prior to that held by any persons except those whose claims are paramount to the rights of the parties to the suit. Such certificates are usually issued only in suits for the foreclosure of railroad or telegraph mortgages, or mortgages of other public corporations, in order to raise money for repairs, or to defray operating expenses, or to discharge claims having an equitable preference to that of the party at whose instance the receiver was appointed,3 or to restore to the rightful owners so much of the income as the receiver has improperly applied to the foregoing purposes. In a few cases, receivers have been authorized thus to borrow money in order to complete the construction of railroads, and save from forfeiture land grants and municipal subscriptions. Certificates have been issued to pay interest upon a divisional mortgage prior to that to foreclose which the suit was brought. Where the net earnings of a railroad are sufficient to defray current expenses, the court will not authorize the issue of receiver's certificates merely for the sake of paying interest upon the mortgage under foreclosure. It has been said to be doubtful whether the court has § 247. Meyer v. Johnston, 53 Ala. 237; Jerome v. McCarter, 94 U. S. 734; Wallace v. Loomis, 97 U. S. 146; Miltenberger v. Logansport Ry. Co., 106 U. S. 286; Stanton v. Ala. & C. Ry. Co., 2 Woods, 506; s. c., 31 Fed. R. 585; Kennedy v. St. Paul & P. R. Co., 2 Dill. 448; Hoover v. Montclair & G. L. R. Co., 29 N. J. Eq. 4; Coe v. N. J. Mid. Ry. Co., 27 N. J. Eq. 37; Union Tr. Co. v. Illinois Mid. Ry. Co., 117 U. S. 434. For a case where certain property was exempted from the lien, see Third St. & S. Ry. Co. v. Lewis, 79 Fed. R. 196. 2 Jerome v. McCarter, 94 U. S. 734; Wallace v. Loomis, 97 U. S. 146; Miltenberger v. Logansport Ry. Co., 106 U. S. 286. The issue of receiver's certificates was authorized in the case of a land and irrigation company in order to pay taxes, but not to carry out contracts nor for operating expenses. Hanna v. State Tr. Co. (C. C. A.), 70 Fed. R. 2. The power has been denied in the case of manufacturing companies; Newton v. Eagle & P. Mfg. Co., 76 Fed. R. 418; Laughlin v. U. S. Rolling Stock Co., 64 Fed. R. 25; but see Fidelity I. & S. Co. v. Shenandoah Iron Co., 42 Fed. R. 372; of a mining company, Farmers' L. & Tr. Co. v. Grape Creek Coal Co., 50 Fed. R. 481; and of a building company, Raht v. Attrill, 106 N. Y. 423. 3 Miltenberger v. Logansport Ry. Co., 106 U. S. 286; Taylor v. Phila. & R. R. Co., 7 Fed. R. 377; Skiddy v. Atlantic, M. & O. R. Co., 3 Hughes, 320. 4 Central Trust Co. v. Wabash, St. L. & P. Ry. Co., 23 Fed. R. 863. 5 Kennedy v. St. Paul & P. R. Co., 2 Dill. 448; Miltenberger v. Logansport Ry. Co., 106 U. S. 286, 294, 295. See also Smith v. McCullough, 104 U. S. 25, 29. But see Investment Co. v. Ohio & N. W. R. Co., 36 Fed. R. 48. See Credit Co. v. Arkansas Central R. Co., 15 Fed. R. 446. 6 Skiddy v. Atlantic, Miss. & O. R. Co., 3 Hughes, 320, 341. 7 Taylor v. Phila. & R. R. Co., 9 Fed. R. 1. the power to authorize a receiver to issue car-trust certificates secured by a lien upon the cars which are thus bought, and payable in ten annual instalments. An order authorizing the issue of receiver's certificates to pay "wages and freights due and to become due " does not authorize the issue of a certificate to pay money advanced to pay wages by honoring "store orders." The power of courts of equity to issue receiver's certificates is of modern origin," has been severely criticised," and should be exercised with great reluctance. Without leave from the court, a receiver