with the following rules: "1st. That the power of appointment is a delicate one, and to be exercised with great circumspection. 2d. That it must appear the claimant has a title to the property, and the court must be satisfied by affidavit that a receiver is necessary to preserve the property. 3d. That there is no case in which the court appoints a receiver merely because the measure can do no harm. 4th. That fraud or imminent danger, if the intermediate possession should not be taken by the court, must be clearly proved;' and 5th. That unless the necessity be of the most stringent character, the court will not appoint until the defendant is first heard in response to the application." 5

§ 242. Ancillary receivers.- An ancillary receiver is a receiver appointed in aid of a receiver appointed by another court. When a receiver has been appointed by one Federal Circuit Court, the others through judicial comity will usually appoint the same person an ancillary receiver of so much of the same estate as is within their jurisdiction. The usual practice is to make such an application ex parte; but the court may require notice to be given to the persons interested in

5 Le Grand, C. J., in Blondheim v. Moore, 11 Md. 365, 374. See Kelly v. Bettcher, 89 Fed. R. 125; infra, § 252. $242. 1 Jennings v. Phil. & R. R. Co., 23 Fed. R. 569; Williams v. Hintermeister, 26 Fed. R. 889.

2 Jennings v. Phil. & R. R. Co., 23 Fed. R. 569; Central Tr. Co. v. Wabash, St. L. & P. Ry. Co., 29 Fed. R. 618; Parsons v. Charter Oak L. Ins. Co., 31 Fed. R. 305; Shinney v. N. A. S., L. & Bld'g Ass'n, 97 Fed. R. 9; Dillon v. Oregon, S. L. & U. N. Ry. Co., 66 Fed. R. 622. But see Mercantile Tr. Co. v. Kanawha & O. Ry. Co., 39 Fed. R. 337; Atkins v. Wabash, St. L. & P. Ry. Co., 29 Fed. R. 161. "When such an application is made, the court to which it is addressed exercises its own original jurisdiction. The decree in the court of the domicile of the corporation is evidence in every other State that the corporation is insolvent and that a proper case exists in that State for the appointment of a receiver,

and it is to be respected accordingly in obedience to the constitutional provision whereby full faith and credit is to be given in each State to the records and judicial proceedings of every other State of the Union. But it is for the court to which the application is made to decide what remedy it should extend in the particular case and whether the proper administration of the assets requires the appointment of a receiver." Wallace, J., in Sands v. E. S. Greeley & Co. (C. C. A.), 88 Fed. R. 130, 132, 133. 3 That is said to be the rule in the First Circuit. Platt v. Phil. & R. R. Co., 54 Fed. R. 569; Coe v. East & W. R. Co. of Ala., 52 Fed. R. 531. It has frequently been done in the Second Circuit. Buchanan v. Bay State Gas Co., October 16, 1896. In the same case ancillary receivers were thus appointed ex parte in the Circuit Courts of New Jersey, Pennsylvania and Massachusetts.

8

opposition. In such a case, the appointment may be vacated after hearing parties interested." The better practice is to move in a new suit instituted by the plaintiff to the bill upon which the original receiver was appointed, or by some other creditor claiming a right to share in the property of which a receiver is desired. It seems that an appearance and a waiver of an objection to the jurisdiction because of non-residence may be made in the name of a defendant corporation by the receiver appointed in the State of its incorporation.? It seems that the application should not be made by the receiver who wishes the ancillary appointment; nor in a summary application where no bill has been filed; nor upon a bill which does not show the difference of citizenship or Federal question that would be essential to the jurisdiction for an original appointment. The ancillary appointment depends upon the comity of the court that has jurisdiction of the assets sought to be impounded; 10 and it may refuse to give the original receiver an ancillary appointment; " and after such an appointment it may remove him.12 Upon an ancillary receivership the court that had original jurisdiction, which, in the case of a railroad company chartered by the United States, extending through several districts, should be that where the principal operating offices are situated and there is some material part of the railroad, is considered as the court of primary jurisdiction and of

See Greene v. Star C. & P. Car L & Tr. Co. v. No. Pac. R. Co., 72 Fed. Co., 99 Fed. R. 656.

