22 due eight, and eleven 23 months, and even two years," before the receivership; in one case claims for loans to the amount of more than $3,000,000 advanced upon collateral for the oper v. Case, 4 Fed. R. 873; Hiles v. Case, 14 Fed. R. 141; s. c., 9 Biss. 549. Contra, Dow v. Memphis & L. R. Co., 20 Fed. R. 260, 266, 267. Claims for the value of a right of way, including damages to easements, even when reduced to judgment, are allowed a preference which is analogous to a vendor's lien. Mercantile Tr. Co. v. Pittsburgh & W. R. Co., 29 Fed. R. 732; Central Tr. Co. v. Hennen (C. C. A.), 90 Fed. R. 593; Central Tr. Co. v. Louisville & T. Ry. Co., 81 Fed. R. 772. Cf. Wright v. Kentucky & G. E. Ry. Co., 117 U. S. 72; Central Tr. Co. v. Wabash, St. L. & P. Ry. Co., 32 Fed. R. 566. In one case a consolidated mortgage covered leases of branch lines and nearly all of the capital stock of the lessor companies, with a cove nant by the trustee that in case of default it would take possession of the mortgaged property and then "operate said railroads and conduct the business . . . and receive all tolls, rents, income and profits from said railroad and other property, ... and from such rents to pay all expenses of taking possession of said railroads and other property and operating said railroads and conduct ing said business, and all taxes due upon any of the mortgaged property, and all amounts due for interest or principal of any of the bonds or other obligations of the railway company secured by mortgages or pledges prior in lien to this mortgage; 22 Skiddy v. Atlantic, M. & O. R. Co., 3 Hughes, 320. 23 Burnham v. Bowen, 111 U. S. 776; Southern Ry. Co. v. Carnegie Steel Co., 176 U. S. 257, 286. 24 Central Tr. Co. v. Wabash, St. L. & P. Ry. Co., 30 Fed. R. 332, 334, and after deducting such expenses and payments and retaining a reasonable compensation for the services of the trustee in connection with the making of said entry and taking possession of said railroads and other property, and operating the same, and conducting the said business, to apply the net income to the payment of any interest previously due or becoming due during such possession on bonds secured by this mortgage." The trustee further covenanted "to cause all of the railroads and other property thus secured by this mortgage, including all shares of capital stock and bonds held in trust under the provisions hereof, to be sold as one property at public auction,” etc. The mortgagor lessee had covenanted to pay interest upon the bonds of the lessors of the branch lines as rent. The earnings of the branch line were insufficient to pay the rent. It was held that the first covenant constituted a contract by the trustee in case it took possession of the railroads of the mortgagor, either directly or through a receiver, to pay the interest on the bonds of the branch roads, as obligations of the mortga gor, before the net income was ap plied to the payment of interest on the bonds secured by the consolidated mortgage; and that the holders of these bonds had an equity upon the net earnings of the entire system superior to that of the holders of bonds and coupons under the conper Brewer, J.; Farmers' L. & Tr. Co. v. Kansas City, W. & N. R. Co., 53 Fed. R. 182, per Caldwell, J. See Atkins v. Petersburg R. Co.,3 Hughes, 307. But see Duncan v. Mobile & O. R. Co., 2 Woods, 542; Addison v. Lewis, 75 Va. 701, 713, 714. ating expenses of the railroad within two years before the receivership; 25 a claim for materials furnished three years before the appointment, for which a note was given sixteen solidated mortgage. Mercantile Tr. Co. v. St. Louis & S. F. Ry. Co., 71 Fed. R. 601, 608, 609; s. c. as Mercantile Tr. Co. v. Farmers' L. & Tr. Co. (C. C. A.), 81 Fed. R. 254. But see Central Tr. Co. v. Wabash, St. L. & P. Ry. Co., 23 Fed. R. 863. Coupons on bonds of a lessor, due for rent when a receiver of the lessee was appointed, were denied a preference in Central Tr. Co. v. Charlotte, C. & A. R. Co., 65 Fed. R. 264. See St. Louis, A. & T. H. R. Co. v. Cleveland, C. & C. I. Ry. Co., 