has no power to pledge the trust estate, nor to make a contract for a loan of money which will bind the estate,12 or even bind the proposed lender. An order for the issue of receiver's certificates is usually granted only upon notice to all parties in interest.15 Those who have not received notice may move to set aside the order and to cancel the certificates, if they act as soon as they learn what was done.16 A very short delay after knowledge that such an order has been granted will estop a party from objecting to the validity of certificates issued in pursuance of it." Receiver's certificates 8 Ibid. 9 Fidelity Ins. & S. D. Co. v. Shenandoah I. Co., 42 Fed. R. 372, 377. 10 The first case seem to have been Meyer v. Johnson (1875), 53 Ala. 237; Coe v. N. J. Mid. Ry. Co., 27 N. J. Eq. 37; Hoover v. Montclair & G. L. Ry. Co., 29 N. J. Eq. 4; Jerome v. McCarter, 94 U. S. 734; Wallace v. Loomis, 97 U. S. 146. Il Barton v. Barbour, 104 U. S. 126, 138; Credit Co. v. Arkansas Cent. R. Co., 15 Fed. R. 46. See The Court Management of Railroads by Hon. S. D. Thompson, 27 Am. Law Rev. 481. 12 Wallace v. Loomis, 97 U. S. 146, 163; Shaw v. Railroad Co., 100 U. S. 605, 612; Taylor v. Phila. & R. R. Co., 9 Fed. R. 1; Credit Co. of London v. Arkansas Cent. R. Co., 15 Fed. R. 46; Street v. Md. Cent. Ry. Co., 59 Fed. R. 25. 13 Union Tr. Co. v. Ill. Mid. Ry. Co., 117 U. S. 434; Cent. Tr. Co. v. Cincinnati, J. & M. Ry. Co., 58 Fed. R. 500. The court may ratify the loan after it has been made. Elk Fork O. & G. Co. v. Foster (C. C. A.), 99 Fed. R. 495; Ibid., 90 Fed. R. 767. 14 Smith v. McCullough, 104 U. S. 25, 29. 15 Ex parte Mitchell, 12 S. C. 83. But see Miltenberger v. Logansport Ry. Co., 106 U. S. 286, 297, 298. 16 Hervey v. Ill. Mid. Ry. Co., 28 Fed. R. 169. Cf. Central T. R. Co. v. Sheffield & B. C. I. & Ry. Co., 44 Fed. R. 526. 17 Miltenberger v. Logansport Ry. Co., 106 U. S. 286; Union Tr. Co. v. Ill. Midland Ry. Co., 117 U. S. 434; Central Tr. Co. v. Marietta & N. G. R. Co. (C. C. A.), 75 Fed. R. 193; s. c., 75 Fed. R. 209. It was held that notice of an application for receiver's certificates given to a trustee of a mortgage who was not a party to a suit did not make them, when issued, prior to his mortgage, Farmers' L. & Tr. Co. v. Centralia & C. R. Co. (C. C. A.), 96 Fed. R. 636; and that a bondholders' committee empowered to act in are assignable, but not negotiable.18 It has been said that the power to issue them is a personal one which the receiver cannot delegate.19 The holders of receiver's certificates are bound by all subsequent proceedings in the suit, whether or not the same affect their lien and with or without notice.20 The purchaser at a judicial sale made subject to the payment of receiver's certificates cannot contest their validity." A receiver is personally responsible for a fraudulent statement in a matters requisite or necessary for the enforcement and protection of the legal rights of the holders of mortgage bonds had no authority to consent in their behalf to the issue of receiver's certificates with a priority over the mortgage, in order to pay claims not entitled to a preference. Ibid. 18 Union Tr. Co. of N. Y. v. Chicago & L. H. R. Co., 7 Fed. R. 513; Stanton v. Ala. & C. R. Co., 31 Fed. R. 585; Turner v. Peoria & S. R. Co., 95 Ill. 134; Stanton v. Ala. & C. R. Co., 2 Woods, 506; s. c., 31 Fed. R. 585; Central Nat. Bank v. Hazard, 30 Fed. R. 484. A purchaser of receiver's certificates at par from the receiver without notice of any suspicious facts is not prejudiced by the appropriation of the funds by the receiver for his own use. Mercantile