5 Ibid.

6 See In re Brant, 96 Fed. R. 257. 7 That was done in all the courts in the case of Buchanan v. Bay State Gas Co., supra, note 3. See infra, 83 245, 249.

8 In re Brant, 96 Fed. R. 257; Greene v. Star C. & P. Car Co., 99 Fed. R. 656. 9 In re Brant, 96 Fed. R. 257.

10 Central Tr. Co. v. Texas & St. L. Ry. Co., 22 Fed. R. 135; Mercantile Tr. Co. v. Kanawha & O. Ry. Co., 39 Fed. R. 337; Atkins v. Wabash, St. L. & P. Ry. Co., 29 Fed. R. 161; Kirker v. Owings (C. C. A.), 98 Fed. R. 499; Farmers' L. & Tr. Co. v. No. Pac. R. Co., 69 Fed. R. 871. But see Farmers'

R. 26, which intimates that the ancillary appointment of the same receiver should be made in the case of a railroad extending through several districts.

11 Mercantile Tr. Co. v. Kanawha & O. Ry. Co., 39 Fed. R. 337; Greene v. Star C. & P. Car Co., 99 Fed. R. 656. But see Farmers' Loan & Tr. Co. v. No. Pac. R. Co., 72 Fed. R. 26.

12 Atkins v. Wabash, St. L. & P. Ry. Co., 29 Fed. R. 161; Greene v. Star C. & P. Car Co., 99 Fed. R. 656; Farmers' L. & Tr. Co. v. No. Pac. R. Co., 69 Fed. R. 871. But see Farmers' L. & Tr. Co. v. No. Pac. R. Co., 69 Fed. R. 871, 72 Fed. R. 26; Chattanooga T. Ry. Co. v. Felton, 69 Fed. R. 273.

principal decree; and proceedings in the other courts are usually considered as ancillary and subordinate thereto.13 The accounting of the receiver is usually first instituted in the court where he was first appointed." Local creditors, without liens or other security, have no absolute right to assets in the hands. of the ancillary receiver prior to that of creditors in the other districts; and the ancillary court may order the transmission of all the proceeds of the assets to the court of primary jurisdiction and require unsecured local creditors to present their claims for adjudication there. The proceedings in the courts of ancillary administration are not binding upon that of original jurisdiction; 17 except to the extent to which they affect assets within the territorial jurisdiction of the former courts. A judgment against an ancillary receiver is not binding upon the court of primary jurisdiction.18 The courts of ancillary administration have the power to retain the assets which they collect and to distribute them independently." They usually

13 Farmers' L & Tr. Co. v. No. Pac. R. Co., 72 Fed. R. 26, 31. For a case of a difference between the adminis tration in two districts of the same circuit where the circuit judge re fused to interfere, see Central Tr. Co. v. Texas & St. L. Ry. Co., 22 Fed. R. 135. 14 Jennings v. Phila. & R. R. Co., 23 Fed. R. 569. To that court also was left the determination of the propriety of continuing a traffic agreement operating in two or more States, Ames v. Union Pac. Ry. Co., 60 Fed. R. 966; and in one case even the propriety of excepting from the receivership assets within the ancillary jurisdiction. Mercantile Tr. Co. v. Baltimore & O. Ry. Co., 79 Fed. R. 388.

13 Sands v. E. S. Greeley & Co. (C. C. A.), 88 Fed. R. 130; Smith v. Tag gart (C. C. A.), 87 Fed. R. 94; Parsons v. Charter Oak L. L. Co., 31 Fed. R. 305. But see Taylor v. Life Ass'n of A., 3 Fed. R. 465; Farmers' L. & Tr. Co. v. No. Pac. R. Co., 72 Fed. R. 26, 31; Kirker v. Owings (C. C. A.), 98 Fed. R. 499; Johnson v. Southern B. & L Ass'n, 99 Fed. R. 646. It has

been held that the ancillary receiver cannot be sued for a tort of the principal receiver. Union Tr. Co. v. Atchison, T. & S. F. R. Co., 87 Fed. R. 530.

