 1 when agent of plaintiff 2 of receiver may conduct sale 191 AGREEMENT, by receiver, power of court to vacate or modify 186 ALIMONY. (See Divorce.) ANCILLARY RECEIVERSHIPS, when not granted at instance of foreign receiver 47 when ancillary receiver not liable for tort of domiciliary receiver 47a over private corporations 306& over railways 375o INDEX. 1001 ANNUITANT, Section not allowed receiver over a pension 31 may have receiver when annuity in arrears 410, 574 not allowed receiver when he may distrain 574 may have receiver as against prior mortgagee not in possession. . 683 ANNUITY, (See Annuitant.) purchase of by receiver, when set aside 194 ANSWER, denial in, bar to a receiver 24 ground for removal • °26 for discharge ^2 receiver formerly granted after 103 granted before, under modern practice 103 grounds of interference before 104, 105 strong grounds required for receiver before 106 of corporation under seal, when not decisive 355 waiver of, under oath, no bar to receiver on creditor's bill 434 denial in, in partnership cases, bar to receiver 491, 515 ground for dissolving inj unction 491 when receiver appointed over real property before coming in of. . 598 receiver in foreclosure of leasehold mortgage allowed before 665 APPEAL, discretion of court below not controlled on 7, 25 not granted from interlocutory order appointing receiver 26 not allowed from appointment by consent 26 from temporary receivership, when properly dismissed 26 when granted in Michigan 27 from appointment of receiver against administrator 27 against surviving partner 27 as affected by legislation in various states 27 allowed if right finally determined 27a under Court of Appeals Act 27& effect of, on receiver's functions 29 pending, receiver may be appointed in another suit 30 want of notice as ground of 112 pending, when receiver appointed HO effect of supersedeas pending 190 should restore property to defendant 190 court may make administrative orders pending 190a will lie from order of sale 198 from order confirming sale 198 effect of, on receiver's possession 136, 161 by receiver, from adverse decision, not evidence of misman- 9C\7 agement "' want of leave to sue receiver, availability on 254a will not lie from order granting leave to sue receiver 254& 1002 INDEX. APPEAL — Continued. Section receiver as party to 258 when receiver entitled to, from orders in receivership cause 246a not entitled to, from administrative orders 264& nor from order of distribution 264& receiver personally liable for costs on unauthorized 264& by receiver of railway from order directing restoration of former wage scale 3936 on question of jurisdiction, receiver not ordered to sell pending. . 543 pending from judgment in ejectment, when receiver denied 557 will not lie from order permitting receiver to collect rents through defendant 628 receiver of rents pending, from foreclosure decree 665a action of lower court in fixing compensation ordinarily not dis- turbed on 781, 783 compensation of receiver pending, not allowed by appellate court 796 from allowance or refusal of receiver's compensation 796a allowance of counsel fees, when not disturbed on 805 from order settling receiver's accounts 819& by one creditor resulting in benefit to all 819c expenses of, allowed in receiver's accounts 819c receiver can not maintain, from order of removal 824 nor from order of discharge 836 from appointment, effect of discharge on 848a APPEAL BOND, when receiver's duty to sue on, without leave 208 APPEARANCE, receiver formerly granted only after 103 affidavit of defendant considered as 103 of counsel in suit against receiver, waiver of want of leave to bring suit 261 ARREST, when receiver exempt from 183 ASSESSMENTS, on premium notes to insurance company, receiver's right of action for 326 what receiver must allege and prove 327 receiver must make assessment and apportionment 328 receiver takes place of directors 329 functions of court in making 329 receiver may make new 330 approval of, by court, not a judicial act 330 form of, and proofs required 331 receiver may sue on, to pay equitable claims for losses 332 what defense denied maker 332 INDEX. 1003 ASSIGNEE, (See Quasi-Assignee.) Section of contract with receiver ^°° of debtor, rights not determined by receivership 411 refusal to act, ground for receiver 412 mismanagement of, ground for relief 412 of partner, when entitled to receiver 507 of lease, denied receiver 5/9 of insolvent debtor, when allowed receiver of rents 587 receiver not, of term of lease 273,. 394in ASSIGNEE IN BANKRUPTCY, when subordinate to receiver in state court 51, 52 can not dispossess receiver over mortgaged premises appointed by state court 52 can not have receiver over bankrupt's property held by receiver of state court 52 actions by, to recover property held by receiver 52 of partnership, when allowed receiver against assignment for creditors -" receiver of debtor incompatible with T^ when required to surrender possession to receiver 153 of one partner, exclusion from firm 527 ASSIGNMENT, by defendant to receiver, right of action under 244 designation of plaintiff as receiver, when descriptio persona 244 by insurance company, ground for receiver 304 of chose in action of corporation by receiver 338 fraudulent, by judgment debtor, ground for receiver 411 rights under, not determined by receivership 41 1 receiver allowed, on refusal of assignee to act 412 on mismanagement by 412 after receivership does not defeat right to receiver 412 before receivership 412, note not appointed to set aside, when it may be done by judgment creditor 414 when title vests in receiver on setting aside 423 to receiver, effect of as to passing title 443 what passes to receiver under 444 should except exempted property 444 irregularities in appointment no justification for refusal to assign 445 debtors compelled to make, although swearing to no property 446 partakes of nature of mortgage 446 no re-assignment necessary 446 not necessary under New York code 447 fraudulent, by debtor, receiver may sue to set aside 454 should j oin all fraudulent grantees 454 limit to receiver's right of action 455 1004 INDEX. ASSIGNMENT— CoH//«M^i Section fraudulent by debtor, can not sue when creditors estopped 456 receiver can not take forcible possession of property assigned 457 debtor proper defendant 459 for benefit of creditors 458-460 action by receiver to set aside, when assignees may retain possession 458 when receiver denied injunction and receiver 458 what receiver must allege 459 by insolvent partners after dissolution, ground for receiver 517 by continuing partner for benefit of all creditors, not ground for 518 by one partner to exclude copartner, ground for 523 assignee can not defeat application for receiver 523 ASSISTANCE. (See Writ of Assistance.) ATTACHMENT, receivership compared with 5, 6 lien of, protected against foreign receiver 47 for not accounting, surety of receiver liable for costs of 131 lien of, obtained pending application for receiver not invali- dated by subsequent appointment 136 possession of receiver can not be interfered with by 141 for failure to surrender property to receiver 144 receiver not subject to garnishment as to assets in possession.... 151 may be garnished when not yet in possession 151 not allowed as to property taken by receiver into foreign state or country 162a punishment by, for contempt of court in interfering with re- ceiver's possession 163 for interference with collection of rents by receiver 167 against defendant for refusing to surrender property 168 for contempt in refusing to surrender to receiver, court the only competent j udge 169 for interference with receiver's possession, actual disturbance necessary 171 levy and sale by sheriff considered 171 courts averse to punishment as between different receivers.. 173 against receiver for refusing to surrender possession 174 of corporate assets, not dissolved by receivership 348 not allowed after receivership 348 against partners to deliver assets to receiver 541 funds held by receiver of firm not subj ect to 552 against tenants for refusing to pay rent to receiver 625, 626 rights of third persons not determined on 627 sale of chattels under, invalid as against prior mortgagee 647 ATTORNEY, lien of, on fund for fees, paramount to receiver's title 138 INDEX. 1005 ATTORNEY — Continued. Section when required to deliver trust property to receiver 144 fraud of, when receiver not liable for 275 of railway company, when salary allowed preference 394d ATTORNEY-GENERAL, proceedings by, against insolvent corporation 53 when affidavit on information sufficient 353 AUCTIONEER, receiver of, when entitled to funds as against customer 155 AUXILIARY REMEDY, receivership considered as 6, 49 B. BANK, (See Corporations, National Banks.) creditor not entitled to receiver where remedy at law 10 insolvent, governor authorized to appoint receiver 39 officer of, eligibility as receiver 72 insolvency of, positive affidavit not required 89 oath to receivers of, omission does not vitiate proceedings 99 receiver of, right to sue in his own name 210 need not be made party to suit by receiver for foreclosure of mortgage 210 trover by receiver of, for conversion of bonds 212 suit begun by, continued by receiver 213 need not be party to foreclosure suit by receivers 215 defense to suit by receiver of, against depositor 245 set-off in suit by receiver of, on notes 247, 248 suit to recover notes illegally transferred to a director, counter- claim for amount paid not allowed 251 failure of, when receiver liable for loss of funds 274 receiver of, when Ifable to pay in full 274a to pay draft or check 274a not necessary party to subsequent proceedings for another receiver 291 illegal issue of notes, receiver to take charge of securities 293 rights of action of receiver of 317 to recover against stockholders 317a in courts of foreign state 3\7b receiver as quasi-assignee 317c against president of bank 320 for unauthorized transfer to director 320 note transferred by receivers of, assignee may recover on 323 contract of, after insolvency, receiver may decline to ratify 334 insolvency of, when insufficient, on information and belief, to warrant receiver 346 1006 INDEX. BANK— Continued. Section assets of, not subject to attachment after receivership 348 suit against, when not allowed after receivership 350 BANKRUPTCY, proceedings in, in United States court, when subordinate to re- ceivership in state court 51, 52 against insolvent corporation, asserted exclusively 53 appointment of receiver over partnership, when an act of 56 assignee of partnership in, when allowed receiver 57 proof of debt in, made by receiver of corporation in another state 242 of railway in United States court, will not interfere with prior receiver in state court 370 discharge in, when no bar to receiver on creditor's bill 425 receiver in aid of proceedings in 426 receiver to collect rents in aid of 587 of executors, ground for receiver 711 of receiver, ground for discharge 845 BARRISTER, eligible as receiver 70 as member of parliament 70 BENEFICE, of clergyman, receiver over rents of 432 BIDS, discretion of receiver as to accepting 176 BILL, necessary to granting receiver 83 need not contain specific prayer 83 multifariousness of, no objection to receiver 86 may be dismissed by plaintiff, although receiver appointed 101 omission of prayer for receiver, not fatal 109, 110 dismissal of, does not release receiver from liability 286 not demurrable because of prayer for receiver 291 when receiver continued after dismissal of 437 BILL OF EXCEPTIONS, when, must contain affidavits upon which application for receiver is based 88 BOND, (See Appeal Bond.) in lieu of receiver 9, 308,478, 761 approval by clerk when invalid 43 of non-resident receiver 69 usually required of receiver before entering upon duties 118 two sureties required under English practice 118 effect of consent to dispense with 118 recognizance of receiver alone, when sufficient 119 INDEX. 1007 BOND — Continued. Section dispensed with, when unnecessary „ . 120 when same receiver extended to different actions 120 title not acquired until receiver executes 121 failure to execute, a ground of nonsuit in action by receiver 121 when may be filed nunc pro tunc 121 informality in, effect of, in suit by receiver 121 filing of, receiver's title relates back to date of appointment 121a failure to require, as part of final decree, no ground for reversal 122 by defendant to account as receiver, held good 124 requiring new, upon making temporary receiver permanent 126^? liability of sureties on 127-133c sureties strictly held to 127 bond may be vacated as to one surety 127 practice on so vacating 127 when liability becomes absolute 129 when action will lie on 129 independent action on, against surety 129a suit on, after death of receiver 130 liable for interest 131 liable for costs of attachment for not accounting 131 not liable for violation of duties beyond scope of appointment 133& when liable although bill is afterward dismissed 133c when receiver seeking injunction must give 140, note failure to execute, effect on suit by receiver 227 informality in, effect on suit by receiver 227 by defendant in lieu of receiver 9 by corporation m lieu of receiver 308 by partner in lieu of receiver 478, 761 BONDHOLDERS, (See Mortgages, Railways.) of railway, granted receiver in United States court, notwith- standing subsequent proceedings in state court 54 receivers in aid of 376-389 grounds for 376 over tolls of railway 381 to prevent land grant from lapsing 386 on application for, court will not pass on validity of bonds 387 discharge of receiver 389 of municipal corporation, secured by rates and assessments, de- nied receiver 658 of canal company, allowed receiver in case of insolvency 678 BOOK-KEEPER, of corporation, when eligible as receiver 72 BREWING, receiver in business of, his functions and duties 549 1008 INDEX. BRIDGE COMPANY, Section receiver over tolls and franchise of ^ . . . . 300 BUILDING ASSOCIATION, receiver over 304 BUSINESS, management of, by receiver 36 discretionary with court 36 preferring debts incurred in 36 may employ help in management of 175 when receiver personally liable on note given in carrying on.... 272 management of, by receiver of partnership 480, 481 of colliery, should not be carried on by receiver 615 c CANAL COMpJJnY, bondholders of, allowed receiver on insolvency 678 CAPITAL STOCK. (See Corporations, Subscriptions.) CARRIAGES, when may be let by receiver 481 CAR TRUSTS, priorities of, in railway receiverships 394/ CATTLE, damages for killing, not enforced in state court against receiver of United States court 397 CAVEAT EMPTOR, applies to receiver's sales 199b CERTIFICATES. (See Railways, Receiver's Certificates.) CERTIORARI, appointment of receiver not reversed on 28 CESTUI QUE TRUST. (See Trusts, Trustees.) CHAMBERS, application to supply vacancy, may be made in 96 CHANCELLOR, duty of, in appointing receiver, a delicate one 3 CHATTELS, mortgagee of, receiver as against, on creditor's bill 420 when receiver can sustain no action concerning 467 mortgage of, securing rents, when receiver entitled to 644 when receiver appointed as to 647 when relief allowed 676 INDEX. 1009 CHECK, Section when not entitled to payment in full 274a CHOSE IN ACTION, when sale of, not set aside 198 construction of term as applied to insolvent corporation 212 of corporation, may be assigned by receiver without corporate seal 338 of debtor, assignment to receiver not necessary 443 title to, as between receiver of debtor and purchaser 449 of partnership, receiver entitled to 541 CHURCH, (See Religious Society.) possession of, by receiver, protected by injunction 140 CLAIMS, of creditors not presented by receiver 175, note brother of receiver may become purchaser of, against estate. .175, note CLERGYMAN, receiver to collect rents of benefice of 432 CLERK OF COURT, receiver over fees of 22 approval of bond by, invalid 43 not necessarily a receiver 71 clerk and master ordered to act as receiver 71 liability of sureties of, when clerk appointed receiver 133a CLOUD UPON TITLE, when receiver may remove 454 CODE OF PROCEDURE, of New York, receiver an incident to general jurisdiction 23 receiver in creditor's suit under 401 of North Carolina, has not changed general equity jurisdiction as to receivers 23 COLLATERALS, deposited by corporation, receiver may exercise option 337 COLLATERAL SUIT, receivership can not be questioned in 39a illustrations 39& otherwise if court without jurisdiction 39c, 203 receiver's sale can not be questioned in 196 when want of leave to sue receiver not available in 254a COLLEGE, fellowship in, receiver refused over 311 COLLIERY, receiver as between tenants in common of 606 on bill by purchaser to set aside purchase of 615 receiver should not ordinarily carry on business of 615 Receivers — 64. 1010 INDEX. COMMERCIAL PAPER, Section receiver's possession of, not that of bona fide holder for value 159 surrender of, by receiver to third person 159' refusal to deliver notes to receiver, when not a contempt 168 when receiver can not maintain action on premium note 204 defense to suit by receiver on stock subscription note 205 defense to suit by receiver of bank on note of depositor 245' want of consideration and fraud, when not available in defense of suit on note by receiver .^ 246 set-off in suit by receiver of bank on notes 247 in suit by receiver of payee against maker 249' counter-claim allowed for services rendered receiver 249 when maker can not set off judgment against receiver 252 trover for conversion of note, by receiver of corporation 316> canceled note for insurance, receiver can not sue on 319' note transferred by receiver of bank, assignee may recover on.. 323 COMMON, (See Tenants in Common.) right of, not to be exercised against receiver's possession 154 COMPENSATION OF RECEIVER, power of courts to fix 781 court may act on its own knowledge 781 for carrying on hotel business 781, note English practice, no settled rule 782 reference to master 782 considerations influencing 782 court may summarily end proceedings before master 782 no fixed rule in this country 783 should correspond with capacity and responsibility 783 no compensation after reversal of appointment 783 court may hear evidence 783 final compensation 783 practice as to partial compensation 783 compensation after removal 783 action of court in fixing, not ordinarily disturbed on appeal.. 