FINANCE CO. fl. CHARLESTON, C. &0. R. CO.
205
this suit, but allY portion thereof which was applied to discharg{' interest on mortgage is not to be included in said second claim. (3) That complainants' said judgment is the next (third) claim on said 62 acres. (4) That, if said 40-acre homestead shall be of more than $1,500 value,-which does not seem probable, under the evidence,then the excess of said value over said $1,500 shall be applied towards the $900 claim of respondent Eliza Jane Root; that is, so much of said $900 as is included in said above (second) claim. No evidence has been submitted as to the bounds of said homestead. The evidence submitted does not enable me to determine with any accuracy the relative values of said homestead 40 and the land outside. This cause is therefore referred to A. HoIlingsworth, Esq., who is hereby appointed special master herein. He will proceed to take evidence, determine, find, and report: (1) Boundaries of homestead 40. If not already platted, he will require respondents Root to file herein, within 20 days from notice of such requirement, a properly acknowledged plat of said homestead boundaries. If same is not so filed, said master will proceed to plat and fix such boundaries, at time and place of which due notice is given counsel on either side. (2) Find value .of said homestead as so platted. If same exceeds $1,500, find excess of such value. As I construe the evidence submitted, said 40 acres will not equal $1,500. (3) Find what amount of said $900 paid in by Eliza Jane Root was applied on purchase money of said 102 acres, or on the principal of debt secured by mortgage for deferred purchase price of same. (4) Find value of said 62 acres lying outside of said homestead 40. (5) Find such further and relevant facts as counsel on either side may, in writing, request, or said master deem important in settling decree herein on basis hereinbefore stated. Said master will fix time and place of hearing, and thereof duly notify counsel of record in this action, and will report to the court the evidence taken, his findings as above directed, and such other matters as he may deem proper and relevant herein, under the evidence already or hereafter submitted. The clerk will record order forwarded herewith, appointing said special master, and defining his duties, as above set forth. FINANCE CO. OF PENNSYLVANIA et aI. v. CHARLESTON, C. & O. R. CO. et aI. BOSTON SAFE DEPOSIT & TRUST CO. v. RICHMO-:-''U & D. R. CO. (CirCUit Court of Appeals, Fourth Circuit. May 22, 1894.) No. 58.
1
RAILROAD COMPANIES-MORTGAGE FORECLOSURE-ApPLICATION Oll' PROCEEDS OF SALE.
The order appointing a receiver of a railroad in a foreclosure suit authorized him to pay balances due to other carriers; and leave was afterwards granted him, Without objection, to issue certificates to meet such obligations. Interveners filed a claim for such balances accruIng before the receiver's appointment, praying payment out of earnings, and general relief; but no proceedings were had thereon until after sale of the road on fore-
206
,FEPERAL
vo1..62.
clO$uJ;e.. The r,eceiver'searnings been absorbed by. running expenses, liM been no diversion of inc(jine to pay interest. HeM, that an ap.pU<$itloh 01 the interveners for paymen-v out of the proceeds of sale was granted. . BAMIit",,:,QOLLATEllAL
,,,\s, . an aCCOUtlt, .for freight 'balances of freight exchange betweeh two r'ailroadcompanies, the. creditor company held the debtor's note, secured by its mortgage bonds, orilin: agreement that the note was "to be payment when paid." Held; that this was not a waiver of a right to claim payment from proceeds of the ,.Sale, on foreclosure, of the debtor company's. railroad.
