CHAPTER XXVI. OF THE APPOINTMENT, REMOVAL AND DISCHARGE OF RECEIVERS. § 695. Introduction. § 696. Appointment upon the application of unsecured creditors. § 697. Appointment upon the application of junior mortgagees. § 698. Appointment upon the company's own application. § 609. Reluctance of the courts in appointing receivers to manage railway property. §700. The adequacy of remedies at law as affecting the appointment of a receiver. 701. Under what circumstances the court will appoint a receiver. § 702. (a). Of insolvency as a ground for appointing a receiver. § 703. (). Of default in payment of interest or principal as a ground for appointing a receiver. § 704. (c). Of the right to foreclose as a ground for appointing a receiver. 705. (d). Of internal corporate disagreements and derangements. 706. (e). Of failure to run trains. § 707. (f). Sundry cases. § 703. Of the court which may appoint a receiver. § 709. § 710. § 711. § 712. The court first obtaining jurisdiction retains it. § 713. The selection of a receiver is in the discretion of the court- § 714. The same subject, continued-The New York and federal rule. § 717. Effect of the appointment upon the rights of litigants and of third parties. 718. Effect of the appointment upon corporate powers-Upon pending litigation. 719. Effect of the appointment upon the liabilities of the company Damages-Taxes. $720. Removal. § 721. Discharge. § 722. The receiver must be discharged upon payment by the defendant of the amount found to be due. § 723. An order by consent vacating an appointment should not make reservations. § 724. Disposition of the property upon discharge. § 695. Introduction.-A receiver is a ministerial officer of a court of chancery, appointed as an indifferent person between the parties to a suit, to take possession of and preserve, pendente lite, the fund or property in ltigation, when it does not seem equitable to the court that either party should have possession or control of it. Receivers are, as a general rule, mere custodians, having no powers except those conferred by the order of their appointment; but with the growth of equity jurisdiction, it has become usual to clothe them with much Larger powers than were formerly conferred. A number of the States of the union have, by statute, conferred enlarged powers upon them for special purposes, the effect being to constitute the officers statutory assignees, having more extensive duties and powers than those of mere custodians, and making them not strictly receivers, though the name is retained. In making an appointment, the court is usually careful to consider only the facts necessary to be taken into account for the purposes of the application, and will not go into the merits of the case generally. The appointment of a receiver will not prevent the running of the statute of limitations. His holding is the holding of the court for him from whom the possession was taken. He is appointed on behalf of all parties, and if any loss arise from deficiency in his accounts, the estate must bear it. A plaintiff, acting without fraud, is not liable for damages sustained by property while in the hands of a receiver appointed at his instance.5 1 Wyatt's Prac. Reg. 335; Chautauque Co. Bank v. White, 6 Barb. 584. With regard to the proceedings to obtain the appointment; of the bill, motion, and answer, and parties to the bill; of the notice, and ex parte applications; of affidavits accompanying the application; of reference to a master; of the order of appointment, and of how the order is drawn and entered, see Beach on Receivers, §§ 106-171. 2 Verplanck v. The Mercantile Ins. Co. 2 Paige, 453; Hooper v. Winston, 21 Ill. 333; Grant v. City of Davenport, 18 Iowa, 194; Davis v. Gray, 16 Wall. 219; Yeager v. Wallace, 41 Pa. St. 234; Runyon v. The Farmers' & Mechanics' Bank, 3 Green, 480; Cooney v. Cooney, 65 Barb. 524. 3 Skinners' Co. v. Irish Soc. 1 Mylne & C. 162; Conro v. Gray, 4 How. Pr. 166. 4 Ellicott v. United States Ins. Co. 7 Gill, 307. 5 Kaiser v. Kellar, 21 Iowa, 95; Beach on Receivers, § 1. § 696. Appointment upon the application of unsecured creditors.