781, 783 Massachusetts doctrine 784 percentage not allowed 784 when court will refuse to pass on exceptions to master's report 784 in Maryland, same as on trustee's sales 784 in Alabama, same percentage as guardians 785 in New York, same rate as executors 785 but courts not bound by 785r receivers in lieu of executors allowed same compensation 786 receiver of railway allowed more liberal compensation 787 considerations in determining 787 entitled to, although work performed by others 788* INDEX. 1011 COMPENSATION OF RECEIVER— Continued. Section commissions on receipts and disbursements 788 compensation of agent of corporation acting as receiver 788 rests in accounts 789 extra compensation 790 receiver's mismanagement ground for refusal of compensation. . 790 receiver of insurance company allowed commissions on notes surrendered 791 payment into court to avoid 792 extra remuneration for survey of minor's estate not allowed.... 793 receiver entitled to, unless otherwise ordered 794 when appointed by consent 794 plaintiff partner not entitled to, when appointed receiver 795 receiver can not take judgment for, against parties, on motion... 796 practice in fixing 796 may be taxed as costs 796 when part taxed as costs against unsuccessful plaintiff 796 when chargeable on fund 796 should not be allowed without notice 796 when not subject to set-off 796 reviewing court will not make allowance 796 appeals from allowance or refusal of 796a receiver's right to retain, before surrendering fund to trustee in bankruptcy 796& agreement by party to pay, of receiver void as against public policy 796c agreement by receiver to serve without 796c when deprived of, for delay in payment 818 when allowed, although receiver has delayed accounting 818 COMPROMISE, of claims and actions by receiver 177, 336 receiver in possession continued pending 564 COMPTROLLER OF THE CURRENCY. (See National Banks.) CONDEMNATION. (See Eminent Domain.) CONFIRMATION, of receiver's sale, unnecessary 199c when not refused 199c what amounts to 199c, note CONSENT, receiver not appointed by, in improper case 7 appointed by, under Irish practice 94 to appointment waives want of notice 112 CONTEMPT OF COURT, by receiver of United States court interfering with receiver of state court 51 interference with receiver's possession punishable by attachment 163 1012 INDEX. CONTEMPT OF COURT— Continued. Section interference by subsequent receiver punishable as a 164 by garnishing funds due receiver 164 not justifiable because of impropriety of appointment 165 liability for, not dependent on official or formal notice of ap- pointment 166 in interfering with collection of rent by receiver 167 by defendant in refusing to surrender property to receiver 168 refusal to deliver possession to receiver, when not a contempt... 168 court itself only competent judge as to 169 resistance to enforcement of order for receiver in foreign country constitutes a 170 actual disturbance of receiver's possession requisite to 171 levy and sale by sheriflf considered 171 proceedings for, receiver's title not determined in 172 when claimant required to restore property 172 courts averse to punishment for, as between different receivers.. 173 in interfering with receiver's rights under patent 174a form of j udgment in proceedings for 174& receiver's disobedience of writ of supersedeas constitutes a 190 suit against receiver without leave of court, constitutes a 254 refusal of receiver to pay money constitutes a 280 appropriation of money by receiver constitutes a 280 CONTRACT, (See Liabilities, Covenant.) by receiver, court may vacate or modify 186 assignee of, bound by 186 persons making, chargeable with notice 186a of receiver binding on co-receiver 370a of railway not binding on its receiver 393b for rent, stipulated or reasonable rental value 273c receiver can not impair liability of original party on 27id receiver of railway not bound by, of company 393c, 398a CREDITORS, (See Judgment Creditors.) not entitled to receiver of debtor's property before judgment ... 406 of bank, denied receiver when remedy at law 10 when allowed receiver in probate court 42 when jurisdiction first acquired by federal court on creditor's bill 50 when by state court 51 receiver in aid of, prior jurisdiction of state court paramount 51 of insolvent, eligibility of 70, 72 rehearing, when not granted in creditor's suit 92 1022 INDEX. CREDITORS— CoH/;nMt'(f. Section receiver in behalf of, may be extended to other creditors 93 receivers usually granted before answer on creditors' bills 105 receiver extended to actions by different creditors, need not give new security 120 priority between receiver and judgment creditor levying after ap- pointment of receiver 136 claims of, not presented by receiver 175, note equities of, should be stated by receiver suing for 234 suit by receiver for, when set-off not allowed 250 on notes due debtor, set-off refused 252 right of, to receiver over corporation, statute strictly construed.. 289 of corporations, right to receiver given by statute 298 may file bill for receiver after execution unsatisfied 299 may have receiver over tolls and franchises of bridge company 300 can not have receiver without j udgment 301 when remedy at law 301 lien of, not divested by receiver in limine 302, 348 foreign corporation may have receiver in New York 305 bond allowed in lieu of receiver 308 receiver represents both creditors and shareholders 314 not prevented from suing by receivership 349 may come in under decree 350 of national bank, may have receiver 362 of railway, not entitled to receiver when judgment may be en- forced by ordinary means 365 not entitled to priority over previous mortgages 382 before j udgment, not usually allowed receiver 406 exception in partnership cases 407 in case of lien on vessel 408 in action to charge property of married woman with her debts 409 annuitant allowed receiver when annuity in arrears 410 receiver over real estate in aid of 418 receiver in aid of, under English bankrupt law 426 of partnership, allowed to proceed at law notwithstanding re- ceivership 505 when entitled to receiver against surviving partner 537 when granted receiver on bill to charge debtor's realty 567 when claims of, not entitled to draw interest 803 CREDITORS' BILLS. (See Judgment Creditors.) CRIMINAL LIABILITY. (See Indictment.) CROPS, ungathered, when receiver refused 590 when allowed 590 receiver of, when mortgagee entitled to 646, 670 not entitled to severed crops 646 INDEX. 1023 CURTESY, ESTATE BY, Section receiver of, debtor takes title to 451 CUSTODIANS, of funds in litigation, when similar to receivers 182 D. DAMAGES, (See Bond, Liabilities.) for wrongful appointment of receiver 39^ for tort of receiver's agent, when a charge on fund 286a DANGER, of loss, as ground for receiver H to fund in litigation, as ground for relief 34 ground for receiver before answer 105 to rents and profits, as ground for receiver over realty 559 DEATH, of receiver, when successor not appointed at instance of defendant 39^ suit continued by successor 213 of one of three directors as ground for receiver over corporation 293 effect of, of debtor before appointment actually made 452 of parties or of receiver 471a practice in such case 471a effect of 471o of partner, as ground for receiver 530-537 receiver on death of both partners 530 not granted against survivor except for misconduct 531 mismanagement by survivor, ground for 532 refusal by survivor to close up business, ground for 532 when administrator of deceased may have 533 rights and functions of receiver 534 when legatee continuing business entitled to 535 appointed notwithstanding death of partner 536 receiver may sue for money due firm 536 when appointed on bill by creditors against survivor 537 of trustee, as ground for receiver 694 of executor, as ground for receiver 718 of receiver, effect of, on settlement of accounts 817 DEBENTURE-HOLDERS, right of, to receiver 652a DECREE, not prejudiced by decision on application for receiver 6 no receiver on final 6 probability as to, considered on application for receiver 8 interlocutory, no appeal from 26 rule in Michigan 27 1024 INDEX. DECREE— Continued. Section final, receiver may be appointed as part of 109 receiver may be appointed after 110 failure to require bond, no ground of reversal 122 court should not render, without passing receiver's accounts 814 when does not operate as discharge 834 of foreclosure, receiver appointed after, in case of emergency 655 DEED, by receiver, power to make implied from power to sell 190 confirmation of, by court 199 delivery of corporate, after appointment of receiver over corpora- tion 290 deposit of, as security, when receiver allowed 658 DEED OF TRUST. (See Trust Deed.) DEFENSE, (See Suit.) receiver not allowed to waive 264 when not required to make particular 264 DEFINITION, of receiver 1 of discretion ' of remedy at law lO DEMURRER, to bill, no objection to appointment when defendant does not appear 95 on overruling of, defendant should be allowed to plead or answer 95 when sustained for want of proper parties 616 DEPOSITARY, bank not ineligible as, because a creditor 274 DESCRIPTIO PERSONS, when designation of plaintiff as receiver amounts to 244, 254&, note DETINUE, action of, may be maintained by receiver 218 DEVISEE, not entitled to receiver over realty when remedy at law 555 bill by, to determine widow's dower, receiver refused 568 contest with heir, when receiver refused 570 when granted 5/0 DILIGENCE, required of plaintifY 14 degree of, required of receiver 797 DIRECTORS. (See Corporations.) INDEX. 1025 DISCHARGE, (See Removal.) Section of receiver, on answer denying equities of bill 24 no bar to suit against him by claimant of property 268 of corporation, when 357 of railway, on payment of mortgage 389 not liable after 398/^ distinction between, and "vacation of appointment" and "re- moval" 820, note in bankruptcy, when no bar to receiver on creditor's bill 425 of receiver 832-848a power of court 820 receiver discharged when necessity terminates 832 in case of lunatic's estate 832 effect of termination of suit 833 does not necessarily follow termination of suit 833 nor on reversal of appointment 833 when jurisdiction retained notwithstanding dismissal of bill. . 833 when final decree does not operate as 834 receiver over infants not discharged on one coming of age.. 835 receiver can not appeal from 836 party can not appeal from 836 punished for contempt in failing to comply with 836 defendant's right to, on satisfying plaintiff's demand 837 plaintiff not entitled to, before accounting 837 receiver not entitled to, as of course, on his own application 838 giving bond not ground for discharge 838 when mortgagee may apply for 839 absolute right to, on payment of mortgage debt 840 granted when corporation able to resume business 841 granted on denial by answer of allegations of creditor's bill 842 granted on plaintiff's delay 843 putting purchaser of lands in possession equivalent to 844 granted on bankruptcy of receiver 845 payment by defendant 846 right of defendant to move for 846 receiver need not appear on hearing 846 not entitled to costs of appearing 846 notice of 846 order for, not appealable in Michigan 847 no bar to action against receiver for liabilities incurred 848 notice of, to all creditors unnecessary 848 effect of, on appeal from order of appointment 848a DISCRETION, appointment of receiver rests in 7 not disturbed on appeal 7, 25 definition of 7 Receivers — 65. 1026 INDEX. DISCRETION— Confrnwrrf. Section when there is doubt as to plaintiff's recovery 8 when defendant is in possession 19 when not interfered with on appeal 25 of court in authorizing management of business 36 of master in chancery in selecting receiver, courts averse to in- terference with 64 of inferior court in selecting receiver, rarely interfered with by appellate court 65 grounds of interference with 65 of receivers in managing properly 176 in accepting or rejecting bids 176 degree of, required 176 none in application of funds 178 as to sale by bulk or in parcels 198 in settling and compromising claims 334, 336 of court in authorizing compromise of action 177 in instructing receiver 188 leave to sue receiver rests in 254b in continuing receiver over corporation 344 in continuing corporate business 346o of receiver of railway, as to expenditures 392 of court, in staying sale by receiver 429 in limiting quantity of debtor's estate over which to appoint receiver 429 allowance of costs rests in 809 DISSOLUTION, of corporation by state court, when prior jurisdiction of federal court not divested by ^^ when receiver may maintain action in foreign court on 241 by expiration of charter, no receiver appointed on 307 of corporation does not result from appointment of receiver 344& same as to national bank 358 same as to railway company 370& of partnership, as ground for receiver 509-521 DISTINCTION, between receiver and trustee 1 receiver and trustee in bankruptcy 1, note active and passive receiver 1. note receiver and public officer 2 actions concerning real property 221 master's and receiver's report on account 801 "vacation of appointment," "removal" and "discharge".. 820, note DISTRAINT. (See Rent.) DISTRIBUTION, receiver can not appeal from order of 264& INDEX. 1027 DIVERSION, Section of income of railway, ground for preferring current debts 394c DIVIDEND, receiver can not make, without order of court 175 by insolvent insurance company, receiver may recover back 321 creditors enjoined from suing for 321 set-offs not allowed 333 DIVORCE, receiver of rents pending action for 146 suit by receiver to set aside fraudulent conveyance made to de- feat decree for alimony 221 receiver in proceedings to enforce alimony 438 receiver over husband pending, does not divest partnership prop- erty 548 DOWER, receiver's sale subject to 199a when receiver granted concerning 568 when receiver may compel assignment of 568 DRAFT, when not entitled to payment in full 274a DUTY, (See Functions.) of chancellor in appointing receiver, delicate nature of 3 of receiver, over railway 390 in partnership cases 538-552 E. EASEMENT, of railways in tunnel, receiver for management of 368 ECCLESIASTICAL COURTS, receiver pending contest in 46 EJECTMENT, can not be brought against receiver without leave 139 permission to bring, receiver not allowed to apply for 181 leave of court necessary before receiver can bring 208 against receiver, leave to defend 266 when receiver refused pending appeal from judgment in 557 receivers in aid of 575-577 not usually granted 575 granted to preserve rents and profits 576^" stronger ground after verdict in 577 granted pending certiorari from state to federal court 577 ELIGIBILITY, to office of receiver 63-81a 1028 INDEX. ELIGIBILITY— Continued. Section as affected by relationship 67 by interest with defendant 68 of solicitor 68 of one of plaintiffs 68 person unfamiliar with property not eligible 68 distant residence as affecting 69 solicitor, under commission of lunacy, ineligible 70 in the cause, ineligible 70 master in chancery ineligible 70 barrister eligible 70 as affected by being member of parliament 70 peer of the realm ineligible 70 member of reorganization committee 70 creditor of insolvent 70, 72 of receiver of corporation, officer ineligible 72, 354 relaxation of rule 72 stockholder 72 officer eligible by statute 72 another corporation eligible 73 of trustees as receivers, generally ineligible 74 when trustee and executor eligible 74 next friend of infant ineligible 75 mortgagee and trustee eligible 76 administrator of deceased partner eligible 78 nomination in the bill 79 nomination by consent of parties 79 stockholder and director of plaintiff corporation as receiver 80 mortgagee of West India estates eligible 81 want of, how waived 81a EMBEZZLEMENT, when loss by, of receiver borne by plaintiff 645 EMINENT DOMAIN, action under right of, by receiver can not be begun without leave of court 208 in what name instituted 209 right of, not taken away by appointment of receiver 370b EMPLOYEES, of receiver, interference with, when enjoined 163 receiver may hire, in management of business 175 wages of, liability of plaintiff for 389a when preferred 394d unwarranted discharge of, by receiver of railway prevented by court 390, note ENGLISH CHANCERY, receivers originated in 40 INDEX. 1029 EQUITABLE INTEREST, ^^2)^ of debtor as ground for receiver ^ ESCHEAT, ^ . when state may have receiver on, of real property ^y* ESTOPPEL of defendant, from denying receiver's right to sue in that capacity 235 of judgment creditor estops receiver EVIDENCE. (See Proof.) EXAMINATION, of judgment debtor before master EXCEPTIONS, . to master's selection of receiver, rarely entertained o4 grounds of entertaining ^ English practice on ^ EXCLUSION, . from partnership, as ground for receiver ^^^ ^^^ EXECUTION, appointment of receiver an equitable -'' ^ receiver's possession can not be interfered with by 141 unauthorized levy of, on property held by receiver, a contempt , . 163 of court not justifiable on ground of illegal or unauthorized appointment Ibi) return of nulla bona before return day, no ground for receiver on creditor's bill •. levy of, on partnership property, how affected by receivership. .. . 