FOR CLAUk
Appeal from the Oirc.uit Oourt of the United States for the District of South Oarolina.· . The facts; ,as sufficiently stated by counsel, are these: On December 10, 1890, the Finance Company of Pennsylvwita:and others, complainants, filed their ):ll1l,iuJ cirCUit cOlpt. of the United; States for' the District of South Carolina,'llgainst the Cincinnati & Chicago Raill'oaP Company, the BostonSllfe .Deposit & TrUsf"CoI:\lpany, alleging: The incorporation of 'the' railroad compllriy,for. the purposedf constructing and operating a railroad from Charleston,i S; C" to Ashla.nd,' Ky., a distance of 620 miles; the exeClltion and delivery to, the Boston Safe & Deposit Company, on August 9, 1887, a wortgage uPOJ;l Bllid railroad, to secure an issue of bonds to the amount delivered to .said Bostoll company; a contract for cons1;ruction ofilie railroad, wit!:i a construction company, the partial performance of: this contraet, and the delivery to the construction company of over $1jOOO,ooo of these1>odds,·and the purchase by complainants from saill company' a, ,po).'.tion of bonds; th,e cOlllpletion and operation of a part of the raib.. the InsolveIlCJt of the l;onstruction compl\ny. and its inability to COn1pleteitScontract; thelrlsolvency of the railroad company; its Inability to complete the road or to operate the completed portion; want of rolllng stock; suits PlIDding; no credit with whlcll. to· purchase fuel" oil, waste, and other employes for several months. Comlilainants. the,efore prayed of a l·eceiver.. . The r11l1foad. company aI!dthe. construction company joining in the prayeif\ the deposit company admitted the first three paragraphs of the bill, and,required proof of the remainder. On De.CIlUll>er 10, 1890, Saml1el Lorq was appointed temporary receiver, but the order. tllade no provision for payment of any balances to. connecting .lines, or for thepaymellt Of any ante-receivership h;:tdebtedness. . On February 26. 1891, D. H. Chamberlain was appointed permanent receiver, by an order of said court, "with all the authority and duties prescribed in the order herein:qaming SamUel ,Lord, Esq., temporary receiver," which order before contained the following provision: "That said receiver be further authorized at the date of the order appointing to pay all the wages due to the the temporary receiver herein, for labor and services within ninety days before the same, and also all balances due to other carriers and connecting to be paijl .for the conducting of the said railroad." On lines, March 16, 1891, Chamberlain, the. receiver, filed his petition asking to be allowed to issue $30,000 of certificates to pay certain obligations found due and unpaid upon.entering upon bis duties as permanent receiver, aggregating $48,901.93. ·These consisted of taxes, freight balances due on December 10, 1890, freight l:Jalnnces and freight dUe since that date, and amounts for crossties, coal, and other supplIes. With the cash on hand, and estimated receipts for some days in March, and the proceeds of these certificates, the receiver ,be able to pa3' off all said indebtedness, exstated. in 1:lis. petitioJ;l he cept $5,247.12. ' This he proposed to pay along with the .future current expenses,. outoft!:ie f)lturecurrent earnings.; Leave was grauted.: to issue said certificates, March 17, 189:!-.. ' ' On August 4, 1891, the Richmond & Danville Railroad CompanY filed its intervening out its account against the rauroad qompany in fUll, accruing both berore the appointment of the temporary j.'eceiver and subsequently, and praying that it be paid out of tl;1e earnings of the road, and for
FINAlS"CE CO. !1. CHARLESTON, C. & C. R. CO.