—Ordinarily the unsecured creditors of a corporation, even though their claims have been reduced to judgments, cannot secure the appointment of a receiver merely because the company fails or refuses to pay its debts.' When ordinary remedies will suffice, creditors will be relegated to them. Where there is another clear and ample remedy open to a complainant, either at law or in equity, the extraordinary proceeding of taking a large property of such a peculiar character as a railway out of the hands of its rightful possessors and placing it under the control of a receiver, as a means of collecting comparatively small debts, will not be countenanced by the courts. But there are special circumstances under which an application by judgment creditors will be granted; as where the company is shown to be insolvent, and there is danger of its wasting its assets.3 And in a late case, allegations by a judgment creditor of a railroad company that its property was so heavily mortgaged, that, if the plaintiff should attempt to enforce payment of his debt by execution and sale, there would be no bidders at more than a nominal amount, while if the property should be placed in the hands of a receiver and operated by him, there would be an annual surplus from which the plaintiff's judgment might be satisfied, were held sufficient to support the appointment of a receiver. It is not necessary in such a case that he should first sue out an execution, where he deems it useless, and no objection is made to the application for a receiver on the ground of his failure so to do.5 1 Sage v. Memphis etc. R. R Co. 125 U. S. 361, per HARLAN, J.; Milwaukee etc. R. R. Co. v. Soutter, 2 Wall. 510, 523, per MILLER, J. 2 Milwaukee etc. R. R. Co. v. Soutter, 2 Wall. 510, 523, per MILLER, J., where the railway was ninety-five miles in length, and the plaintiff's claim was based upon a judgment for only $16,000. 3 Turnbull v. Prentis Lumber Co. 55 Mich. 387. 4 Sage v. Memphis etc. R. R. Co. 125 U. S. 331, per HARLAN, J. 5 Sage v. Memphis etc. R. R. Co. 125, U. S. 361, per HARLAN, J. i § 697. Appointment upon the application of junior mortgagees. A junior mortgagee has a right to a receiver to collect the rents of the mortgged premises for his benefit, pending a suit to foreclose, brought by a senior mortgagee, to which he is made a party. The common-law rule defining the rights of junior and senior mortgagees, where the first mortgagee is in possession, was early stated by Lord ELDON, as follows:-" If a man has a legal mortgage, he cannot have a receiver appointed; he has nothing to do but to take possessio!.. If he has only an equitable mortgage, that is, if there is a prior mortgagee, then, if the prior mortgagee is not in possession, the other may have a receiver without prejudice to his taking possession; but if he is in possession, you cannot come here for a receiver; you must redeem him, and then in taking the accounts, he will not be allowed any sums that he may have paid over to the mortgagor after notice of the subsequent incumbrance." So long as anything is due, in one case it was said, if even a sixpence is due, the receiver will be refused, and the question whether anything is due cannot be tried on motion.* But it should clearly appear that something is due, and if the accounts of the mortgagee are so incomplete that he cannot determine definitely whether or not anything is due, the court will allow the motion to stand over in order to allow him to find out the amount, and if he fail to show any, the court may assume that nothing is due and act accordingly.3 1 Washington etc. Ins. Co. v. Fleischauer, 20 Hun, 117. 2 Berney v. Sewell, 1 Jacob & W. 647. Acc. Rowe v. Wood, 2 Jacob & W. 553; Hiles v. Moore, 15 Beav. 175; Codrington v. Parker, 16 Ves. 469; Faulknez v. Daniel, 10 Law J. N. S. Ch. 33; Quinn v. Brittan, 3 Edw. Ch. 311; Bolles v. Duff. 35 How. Pr. 481: Boston & Providence R. R. Co. v. New York & N. E. R. R. Co. 12 R. I. 220; Norway v. Rowe, 19 Ves. 144. 3 Chambers v. Goldwin, cited in 13 Ves. 377. See, also, the cases cited in the preceding note. 4 Rowe v. Woods, 2 Jacob & W. 553; Quinn v. Brittan, 3 Edw. Ch.314. 5 Codrington v. Parker, 16 Ves. 469. § 698. Appointment upon the company's own application. A receiver may be appointed not only upon the application of creditors and others interested in the property, but also upon the application of the corporation itself. This has been done upon the application of a railway company which was a consolidation of a number of corporations created by several States, where it was alleged that the company was insolvent, and that if the lines of road composing it were broken up and the fragments thereof placed in the hands |