495 realty subject to lien of, on termination of receivership 602 EXECUTORS, receiver pending contest between ^ when eligible as receivers • receiver granted against, before answer, in case of abuse of trust 1U4 receiver granted against, after decree 110 assignment of mortgage by, as security for receivership, held good 125 706-/^4 receivers over courts averse to granting ^j^ relief based on doctrine of quia timet 700 not allowed on slight ground 707 on information and belief 707 abuse of trust and waste, ground for 708 allowed before answer 708 poverty of, no ground for insolvency and misconduct ground for 71U bankruptcy ground for removal from state ground for 71^ allowed although estate in foreign country 713 1030 INDEX. EXECUTORS— C(7«/in«r(/. Section receivers allowed over executors in foreign country 713 allowed pending controversy in ecclesiastical court 714 judgment creditors, when allowed receiver against 715 when denied receiver 716 not allowed to interfere with administration 716 death and refusal to act ground for 718 misunderstanding between, not sufficient 718 allowed over realty when plaintiff equitably interested with deceased 719 court will not examine executor's account on application for receiver 720 on removal of receiver executors again ordered to act 723 appointment of receiver does not remove executor 724 of receiver, not ordered to account 817 when entitled to petition for account of payments 817 entitled to notice of passing of accounts 817 EXEMPTIONS, receiver in creditor's suit takes no title to exempted property 441 nor to insurance on 442 nor to j udgment for damages for seizing 442 EXPENSES, of receivership entitled to preference 809 when charged against plaintiff 809a EXTRA COMPENSATION. (See Compensation of Receiver, Ac- counts.) EXTRAORDINARY REMEDY, receivership considered as 3 of receiver as compared with injunction 10 R FARM, partnership in, when receiver granted 504 compensation of receiver of 788 FEDERAL COURTS. (See Courts, United States Courts.) FEES, of office, receiver refused 21 when granted 22 FELLOW-SERVANTS, statutes abolishing rule of 395 FELLOWSHIP. (See College.) FINAL DECREE. (See Decree.) INDEX. 1031 FORCIBLE ENTRY AND DETAINER, Section can not be brought in receiver's name 209 contrary doctrine recognized 210 FORECLOSURE. (See Mortgages, Trust Deed.) FOREIGN CORPORATIONS. (See Corporations.) FOREIGN COUNTRY, receivers over property in 44 receiver to enforce decree in 45 contempt for resisting enforcement of order for receiver in 170 mortgaged property in, receiver allowed 648 FOREIGN RECEIVER. (See Courts.) FRANCHISE, of bridge company, judgment creditor may have receiver over.. 300 receivership of street railway to prevent forfeiture of 371 FRANCHISE TAX, liability of receiver for 140a, note FRAUD, prevention of, as ground for receiver 11 general allegations of, insufficient 17 ground for receiver before answer 105 for setting aside receiver's sale \99d as defense to suit by receiver on stock subscription note 205 when not defense in action brought by receiver of corporation 246 general allegations of, insufficient to warrant receiver over cor- poration 292, 295a plaintiff's participation in, bars relief 295 in obtaining real property, when ground for receiver 565 FUNCTIONS, (See Sales, Suits.) of receiver, effect of appeal 29 as affected by supersedeas 29, 190 not allowed to pay money except by order of court 142 general nature of 175-190a receiver can make no dividend without order 175 receiver not an assignee 175 nor adverse party 175 not plaintiff's agent, but represents all parties 175 may not profit at expense of trust 175 should make inventory 175 may make admissions 175 may employ assistants in business 175 need not present claim of creditor 175, note discretion as to management of property 176 as to accepting bids 176 1032 INDEX. FUNCTIO'NS— Continued. Section of receiver, degree of discretion required 176 no discretion in application of funds 178 must obey all orders of court as to settlement of demands. .. 177 may compromise claims and actions 177, 336 can not set off personal claims against person to whom he is ordered to refund money 178 enlargement of 179 repairs made by receiver, rule as to 180 receiver not allowed to originate proceedings under English and Irish practice 181 of custodians of funds in litigation, when similar to receivers 182 receiver attending court exempt from arrest 183 effect of receivership as regards statutes of limitations 184 functions not determined by abatement of cause 185 may collect rents until removal 185 court may vacate or modify contract by receiver 186 assignee of contract with receiver 186 lease of offices by receiver 186 relative functions of different receivers, second subordinate to first 187 receiver entitled to instruction and advice of court 188 practice on applying for 188 entitled to and should obtain counsel 188 must show necessity for 188 should not employ counsel of party 188 receiver may collect money not yet due 189 receiver's functions suspended by appeal and supersedeas. .29, 190 should restore property to defendant 190 court may make administrative orders notwithstanding appeal and supersedeas 190a sale by receivers 191-1999d of receivers 269-286fe liable directly to court appointing him 269 liability to third persons enforced by court 269 improper payments 269 can not be called to account by another court 269 receiver and not plaintiff liable for injury to property in his possession 270 liability can not be enforced without leave of court 271 not individually liable on covenant as receiver 272 when personally liable on note given in carrying on business 272 not liable on covenant of person over whom appointed 273 when liable for rent 273 becomes liable by adopting covenant 273o election to adopt lease '. 273a when not personally liable for rent 273a rule further illustrated 27Zb not bound by contract of former receiver 272)b election to adopt rests in discretion 273& liability for rent, stipulated or reasonable rental value 273c receiver can not impair contract liability of original party . . . 273d loss of funds by failure of bank 274 bank not ineligible as depositary because a creditor 274 of receiver of bank to pay in full 274a to pay check or draft 274a not liable for loss without his fault 275 bills of exchange of failing tradesman 275 liable for use of property in private business 276 not liable for speculative profits 276 liable for forcibly taking mortgaged property 277 liable for tort 277 to court, does not terminate until discharge 278 appointing receiver trustee in insolvent proceedings does not relieve him from liability as receiver 278 receivers of railway liable to action in another state for breach of duty as common carriers 279 for failing to pay money into court 280 limit should not be placed on term of imprisonment . . . 280 INDEX. 1047 LIABILITIES— Continued. Section of receivers, not liable for rent of premises to firm 281 liable for payment to wrong persons 282 when not liable for loss through real estate remaining in owner's possession 283 for loss of rents by solicitor assuming to act as receiver 284 liability extended to administrator of receiver 285 not released by dismissal of bill 286 damages for tort of receiver's agent a charge on fund 286a liability for wrongful conversion of estate 2S6b enforced by supplemental bill in receivership cause 2S6b of receiver over railway, for inj uries 395 action against, for injuries 393 j udgment against, only in official capacity 395 as common carrier, in another state 398 when liable for interest on infant's funds 730 LICENSE, of market stall, receiver refused 32 LIEN, (See Mechanic's Lien.) not created by appointment of receiver 5 of plaintiff, as ground for receiver 11 of creditors, not disturbed by foreign receiver 47 not divested by appointment of receiver 138 possession of receiver subj ect to 138 of judgment creditor, protected against receiver 138 of attorneys for services, receiver takes fund subject to 138 of municipality for taxes, receiver takes property subject to 138 can not be obtained on property in possession of receiver 138 not divested by receiver's sale 191, 199a of judgment creditor on real estate of corporation, not divested by receiver itt limine 302, 348, 349 of vendor for land sold railway, receiver in aid of 367 on freight and earnings of vessel, receiver to protect 408 receiver of debtor takes realty subj ect to 424 not divested by appointment of receiver on creditor's bill 440 of judgment creditors of partnerships, how affected by receiv- ership "^^J of judgment, realty subject to, on termination of receiver's functions "^■^ LIMITATIONS. (See Statute of Limitations.) LIMITED PARTNERSHIP, creditors of, when entitled to receiver 407, 508 LIS PENDENS, receiver refused when notice of, sufficient to prevent transfer of real property ^"^ 1048 INDEX, LOSS. (See Irreparable Loss.) Section LUMBER, partnership in, when receiver allowed 500 LUNATICS, receivers over estates of 733-736 when allowed 733 required to surrender to administrator 733 relief discretionary 734 refused where rival claimants 734 solicitor under commission ineligible as 735 when required to account 736 reference to master to ascertain condition of estate 736 M. MANAGEMENT, of business by receiver, principles regulating 36 discretionary with court 36 preferring debts incurred in 36 may hire employees in 175 of partnership business, not province of court 480 to what extent may be continued by receiver pending liti- gation 481 MANDAMUS, when a bar to receiver 32 refused against receiver of railway 374 MANDATORY INJUNCTION. (See Injunction.) MARKET, stall in, receiver refused 32 MARRIAGE SETTLEMENTS, when receiver denied in case of 591 after marriage, when receiver allowed against 612 MARRIED WOMAN, in suit to charge property of, with her debts, receiver granted. .. . 409 MARSHAL, will not be directed to take property out of receiver's hands 52 MASTER IN CHANCERY, reference to, to appoint receiver 63 selection of receiver by, courts averse to interfering with 64 grounds of interference 64 when required to revise report 64 ineligible as receiver 70 master and clerk of court, ordered to act as receiver 71 I INDEX. 1049 MASTER IN CHA'^CERY— Continued. Section may conduct sale for receiver 191 reference to, to appoint, practice on 90 when appointment complete 90 objections to appointment 90 as to repairs by receiver 180 on creditors' bills, to appoint receiver 415 practice under 415 examination under 415 receiver required to produce books of account before 544 reference to, in case of receiver over lunatic 736 exceptions to report of, on receiver's compensation 784 report of, on receiver's accounts 800, 801 how reviewed 801 courts investigate principles of, but not items 800, 801 distinction as to 801 exceptions to 801 MATERIALS, furnished railway, creditors not entitled to priority 379 MECHANIC'S LIEN, (See Lien.) against property in receiver's possession 171 not divested by receiver's sale 191, 199a when not divested by sale of railway 398^ receiver denied in action to enforce 586 MEMBER OF PARLIAMENT, eligibility as receiver considered 70 MERITS, of cause, not decided on application for receiver 6 MILLS, wharfage in front of, receiver of mills entitled to 158 receiver as between tenants in common of 604 MINES, receiver on difficulty of managing by co-tenants 606 controversy between owners 606 purchaser of gold mine at mortgage sale, when granted receiver 614 purchaser of colliery allowed receiver on bill to set aside pur- chase for fraud 615 receiver of, when discharged 615 MISMANAGEMENT, by receiver ground for refusal of compensation 790 for refusal of fees of receiver's counsel 805 MORTGAGES, receiver over mortgaged premises, not dispossessed by assignee in bankruptcy 52 1050 INDEX. MORTGAGES— ro«Ymj(r(/. Section prior jurisdiction of United States courts respected by state court 54 receiver of rents appointed after decree in foreclosure 110 when receiver refused after decree for redemption 110 assignment of, as security for receivership, held good 125 lien of unrecorded, when not valid as against receiver 138 directions as to payment, receiver not allowed to apply for 181 not due, receiver may collect and discharge 189 receiver holding equity of redemption can take no benefit by purchasing at foreclosure sale 194 to receivers of bank, may be foreclosed by successor 215 may be foreclosed by receivers of another state 243 assignment of, to receiver, right of action under, in foreign state 244 appointment of receiver over one defendant in foreclosure suit, no bar to continuing suit 259 foreclosure of mortgage given by corporation, when receivers need not be made defendants 260 receiver liable as trespasser for forcibly taking mortgaged prop- erty 277 of railway, receivers in aid of 376-389o inadequacy of security and insolvency as ground for 376 appointment not a matter of course 377 not granted where it would cause irreparable injury Zll proceedings for, regarded as in rem 378 right of, limited to property mortgaged 378 creditors for materials and supplies not entitled to priority 379 receiver over tolls 380 principles governing 381 right to, as between different mortgagees of tolls ..382, 385 mortgagees pari passu, not allowed preference 383, 385 granted in behalf of state holding mortgage 384 validity of bonds not determined on application for 387 relative jurisdiction of state and federal courts 388 right to discharge, on payment of mortgage 389 may pay what debts 391 to delay creditors, no ground for receiver before judgment 406 fraudulent, by debtor, creditors may set aside notwithstanding receiver 421 of chattels, when receiver has no right of action 467 receivers in aid of foreclosure of 639-691a principles governing the relief 639-665a the j urisdiction cautiously exercised 639 only granted in strong case 639 legal mortgagee with right of entry not entitled to 640 may have, when can not take possession 641 refusal of trustee to take possession 641 when receiver refused 641o INDEX. 1051 MORTGAGES— Contimted. Section receiver in aid of foreclosure of, rents and profits, mortgagee not entitled to receiver of, when security adequate . . 642 test as to adequacy of security 642 not entitled to, when mortgage not due 642 rents and profits of railway 642 refused when property already in custodia legis 642 refused when improvements destroyed by fire 642 entitled to, when security inadequate and mortgagor in- solvent 643 mortgagee entitled to rents in receiver's hands to make up deficiency 643 express pledge of rents 643 when insolvency of mortgagor immaterial 643 insurance and taxes 643 past-due rents 643 when entitled to unpaid rents 644 liability for waste of, by receiver 645 crops on mortgaged premises, receiver over 646 receiver not entitled to severed crops 646 when refused as to crops 646 crops grown by receiver 646 when appointed as to mortgage of chattels 647 attachment sale of chattels invalid as against prior mortgagee 647 may be appointed though mortgaged property in foreign country 648 allowed when interest in default 649 when allowed before default in case of railway company 371 effect of payment of interest by receiver to mortgagee 649 receiver represents all parties in interest 650 assignees in bankruptcy of mortgagor 650 mortgagee appointed, duties of 651 order to lease premises 651 mortgagee authorized to appoint by mortgage 652 receiver mortgagor's agent in such cases 652 effect of mortgagor attorning to receiver 652 English statute authorizing 652 Supreme Court of Judicature Act 652a rights of debenture holders 652a not appointed over property of soldiers when prohibited by statute 653 appointed in behalf of mortgagor to keep down interest 654 mortgagee in possession not divested by receiver 654 when receiver appointed 654 may be appointed after decree in case of emergency 655 when refused after decree 655 1052 INDEX. MORTGAGES— Conh'inicd. Section mortgagee not party, can not divest receiver's possession by notice to tenants 656 mortgagor not entitled to rents paid into court 656 mortgagor entitled to pay debt and have receiver discharged.... 657 entitled to discharge on sale for full amount due 657 when owner of equity of redemption entitled to rents collected by receiver 657 equitable mortgages, relief granted 658 deposit of title deeds as security 658 holders of municipal bonds secured by rates and assessments, not entitled to 658 equitable mortgagee of private corporation allowed receiver 659 official liquidator appointed 659 petition for, should show who is in possession 660 reasons for 660 on decree pro confesso amount due should be shown 660 railway mortgages, receivers granted on same principles 661 inadequacy of security and insolvency, ground for 661 receiver in behalf of judgment creditor extended in behalf of mortgagee 662 need not be appointed over entire estate 663 defense of usury sworn on information 664 mortgage of leasehold, receiver allowed 665 when allowed before answer 665 allowed against administrator of mortgagor 665a receiver of rents pending appeal from foreclosure decree.... 665« inadequacy of security and insolvency of mortgagor 666-678Z> inadequacy principal ground for 666 elements of inadequacy 666 general rule that inadequacy and insolvency must be shown 666 satisfactory proof required 667 inadequacy confined to particular mortgage in question 667 doctrine of the Irish Chancery 668 in New Jersey, the general rule not recognized 669 fraud and bad faith ground for 670 change or depreciation in property 670 transfer to insolvent person ground for 670 assignment to creditors, when not ground for 670 the doctrine in Mississippi 671 the doctrine in Minnesota 671o! non-payment of taxes ground for 672 of insurance, ground for 672 when not ground for 672 contest whether property covered by mortgage ground for. . . 672 of hotel property 672(r doctrine in Nevada, general rule recognized 673 INDEX. 1053 MORTGAGES — Continued. Section Inadequacy of security and insolvency of mortgagor, doctrine in Nevada, mortgagees purchasing at foreclosure sale allowed receiver 673 doctrine in California, mortgagee not allowed receiver for inadequacy and insolvency 674 doctrine in Iowa 674 receiver not allowed in South Carolina 674a when allowed though only portion of debt due 675 not allowed if doubtful as to amount due and inadequacy denied by answer 675 insolvency ground for receiver in case of mortgage over leasehold 676 mortgage of chattels 676 no objection that premises are in possession of tenant .... 