Tr. Co. v. Kanawha & O. Ry. Co., 50 Fed. R. 874. Where a receiver issued a certificate to a person named therein as payee, for negotiation and sale, and the latter never paid over any money on account of it, a purchaser of the certificate at much less than par, who was unable to prove that the person from whom he bought it had paid anything therefor to the person named as payee, was not allowed to receive anything from the receiver on account of the same. Union Tr. Co. v. Chicago & L. H. R. Co., 7 Fed. R. 513. See Stanton v. Ala. & C. R. Co., 31 Fed. R. 585; s. c., 2 Woods, 506. The court has power to pay out of the fund receivers' certificates in the hands of bona fide purchasers, although the receivership is dissolved and the bill dismissed. El. Supply Co. v. Put-in-Bay W. L. & Ry. Co., 84 Fed. R. 740. 19 Union Tr. Co. v. Chicago & LH. R. Co., 7 Fed. R. 513. But see Ala. Iron & Ry. Co. v. Armiston L. & Tr. Co. (C. C. A.), 57 Fed. R. 25. 20 Gordon v. Newman, 62 Fed. R. 686; Mercantile T. Co. v. Kanawha & O. Ry. Co. (C. C. A.), 58 Fed. R. & But see Sheffield & B. C. I. & Ry. Co v. Newman (C. C. A.), 77 Fed. R. 787. The order authorizing the issue of receiver's certificates, although ex parte, remains in force till set aside; and is not revoked by a reference to determine all claims against the receiver, and a confirmation of a report thereat making no mention of the certificates, when it appears that they were not presented or considered at the reference, and that their holder had no notice of the reference. Mercantile T. Co. v. Kanawha & 0. Ry. Co., 50 Fed. R. 874. It has been said that a receiver's certificate payable out of the income is in the nature of a call loan, and that the holder has the right to presume that the receiver will notify him when the loan is to be collected or the money paid. Sage, J., in Mercantile T. Co. v. Kanawha & O. Ry. Co., 50 Fed. R. 874, 878. 21 Central Nat. Bank v. Hazard, 30 Fed. R. 484; Central T. Co. v. Shef field & B. C. & L. Ry. Co., 44 Fed. R. 526. certificate which he issues.22 In at least one case, the court ordered the receiver to execute a mortgage to secure the receiver's certificates.23 But, ordinarily, the order for the issue of the certificates provides that they shall constitute a lien upon the property superior to all prior incumbrances, which is sufficient.24 In one case the order simply stated that the certificates should be payable out of the income of the property, and "be provided for by this court in its final order in said cause, unless paid by the receiver out of the income of said road as aforesaid." 25 Where the order provides that the certificates shall be a first lien on the property, the lien may be enforced by an independent suit,26 or by a petition in the suit in which they were issued to the court which ordered their issue, or to a court having territorial jurisdiction over a part of the railroad in an ancillary suit.28 A receiver appointed in a suit for the foreclosure of a second railroad mortgage may be authorized to issue certificates constituting a prior lien to that of the first mortgage, provided the mortgagor is in default as to that, and the first mortgagee is a party to the suit.29 An order authorizing the issue of receiver's certificates is appealable.0 A Federal court has no power to enjoin a receiver appointed by a State court from issuing certificates of indebtedness.31 § 248. Advice to receivers.