20'/
general relief. This was referred the same day to a special master, to take testimony and report, but no proceedings were had under this order until after the sale of the road, when, on July 11, 1893, the reference was proceeded with. The account cohsisted of four classes of items: (1) Amount due on account -of claims, $75.44; (2) amount due on Blacksburg Crossing, $1,057.65; (3) amount -due on freight, $5,422.94; (4) amount due on freight balances, $8,095.58. It appeared, in the testimony returned by the master, that the Richmond & Danvilie Company held, as against the account in question, a note of the Charleston, Cincinnati & Chicago Company for $10,000, secured by certain the note "to be payment when paid," first mortgage bonds of that and counsel for the deposit company, trustee, claimed that, upon the settlement of the account, the trustee was entitled to the return of the collateral bonds, or to an accounting for their value. It was admitted that the Charleston, Cincinnati & Chicago Company was run at a loss, both before and since the appointment of a receiver, and that the earnings of the receiver had been more than absorbed by running expenses; also, that there had been no diversion of income to payment of interest. 'l'he master haVing made his report, the application of the interveners to be paid out of the proceeds of sale came on to be heard in the circuit court, before Simonton, J. The court allowed the first item, which was admitted; ·disallowed the second item; allowed the third and fourth items,-and rendered a decree August 24,1893, for the sum of $13,421.95 (made up of the three items allowed; with a deduction of credits amounting to $172.01), with interest from December 11, 1890. From this decree, the Boston Safe & Deposit Company prayed an appeal to this court, and assigned errors as follows: 1. That the court erred in ordering the sum of $5,422.94, made up of items of freight charges of the Richmond & Danville Railroad Company against the Oharleston,. Cincinnati & Cl).icago Railroad Company for cars and other articles of freight 'carried by the former company for the last-named company, ,and delivered to it as consignee and owner, to be paid out of the proceeds of sale. 2. That the court erred in ordering the freight balance of $4,376.19, due by' the Charleston, Cincinnati & Chicago Railroad Company to the Richmond & Danville Railroad Company, to be paid out of the proceeds of sale.
Samuel Lord, for appellants. T. P. Cothran, for appellees. Before Mr. Chief Justice FULLER, GOFF, Circuit Judge, and JACKSON, District Judge. Mr. Chief Justice FULLER (after stating the facts as above). It was conceded, on the argament, that the item mentioned in the second assignment of error related to a balance due by the receiver the Charleston, Cincinnati & Chicago Railroad Company to the Richmond & Danville Railroad Company, which had accrued subsequent to his appointment, and which, as a matter of fact, had been paid, and we assume that the intention of counsel was to question the allowance of the fourth item for $8,095.58, and it will be so regarded. The two items complained of were for freight on shipments of coal, cars, oil, etc., consigned to the Charleston, Cincinnati .& Chicago Railroad Company for its own use, and which were turned over by the agent of the Danville road to the agent of the former road at Blacksburg, the Danville road being charged with all back charges, and paying them; and for balances of freight exchange found to be due by the Charleston, Cincinnati & Chicago Company to the Danville Company: The order of February 26, appointing the permanent receiver, expressly authorized him "to pay all the
208
FEbEItAL .:a,EPORTER,'t0I.
62.
employes, at the;Qate of.the order appointing the temporaty,lreceiver herein, .for labor and services within' ninety dn.ys before thEHiame, and also all due to othercartiers and connecttnglitles and necessary t9,be paid the conducting of said railroadY This was such an order as is frequently made in these cases,·and cannot properly be construed as limited to payment out of ,current earnings, especially ill view of the condition of the road. which made up t:Q.e two disputed items accrued prior to Decermber 11, 1890, and the bill was filed, and the temporary reo ceiverappointed, on December 10. On March 16, 1891, the permanent receiver was grl:!,nted leave to issue $30,000 of with which to meet obligations, which included freight, balances for freight, cross-ties, coal, and ·other supplies, which certificates were necessarily a charge upon the corpus of the estate. It does not appear that appellant raised any objection to either of these orders, althougll,l( it considered them objectionable or injurious to its in· terests"it might well have applied to the court to cancel or modify them.U. S. Trust Co. v. Wabash W. Ry. 00., 1M U; 8. 