677 bondholders of canal company allowed receiver on insolvency 678 when allowed in behalf of wife 678a exemption of rents 678b receivers as between different mortgagees 679-691a prior mortgagee in possession, not granted as against 679 not granted on creditor's bill as against 680 on bill by heirs-at-Iaw 680 granted when nothing appears due mortgagee 681 prior mortgagee not in possession, receiver allowed in aid of subsequent mortgagee 682 consent of, not necessary 682 can only prevent by asserting right and taking possession 682 granted annuitants as against 683 need not be made parties 683 receiver granted though mortgagor out of jurisdiction. . . 684 appointment without prejudice to prior interests 685 for whose benefit made 685 no objection that other mortgagees are satisfied 686 that plaintiff represents only one-ninth of debt 686 not appointed for judgment creditor as against puisne mort- gagee in possession 687 rents, when j unior mortgagee entitled to 688 when prior mortgagee entitled to 688 effect of extending receiver 688 subrogation 688 different doctrine in Virginia 689 assigned to junior mortgagee, prior mortgagee can not have receiver of 690 receiver of, allowed on foreclosure by junior mortgagee 691 tenants required to attorn to receiver 691 consolidation of actions to foreclose different mortgages 691a 1054 INDEX. MORTGAGEE, (See Mortcaces.) Section when eligible as receiver 76 of West India estates, eligible 81 appointed without security 118 in possession, receiver refused as against, on creditor's bill 419 of chattels, receiver appointed in behalf of creditors against.... 420 priority of payment as against judgment creditor 430 entitled to rents in receiver's hands to make up deficiency 643 right of, to unpaid rents 644 duty of, when appointed receiver 651 in possession, not divested by receiver 654 may have receiver for judgment creditor extended to his mortgage 662 receivers as between different mortgagees 679-691o prior, in possession, receiver not granted against 679 not in possession, receiver allowed in aid of subsequent mortgagee 682 of goods of infant, receiver against 728 when entitled to apply for receiver's discharge 839 MORTGAGOR, (See Mortgagee, Mortgages.) when receiver appointed in behalf of one of several 654 entitled to pay debt and have receiver discharged 657 MOTION, irregular to appoint receiver without 84 affidavits in support of 84 rehearing of, when allowed 91, 92 when not allowed in creditor's suit 92 demurrer to bill, when no objection on hearing of 92 may be entertained, although plea to amended bill undisposed of 95 to substitute, regularity of proceedings can not be questioned.... 97 for receiver before answer, heard on affidavits 107 defendant's affidavit admissible against 107 to take action by receiver, not usually allowed under English and Irish practice 181 MUNICIPAL CORPORATION, enjoined from interfering with receiver's possession of wharfage 158 creditor of, not entitled to receiver to collect tax 403a MUTUAL BENEFIT ASSOCIATION. (See Corporations.) N. NAME. (See Suit.) NATIONAL BANKS, action by receiver of, allegations required as to his appointment 237 receivers over 358-364a appointed by comptroller 358 effect of 358 INDEX. 1055 NATIONAL BANKS— Continued. Section receivers over, title of 359 can not avoid pledge of notes 359 assets exempt from taxation 359 regarded as agent of comptroller 360 no control over bonds deposited with United States treasurer 360 rights as to bringing suits 360 power to contract or sell 360 may enforce individual liability of shareholders 360o right of action against directors for mismanagement 360^ suits by, what must be averred 361 what must be proven 361 appointment of, by comptroller, not exclusive of jurisdiction of equity 362 judgment creditor may have 362 jurisdiction of state and federal courts over 363 property in hands of, can not be sold by creditor 364 subj ect to same set-ofifs as bank 364a NEGLIGENCE, of receiver ground for refusing compensation 790 NEWSPAPER, publication of, by receiver 481 receiver in aid of foreclosure of mortgage on 639, note NEW YORK, code of procedure, receiver under 23 compared with injunction 49 receivers on creditors' bills, under former chancery system 400 under code of procedure 401 NON-RESIDENT, not ineligible as receiver "" condition of bond of ^ surety on receiver's bond may be 126 NORTH CAROLINA, code of procedure, effect of 23 NOTES. (See Commercial Paper.) NOTICE, of application for receiver 111-117 courts averse to interference without HI want of, j udicial error Il2 ground for reversal 112 how taken advantage of 112 how waived or cured 1^2 presumed on appeal 112 interference without, grounds of 113 facts must clearly appear 113 1056 INDEX. NOTICE-Contiuucd. S^^^^^^ of application for receiver, service of process considered with . . 114 notice served immediately on filing bill, under English practice 114 necessary to appointment over insolvent corporation 115 New York chancery practice as to 115 service of 116 when sufficient on co-defendant 1 16 unnecessary, when parties appear by counsel to oppose motion... 116 when defendant has absconded 117 when he has left state and it is necessary to collect rents 117 when a trustee defendant is beyond jurisdiction 117 non-resident defendants 117 in case of partnership, when 117 in case of foreclosure, when 117 of appointment, formal notice not necessary to fix liability for contempt 156 of filing of intervening petition 175^ note of petition for instructions, defendant not entitled to 188 of sale by receiver ipg of allowance of receiver's compensation 796 of application for leave to sue receiver, to whom given 265 of that of his counsel g05 receiver's executor entitled to, of passing of receiver's accounts 817 want of, of appointment of successor not ground for removal 821 of motion to remove receiver 824 to discharge receiver 846 to all creditors unnecessary 848 NUISANCE, by receiver, when enjoined 262 O. OATH, to receivers under statute, omission of does not vitiate pro- ceedings gg when taking of, presumed 99 OBJECT, of receivership 4 OFFICE, controversies concerning, not determined in equity 21 contest over, receiver refused 21 fees of, receiver refused 21 when granted 22 salary of, receiver refused 22 OFFICER OF COURT, receiver considered as an j INDEX. 1057 OFFICERS, Section of corporations, eligibility of, as receivers 72 when competent as receivers 354 of state, enjoined from disposing of railroad land grant 373 equity averse to receiver when trust vested in 696 OFFSET. (See Set-off.) P. PARLIAMENT. (See Member of Parliament.) PARTIES, receiver over corporation, latter not proper party plaintifif 225 receiver holding equitable title necessary party to bill to redeem by mortgagor against mortgagee 258, note receiver as party to appeal 258 receiver of corporation as party defendant 260 corporation necessary party to proceeding for receiver over it 290 receiver need not be party to subsequent proceeding for another receiver over corporation 291 receiver of railway not proper party to action for injuries suffered prior to appointment 395 where demurrer sustained for want of proper 616 PARTITION, receiver allowed in action for 607 PARTNERSHIPS, interlocutory appointment of receiver over, not appealable 26 when appealable 27 non-resident, receiver refused against 44 when bill for dissolution and receiver an act of bankruptcy 56 assignee in bankruptcy of, when allowed receiver as against as- signment 57 administrator of deceased, eligible as receiver 78 receiver may be appointed as part of final decree 109 real estate of, when sold subject to judgment against partner 199fl receiver of, can not be garnished as to assets in his hands 151 can not maintain action of trover in his own name 209 allowed to sue in his own name for money due the firm 210 rent due from, can not be set ofif in action by receiver of the firm 253 when receiver not liable for rent 281 creditors of, when allowed receiver and injunction before judg- ment 407 receivers over 472-552a principles governing the relief 472-50Sa the j urisdiction well established 472 doctrine of Lord Eldon 472 probability of dissolution a controlling element 472 Receivers — 67. 1058 INDEX. PARTNERSHIPS— Co;iM««rrf. Section courts proceed cautiously 473 beneficial nature of the j urisdiction 473 receivers over, principles governing the relief, same conditions necessary as for inj unction 474 actual abuse must appear 474 quarrel not sufficient 474 court does not determine ultimate rights of partners on application for 475 duty of court only to preserve property pendente lite 475 existing partnership necessary 476 receiver refused when partnership disputed 476 not granted in nominal partnership 476 employee can not have right to participate in profits the test 477 burden of proving partnership on plaintiff 477 relief not granted in case of executory agreement to form partnership 477 when defendant permitted to give security in lieu of 478 receiver ^'° when court satisfied of existence of partnership, mere denial by defendant no bar to relief 479 management of business not province of court 480 may be continued by receiver pendente lite to pre- serve good will 4ol operating steamboat 481 hire of horses and carriages 481 publication of political paper 481 borrowmg money ^°^ court only interferes in clear cases 482 conflict of interest must be shown 482 effect of denials in answer 482 breach of duty or violation of agreement must be shown 483 irreconcilable disagreement, ground for relief 483 destruction of mutual confidence 484 insolvency of firm 484 want of co-operation no ground for 485 unprofitable business no ground for 485 receiver not a matter of course 486 not granted when bill alleges no facts showing necessity for 486 defendant resolved to ruin business, ground for 487 when granted though doubtful whether property in de- fendant's possession is firm property 488 retiring partner, when entitled to 489, 493 violation of agreement for dissolution 489 exclusion from books 489 fraud by continuing partner 493 INDEX. 1059 PARTNERSHIPS-Co»//»»^rf. Section receivers over, principles governing the relief, embittered feeling 489 partner in possession not entitled to 490 not granted when equities of bill denied by answer 491 not granted over property claimed by plaintiff individ- ually 492 receiver on creditor's bill, extended to what property. ... 494 appomtment of, prevents one partner giving preference 495 valid liens of creditors not interfered with 495 execution creditor not deprived of rights under prior levy 495 failure to contribute to capital stock 496 sale of interest in firm 495 insolvency and refusal to pay firm indebtedness 496 large sums of money in defendant's hands no ground for relief in absence of danger 497 misapplication of funds 497 agreement to arbitrate differences 497 when refused over shares of stock constituting assets of firm 49g continuing business with firm funds after dissolution, ground for 4pp violation of agreement in lumber business as ground for 500 when issue as to partnership directed to be tried at law 501 when issue as to plaintiff's right to profits tried.... 501 courts averse to appointing ex parte 502 foreign partnerships, when allowed 503 when allowed in case of farm 504 does not prevent creditors from proceeding at law 505 when injunction continued as auxiliary to 506 assignees of partners, when entitled to 507 limited partnerships, when receiver allowed ,' 508 ^ effect of denial of motion in former suit 508a dissolution of firm as ground for ' .509-521 English rule allowing receiver only when plaintiff en- titled to dissolution caq English rule followed in this country ] / 510 courts do not interfere to continue business 510 receiver does not necessarily follow injunction 510 when injunction necessary adjunct of 510 inability to agree after dissolution 5IO right to dissolution not ground per se for 511 partnership determinable by consent or at will, receiver not of course 5ji relief refused when defendant has advanced entire capital 511 insolvency of defendant and right to dissolution ground ^^'^ 511 1060 INDEX. PARTNERSHIPS— ConhHMed. Section receivers over, dissolution of firm as ground for, purchaser at sheriff's sale of partner's interest, when denied 512 departure from agreement, when ground for 513 partners in theater, when receiver appointed 513 relief denied when it would destroy business without benefit to either party 514 receiver granted when both partners desire dissolution and plaintiff is excluded 515 refused when answer denies equities of bill 515 on dissolution of, when granted against continuing part- ner, though entitled to exclusive possession 516 dissolution by insolvency and assignment by insolvent partners ground for 517 general assignment by continuing partner for benefit of all creditors not ground for. 518 when appointed as of course on disagreement as to closing up business 519 debts to be paid ratably and without preference.. 519 may be appointed on final judgment for dissolution 520 failure to give bond, effect of 520 usually granted on interlocutory application 521 injunction frequently granted as adjunct 521 exclusion from firm as ground for 522-529 exclusion strong ground for 522 doctrine of Lord Eldon 522 assignment for purpose of excluding partner ground for.... 523 assignee can not defeat application 523 exclusion from profits, ground for 524 not necessary that fund should be in peril 525 when receiver continued on ground of exclusion 525 exclusion of purchaser of partner's interest ground for re- ceiver 526 doctrine of exclusion applied to assignees of bankrupt partner 527 exclusion from profits in vessel 528 exclusion from books 529 refusal to settle or to pay firm debts 529 fraudulent appropriation of funds 529 death of partner as ground for 530-537 receiver on death of both partners 530 not granted against survivor except for mismanagement . . 531 granted for improper conduct of survivor 532 refusal by survivor to close up firm business ground for.... 532 when administrator of deceased entitled to 533 administrator may be appointed 533 form of decree 533 INDEX. 1061 PARTNERSHIPS— Co«/mM^rf. Section death of partner as ground for, survivors required to deliver to 533 enj oined from collecting debts 533 rights and functions of the receiver 534 ; when legatee of deceased partner entitled to 535 receiver appointed notwithstanding death of partner 536 may sue for money due firm 536 when appointed on bill by creditors against survivor 537 receivers over, functions and duties of 538-552a duty of, to collect debts 538 entitled to assets 538 will not be enjoined from management of fund 538 not directed to take property when doubtful whether part- nership property 538 on application for, court will not determine disputes as to ownership 538 receiver takes whole equitable title without assignment 539 may bring action to obtain possession 539 succeeds to equitable rights and remedies of firm 539 rights of action 539 when receiver can not recover individual property of partner 539 extent of receiver's title 539a when receiver can not set aside fraudulent conveyance by partnership 539^ selection of 54O partner may act as, without pay 540 partner appointed receiver no longer sustains relation of partner 54O entitled to money, choses in action and assets in hands of survivors 54I decree for delivery of, enforced by attachment 541 can not withhold partnership funds as due to him personally 542 not directed to sell pending appeal as to jurisdiction of court 543 required to produce books of account before master 544 payment of debts by, sufficient excuse for not paying money into court . , 545 appointed to collect debts which partners are enjoined from collecting 545 may be required to pay plaintiff his proportion of debts collected 545 when required to sell lease and good will of insane hospital 547 either party may become purchaser 547 remaining parties enjoined from continuing business in same locality 547 appointment over husband in divorce suit, does not divest title to partnership property 548 1062 INDEX. FARTNERSHIFS— Continued. Section receivers over, duties of, in brewing business 549 retiring partner compelled to pay firm notes may recovei of receiver of new firm 550 purchaser of partner's interest after receivership can not interfere with 551 funds in hands of, not subject to attachment or garnishment 552 when not required to pay deposit in full 552a PARTY, to the cause, ineligible as receiver 70 PATENT RIGHT, receiver granted in suit for infringement of 34 receiver entitled to rights under 174a PAYMENT, of money, receiver not granted for 35 effect of, by surety to solicitor 132 receiver not directed to make, until claims determined 428 by receiver of partnership, to be made ratably 519 effect of 545 PEER, ineligible as receiver 70 PENSION, receiver refused over 31 when allowed 705 PERSONAL INJURIES, judgments and claims against railway for, prior to receivership not preferred 394« action for, prior to receivership will not lie against receiver. .395, 397& PERSONAL PROPERTY, tenants in common of, courts averse to allowing receiver 20 sale of, by receiver, discretion as to sale in bulk or by parcels 198 distinction between realty and personalty as to appointing receiver 554 PETITION, receiver not granted on 83 PLEA, pending, to amended bill, no bar to motion for receiver 95 PLEADINGS, general allegations in, when not sufficient 17 in actions by receivers, appointment should be alleged issuably 231 strictness of earlier rule as to particulars necessary to be alleged 232 averment of appointment in general terms now sufficient.... 233 INDEX. 