125 U. S. 658. Rent of a terminal property was al lowed a preference in Manhattan Tr. Co. v. Sioux City & N. R. Co., 102 Fed. R. 710. Creditors of a lessor railroad were given an equitable lien upon the amount of its earnings collected by the lessee. Terre Haute & I. R. Co. v. Cox (C. C. A.), 102 Fed. R. 825. Upon the foreclosure of a consolidated mortgage, the court ordered the receivers to pay interest upon bonds secured by mortgage upon a vital portion of the system although there was some doubt whether the mortgage foreclosed was not a superior lien. Park v. N. Y., L. E. & W. R. Co., 64 Fed. R. 190. See also Lloyd v. Ches., O. & S. W. R. Co., 65 Fed. R. 351. It was held otherwise, however, in the case of mortgages upon parts of the consolidated road which could be separated from the rest without a serious depreciation. Cleveland, C. & S. R. Co. v. Knickerbocker Tr. Co., 64 Fed. R. 623. consolidated mortgagee could not in the subsequent foreclosure in the same suit of mortgages on different parts of the line have that preferential debt apportioned between its own and the divisional mortgages, or require an accounting of the receipts and disbursements of each division before the extension of the receivership to the divisional mortgages so as to displace in its favor the liens of some of those mortgages; but that these debts were primarily a charge upon the interest of the consolidated mortgagee. N. Y. S. & Tr. Co. v. L., E. & St. L. Con. R. Co., 102 Fed. R. 382. Under State statutes preferring the claim of persons who perform labor upon the property, the services of a civil engineer who superintended the construction, Central Tr. Co. v. Richmond N. I. & Br. Co., 54 Fed. R. 723; and of a managing agent and a superintendent of trains, who occasionally ran cars, cleaned cars, repaired tracks, and acted as “general utility man," were held to be included, Gilchrist v. Helena, H. S. & S. R. Co., 58 Fed. R. 708; but that of a man who had charge of the office and receipts and entered in a book the time of the workmen as handed in to him was not. Ibid. In the following cases the fees of attorneys and counsel for services immediately before the receivership were allowed a preference: Finance Co. v. Charleston C. & C. Co., 52 Fed. R. 526; Blair v. St. Louis, H. & K. Ry. Co., 23 Fed. R. 521; Louisville, E. & St. L. R. Co. v. Wilson, 138 U. S. 501. Fees for the services of attorneys and counsel have been disallowed a preference where rendered more than a year (Blair v. St. Louis, 25 Ibid. Where the receivers appointed under a consolidated mortgage had paid interest on prior divisional mortgages, taxes, operating expenses, debts for equipment, and for that purpose had incurred a preferential indebtedness, it was held: that the months before the receivership; 26 and in one case, those who advanced money, after a default in interest two years before the receivership, to pay the arrears of wages due striking laborers, under a promise from the president of the mortgagor H. & K. Ry. Co., 23 Fed. R. 521) and more than two years before the receiverships have been disallowed, although the services have increased the value of the property. Finance Co. v. Charleston C. & C. Co., 52 Fed. R. 526. Fees for services performed partly more than six months before the receiverships, but principally within that time, were allowed a preference when they had increased the fund. Louisville, E. & St. L. R. Co. v. Wilson, 138 U. S. 501. When the order of appointment gives a preference to "wages of employees," counsel fees due an attorney who was not employed as general counsel are not included. Louisville, E. & St. L. R. Co. v. Wilson, 138 U. S. 501. But see Gurney v. Atlantic & G. W. Ry. Co., 58 N. Y. 358. An attorney was denied a preference for the payment, at the request of the president of the company, a few weeks before its default, under a promise of reimbursement within a few months, of judgments and other claims against it for wages and injuries to cattle, Blair v. St. Louis, H. & K. Ry. Co., 