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Entries,' we shall hardly fail to observe that the protection which is still given when a descent has been cast is given very grudgingly; every sort of excuse seems accepted for allowing 'him that right hath' to enter upon what is his own. The rule which protects the heir looks as if it were being pared to the quick. It has become an isolated anomaly; that it did not disappear altogether may be in great measure due to Littleton's genius; a man of his ability had it in his power to stereotype the law at an evil moment. Then, as already said, Parliament came to the rescue and the tolling of an entry became an anomaly, and in actual practice a rare anomaly; but it was not until 1833 that the long experiment, the experiment of Henry Fitz Empress, was brought to a formal and final end. Practically for the last three hundred years and more, theoretically as well as practically for the last fifty years and more, we have had no action in which an ejected possessor could recover possession from the owner who ejected him: certainly this is a fact which deserves the consideration of all who are troubled with theories of possession 1.

F. W. MAITLAND.

Since this article was in print, Mr. H. W. Elphinstone has suggested that the curious rule of Norman law which makes the last harvest a term of limitation is very intelligible if a system of common fields and common agriculture was prevalent: it is only at harvest time that an owner does any act which manifests an exclusive ownership.

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IN

RAILWAY MORTGAGES AND RECEIVER'S DEBTS
IN THE UNITED STATES.

N his preface to a work which is destined to be of high authority in the United States, and of interest to all investors in American railway securities, the author says, 'The law of Receivers is largely the growth of the last five-and-twenty years, and is moreover essentially American in its character and characteristics 1.' Had this remark been made concerning the chapter on Receiver's Certificates only, it would have been even less subject to exception than it is, for without doubt it is chiefly in the courts of that country, both State and Federal, that the once narrow rule which permitted limited expenditures for the care of the estate by a mortgagee in possession, or by a court, acting at the instance of a creditor, has been so expanded, that at the present time the holders of bonds of railway companies situated in those jurisdictions there, where the common-law title of a mortgagee and his right to possession after default have been superseded by the more modern notions, according to which he has merely an equitable lien upon the property in the nature of a chattel interest, are frequently obliged to incur an expenditure pending a foreclosure and sale wholly out of proportion to the benefits which have accrued to them from their investment.

In Mr. Beach's work he has written upon this subject with necessary conciseness, and it is proposed here to consider with more detail those cases in which property in the hands of a Receiver of a railway appointed at the instance of a bondholder, can be charged with the payment of claims of third persons, and to what extent the power of a Court of Equity can be exercised in this regard.

it.

Generally speaking, all expenses which must be necessarily incurred for the conservation of the property will be charged upon Among them are fees of the receiver and his counsel, amounts laid out for repairs, or for betterments, when these are necessary; when the property consists in part of a business, payments for rentals, salaries of assistants, tools, office expenses-all these will be allowed, provided the Receiver has obtained sufficient general or specific authority from the court for the outlay. Such expenses impose an equitable lien upon the estate which, being incurred in

1 Commentaries on the Law of Receivers. By Charles Fisk Beach, jr. New York: 1887.

preserving the property, will in certain cases be enforced as paramount to all others.

The theory upon which this rule is based is stated by Lord Justice Turner1 to be that the Court represents the whole estate, and stands in the position of a trustee of it, and the person placed in charge is the paid agent of the Court to manage the estate in its hands. The moneys due him are moneys due to the Court itself, and when the Court has in its hands moneys belonging to the estate, on account of which it has made payments, it must have the right to repay itself its advances out of these moneys. This right, he says, has priority over the costs of suit even, for as to a fund in the hands of a trustee his expenses must be the first charge. The most frequent illustration of this practice is that afforded by the American cases of railway administration through a receiver, and the incidental charge upon the property for the payment of receiver's debts, usually evidenced by certificates. A receiver's certificate is a promise to pay, out of the proceeds of the estate, and usually contains a covenant that the charge upon the estate is a first lien, paramount to all others, together with a reference to the decree which has authorised the issue and created the preference. Such certificates are not evidence of a debt of the railway corporation, but of the receiver solely, and the Court is pledged to devote the property in its possession or the proceeds, when it is disposed of, to their payment. This results from the fact that they are but a device for appropriating in advance a portion of the property, in order to enable the Court to save the remainder from waste.

The cases in which these preferential liens have been created are, first, those in which the claims of the creditors at large against the owner of the estate all stood upon an equal footing, there being no contract for security in favour of any creditor over another; and, second, cases where some contractual obligation, in the nature of a lien upon the property sought to be charged, was created before the debts arose for which the certificates were issued. These contractual obligations, the parties to which were the railway company, upon the one hand, and, upon the other, third parties, who often were wholly unconnected with the litigation, have usually taken the form of mortgages or trust deeds conveying both the railway property and its earnings to secure the payment of bonds issued by the company, and it is in reliance upon the lien created by the mortgage, which may at the time be paramount to all others, that the bonds are purchased.