1063 PLEADmOS— Continued. Section in actions by receivers, receiver should state equities of judgment creditors whom he represents 234 when defendant estopped from denying receiver's right to sue in that capacity 235 in action by receiver on premium notes 236 in action by receiver of national bank 237 PLEDGE, of notes by bank, receiver can not avoid 359 POLICY OF INSURANCE. (See Insurance Company.) POSSESSION, of defendant, divested by appointment of receiver 3, 15 of receiver, that of court 4 disturbance of, a contempt 4 acquiescence in, as a bar to receiver 14 receiver cautiously granted against 19 of receiver, when protected by foreign court 47 of receiver of state court, respected by federal court 52 when denied by federal court 53 of receiver of federal court, respected by state court 59 not disturbed by writ of assistance from state court 61 nature of receiver's possession 134-1 62rt importance of determining 134 receiver's possession that of court 134 not adverse to either party 134 not interrupted by change in receiver 134 \ defendant in ejectment can not rely on, of receiver 134 regarded as possession of prevailing party, to what extent 135 when regarded as possession of plaintiff 135 when regarded as possession of mortgagee 135 does not affect operation of statute of limitations 135 vests back to original order of appointment 136 but not beyond ^36 effect of appeal on 136 property subject to garnishment in Maryland until reduced to receiver s possession ^-J' receiver acquires, subj ect to existing liens 138 lien of taxes 138 can not be disturbed without leave of court 139 practice as to obtaining leave of court 139 court may enjoin unauthorized interference with 140, 747 relief may be by petition in receivership cause even as against 140 stranger '■^^ property in, not subj ect to seizure for taxes 140a inj unction against tax 14^^ 1064 INDEX. POSSESSION— Cotttinued. Section nature of receiver's possession, property in, how taxes collected.. 140a liability to taxation 140a ^Qte can not be interfered with by execution or attachment 141 receiver not allowed to pay money except by order of court 142 can not be interfered with on ground that appointment was improper 143^ 165 persons desiring possession must apply to court 143 receiver entitled to aid of court to obtain possession 144 practice in obtaining possession of real property by re- ceiver 144^ 147 order for surrender to receiver may be enforced by attach- ment 144 defendant's attorney required to deliver trust property to receiver ^44 court reluctant to take possession by receiver as against purchasers in good faith who are not parties 145 when receiver must institute independent suit to recover property in possession of stranger 145, 149 persons claiming real estate held by receiver will be heard by the court 14g receiver allowed to take steps to procure possession of property j4g receiver not allowed writ of assistance as against stranger claiming under superior title I49 duty of court to protect receiver's possession ISO practice when receiver forcibly takes possession from party holding under claim of right 150 funds in receiver's possession not subject to garnishment 151 exceptions to rule I5I subject to garnishment by leave of court 151 assets not in possession subject to garnishment 151 precedence in possession as between different receivers 152 possession as between receiver and assignee in bankruptcy . . 153 right of common not allowed as against possession of re- .«iver 154 right to possession as between receiver of an auctioneer and customer I55 goods in receiver's possession, when not subject to distraint ^o'" rent 155 receiver over property of decedent, not entitled to fund by creditor as security I57 when receiver entitled to possession of wharf in front of "i|"s ^ 158 receiver's possession of commercial paper, not that of bona Ade holder I59 INDEX. 1065 POSSESSION — Continued. Section nature of receiver's possession, placing property in receiver's possession relieves defendant from responsibility 160 receiver may retain possession pending appeal 161 receiver's possession that of trustee for person entitled un- der final decree 162 when receiver required to deliver possession to trustee of defendant under insolvent laws 162 receiver required to restore fund on reversal of his appoint- ment 162 right of, when property taken beyond state 162a interference with receiver's possession 163-174& unauthorized interference a contempt of court, punishable by attachment 163 landlord guilty of contempt in seizing property under dis- tress warrant 163 duty of court to protect receiver against 164 by another receiver subsequently appointed, punished as a contempt 164 liability for, not dependent upon propriety of appointment 143, 165 not dependent upon formal notice 166 no liability for, when appointment of receiver is void. .166c, 168, 203 collection of rents 167 refusal of defendant to surrender property to receiver 168 refusal of purchaser at sheriff's sale to surrender posses- sion to receiver 168 not a contempt where order is void 168 when refusal not a contempt 168 court itself the only competent judge as to contempt 169 contempt in resisting enforcement of order for receiver over property in foreign country 170 when not a contempt 170 actual disturbance of possession necessary to contempt .... 171 levy and sale by sheriff considered 171 receiver's title not determined on proceedings for contempt.. 172 claimant required to pay for property taken out of state 172 courts averse to punishing receiver for contempt in inter- ference with other receiver 173 attachment against receiver for refusing to surrender posses- sion 174 interference with rights of receiver under patent 174a judgment in contempt proceedings, form of 174& receiver of corporation may remove cloud upon, by ancillary bill 342a inj unction 342a of real property, receiver rarely granted against 557 acquiescence bars receiver 560 by lessee, receiver rarely granted against 562 fraud in obtaining possession, ground for 565 1066 INDEX. POVERTY, Section of executor, no ground for receiver 709 POWER, of appointing receiver, high nature of 3 inherent in courts of equity " when may be invoked " PRACTICE, general rules of 82-102 divergent in different states 82 receiver appointed only on bill o-^ not appointed on application of defendant 83 bill need not contain specific prayer for receiver 83 appointment may be made on final hearing 83 court may appoint ex suo motu 83a motion necessary 84 affidavits, copies should be served 84 in behalf of plaintiff, admissible after answer 85 of defendant, admissible before answer 85 admissible to explain doubtful passage in answer 85 must be entitled in cause 85 multifarious bill no obj ection to motion 86 insufficient record no objection 86 order should state over what property receiver is appointed 87 facts need not be stated in pleadings 88 may be set forth in affidavits 88 facts on which receiver is asked may be presented in 88 conclusions insufficient 88 copies of, when should go to appellate court 88 should be distinct and precise 89 insufficient when on information and belief 89 when not necessary as to insolvency of bank 89 verification may be waived 89 reference to master to appoint, practice on 90 when appointment complete 90 practice in obj ecting to 90 leave granted to renew motion 91 receiver may be appointed on rehearing on new proof 91 rehearing, allowed after appointment 92 when not granted in creditor's suit 92 extending receiver, for protection of other parties 93 regarded as a new appointment 93 appointment by consent, under Irish practice 94 when consent not made a rule of court 94 demurrer to bill, no objection to appointment when defendant does not appear 95 on overruling of, defendant should be allowed to plead or 95 answer ^*' INDEX. 1067 PRACTICE-Confinued. Section motion entertained, although plea to amended bill undisposed of 95 when application must be heard in court % when in chambers g^ regularity of proceeding can not be questioned on motion to substitute receiver 07 receiver may be appointed although application was for an in- j unction no omission of receiver to be sworn not fatal 99 when taking of oath presumed 99 order of appointment should not include application of proceeds °^ '^^l •;;••: lOO bill may be dismissed although receiver appointed 101 appointment may be made, unless defendant satisfies plaintiff's demand , ^^ time of appointment 103-110 formerly only after answer 103 modern practice, before answer IO3 grounds of interference before answer 104, 105 granted before answer in this country ' io5 strong ground required for receiver before answer 106 motion before answer heard on affidavits 107 defendant heard by affidavit in reply IO7 appointment will not date back by relation ,,[ 108 may be made at final hearing ' ] ] ] 109 the same, although bill does not pray receiver 109 may be made after final decree .\' ] HO pending appeal HO notice of application * 111-117 courts averse to interference without HI error to appoint receiver without H2 where protection by injunction is sufficient 112 want of, ground of reversal H2 how taken advantage of H2 how waived or cured H2 appeal because of H^ grounds of interference without H3 facts on which application is made ex parte should clearly appear 213 service of process considered H4 notice necessary to appointment over insolvent corporation 115 practice of New York Court of Chancery as to 115 service of Hg when sufficient on co-defendant II5 not necessary, when parties appear by counsel to resist motion H^ unnecessary when defendant has absconded 117 1068 INDEX FRACTICE— Continued. Section notice of application, unnecessary, when defendant has left state and receiver is necessary to collect rents 117 against trustee defendant beyond jurisdiction of court.. 117 on vacating bond as to one surety 127 on claiming property or fund held by receiver 139 on obtaining possession of real property by receiver 144 on proceedings in attachment for interfering with collection of rents by receiver 167 on application by receiver for advice of court 188 on obtaining leave by receiver to bring suit 208 in continuing suit by successor of receiver 213 in appointing receiver over insolvent corporation 346 PRECEDENCE, in possession, as between different receivers 152 PREFERENCE, by insolvent, when set aside on application of receiver 314, 320 when not given to prior unsecured debts of railway 391, 394/i as between different classes of receivers' certificates . . . 39Sd, 398; receiver of partnership prevents, to creditor 495 allowed to counsel fees 805 to costs and expenses of receivership 809 PREFERRED DEBTS, (See Railways, Receivers' Certificates.) incurred in management of business 36 claim of state for taxes as 140a, note, 394&, SUa in case of private corporations 2l2c, 3\2d in case of railways 394a-394H incurred in management of partnership business 481 PRELIMINARY INJUNCTION. (See Injunction.) PREMIUM NOTE, when receiver can not sue on 204 pleadings in action by receiver on 236 set-offs in actions by receivers on 247 defense to suit on 318 assessments on, receiver's right of action for 326 what receiver must allege and prove 327 liability not increased by receivership 328 receiver must make assessment and apportionment 328 receiver takes place of directors 329 sanction and approval of court 329 receiver acts ministerially, not judicially 330 may make second assessment 330 approval by court not j udicial act 330 form of, when general on all notes 331 proof of losses, what required 331 receiver may sue on, to pay equitable claims 332 defense by maker, what not allowed 332 INDEX. 1069 PRESIDENT, Section of corporation, when eligible as receiver o... . 72 PRINTING OFFICE, receiver refused as between joint owners 20 PRIORITY, in possession, as between different receivers 152 as between j udgment creditors 439b, 461 PRIVATE SALE. (See Sale.) PROBATE COURTS. (See Courts.) PROBATE OF WILL. (See Will.) PROCESS, service of, qucsre as to necessity for, before appointing receiver 114 on agent of corporation in hands of receiver 260 PROFITS, receiver can not make, at expense of trust 175 in partnership cases, right to, as test for receivership 477 when issue to be tried by j ury 501 exclusion from, ground for receiver 524, 528 PROHIBITION, remedy by, against unauthorized appointment 43 PROMISSORY NOTES. (See Commercial Paper.) PROOF, degree of, on interlocutory application o of receiver's appointment by foreign court 162a, note, 241, note in action against principal 238 degree of, required at trial 238 receiver need not produce transcript of all proceedings in which he was appointed 238 degree of, required to show inadequacy and insolvency in cases of mortgages 667 PROTECTION, of court, against interference with receiver's possession 164 receiver entitled to, in performance of duties 179 extended to custodians occupying relation of receivers 182 PROVISIONAL REMEDY, receivership considered as a 6, 49 PUBLICATION, of newspaper, by receiver 481 PUBLIC OFFICE. (See Office.) PUBLIC OFFICER, distinguished from receiver 2 1070 INDEX. PURCHASE. (See Sale.) Section PURCHASER, (See Innocent Purchasers.) at receiver's sale, acquires no right of action against former officer of corporation 356 of partner's interest, when denied receiver 512 when allowed receiver 526 can not interfere with receiver 551 receivers as between vendors and purchasers of realty 609-617 allowed vendor on bill for specific performance 609 vendee on same 610 allowed vendor on bill against, to recover possession for non- payment 61 1 purchaser allowed receiver on bill to perfect title 612 when purchaser at sheriff's sale allowed receiver and in- junction 613 of gold mine at mortgage sale, when granted receiver 614 of colliery, entitled to receiver, on bill to set aside purchase for fraud 615 receiver not allowed over realty against purchasers not made parties 616 when receiver required to return purchase-money on an- nulling purchase 617 at receiver's sale, title acquired by 636 what sufficient to see 636 not affected by errors 636 brother of receiver may become, of claims against estate .... 175, note Q. QUASI-ASSIGNEE, receiver as, may maintain action in foreign court 241o to enforce double liability of stockholder of corporation .... 317c QUO WARRANTO, receiver refused, pending controversy in 21 against corporation, receiver not allowed before judgment of forfeiture 307 injunction allowed pending 307 when receiver allowed 312^ R. RAILROADS. (See Railways.) RAILWAYS, appointment of receiver over, when not appealable 26 in different states, receiver over 44 receiver in state court, bill for account not entertained by United States court 55 INDEX. 1071 RAILWAYS— Continued. Section receiver of United States court, not subject to control of state court 59 action against in state court 60 enjoined from condemning land held by receiver 140 interference with operation of, by receiver, where a contempt . . 164 receivers over, principles governing the jurisdiction 365-375a courts reluctant to appoint 365 not appointed for creditor who can enforce his judgment by ordinary means 365 consolidation of companies 365 appointed on bill by shareholder to set aside void lease 366 granted to protect vendor's lien 367 granted for management of common easement 368 in case of tunnel 368 when refused on bill to recover for illegal shares of stock 369 appointed by state court, when not interfered with by United States court in bankruptcy 370 jurisdiction as between state and federal courts 370 two receivers not desirable 370a contract of one binding upon the other 370a receivership does not dissolve corporation 370b nor suspend power to maintain condemnation proceedings 370b injunction against company binds receiver 370b taxes enforced 370b appointed on failure to operate road 371 before default 371 when relieved 371 receiver appointed over street railway to prevent forfeiture of franchise 371 vendor's rights not disturbed by 372 distraint for rent notwithstanding 372 may enjoin state officers from disposing of land grant 373 stockholders' meeting 373 appointed by state court, United States court will not enter- tain bill for account against 374 mandamus refused w 374 order for, vacated, road restored to owner 375 surplus funds, when applied on j udgment 375 ancillary receiverships 375a in aid of mortgagees and bondholders 376-389a relief based on same principles as in foreclosure of mort- gages 376 inadequacy of security and insolvency ground for 376 neglect to apply earnings as ground for 376 non-payment of interest and inadequacy of security as ground for 376 1072 INDEX. RAILWAYS— CoM/mwrt/. Section receivers over, in aid of mortgagees and bondholders, not matter of course on default 377 not granted where it would cause irreparable injury 377 when not granted over entire system 377 proceedings for, regarded as in rem 378 right of, extends only to property mortgaged 378 may lease other lines 378 right to take possession on default 379 refusal of trustee to take possession 379 appointed after decree of foreclosure 379 receiver over tolls 380 when bondholders entitled to 381 right to, as between different mortgagees 382, 385 mortgagees pari passu, not allowed preference 383 granted in behalf of state holding mortgage 384 granted to prevent land grant from lapsing 386 validity of bonds not determined on application for 387 relative jurisdiction of state and federal courts 388 court first acquiring jurisdiction will retain it 388 jurisdiction of United States court over consolidated road.. 388fl when president and directors regarded as receivers 388& discharge of, on payment of mortgage 389 liability of plaintiff in foreclosure for wages of receiver's employees 389o functions and duties of 390-394 duties usually prescribed by order 390 what usually embraced in 390 when authorized to complete road 390 condemnation to acquire land for completion 390 discharge of employees 390, note contracts subject to control of court 390a may contract for transportation beyond line 390a may make lease of company's property 390c may take lease of another road 390a can not prevent construction of rival line 390a unjust discrimination not allowed 390a pooling contract, when enforced 390a when not allowed to pay prior debts 391 nor to adopt contract which would result in preferring prior debts 391 discretion of, as to expenditures 392 what outlays allowed in accounts 392 entitled to protection of court 393 court will enjoin diversion of earnings from 393 receiver's joint use of another line protected by injunction .. 393 strikers punished for contempt 393a revision of wages by court 393b INDEX. 