23 Fed. R. 521; and for the payment as surety upon appeal bonds of judgments against the railroad upon claims two or three years old, although the appeals were taken a few months before the appointment of the receiver, and the payment made after that appointment, Blair v. St. Louis, H. & K. Ry. Co., 23 Fed. R. 521; Whiteley v. Central Ir. Cc. (C. C. A.), 76 Fed. R. 74; and for services in securing a preference to unsecured creditors, Louisville, E. & St. L. R. Co. v. Wilson, 138 U. S. 501. Preferences have been allowed to sureties upon appeal and replevin bonds given on behalf of a receiver, Union Tr. Co. v. Morrison, 125 U. S. 591; or by a mortgagee in order to save the property, Jones v. Central Tr. Co. (C. C. A.), 73 Fed. R. 568. Railroad mortgages usually provide for the payment, prior to the bonds, of the fees and expenses of the trustee; but where the inaction of the trustee has compelled the institution of litigation by a bondholder or other person interested, the trustee's counsel fees may be disallowed. So when the services were unnecessary. Bound v. S. C. R. Co., 62 Fed. R. 536. When on account of the inaction of the trustee or otherwise a necessary suit was instituted by a bondholder or other beneficiary to preserve the fund, the counsel fees of the plaintiff may be allowed a preference. Cowdrey v. Galveston, H. & H. R. Co., 93 U. S. 352; Trustees v. Greenough, 105 U. S. 527; Central R. & B. Co. v. Pettus, 113 U. S. 116; infra, § 335. The counsel fees of the attorney for the mortgagor cannot be awarded a preference, unless the mortgage so provides. Mercantile Trust Co. v. Missouri, K. & T. Ry. Co., 41 Fed. R. 8, 10; Union Loan & Trust Co. v. Southern Cal. M. R. Co., 51 Fed. R. 106. Cf. Mason v. Pewabic Min. Co. (C. C. A.), 66 Fed. R. 391. Contra, Bound v. S. C. R. Co., 43 Fed. R. 404. The fees, counsel fees and other debts of a receiver, and a master appointed in a former suit by shareholders or junior incumbrancers, may be allowed a preference. Pennsyl vania Co. v. J. T. & K. W. Ry. Co., 93 Fed. R. 60; Reinhart v. Augusta, M. & Inv. Co., 94 Fed. R. 901. Contra, Am. L. & Tr. Co. v. South Atl. & O. R. Co., 81 Fed. R. 62. A preference 26 Hale v. Frost, 99 U. S. 389. 27 that they would be repaid out of the current earnings of the road: have been given a preference. And by Judge Caldwell: "The debts due from a railroad company for ticket and freight balances, and for work, labor, materials and machinery, fixtures, and supplies of every kind and character done, performed or furnished in the construction, extension, repair, equipment, or operation of said road and its branches in the State of Kansas, and liabilities incurred by said company in the transportation of freight and passengers, including damage to person or property, which have accrued since the execution of the mortgage set out in the bill of complaint," about two years and three months before the receivership, were allowed a prefer ence. A creditor does not lose his preference by taking notes of the railroad company for several months; 29 nor by renewing the notes after the receiver's appointment; nor by reducing his claim to judgment, even though the judgment is entered pending the receivership in a suit begun previously. The recovery of a judgment after a receivership does not, of itself, entitle the plaintiff to a preference over other creditors." An was denied to so much of a judgment as included costs incurred before the receivership. Williams v. Groat, 73 Fed. R. 59. The claim of a secretary for a balance of salary due him within the prescribed time has been thus preferred. Olyphant v. St. Louis O. & S. Co., 22 Fed. R. 179. But see Wells v. Southern Min. Ry. Co., 1 Fed. R. 270; Addison v. Lewis, 75 Va. 701, 712, 713; Union L. & T. Co. v. Southern Cal. M. R. Co., 51 Fed. R. 106. No case as yet extends the preference to the salary of a president. Nat. Bank of Augusta v. Carolina, K. & W. R. Co., 63 Fed. R. 25. A president forfeits any right he may possess to such a preference by publishing in the annual report a statement that his salary has been paid. Addison v. Lewis, 75 Va. 701, 713. A contract for future employment is not binding on the receiver. Keeler v. Atchison, T. & S. F. R. Co., 92 Fed. R. 545. 