16 Ibid.; Jennings v. Phila. & R. R. Co., 23 Fed. R. 569. For cases where foreign receivers have been allowed to collect domestic assets without ancillary appointments, see Farley v. Talbee, 55 Fed. R. 892; supra, § 34; infra, § 249.

17 Reynolds v. Stockton, 140 U. S. 254, 272.

18 Ibid.

19 Kirker v. Owings (C. C. A.), 98 Fed. R. 499; Sands v. E. S. Greeley & Co. (C. C. A.), 88 Fed. R. 130; Miles v. New So. B. & L. Ass'n, 99 Fed. R. 4; N. Y. Security & Tr. Co. v. Equitable Mtge. Co., 71 Fed. R. 556. Where the courts of primary jurisdiction exacted a stipulation from the receiver as to his conduct in a suit in the ancillary jurisdiction, the court there enforced observance of such stipulation. Wheeling, B. & St. T. Ry. Co. v. Cochran, 85 Fed. R. 500.

apply them to the discharge of local liens," the expenses of the ancillary receivership and to the payment of claims arising out of his management of the property before transmitting any funds to the court of primary jurisdiction." An ancillary receiver is not justified in sending the assets to the court of original jurisdiction without the permission of the ancillary court; and he may be held personally responsible for such conduct."

§ 243. Terms upon the appointment of receivers, and preferences in foreclosure suits.- As the appointment of a receiver is in its discretion, the court may impose terms upon the party applying for it. Thus, it may insist as a condition precedent to appointing a receiver to manage a colliery that the moving party advance the funds necessary to continue the business. So a party or person interested in a suit was in England rarely appointed receiver unless he agreed to act without compensation. By analogy to this rule of practice, the Supreme Court of the United States first sustained the principle granting preferences to certain classes of unsecured creditors upon the foreclosure of railroad mortgages. It is the

20 Fletcher v. Harney P. T. M. Co., 84 Fed. R. 555, where the court of primary jurisdiction expressed its views as to the proper action of the court of ancillary jurisdiction upon claims for taxes. Clyde v. Richmond & D. R. Co., 65 Fed. R. 336; Central Tr. Co. v. East Tenn., V. & G. Ry. Co., 69 Fed. R. 658. The court of primary jurisdiction remitted to the ancillary court the determination of the priority of receiver's certificates issued by the latter. Doe v. N. W. Coal & Transp. Co., 78 Fed. R. 62.

21 Kirker v. Owings (C. C. A.), 98 Fed. R. 499.

22 Ibid.

Fosdick v. Schall, 99 U. S. 235, 253; Farmers' L. & T. Co. v. Green Bay, W. & St. P. Ry. Co., 45 Fed. R. 664, 666, 667. "The doctrine is analogous to that of the admiralty allowing certain supplies to a vessel precedence over a mortgage upon the vessel, and rests upon the same principle. The vessel must not be allowed to rot at the wharf. The railway must not be permitted to rust, and its franchise to be forfeited, through failure to operate. Such things, therefore, that are done to avoid such result, working destruction to the mortgage, should be compensated in priority to the mortgage."

$243. 1 Gibbs v. David, L. R. 20 Eq. So Caldwell, J., in Farmers' L. & T. 373.

Co. v. Kansas City, W. & N. W. R.

2 Wilson v. Greenwood, 1 Swanst. Co., 53 Fed. R. 182, 190, 191. For 471. criticisms of the practice, see Coe v. N. J. Midland Ry Co., 27 N. J. Eq. 37; Raht v. Attrill, 106 N. Y. 423; Hollister v. Stewart, 111 N. Y. 644, 663. The doctrine originated in Kentucky. Douglass v. Cline, 12 Bush (Ky.), 613 (1876).