1073 RAILWAYS— Continued. Section functions and duties of, receiver not bound by joint traffic agree- ment of company 393c nor by contract to carry passengers 393c: criminal liability of receiver for failure to comply with state statute 393c must enforce rights of action by appropriate remedies 394 must bring suit at law to enforce subscription 394 rights limited to property covered by mortgage 394 preferred debts 394a^394n preference to unsecured debts indefensible on principle . . . 394a receiver's expenses a prior charge 394b extension of line 394& damages 394& rentals 394& supplies 394& distribution among divisions 394b taxes on gross earnings 394& purchase of rolling stock 394& expenses of reorganization committee 394b, note diversion of income ground of preference 394c what not a waiver of right to a preference 394c counter-claim by receiver 394c preference independent of diversion 394d materials furnished company and used by receiver 394d traffic balance 394d arrears for operating expenses 394d wages of employees threatening to strike 394d salary of attorney 394d balance for terminal rental 394d repair work on bridge 394c? claim for cross ties 394d coupling links, pins and steel tank 394d claim for maintaining passenger waiting rooms 394d materials for necessary freight cars 394d damages to abutting property owner 394d loss of cars 394d rail joints and track bolts 394d when interest not recoverable 394d, 394k mortgagee must submit to equitable conditions 394c assignee of debt protected 394c claims for rolling stock, when preferred 394/ car-trust leases 394/ receiver may elect to be bound by 394/ sale of rolling stock under foreclosure 394/ use of rolling stock by receiver 394/ right of appeal by purchaser 394/ judgment creditors, when allowed priority 394^ Receivers — 68. 1074 INDEX. RAILWAYS— Confinued. Section preferred debts, general creditors not preferred 394/» illustrations of claims which have been denied preference.. 394/» judgments and claims for personal injuries prior to receiver- ship not preferred 394» when payment allowed out of proceeds of sale 394; statutory liens preserved 394k interest, when disallowed against receiver 394d, 394^ construction claims 394/ boarding-house keepers 394/ grocers 394/ completion of building 394/ receiver's liability as to leased lines 394m taxes on leased line 394m paramount lien enforced by resale 394w actions against receivers of 395-398& liable to same extent as railway 395 action need not be at receiver's domicile 395 will not lie for personal injuries suffered prior to appoint- ment 395, 397& when will not lie against ancillary receiver 395 statute abolishing fellow-servant rule 395 leave of court necessary to sue 395a practice by petition 395a leave unnecessary under act of congress 395b illustrations of application of act 39Sb removal of cause by receiver to federal court 395c New York decisions unsettled 395d liability for inj uries 395d rent of leased lines 395c/ company not liable for negligence of receiver's servants .... 396 liability of company for failure to comply with penal stat- utes of state 396 statutory liability of company, notwithstanding receivership 397 j udgment for, how enforced 397 action against company after surrender of receiver's possession 397o liability of receiver official not personal 397& may be enforced against successor 397b not liable for negligence of company prior to his appointment 395, 397& liable generally as common carriers 398 suit in other state 398 for right of way 398a not liable on contract with express company 398o not liable on covenant of company 393c, 398a INDEX. 1075 fLAIUWAYS— Continued. Section actions against receivers of, liability on covenant of, after dis- charge 398b liability of purchasers 398& receivers' certificates 398c-3yo; unsupported by principle 3"°'- warranted by authority 398c not invalidated because bill is demurrable 398(; purposes for which issued 398o order strictly construed 398a preference as between different classes of certificates . . 398d, 398; not commercial paper 398^ innocent purchasers not protected 398^ when bondholder estopped from questioning 398/ when not estopped 398/ order appealable 398/ sale subj ect to 398g purchasers concluded 398g when issued for construction 398/? purchasing company liable for 39oh case of Illinois Midland Railway 398j priority as between, for compensation of receiver and that of trustee 398/ same as to counsel fees 398; compensation of receiver of '87 considerations governing 787 RATES, receiver refused over 3^ REAL ESTATE. (See Real Property.) REAL PROPERTY, receiver appointed to collect rents of, after decree 110 receiver extended over, new security required 123 practice in obtaining possession of, by receiver 144, 147 in receiver's possession, claimants will be heard by court 146 rights of common not allowed to be exercised as against posses- sion of receiver ^''^ motion to let, should not come from receiver 181 when receiver not allowed to purchase at sale of 193 when receiver allowed to become tenant of lands subject to re- ceivership ^"^ sale of, by receiver, power to give deed implied 199 confirmation of conveyance by court 199 ejectment for, receiver must obtain leave to bring 208 receiver of, can not maintain action of forcible entry and de- tainer in his own name 209 contrary doctrine recognized 210 1076 INDEX. REAL PROPERTY— Continued. Section distinction between actions by receiver concerning title, and con- cerning injury to or possession of real estate 221 action by receiver to set aside fraudulent conveyance made to defeat decree for alimony 221 to recover balance of purchase-money 223 assignment of, receiver's right of action under 244 loss to, remaining in owner's possession, who in fault 284 long acquiescence in situation of title, bar to receiver 295 of corporation, not divested by receiver pendente lite 302 vests in receiver on dissolution of corporation in New York 303 lien of judgment creditor on, as affected by receivership .. 349 of debtor, claimed by third party, courts averse to interfering by receiver on creditor's bill 416 debtor can not create trust in, to prejudice of creditors 417 when receiver appointed over, in behalf of creditors 418 in receiver's possession, regarded as in custody of court 422 of debtor, receiver takes subj ect to j udgment liens 424 when title vests in receiver 447 receivers over 553-638a principles on which the relief is granted 553-602fl jurisdiction well established but cautiously exercised .. 553 English doctrine denying receiver except in aid of equit- able title 554 distinction in cases of realty and personalty 554 not appointed as between conflicting claimants to pos- session 554 outstanding terms no additional ground for 554 not granted when remedy at law 555 devisee not entitled to, when he can obtain redress at law 555 • appointment does not affect title of either party 556 obj ect of the appointment 556 for whose benefit made 556 does not prevent statute of limitations from running .... 556 general rule denying receiver against defendant in pos- session under claim of title 557 when receiver refused pending appeal from judgment in ejectment 557 exceptions to the rule 558 probability of plaintiff prevailing 558 danger to rents and profits 558 refused when defendant claims legal and equitable title 559 refused when only ground is defendant's insolvency .... 559 effect of long acquiescence in defendant's possession . . . 560 not appointed when notice of lis pendens will prevent transfer pendente lite 561 not granted against possession of lessee 562 INDEX. 1077 REAL FROFERTY—Confinucd. . Section receivers over, principles on which relief is granted, danger to property must be shown 563 when refused in case of dissension in religious society. . 563 in possession, may be continued pending compromise ... 564 fraud in obtaining possession ground for 565 granted when plaintiff shows legal and equitable title, and defendant none 566 prevention of vexations litigation ground for 566 defendant's abuse of trust and insolvency ground for . . 566 receiver of rents and profits pending litigation in another state 566 when granted on bill by creditors to charge debtor's realty 567 in aid of incumbrancer, will not prejudice judgment creditors in possession 567 granted when plaintiff shows probable title and danger to rents 567 when granted to protect dower interests 568 when receiver may compel assignment of dower 568 for protection of heirs and devisees 568-572 granted to enforce trusts of will 569 when granted against heir-at-law in possession ... 569 when denied legatee under will 569 contest between heir and devisee, when receiver refused 570 when granted 570 when refused heirs on grantor's taking possession after life estate 571 opposition by heirs to administration, no ground for 571 when granted against tenant for life 572 devise to wife 572 settlement upon daughter 572 vendor seeking to rescind imprudent contract of sale not entitled to 573 when granted in behalf of annuitants 574 granted over clergyman's benefice 574 annuitant denied receiver when he can distrain 574 pending contest as to will 574 in actions of ejectment and to recover lands 575-577 not granted in absence of equitable grounds 575 granted to preserve rents and profits 576 stronger ground for, after verdict 577 granted pending certiorari from state to federal court 577 appointed over leasehold interests 578 landlord may re-enter without leave of court 581 assignee of lease not entitled to 579 1078 INDEX. REAL PROPERTY— Cow//«Hcrf. Section receivers over, principles on which relief is granted, insolvency of defendants no ground for receiver of house on leased ground 580 when defendant to be served with notice of motion to dis- charge 581 extending same receiver to subsequent applications .... 582, 583 new security required 582 when not done before answer 582 extension deemed new appointment 583 effect of, on rents 583 dissensions among trustees, when ground for 584 denial of trust not necessarily ground for 584 granted in aid of equitable incumbrances 585 to enforce rent-charge 585 not allowed in mechanic's lien suit 586 when granted in aid of proceedings in bankruptcy 587 conflicting claims to trust property ground for 588 nature of defendant's interest in realty 589 when refused over crops 590 when allowed 590 in cases of marriage settlements 591 difficulty in enforcing remedy to collect rents no ground for 592 acquiescence in defendant's possession a bar to 593 granted when property escheated to state 594 refused when defendant consents to pay rents into court 595 only party to cause may object to 596 remainder-man and tenants can not enjoin receiver from turning them out 596 how possession obtained by 597 loss through owner remaining in possession 597 appointed before answer in emergency 598 over corporation, title to realty not divested in limine 599 divested on dissolution 599 order should point out particular property 600 may be appointed over part of property 600 ordered to deliver funds to plaintiff obtaining final judgment 601 on termination of functions realty again subject to lien of j udgment 602 receiver allowed against plaintiff suing in forma pauperis. . . 602a tenants in common 603-608 courts averse to granting receiver 603 when refused 603 exclusion by co-tenant ground for 604 insolvency 604 receiver allowed over moiety 60S allowed in default of defendant giving security 605 equitable tenants in common. 60S INDEX. 1^^^ REAL VRO-PERTY-Continncd. ^^^^'^ tenants in common, allowed in case of colliery wo goldmine ^_ action for partition '/■'"■a notice to under-tenants not to pay rent to plamtiffs no , , oU» g'-^""^ ^"^r ..609-617 vendors and purchasers • when vendor entitled to receiver on bill for specific per- , ouy formance -^^ when vendee entitled insolvency of vendor unnecessary vendor entitled to, in suit to recover possession for non- 611 payment , . ^ when allowed purchaser on bill to perfect title o j^ when purchaser at sheriff's sale entitled to oli purchaser of gold mine at mortgage sale allowed receiver. .. 614 purchaser of colliery entitled to, on bill to set aside pur- ^^^ chase for fraud when receiver of mine discharged ° receiver should not carry on business oj not allowed over realty as against purchasers not parties. .. . 616 when receiver required to return purchase-money on an- nulling purchase Z' ['.MS^SSa functions of receiver right to rents g tenants required to attorn to right to rents in arrear • motion for tenants to attorn, when ordered to stand over. ... 6^U costs on • -„- eflfect of order on tenants to pay receiver o^J payment to third person right to distrain, no settled practice • • • "^ not allowed to distrain when plaintiff still proceeds at law 6Z3 must notify tenants of appointment before suit for rent W4 attachment for refusal to pay rent to • must be discharged before receiver can distrain, and 626 znce versa _ rights of third persons not determined on oZ/ not issued pending abatement of suit by death 627 effect of authorizing defendant to collect rents 628 not appealable ^ receiver should invest rents rights of claimants of who entitled to rents of corporate property receiver continued for collection of, until conveyances ex- 6ol ecuted ,.^2 should pay rent due landlord 1080 INDEX. REAL PROFERTY—Confmucd. Section functions of receiver, right to make repairs .... 180, 633 duty of, when waste committed 634 inj unction 634 may file bill to sell free from liens 635 purchaser at receiver's sale, rights of 636 what sufficient to see 636 purchaser not affected by errors 636 may enjoin use of premises for forbidden purposes 637 permission of court to lease premises 638 lease not binding on infant remainder-man 638 rent due third parties 638a dilapidations 638a receiver ordered to surrender to new trustees 704 RECEIVERS' CERTIFICATES, in cases of private corporations 312& in railway foreclosures 398c-398y unsupported by principle 398c not invalidated because bill is demurrable 398c sustained by authority 398c purposes for which issued 398^ preference as between different classes of certificates 398c/, 398; not commercial paper 398^ innocent purchasers not protected 398^ when bondholder estopped from questioning 398/ when not estopped 398/ sale subject to 398g when purchaser liable for 398/t case of Illinois Midland Railway 398/ priority as between, for compensation of receiver and that of trustee 398/ same as to counsel fees 398/ RECOGNIZANCE, usually required of receiver before entering on duties 118 two sureties required under English practice 118 of receiver alone, when allowed 119 may be filed nunc pro tunc 121 liability of sureties on 127-133 may be vacated as to one surety 127 practice on so vacating 127 on death of one surety on, new one required 128 liability on, when absolute 129 when action may be sustained on 129 suit on, after death of receiver 130 judgment on, enjoined after full amount due is paid by surety 131 INDEX. 1081 REDEMPTION, Section from receiver's sale, not allowed 199c REFERENCE. (See Master in Chancery.) REGISTER OF COURT, not allowed to appoint receiver 43 REHEARING, receiver may be appointed on 91 additional proof requisite on 91 may be allowed after appointment 92 when not granted in creditor's suit 92 RELATIONSHIP, effect of, in selecting receiver 67 as to removal 821 RELIGIOUS SOCIETY, dissension in, when receiver refused 563 REMAINDER-MAN, can not enjoin receiver from turning him out 596 infant, not bound by lease by receiver 638 REMEDY AT LAW, a bar to appointing receiver 10 defined 10 difficulty of, no ground for receiver 10, 592 when need not be exhausted 10 laches in resorting to, no ground for receiver 10 when no bar to injunction on behalf of receiver against tax.... 140a bar to receiver in aid of creditor of corporation 301 must be exhausted before receiver appointed on creditor's bill 403 must be pursued by receiver of debtor to recover property claimed by third persons 457 bars receiver over real property 555 REMOVAL, (See Discharge.) of receiver, for cause 820-831a power of court considered 820 distinction between, and "vacation of appointment" and "dis- charge" 820, note rests in discretion 821 relationship to parties, not ground for 821 when ground for, with other circumstances 821 when not ground for 821 want of notice of appointment of successor not ground for 821 not removed to make way for agents of parties 822 employment of counsel for parties not ground for 823 courts always open for 824 by vacating appointment 824 1082 INDEX. REMOVAL— Continued. Section of receiver, written notice of motion required 834 notice to every creditor unnecessary 824 decision on, not appealable 825 allowed pending motion for new trial 825 analogous to dissolution of inj unction 826 removed when equities of bill denied by answer 826 substitution by consent 827 removal of several and extending one 827 of receiver of bank who was shareholder and director 828 in creditor's suit, employment of debtor to collect not ground for 828 compelled to make restitution on 829 receiver not heard in opposition to 830 when defendants estopped from, by their own agreement.... 831 diligence necessary in application for 831a suit continued by successor 213 REMOVAL OF CAUSE, right to, of receiver of federal court 60&, 395c RENTS, (See Real Property.) receiver to collect, may be appointed after decree 110 receiver of, pending action for divorce 146 landlord can not distrain for, when goods have passed into re- ceiver's possession 156 receiver to collect, his duty to move for attachment in interfer- ing with 167 when party not liable for contempt in collecting 167 receiver may collect rents until removal, although cause is abated 185 action by receiver to recover, notice to tenant of appointment necessary 223 when receiver liable for 273 when not personally liable for 273a liability for stipulated, or reasonable, on adoption of lease of principal 273c due from firm, when receiver not liable for 281 loss of, solicitor acting as receiver without appointment liable for 284 of corporate property, right to, after receivership 351 vendor of lands to railway, when may distrain for 372 claim for, against railway when allowed preference 394b, 394J of debtor's building, receiver allowed on creditor's bill 417 from sub-tenants, when receiver directed to pay to landlord 470 receiver over, pending ej ectment 576 after verdict for recovery of lands 577 of leasehold interests 578 assignee of lease not entitled to 579 INDEX. 