It may again be observed that the debts evidenced by a receiver's certificate are, like those spoken of by Lord Justice Turner, debts of 1 Morrison v. Morrison, 7 De G. M. & G. 226.

the receiver in his official capacity-that is to say, as an officer of the Court, and consequently are the obligations of the Court itself. In liquidating past due debts, or in creating new ones, by the issue of certificates, the Court can only act by virtue of the powers of conservation and administration to which reference has already been made. In the former of the two cases mentioned, where no contractual obligation will be dishonoured in their exercise, these powers are limited only by the exigencies of the situation. In the second case, the circumstance that the creation of a new lien in favour of a certificate holder, commits the Court to the disaffirmance of a prior obligation, leads to the inquiry, Whence is such power derived, and what, if any, are its limits? Although this subject, of the implied breach of contract by the aid of the Court, may not at first appear to be involved in a discussion of the administration of the estate, yet such a result may follow directly upon the principle adopted for the distribution of the proceeds as between the first lien holders and the new class of creditors.

We may notice further, as a preliminary question, the difference between those debts which find their first and only recognition in the final decree, when the estate is distributed, and those which are evidenced by the certificates. The former may include the expenses of the suit, together with disputed claims against the property, which are established by the decree itself. In the latter are included debts existing against the estate at the time the receiver took possession, the payment of which he has been directed by the Court to assume, because otherwise he might be hampered in carrying on his duties (as an illustration of which may be mentioned past due balances upon traffic agreements with other companies which are continued in force by the receiver), and debts incurred by him. which the current earnings have not been sufficient to discharge. Obligations incurred for the purchase of supplies, such as new rails, are an illustration of these. The essential distinction between these two classes of debts is worthy of notice in another view. In the former case no action of the Court initiated by itself has increased the charges upon the estate; in the latter, the Court becoming a borrower of money has carried on its administration upon credit, with the result that having been compelled to rely upon individuals for the conduct of details, it has too often found that its delegation of power did not result beneficially to the parties concerned to the bondholders, because the money borrowed or forborne must be first paid out of the proceeds of the sale; and to the corporation, because the benefits to its estate from the borrowing are by no means to be measured by the debt incurred, part of which may have been used for current expenses; and though part may

have been laid out in permanent improvements, yet at a forced sale the difficulty of realizing the amount so invested is manifest. Thus the principal of the debt has accumulated, however slightly the actual value of the property may have been enhanced.

The habit into which courts have fallen of imposing these forced loans upon the property of railroad companies is without doubt the product of an unbusinesslike system of corporate management, of which so many examples are found in America, where speculative methods upon the one hand are joined to a limited earning capacity upon the other, due to competition or to lack of patronage; and where extravagance in the creation of a bonded debt has entailed a burden far in excess of the income of the company. The inevitable result of this is a default in the payment of interest, but not until every available asset has been appropriated in a vain attempt to postpone it: so that when a court is called upon to intervene it happens in nine cases out of ten that no capital is found in the company's treasury with which to meet current engagements or to carry on the enterprise.

Under these circumstances two alternatives are presented for adoption1. One is the old method usually applied to banking, insurance, and manufacturing companies, of shutting down and stopping by injunction all operations and proceedings, taking possession of the property in the condition it is found at the instant of stoppage, and selling it for what it will bring at auction. The other is to give the receiver power to continue the ordinary operations of the corporation, to run trains of cars, to keep the tracks, bridges, and other property in repair, so as to save them from destruction, and as soon as the interest of all persons having any title to or claim upon the corpus of the estate will allow, to dispose of it to the best advantage for all, having due regard to the rights of those who have priority of claim.

Notwithstanding that an eminent judge of the Sixth Circuit has declared in an Ohio case, 'That it is not a part of the duty of a court to run a railroad 2,' yet doubtless no Court of Equity would consider that its duty either to the company or its creditors or to the public permitted a resort to the former alternative. Yet it is often a question whether that course, if followed, would not have been the wiser If in the famous case of the reorganisation of the West Shore Railroad Company the receivers had not continued to operate the road, the bondholders and other creditors would have been saved from an additional liability, for a deficiency in earnings over actual running expenses of a million dollars or more in a single year, which was met by the issue of certificates. But as a choice of the

one.

1 Barton v. Barbour, 104 U. S. 136.

Judge Baxter.

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