3 Waite, C. J., in Fosdick v. Schall, 99 U. S. 235, 251, 252. See also Turner v. Ind., B. & W. Ry. Co., 8 Biss. 315. This is said to depend upon the principle that he who seeks equity must do equity. Waite, C. J., in

better practice to provide for such preferences as a condition. in the order for the appointment of the receiver. Even where no such order has been made when the receiver was appointed, if it appears at any time in the progress of the cause that bonded interest has been paid, additional equipment provided, or repairs of the property made out of its earnings during a short time before the default in interest, the court usually directs that such debts then incurred be paid out of the income of the receivership after the payment of the receiver's expenses in preference to the claims of creditors secured by a mortgage or other lien. Although usually they are paid out of the net income of the receivers, in special cases, especially where this income has been used to pay for betterments or mortgage interest by a receiver appointed in the foreclosure suit, or even by a receiver appointed in a prior suit to foreclose a junior lien, or to preserve the property for other creditors or stockholders; such claims have been ordered paid out of the proceeds of the foreclosure sale before any payment on account of mortgage bonds; and in some cases it has been made a con

8

4 Central T. Co. v. St. Louis, A. & T. Ry. Co., 41 Fed. R. 551. For forms of such orders, see Dow v. Memphis & L. R. Ry. Co., 20 Fed. R. 260, 266, 267; Central T. Co. v. St. Louis, A. & T. Ry. Co., 41 Fed. R. 551, 553, 554.

5 In Fosdick v. Schall, 99 U. S. 235, 253, 254; Fosdick v. Car Co., 99 U. S. 256; Hale v. Frost, 99 U. S. 389; Miltenberger v. Logansport Ry. Co., 106 U. S. 286, 308; Union T. Co. v. Souther, 107 U. S. 591; Union T. Co. v. Walker, 107 U. S. 596; Burnham v. Bowen, 111 U. S. 776; Blair v. St. Louis, H. & K. Ry. Co., 22 Fed. R. 471, 474, with a valuable note by Benj. F. Rex, Esq., of the St. Louis bar; Porter v. Pittsburgh Bessemer S. Co., 120 U. S. 649; Virginia & A. Coal Co. v. Central R. & B. Co., 170 U. S. 355; Southern Ry. Co. v. Carnegie Steel Co., 176 U. S. 257; Douglas v. Cline, 12 Bush (Ky.), 608. The rule is ordinarily otherwise when there was no diversion of the earnings from the payment of operat

ing expenses. Penn v. Calhoun, 121 U. S. 251; St. Louis, A. & T. H. R. Co. v. Cleveland, C., C. & L. Ry. Co., 125 U. S. 658; Wood v. Guarantee T. & S. D. Co., 128 U. S. 416; Kneeland v. Am. L. & T. Co., 136 U. S. 89; Lackawanna I. & C. Co. v. Farmers' L. & T. Co., 176 U. S. 298: U. S. Trust Co. v. N. Y. W. S. & B. R. Co., 25 Fed. R. 800; Finance Co. of Pennsylvania v. Charleston, C. & C. R. Co., 52 Fed. R. 524; Ruhlender v. Chesapeake, O. & S. W. R. Co. (C. C. A.), 91 Fed. R. 5; International T. Co. v. T. B. Townsend B. & C. Co. (C. C. A.), 95 Fed. R. 850.

6 Miltenberger v. Logansport, C. & S. W. R. Co., 106 U. S. 286, 311, 312; Virginia & A. Coal Co. v. Central R. & B. Co., 170 U. S. 355, 365–367; Blair v. St. Louis, H. & K. R. Co., 22 Fed. R. 471, 475; Kneeland v. Bass F. & M. Works, 140 U. S. 592.

7 Ibid.

8 Virginia & A. Coal Co. v. Central R. & B. Co., 170 U. S. 355, 370.