287, 303, 14 Sup. 8t;; Miltenbergerv. Railroad 00.,106 U. 1 Sup. Ct.140. It ,be regarded 'as settled that a court may make it acolldition of the issue of an order foil' the appointment of a receiver. of a railroad company that certain outstanding debts of the company shall be paid from the income that maybe collected by the or from sale,; that payments may be directed of unpaid debts for operating expenses, accrued within 90 days, and of limited amounts due to other and connecting lines of road for materials and repairs '.and for unpaid ticket and freight balances, in vieW-Of the interest$bpth of the jlroperty and of the that the property may be preserved and. disposed of as a going concern, and the company's public discharged; and that such indebtedness may be given priority, notwithstanding there may have been no diVersion of income; or that the order for payment was not made at the time, and as a condition, of the receiver's appointment, the necessity and propriety of making it depending upon the. facts and circumstances of the particular' case, and the characteJ,',ottb.e claims. Miltenberger-v. Railroad Co., 106 U. S. 286, 311, Sup. Ct. 140; Trust Co. v. Souther, 107 U. S. 591, 594, 2 Sup. Ct·. Trust Co. v. IllinoisM. Ry. Co., .117 U. S. 434, 6 Sup. L.& T. RailrQfld:& Steamship .Co. v. Texas Cent. Ry. Co" 137 U. S.).71, 11 Sup. Ot.61; Kneeland v. Foundry WorkliJ"HO U. S. 592, If.Sup.·Ct. 857. Of course"thediscretion to enter sqchorders shoul11 be. exercisedwitb. great care, but as late as Thoma,s, v. C:;tr 00., 149U. s. 95, 110, 13.Sup. Ct. 824, the supreme court qu()ted the remark$! upon the doctrine and its proper tioll in M:ilten,berger v. :Gailroad Co., sUipl'a, with. approval, although, as by this coul"t in Bound v. Railway Co., '08 Fed. 473, 7 C. C" tendency, of that case was to narrow the limits within which an equity.conrt sllOuldconfine itself in making such allowanQeIj!l". . " We opillion that the order otFebruary 26, 1891,. wasprovidently ellteroo, and that the circuit court did not err in its decree. · ." " . J
M'CLAt5KEY V. BARR.
209
The petition was sufficient, and the relief awarded, being consistent with the case made, was grantable under the prayer for general relief. The allowance of interest from the date of the appointment of the temporary receiver was, perhaps, open to question, but no error is assigned in regard to it, and, under the circumstances, we do not feel called upon to disturb the decree on that account. Something was said upon the argument in respect of the note and bonds of the Charleston, Cincinnati & Chicago Company, taken and held by the Danville Company, but that was as collateral to the original obligation, and the express agreement was that the note was to be considered as payment only "when paid." This was no waiver of the right to come upon the fund, and, when the amount of the decree is paid, whatever rights in that collateral appellant m&", be entitled to, by way of subrogation or otherwise, can be adjusted and determined. Decree affirmed.
----McCLASKEY et aI. v. BARR et al. (Circuit Court, S. D. Ohio, W. D. June 18, 1894.) NECESSITY OF CROSS BILL.
1.
PARTITION -
A plea by defendants in possession, setting up the statute of limitations and adverse possession, was overruled, on the ground that they were rightfully in possession as cotenants. Held, that any equities they might have as cotenants to compensation for improvements might be allowed, without a cross bill, as incidental to the partition, under the general prayer for relief. Dictum in 48 Fed. 137, disapproved. In partition between cotenants, defendants having exclusive possession, who had bought in what they supposed to be all the outstanding interests in the land, maybe allowed, under the laws of Ohio, for improvements made by them after such purchase and after the termination of a preceding life estate, and before suit for partition was brought, to the extent that the value of the property was enhanced by such improvements, not exceedingtheir cost; but they cannot be allowed for taxes and assessments except by way of o1rset to rents. State laws relating to compensation for improvements upon land, made in good faith, are rules of property, which federal courts will recognize and follow.
COMPENSATION FOR IMPROVEMENT -
2. SAME-IMPROVEMENTS BY COTENANTS-TAXES.
lS. FEDERAL COURTS-STATE LAWS RUI,ES OF DECISION.
This was a suit by Sarah E. McClaskey and others against Robert Barr and others for partition of lands. The court rendered a decree for partition (48 Fed. 130), and there was a reference thereupon to a special master. Complainants excepted to the special master's report as to claims by defendants for compensation for improvements. H. T. Fay, for complainant. S. T. Crawford and 'V.S. Thurston, for cross complainants. Richard A. Harrison, Stephens, Lincoln & Smith, and Bateman '& Hoo.per, for respondents. SAGE, District Judge. This case is before the court on exceptions to the special master's report, which present questions relatv.62F.no.4-14