1083 RENTS — Continued. Section right to, when receiver extended to other applications 583 when cestui que trust entitled to receiver over 584 receiver over, not allowed in mechanic's lien suit 586 in aid of proceedings in bankruptcy 587 denied in case of marriage settlements 591 not granted because of difficulty in enforcing legal remedy 592 granted when property escheated to state 594 appointed before answer in emergency 598 in case of exclusion by tenant in common 604 receiver allowed over moiety 605 allowed in default of defendant giving security 605 receiver's right to 618 tenants compelled to attorn to 618 right to arrears 619 motion for tenants to attorn, when ordered to stand over. . . . 620 costs on 620 effect of order on tenants to pay to receiver 621 effect of payment to third person 621 right to distrain, practice unsettled 622 not allowed to distrain when plaintiff still proceeds at law 623 must notify tenants of appointment before bringing suit for 624 attachment against tenant for refusing to pay 625 must be discharged before receiver can distrain, and vice versa 626 rights of third persons not determined on 627 not issued pending abatement of suit by death 627 effect of permitting defendant to collect rents 628 receiver should invest rents 629 rights of claimants of 629 who entitled to rents of corporate property 630 receiver continued for collection of, until conveyances ex- ecuted 631 receiver should pay rent due landlord 632 of mortgaged premises, receiver of, not allowed when security adequate 642 of railway company 642 receiver of, refused when property already in custodia legis 642 refused when improvements destroyed by fire 642 allowed when security inadequate and mortgagor insolvent 643 mortgagor entitled to rents in receiver's hands to make up deficiency 643 express pledge of rents 643 when insolvency of mortgagor immaterial 643 1084 INDEX. RENTS— Co«/!»«rrf. Section of mortgaged premises, insurance and taxes 643 past-due rents 643 when entitled to unpaid rents 644 liability for waste of, by receiver 645 paid into court, mortgagor not entitled to, on receiver's discharge 656 when owner of equity of redemption entitled to, collected by receiver 657 receiver of, pending appeal 665o right to, as between different mortgagees 688, 689 when j unior mortgagee entitled to 688 prior mortgagee entitled to 688 contrary rule in Virginia 689 assigned to junior mortgagee, prior mortgagee can not have receiver of 690 receiver of, allowed on bill by junior mortgagee to foreclose and to compel prior mortgagee to exhaust other mortgage 691 receiver allowed over, on death of one trustee and refusal of another to act 694 when plaintiff liable to pay, of receivership premises 809o RENT CHARGE, receivers allowed in aid of c 585 REORGANIZATION COMMITTEE, expenses of, of railway 394&, note REPAIRS, by receiver, rule as to 180, 633 REPLEVIN, by receiver, will not lie when property seized under paramount lien 136 against receiver, enjoined when brought without leave 256 RIGHTS OF ACTION, (See Suits.) receiver succeeds to those of original party 201 not changed by appointment of receiver 204, 318 of receiver, when determined by statute 211 limited to state where appointed 239 of receiver of corporation 313-342a over national bank 360 in creditors' suits 453-^71o over partnerships 539 RINGS, receiver appointed over 432 INDEX. 1085 SALARY, (See Compensation of Receiver.) Section of public officer, receiver refused 22 of school-teacher 22 of clerk of court 22 receiver appointed without, security dispensed with 118 of corporate officers, allowed by receiver pro rata 336 when not allowed for period covered by receivership 336 SALE, application of proceeds should not be included in order of ap- pointment 100 set aside for undue haste 112 by sheriff, when purchaser not in contempt for refusing to sur- render possession to receiver 168 to receiver by himself individually 193, note "ty receivers 191-199^ set aside for fraud 191 for inadequate price 191 does not divest existing liens 191, 199o may be conducted by master in chancery or agent for receiver 191 court vested with power to sell when necessary 192 may be decreed though interests of parties not yet ascertained 192 though no petition therefor filed 192 sale of steamboat 192 receiver not allowed to purchase for his own benefit 193 the rule independent of question of fraud 194 receiver can derive no benefit from foreclosure sale 194 nor from j udicial sale 194 when sale set aside because of purchase by receiver 194 purchase of annuity by receiver set aside 194 order for, can not be assailed in collateral action 196 fraudulent action to set aside 196 to meet taxes, evidence should be clear 197 of personal property, discretion as to sale by bulk or in parcels 198 when set aside for undue haste 198 in bulk or parcels 198 private sale 198 irregular sale 198 want of notice of 198 order of, appealable 198 confirming, appealable 198 of real estate, power to give deed implied 199 confirmation of conveyance by the court 199 subj ect to incumbrances and liens 199a title of third person not divested by 199a of real estate of partnership 199a 1086 INDEX. SALE— Continued. Section by receivers, subj ect to dower interest 199o caveat emptor 1996 confirmation unnecessary 199^ when not refused 199^ what amounts to 199^- j^Q^e no redemption from igg^ fraudulent sale by receiver 199j must take place at time designated by court 199^ of corporate property does not need corporate seal 338 not set aside because applied for by creditor who was also judge 338 purchaser acquires no right of action against former officer 356 when shareholder estopped from questioning order of sale 356 by sheriff, when subject to receiver's sale 423 when prior to receiver's sale 424 when receiver directed to stay 429 by receiver, not ordered pending appeal as to jurisdiction 543 SAVINGS BANK. (See Bank.) SECRETS, concerning manufacture, not disclosed to receiver 36 SECURITY, (See Bond, Recognizance, Sureties.) usually required of receiver in advance 118 of receiver alone, when allowed 119 may be dispensed with by court 120 dispensed with when same receiver extended to different cred- itors' suits 120 failure to give, receiver acquires no title 121 omission to require in final decree, effect of 122 additional, required when same receiver extended over real estate 123 assignment of mortgage as, held good 125 held by creditor of deceased, receiver not entitled to 157 w^hen defendant allowed to give, in lieu of receiver and injunction 478 SELECTION, of receiver 63_81g importance attached to 53 reference to master under English practice 63 same under New York chancery practice 63 by master, courts averse to interfering with 64 grounds of interference 64 by court below, rests in judicial discretion 65 rarely interfered with by appellate court 65 grounds of interference with 65 may be interfered with to prevent injury and expense.. 66 INDEX. 1087 SELECTION— Con^mM^rf. Section of receiver, effect of relationship 67 interest with defendant 68 solicitor eligible 68 eligibility of one of plaintiffs 68 person unfamiliar with the property not eligible 68 distant residence considered as an objection 69 solicitor, under commission of lunacy, ineligible 70 in the cause, ineligible 70 master in chancery ineligible 70 barrister eligible 70 member of parliament 70 peer ineligible 70 member of reorganization committee 70 creditor of insolvent 70, 72 party to the cause 70 clerk of court not necessarily receiver 71 clerk and master 71 of receiver over corporation, delicacy of 72 officer ineligible 72 relaxation of rule 72 eligible by statute 72 stockholder 72 another corporation eligible 73 of trustees, generally ineligible 74 when trustee and executor eligible 74 next friend of infant ineligible 75 mortgagee and trustee eligible 76 in partnership cases, administrator of deceased partner eligible 78 partner eligible 540 nomination in bill 79 nomination by consent of parties 79 stockholder and director of plaintiff corporation as receiver 80 mortgagee of West India estates eligible 81 objection to, must be made in apt time 81a how waived 81a SEQUESTRATION, receivership considered as a 5 of effects of corporation, not done under general equity powers 288 under statute, rights of creditors 297 right of j udgment creditors to 298 SET-OFF. receiver not allowed to set off personal claim 178 to suit on note by receiver of bank 247 to suit by receiver of insurance company on premium note 247 in actions by receivers of insolvent corporations 248 accruing after receiver's appointment, not allowed 249 1088 INDEX. SET-OFF— Cont!nued. _ Section not allowed in suit by receivers of corporation to recover illegal dividends ^^^ counter-claim not allowed for amount illegally paid for notes 251 for rent due from firm, not allowed in suit by receiver of firm 253 when allowed to suits by receivers of corporations 333 not allowed to suit by receiver to recover illegal dividends 333 against receivers of national banks 364a defendant can not set off judgment against receiver 464 when receiver's compensation not subj ect to 796 SHAREHOLDERS, (See Corporations.) 77 of corporation as its receiver '^ of plaintiff corporation as receiver 80 when receiver not appointed on behalf of 29^ misconduct of, as ground for receiver 293 receivers for protection of, cautiously granted 294 not entitled to relief after parting with interest 294 acquiescence or laches of, a bar to receiver 295 in behalf of minority, when receiver not appointed 295o when receiver appointed 295& action by, against directors 295b when demand on receiver to sue is unnecessary. 29Sb demand on officers and directors to proceed 295c when demand unnecessary 295c when refused receiver as to new issue of stock 296 of foreign corporation, when allowed receiver in New York 306 suit against, for subscription, not barred by appointing receiver 309 individual liability ^^''^ enforcement of, in foreign state 317?; the same ; receiver as quasi-assignee • • • 317c suit against, maintained by receiver of corporation for unpaid subscriptions "^^^ defenses to such actions 3_4o will not be enj oined 325 fraud no defense to, when all parties participated 325 •when estopped from questioning receiver's appointment or order of sale 356 of national bank, receiver may enforce liability of ^ 360a may have receiver over railroad, on bill to set aside void lease 366 SHERIFF, receiver compared with ^ relative title and possession as between receiver and 136, 138 not allowed to enjoin receiver from suing for unauthorized levy 141 when levy and sale of property in receiver's possession not a contempt of court ^71 receiver may move for judgment against, for money collected 228 INDEX. 1089 SHERIFF— Co7itinned. Section sale by, when purchaser at receiver's sale takes priority 423 when purchaser takes priority over receiver's sale 424 when purchaser granted receiver and injunction 613 levy by, when receiver's title subject to 440 when a contempt of court 443 when receiver can not recover value of property 469 SLAVES, in receiver's possession, defendant not responsible for 160 SOLDIERS, when receiver refused over mortgaged property of 653 SOLICITOR, eligible as receiver 68 under commission of lunacy, ineligible 70 in the cause, ineligible 70 payment to, by surety, when insufficient 132 assuming to act as receiver, liable for loss in collection of rents 284 SPECIFIC PERFORMANCE, vendor allowed receiver on bill for 609 vendee allowed receiver on bill for 610 insolvency of vendor unnecessary 610 STATUTE OF LIMITATIONS, as against receiver 126o possession of receiver in aid of, defendant in ejectment can not rely on 134 operation of, not prevented by receivership 135, 184, 556 payment by receiver can not take case out of 184 effect of appointment to prevent statute from running in favor of stranger 184 STATUTES, enlarging jurisdiction of equity over corporations 287, 288 construction of 289 STEAMBOAT, sale of, by receiver 192 when may be operated by receiver 481 STOCKHOLDER. (See Corporations, Shareholders.) STRANGER, not allowed a receiver 12 can not nominate receiver 12 receiver not appointed for benefit of 13 may apply to court pro inter esse suo 13 can not object to receiver employing counsel of parties 217 Receivers — 69. 1090 INDEX. SUBSCRIPTIONS, Section to fund, receiver granted 35 to capital stock, must be enforced by receiver according to ex- isting remedies 207 of insurance company, receiver may recover 212 unpaid, receiver's right of action to enforce 224 action against shareholder for, not barred by appointing receiver 309 may be enforced by receiver of corporation 324 shareholder not entitled to injunction against 325 fraud no defense when all parties participated 325 by receiver of railway, must be by action at law 394 SUBSTITUTION, of receiver in lieu of plaintiff on terms 214 what not a 214 SUCCESSOR, to receiver, when not appointed at instance of defendant 39^ suits to be continued by 213 not bound by covenant of former receiver 273& fund liable for tort of receiver's agent although, appointed 286o liability of receiver enforced against 397fe want of notice of appointment of, not ground for removal 821 SUIT, must be pending to warrant receiver 17 by receiver, failure to execute bond ground of nonsuit 121 on receiver's bond, when right of action accrues 129 independent, against surety on receiver's bond 129a against receiver, leave of court necessary 139 may be enjoined for want of leave 140 independent by receiver to recover property in possession of stranger 145, 149 by receivers, principles governing 200-230 in some states regulated by statute 200 regulated by court 200 receiver succeeds to rights of action of original party 201 what receiver must allege and show 201 must show leave of court 201 can not be maintained on obligation paid to obligee 201 will lie on note of insolvent 201 by receiver against himself individually 201, note appointment of receiver over corporation suspends its right of action 201, note courts exercise strict control as to bringing 202 if unauthorized, receiver may be directed to discontinue 202 when regularity of appointment deemed conclusive in 203 rights of action not changed by appointment of receiver 204 INDEX. 1091 sun— Continued. Section by receivers, can not be maintained when not maintainable by original party 204 same defenses available as in suits by original parties 205 on note for subscription to capital stock 205 judgment in action by, bar to subsequent action 206 freedom of action by receiver in management of case 207 appeal by receiver from adverse decision, not evidence of bad faith 207 receiver must pursue existing remedies 207 leave necessary before bringing 208 the rule applied to actions of ejectment 208 to actions for condemnation 208 to actions to enforce stockholder's liability 208 leave may be conditional 208 on appeal bond, when receiver's duty to sue without leave 208 receiver must sue in name of original party in whose favor action accrued 209 the rule applied to receiver of corporation 209 of partnership 209 over real estate 209 contrary rule in some states, receiver allowed to sue in his own name 210 when allowed in name of receiver of partnership 210 of bank 210 to recover purchase price 210 allowed in name of receiver under statutes 211 when receiver's right of action determined by statute 212 trover by receiver of bank for conversion of bonds 212 suits by receiver of insurance company 212 on death of receiver, successor substituted 213 practice on 213 on removal of receiver, terms imposed on successor 214 what not a substitution 214 foreclosure of mortgage by successors of original receivers 215 employment of counsel by receivers, should not employ coun- sel of parties 216 limitation upon the rule 217 receiver may maintain action of detinue 218 judgment in favor of receiver, bar to subsequent suit for same cause of action 219 effect of amendment changing character of plaintiff from administrator to receiver 220 distinction between suits concerning title, and concerning injuries to or possession of real estate 221 to set aside fraudulent conveyance made to defeat decree for alimony 221 1092 INDEX. SUIT— Continued. Section by receivers, to recover usurious payments 222 rents, notice to tenant necessary 223 balance of purchase-money 223 to enforce unpaid subscription 224 when defendant can not object to irregularities in appoint- ment 225 of corporation, latter not proper party plaintiff 225 when right of action relates back to beginning of princi- pal's title 226 failure to execute bond, ground for nonsuit 227 when receiver entitled to move for judgment against sheriff for money collected 228 liability of receiver for costs 229 receiver may garnish plaintiff in suit in which he was ap- pointed 230 pleadings and proofs in suits by receivers 231-238 receiver must allege his authority in traversable terms 231 stringency of former rule as to particulars required to be alleged 232 now sufficient to allege appointment in general terms 233 receiver should state equities of judgment creditors whom he represents 234 when defendant estopped from denying receiver's right to sue in that capacity 235 in actions by receivers on premium notes 236 of national banks 237 degree of proof required at trial 238 receiver need not produce transcript of all proceedings in which he was appointed 238 suits by receivers in foreign courts 239-244a receiver has no extraterritorial powers 239 rights of action limited to his own state 239 illustrations of rule denying receiver's right of action in another state 240 suits allowed in another state on principles of comity 241 tendency toward more liberal doctrine 241 action maintainable when receiver has legal title or is quasi- assignee 241a receiver of corporation allowed to prove debt in bankruptcy in another state 242 mortgage given to receivers of another state, may be fore- closed in state where premises are located 243 assignment by defendant, right of action under 244 designation of plaintiff as receiver, when a descriptio personcE 244 when allowed to sue for property in another state 244 INDEX. 