27 Atkins v. Petersburgh R. Co., 3 Hughes, 307. 28 30 32 28 Farmers' L. & Tr. Co. v. Kansas City, W. & N. R. Co., 53 Fed. R. 182, 184. 29 Southern Ry. Co. v. Carnegie Steel Co., 176 U. S. 257, 286; Burnham v. Bowen, 111 U. S. 776; Central T. R. Co. v. Texas & St. L. Ry. Co., 23 Fed. R. 703. Preferences were refused where notes were originally taken for six months, with the right of renewal for the same term, and the payment had been extended for more than five years, Lackawanna I. & C. Co. v. Farmers' L. & T. Co., 176 U. S. 298, 317; and where the notes were indorsed by a third party upon whose credit the money or supplies were advanced. Continental Tr. Co. v. Toledo, St. L. & K. C. R. Co., 93 Fed. R. 532. 30 Burnham v. Bowen, 111 U. S. 776. 31 Central Tr. Co. v. Clark (C. C. A.), 81 Fed. R. 269. 32 Mercantile Tr. Co. v. So. State L. & Tr. Co., 86 Fed. R. 711; Williams v. Groat, 73 Fed. R. 59. assignee of a preferred claim has all the rights of his assignor; but usually a guarantor who pays a debt has no more right to a preference than the original creditor.32 A purchaser under a decree which provides for the payment of preferred claims cannot contest their right to a preference; 33 and upon their payment he is not entitled to be subrogated to the rights of the claimants.34 Where payment had been made on account of advances, some of which were entitled to a preference and some not, it was held that in the absence of a prior application by the parties, the mortgagee could procure their application upon the preferred claims.35 It has been held that pending a receivership in a Federal court, where parties are entitled to a lien, and can secure it by proceedings under a State statute, they are not required to go to the expense of such proceedings, but the Federal court will treat it as though all needful steps had been taken to establish the lien; and that "where like demands are presented from other States in which 31 Union Tr. Co. v. Walker, 107 U. S. 596; Burnham v. Bowen, 111 U. S. 776. Where, before the appointment of a receiver, a bondholder accepted a compromise which scaled down the indebtedness; in pursuance thereof surrendered his bonds, under an agreement to receive in exchange new bonds secured by a subsequent mortgage; and did receive enough to replace the greater part of those which he surrendered; but there were a few for which no new bonds issued, apparently because none were engraved for so small an amount, it was held that his unadjusted claim for this balance remained secured by the old mortgage, and was superior to those under the subsequent mortgage given to secure the new bonds. Blair v. St. Louis, H. & K. Ry. Co., 23 Fed. R. 524. But where rails had been sold to an individual upon his own credit for the use of the railroad by its lessee, a preference against the interest of the lessor was denied. Ruhlender v. Ches., O. & S. W. R. Co. (C. C. A.), 91 Fed. R. 5. For a case where it was held that a party who paid a preferred claim became an equitable assignee of the preference, see Kneeland v. Luce, 141 U. S. 491. For one where it was held that he did not, see U. S. Tr. Co. v. Western C. Co. (C. C. A.), 81 Fed. R. 454. 32 Farmers' L. & Tr. Co. v. Stuttgart & A. R. Co., 92 Fed. R. 246; Blair v. St. Louis, H. & K. Ry. Co. (Norton, Intervenor), 23 Fed. R. 523. But see Union Tr. Co. v. Morrison, 125 U. S. 591. 33 Swann v. Wright's Ex'r, 110 U. S. 590; St. Louis S. W. Ry. Co. v. Stark, 55 Fed. R. 758; infra, §§ 316, 482; Laughlin v. U. S. Rolling Stock Co., 64 Fed. R. 25. 34 Morgan's L. & T. R. & S. S. Co. v. Moran, 91 Fed. R. 22. 35 Illinois T. & S. Bank v. Ottumwa El. Ry. Co., 89 Fed. R. 235. 36 Brewer, J., in Central Tr. Co. v. Texas & St. L. Ry. Co., 23 Fed. R. 673, 674, 675; Treat, J., in Blair v. St. Louis, H. & K. R. Co., 19 Fed. R. 861. But see Hassall v. Wilcox, 130 U. S. 493. |