- Receivers may apply to the court for instructions and advice, both generally and in particular cases. "If there are parties in interest, and they have their day in court, the advice may be decisive. But if the matter is ex parte, the value of the advice depends largely upon the information and ability of the judge, and is probably binding only on the receivers, for the judge may change his mind on hearing full argument." It has been said, that from the nat 22 Bank of Montreal v. Thayer, 7 Fed. R. 622. 23 Jerome v. McCarter, 94 U. S. 734. 24 For a good form of an order and a certificate, see Kennedy v. St. Paul & P. R. Co., 2 Dill. 448. 25 Miltenberger v. Logansport Ry. Co., 106 U. S. 286, 298. 26 Swann v. Clark, 110 U. S. 602. 27 Mercantile T. Co. v. Kanawha & O. Ry. Co., 50 Fed. R. 874. 28 Ibid. 29 Miltenberger v. Logansport Ry. Co., 106 U. S. 286. 30 Farmers' L. & T. Co., Petitioner, 129 U. S. 296. 31 Reinach v. Atlantic & G. W. R. Co., 58 Fed. R. 33. § 248. Frank v. Denver & R. G. Ry. Co., 23 Fed. R. 757; Ex parte Koehler, 23 Fed. R. 529; Mo. Pac. Ry. Co. v. Tex. & P. Ry. Co., 31 Fed. R. 862. 2 Mo. Pac. Ry. Co. v. Texas & P. Ry. Co., 31 Fed. R. 862. ure of things the court cannot determine how many trains a receiver shall run, nor select his employees, although it may regulate his treatment of them, and his contracts with them, and will listen to their complaints of unfair treatment by him. The courts have, at the request of receivers, instructed them what rates to charge, and directed them not to obey so much of a State statute as impaired the obligation of a contract, where the petition for instructions was filed a month before the act went into operation," and advised a receiver whether he should pay a tax.10 When a railroad was in the hands of a receiver appointed in a suit to foreclose a mortgage, the court refused to entertain a petition by the mortgagee asking for instructions as to the propriety of postponing a meeting of its stockholders, and for permission to postpone the meeting." § 249. Litigation by receivers.-The causes of action which a receiver can enforce are of two kinds,- those which belonged to the estate of which he has charge before it was entrusted to him, and those which have accrued since his appointment. As has been said before, he cannot sue upon either without the leave of the court which appointed him. A suit upon a cause of action which belonged to the estate before his appointment is brought in the name of the legal owner of the estate; ? unless, as is not uncommon, the order authorizes the receiver to sue in his own name. In the former case, the person whose 3 Brewer, J., Treat, J., concurring, in Central Tr. Co. v. Wabash, St. L. & P. Ry. Co., 23 Fed. R. 863, 867. 4 Brewer, J., in Frank v. Denver & R. G. Ry. Co., 23 Fed. R. 757, 764. 5 Frank v. Denver & R. G. Ry. Co., 23 Fed. R. 757, 764; Waterhouse v. Comer, 55 Fed. R. 149. 6 Waterhouse v. Comer, 55 Fed. R. 149; Platt v. Phila. & R. R. Co., 65 Fed. R. 660. The court refused to permit receivers of a railroad to reduce the wages of the employees and change the terms of their employment without notice to them. Ames v. Union Pac. Ry. Co., 60 Fed. R. 674. A reduction was allowed in U. S. Tr. Co. v. Omaha & St. L. Ry. Co., 63 Fed. R. 737. 7 Continental Tr. Co. v. Toledo, St. L. & K. C. R. Co., 59 Fed. R. 514. 8 Ex parte Koehler, 23 Fed. R. 529. 9 Ibid. 10 Ledoux v. La Bee, 83 Fed. R. 761. 11 Taylor v. Phila. & R. R. Co., 7 Fed. R. 381. § 249. Wynne v. Lord Newborough, 1 Ves. Jr. 164; s. c., 3 Brown, Ch. C. 88; Green v. Winter, 1 J. Ch. (N. Y.) 60. 2 Dick v. Struthers, 25 Fed. R. 103; Dick v. Oil-Well S. Co., 25 Fed. R. 105; Daniell's Ch. Pr. (2d Am. ed.) 1977, 1991. 3 Davis v. Gray, 16 Wall. 203. See Frankle v. Jackson, 30 Fed. R. 398. 2 |