1093 SUIT — Continued. Section suits by receivers, jurisdiction of foreign court, when not pre- sumed 244^ defenses to suits by receivers 24S-253a same defenses available as if action were brought by orig- inal party 245 rule applied to action by receiver of bank against depositor 245 want of consideration of note and fraud, when not available 245 set-offs, the general rule 247 what may be set off in suit on notes by receiver of bank 247 in suit by receiver on premium notes 247 burden of proof 247 assignment, effect of 247 in actions by receivers of insolvent corporations 248 demands accruing after receiver's appointment can not be set off 249 counter-claim allowed for services rendered receiver 249 not allowed in suit by receivers of corporation to recover illegal dividends 250 in suit to recover notes illegally transferred, counter- claim not allowed for amount paid for notes 251 judgment against receiver, can not be set off in suit by receiver in favor of creditors 252 suit by receiver of partnership against purchaser, set- off for rent to firm not allowed 253 notes not attached in another state 253a suits against receivers 254-268a leave of court necessary before bringing 254 must be averred 254 exceptions to rule 254 conflict of authority as to whether leave jurisdictional 254a presumption as to leave 254a want of leave, availability on appeal 254o in collateral proceeding ^ 254o court may fix forum 254a dismissal of action begun without leave 254/? usual practice by petition 254b court may grant leave to sue 2546 trial by jury ,2546 practice on petitions of intervention 254c leave to sue receiver may be revoked 254d may be conditional 254d when not revoked 254d court may permit action against receiver for injuries sus- tained by his negligence 255 suit against receiver of railway, no defense that he is a public officer 255 1094 INDEX. SUIT— Covtinued. Section suits against receivers, receivers not personally liable 255 may be enjoined when brought without leave 256 suit for trespass not enj oined 257 not enjoined because matters have been passed upon in other proceedings 257 receiver of debtor need not be joined as defendant in action against debtor 258 but must be made party before he can take action 258 must file plea 258 as party to appeal 258 to foreclosure suit 259 receivers of corporation, joinder of as defendants 260 appearance of receiver a waiver of want of leave to bring suit 261 courts will not enjoin their own receivers 262 relief granted in receivership proceeding 262 mandatory injunction against receiver 262 receiver may bring bill of interpleader against different claimants proceedings against him 263 receivers not allowed to waive any defense 264 when receiver not required to make particular defense 264 when receiver may appeal from orders in receivership cause 264a can not appeal from administrative orders 264^ nor from order of distribution 2fAb costs against receiver personally on unauthorized appeal.... 264b leave to sue receiver, what notice necessary 265 to defend ejectment against receiver 266 receiver not entitled to costs when he has not obtained leave to defend 267 discharge of receiver, effect of 268 when receiver concluded by judgment 268a by receivers of corporations 316-333 against receiver of corporation to collect tax 340 by receiver of national bank, what must be alleged 361 what must be proven 361 against receivers of railways 395-398& independent, by receiver for property of debtor claimed by third persons 457 SUPERSEDEAS, not a matter of right 29 effect of, on receiver's functions 29, 190 on receiver's possession 136 should restore property to defendant 190 disobedience of, by receiver a contempt 190 pending appeal with, court may make administrative orders . 190a INDEX. 1095 Section SUPPLEMENTARY PROCEEDINGS, (See Judgment Creditors.) under New York code, receivers in 401 no objection that property is claimed by adverse claimants 413 not appointed to attack assignment which may be set aside by creditor 414 assignment to receiver unnecessary 447 title vests in receiver on appointment 447 rights of action of receiver 454 SUPPLIES, furnished railway, creditors not entitled to priority 379 SUPREME COURTS, when may appoint receivers 41 SUPREME COURT OF JUDICATURE ACT, receivers under 23 in aid of j udgment creditors 439a mortgagees and debenture holders 652a SURETIES, of receiver, two required under English practice 118 approval of 126 may be non-residents 126 liability of 127-133C held strictly to 127 bond may be vacated as to one 127 practice on so vacating 127 death of one, new one required 128 when liability becomes absolute 129 when action can be maintained against 129 independent action on bond against 129a suit against, on death of receiver 130 ■when concluded by order on receiver 130a not liable for default prior to bond 130a liability for interest 131 when relieved from paying interest 131 liable to costs of attachment against receiver for not ac- counting 131 surety protected by injunction after paying full amount due 131 payment by surety to solicitor, when not sufficient 132 right of surety to be reimbursed out of balance in receiver's hands 133 when ordered to refund 133 remedy in equity against 133 of clerk of court appointed receiver 133a liability of, to creditors not named in bond 133a not liable for violation of duties beyond scope of ap- pointment 133& 1096 INDEX. SURETIES — Continued. Section of receiver, when liable although bill is afterwards dismissed 133c arrangement with, for control of funds 274 of administrator, refused receiver 721 SURVEYOR. (See Land Surveyor.) T. TAXES, when receiver refused over 32 lien of, not affected by appointment of receiver 138 how enforced against receiver 140a when receiver may enjoin 140a remedy at law not a bar 140a liability of receiver for 140a, note sale by receiver for pasmient of 197 when receiver can not enjoin 318 against railroad company in hands of receiver 370&, 3946 taxes on leased line, when allowed preference in railway re- ceivership 394m municipal, receiver refused for collection of 403o on mortgaged property, non-payment ground for receiver 672 when receiver may enjoin collection of 753 unauthorized payment of, when allowed in account 798 payment by receiver gllo TENANTS, (See Rents.) enjoined from bringing trespass or replevin against receiver without leave of court 256 can not enjoin receiver from turning out of possession 596 compelled to attorn to receiver 618 when receiver authorized to relieve 731 TENANTS IN COMMON, of personalty, courts averse to appointing receiver 20 of realty, receivers as between 603-608 courts averse to interference 603 when receiver denied 603 exclusion by co-tenant, ground for 604 insolvency as ground for 604 may be allowed over moiety 605 inj unction allowed 605 allowed in default of defendant giving security 605 equitable tenants in common 605 allowed in case of colliery 606 actions for partition 607 notice to under-tenants not to pay rents to co-tenants 608 INDEX. 1097 TENANT FOR LIFE, Section receiver granted against 572 THEATER, receiver not appointed to manage 36 partnership in, when receiver appointed 513 TIME, of appointment, formerly after answer 103 modem practice before answer 103 grounds of interference before 104, 105 modern English practice adopted in this country 105 strong ground required for receiver before answer 106 not dated back by relation 108 may be made at final hearing 109 the same, although bill does not pray receiver 109 may be made after final decree 1 10 TITLE, not changed by appointment of receiver 5 dispute as to, receiver reluctantly allowed 11 of receiver of state court, as affected by subsequent bankruptcy.. 52 receiver does not acquire, until bond executed 121 vests back to original order of appointment 136 does not take effect back to beginning of action 136 of receiver, not divested by order of court when he is not a party 161 not determined on proceedings for contempt 172 to real estate of corporation, not divested by receiver pendente lite 302 vests in receiver on dissolution of corporation 303 of receiver in creditors' suits 440-452 subject to prior liens 440 not better than that of debtor 440 takes no title to exempted property 441 exemption extends to insurance 442 effect of assignment as vesting 443 what passes to receiver under assignment 444 right of action for tort does not pass 444 when debtors compelled to make assignment 446 receiver acquires title to debtor's property under New York code by virtue of appointment 447 superior to that of judgment creditor subsequently levying 448 when not defeated by delay in taking possession 448 choses in action as between receiver and purchaser 449 trust fund, when receiver not entitled to 450 takes ntle to estate by curtesy 451 acquires no title when debtor dies before appointment 452 of third parties, not determined on summary application 457 to real property, not affected by appointment of receiver 556 receiver not allowed in contest concerning 557 1098 INDEX. TOLLS, Section of bridge company, judgment creditor allowed receiver over .. 300 of common carrier, receiver over 380 different mortgagees of, right to receiver as between 382, 385 when not allowed preference ..383, 385 TORT, independent suit for, against receiver 254& joinder of parties in 254o liability of receiver for ^'' damages for, of receiver's agents, when a charge on fund 286a right of action for, does not pass to receiver 444 TRESPASS, action of, against receiver, enjoined when brought without leave 256 when receiver liable in, for taking mortgaged property 277 TROVER, can not be maintained by receiver of partnership in his own name 209 by receiver of bank, for conversion of bonds 212 for promissory note, by receiver of corporation 316 TRUST DEED, securing railroad bondholders, prior jurisdiction of United States courts maintained 54 securing illegal bank-notes, receiver on bill to set aside 293 TRUSTEES, (See Trusts.) distinguished from receiver 1 eligibility of, as receivers 74-76 generally ineligible '^ when eligible '4 mortgagee, also trustee, eligible 76 in bankruptcy, incompatible with receiver of debtor '^^ receiver may be appointed against, after decree HO beyond jurisdiction of court, when receiver allowed without • 117 notice ^^' in nature of receiver, can not sue in his own name 209 may be sued without leave of court 254 under assignment for creditors, refusal to act ground for re- 412 ceiver ^^^ mismanagement of, receiver granted 412 of foreign mining property, when receiver granted against 503 of religious society, receiver refused over real estate in posses- sion of 5"^ dissensions among, ground for receiver to secure rents 584 death of, or refusal to act, ground for receiver 694 bad habits of, not alone sufficient 695 action for removal of, receiver allowed pendente lite 697 fraudulent conveyance by, receiver allowed 699 INDEX. 1099 TRUSTEES— Continued. Section appointment of new, receiver ordered to surrender to 704 pension held by, receiver appointed 705 TRUST FUND, of insurance company, mismanagement ground for receiver.... 304 when receiver of debtor not entitled to 450 TRUSTS, receivers in cases of 692-736 principles governing the relief 692-705 referred to general jurisdiction of equity over trusts 692 receiver only appointed against trustee for good cause 693 death of one trustee and refusal of another to act, ground for gg4 bad habits of trustee not alone sufficient 695 vested in state officers by law, equity averse to receiver 696 principles governing, receiver allowed pending action for removal of trustee 597 fraud, misconduct, breach of trust 697 mingling trust funds with private funds, when not ground for g9g granted on bill by cestui que trust to set aside convey- ance by trustee for fraud 599 when devisee allowed receiver as against husband of deceased wife 7Qg refused in case of trustee under contract for public works 702 appointment of trustee as receiver not usually allowed 703 when allowed 7Q3 receiver ordered to transfer estate to new trustees when appointed 704 receiver allowed over pension paid by trustee 705 receivers over executors and administrators 706-724 courts averse to granting 7Qg relief based on doctrine of quia timet 706 not allowed on slight ground [ " " * yQ-j on information and belief yQy waste and abuse of trust, ground for [ [ 708 allowed before answer 7qo poverty no ground for 7Q9 insolvency and misconduct ground for 710 bankruptcy ground for 7I j removal from state, ground for 7J2 allowed in England though estate in foreign country 713 executors in foreign country 713 allowed pending controversy concerning probate 714 judgment creditors, when allowed receiver against 715 when denied receiver 71g 1100 INDEX. TRUSTS— Continued. Section receivers over executors and administrators, not allowed to interfere with administration 716 receiver over, in personal capacity, not entitled to rents in representative capacity 717 death and refusal to act, ground for 718 misunderstanding between, not ground for 718 allowed when plaintiff equitably interested in realty with deceased 719 court will not examine executor's account on application for 720 surety of administrator denied receiver against 721 allowed against administrator in behalf of ward 722 on removal of receiver executors again ordered to act 723 appointing receiver does not remove executor 724 receivers over estates of infants 725-732 relief based on doctrine of trusts 725 granted on mismanagement of estate by husband of ex- ecutrix 725 granted when executor has absconded 726 refusal of trustees to act, not granted on refusal of one of several 727 granted on refusal of one of two 727 granted over goods in possession of mortgagee 728 eligibility of receiver, next friend ineligible 729 trustee and executor ineligible 729 when eligible 729 liability of receiver for interest on funds of 730 when authorized to relieve poor tenants 731 not discharged on one of two infants attaining majority 732 receivers over estates of lunatics 733-736 when appointed 733 required to surrender to administrator 733 relief discretionary 734 refused in case of rival claimants 734 solicitor ineligible as 735 may be called to account 736 reference to master to ascertain condition of estate 736 TUNNEL, receiver for management of, between railways 368 TURNPIKE COMPANY, receiver over tolls of 382 as between different mortgagees 385 U. UNFAIR COMPETITION, when receiver may enj oin 753 INDEX. 1101 UNITED STATES COURTS, (See Courts.) Section powers of, compared with state courts 50-62a retain jurisdiction if first acquired 50 jurisdiction in bankruptcy, subordinate to prior receiver in state courts 51 receiver of, when guilty of contempt in interfering with receiver of state court , 51 usually recognize prior jurisdiction of state courts 52 exclusive jurisdiction asserted in proceedings against insolvent corporation 53 foreclosure of railroad trust deed in, when jurisdiction exclusive 54 will not entertain bill for account against receiver of state court 55 conflict between United States and state courts ground for re- ceiver 58 receiver of, beyond control of state court 59 action against, in state court 60 action by, when maintainable in federal court regardless of citizenship and amount 60a action against, when removable regardless of citizenship and amount 60b receiver of state court not granted writ of assistance against 61 no greater rights of action than receiver of state courts . . 62 Supreme Court of United States, power to review decision of state court 62a over railway, judgment against, not enforcible by state court 397 on creditor's bill, can not sue in another federal court 471 USURY, suit by receiver to recover 222 receiver of corporation can not plead, when corporation could not 315 defense of, in case of receiver in foreclosure suit 664 V. VACANCY, application to supply, may be made in chambers 96 VACATION OF APPOINTMENT, distinction between, and "removaJ" and "discharge" 820, note VENDEE. (See Purchaser, Vendor.) VENDOR, of real estate, denied receiver in action to rescind contract 573 receivers as between vendors and purchasers 609-617 when vendor entitled to, on bill for specific performance . . 609 when vendee entitled to 610 when vendor entitled to, in suit to recover possession for non-payment 611 1102 INDEX. VERIFICATION, Section on information and belief, when insufficient 89 may be waived 89 VESSEL, lien on freight and earnings of, receiver to protect 408 exclusion from profits in, ground for receiver 528 VOUCHERS, receiver must present, with account 798 W. WAGES, of receiver's employees, liability of plaintiff for 389a revision of, by court 393& when preferred 312c, 394d WARD, allowed receiver against guardian 722 WASTE, as ground for receiver 4, 9, 11 duty of receiver on commission of 634 inj unction against 634 loss by, of receiver, when borne by plaintiff 645 by executor, ground for receiver 708 WHARFAGE, in front of mills, receiver entitled to 158 WIDOW. (See Dower.) WIFE. (See Husband.) WILL, (See Devisee, Heirs-at-Law.) receiver pending contest over 46 action to enforce trusts of, receiver appointed after decree 110 interest of devisee under, receiver can not reach by motion 466 when receiver appointed over realty in action to enforce trust of 569 litigation to revoke probate of, not ground for receiver 701 WRIT OF ASSISTANCE, not granted to receiver of state court against prior receiver of United States court 61 not granted to recover property in possession of stranger under claim of title 149 UC SOUTHERN REGIONAL LIBRARY FACILITY AA 000 820 127 9 UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. AUG 1 3 1975 I Law Library Fi^U FtB u 4 1993 »rig § 1978 l&w Library Rec'd AUG 311978 APR 1 h Jbo^ suffer ^'17-^7 Law Library Rec'di APR ^ UiSu Form L9-Series 4939 '"-^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^H '^^^^^^^^^^^^^^^^^^^^H ' ^^^I^I^H ,^j^^^^^^^^^^^^^£■£^'_«i^^^^2*A';^^•'^*' ''V^^^W ^^^^^H ■ ^^^^^^^■1. 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