§ 250. Duties of receivers.- A receiver holds the property of which he is given the care in trust for all persons interested therein, whether parties to the suit or not,1 provided that they do not claim it by a title paramount to his own. His duties, therefore, are substantially those of a trustee, although his powers are usually more limited; and the decisions concerning the duties and liabilities of trustees, executors, administrators, and assignees in bankruptcy and insolvency are often of service in determining those of a receiver. A receiver's first duty after his appointment is to take possession of the property entrusted him by the order, using all the powers therein given him. If any of it is under lease he should notify the tenants of his appointment and demand that they attorn to him. It seems that as soon as he has obtained possession of all the estate that consists of personal property he should make an inventory thereof. "Under some circumstances a receiver would be derelict in duty, if he did not cause property in his hands to be insured against fire." All moneys that he receives he should either pay into court or deposit in a bank to the credit of himself as receiver, in a separate account from that for his private deposits. In remitting money from one place to another, he may do so by using the ordinary means, provided that he uses due care. He will be personally liable for all loss to the estate caused by his making any other disposition of the funds collected by him.10 It is advisable for a receiver to take a receipt for all sums of money exceeding twenty dollars paid out by him. By so doing, and by using such receipts as vouchers, he will have less diffi

§ 250. 1 Davis v. Gray, 16 Wall. 203, 217, 218; Central T. Co. v. Wabash, St. L. & P. Ry. Co., 23 Fed. R. 863.

2 Davis v. Duke of Marlborough, 2 Swanst. 108, 118, 137, 138; Georgia v. Atlantic & G. R. Co., 3 Woods, 434.

3 See, for example, Com. v. Franklin Ins. Co., 115 Mass. 278; People v. National T. Co., 82 N. Y. 283.

4 Daniell's Ch. Pr. (2d Am. ed.) 1987. 5 Daniell's Ch. Pr. (2d Am. ed.) 1987. 6 Lewin on Trusts (6th ed., London, 1875), 184; England v. Downs, 6 Beav. 269. See also Williamson v. Wilson, 1 Bland (Md.), 418, 436.

Thompson v. Phoenix Ins. Co., 136 U. S. 287, 293, per Mr. Justice Harlan.

8 Salway v. Salway, 4 Russ. 60; s. C., 2 R. & M. 215; Wren v. Kirton, 11 Ves. 377; Hinckley v. Railroad Co., 100 U. S. 153, 157. For a case where a receiver was held responsible for money lost by the failure of a bank, see Fikener v. Bott, 47 S. W. R. 251. 9 Knight v. Lord Plimouth, 3 Atk. 480; s. c., 1 Dickens, 120.

10 Salway v. Salway, 4 Russ. 60; s. C., 2 R. & M. 215; Rowth v. Howell, 3 Ves. 565.

14

culty in passing his accounts." A receiver should so keep the estate in his hands that it can easily traced, delivered up, or accounted for.12 He should, at least as often as once a year, account and pay into court all the money which he has received, together with the profits thereof, less all necessary or authorized expenditures, and such compensation as the court allows him.13 If he receives a considerable sum of money during the interval between the regular times for his accounting, it seems that he should apply to the court for directions concerning its investment; and in general, he should apply for instructions whenever any unexpected event occurs of which advantage may be taken for the benefit of the estate, or which necessitates active measures to preserve the estate from loss.15 Any profit which he may make from the estate belongs to the finally successful party, or to him to whom the surplus, after the payment of prior demands, is finally directed to be paid.16 And if he uses the property over which he has been appointed in his private business, he must pay to the estate for its use. It is usually considered improper for a receiver to retain as his counsel one who has previously acted in the suit for one of the parties.18 But it is proper for a receiver appointed in a suit brought by a creditor for the satisfaction of his own debt alone, to retain the attorney of the complainant.19 A receiver of a railroad is a common carrier; 20 he is guilty of impropriety, for which he may be removed, when he discriminates between

11 Remsen v. Remsen, 2 J. Ch. (N.Y.) But see Whitesides v. Lafferty, 3 495, 501. Humph. (Tenn.) 150.

12 Williamson v. Wilson, 1 Bland (Md.), 18; Hinckley v. Railroad Co., 100 U. S. 153, 157; Atty. Gen. v. North Am. L. L. Co., 89 N. Y. 94, 107, 108.

13 Daniell's Ch. Pr. (2d Am. ed.) 1992; Shaw v. Rhodes, 2 Russ. 539. See § 256. 14 Shaw v. Rhodes, 2 Russ. 539; Hicks v. Hicks, 3 Atk. 274; Earl of Lonsdale v. Church, 3 Brown Ch. C.

41.

15 Shaw v. Rhodes, 2 Russ. 539, Hicks v. Hicks, 3 Atk. 274; Earl of Lonsdale v. Church, 3 Brown Ch. C. 41.

16 Gibbs v. David, L. R. 20 Eq. 373.

17 Battaile v. Fisher, 36 Miss. 321.

18 Ryckman v. Parkins, 5 Paige (N. Y.), 543; Blair v. St. Louis, H. & K. R. Co., 20 Fed. R. 348. In one case the court refused to allow the receiver to retain a relative who had previously practiced elsewhere, and had come into the circuit apparently for the purpose of acting as counsel for the receiver. Blair v. St. Louis, H. & K. R. Co., 20 Fed. R. 348. 19 Shainwald v. Lewis, 8 Fed. R. 878. See Davis v. Chattanooga U. Ry. Co., 65 Fed. R. 359.

20 Beers v. Wabash, St. L. & P. Ry. Co., 34 Fed. R. 244.

different persons who use the railway; " and he may be obliged to repay such sums of money as he has exacted from shippers of freight by unlawful discriminations against them." A receiver cannot resign without the permission of the court which appointed him.23 A recent statute provides "that whenever in any case pending in any court of the United States, there shall be a receiver or manager in possession of any property, such receiver or manager shall manage and operate such property according to the requirements of the valid laws of the State in which such property shall be situated, in the same manner that the owner or possessor thereof would be bound to do if in possession thereof. Any receiver or manager who shall wilfully violate the provisions of this section shall be deemed guilty of a misdemeanor, and shall on conviction thereof be punished by a fine not exceeding three thousand dollars, or by imprisonment not exceeding one year, or both said punishments, in the discretion of the court." 24

§ 251. Liability of a receiver.-The liability of a receiver is in many but not all respects analogous to those of a trustee. He is liable to all persons interested in the estate in his hands for any damage resulting to them from any breach of duty by him, whether intentionally or through negligence. It has been held that he is personally responsible for funds of the trust embezzled by his clerks. He is, however, free from liability to the parties to the suit on account of any act performed in obedience to an order of the court within its jurisdiction, and not obtained by fraud, until the same has been vacated upon appeal or otherwise. A receiver's liability to strangers is much more limited than that of a trustee. He is not liable

21 Handy v. Cleveland & M. R. Co., 31 Fed. R. 689. See Missouri Pac. Ry. Co. v. Texas & P. Ry. Co., 30 Fed. R. 2; Cutting v. Florida Ry. & Nav. Co., 43 Fed. R. 747.

22 Cutting v. Florida Ry. & Nav. Co., 43 Fed. R. 747.

23 Daniell's Ch. Pr. (2d Am. ed.) 2002. See In the Matter of Jones, 4 Sandf. Ch. (N. Y.) 615.

24 25 St. at L., § 2, p. 436; 24 St. at L., § 2, p. 554. As to the liability of receivers under Federal statutes, see Erb v. Morasch, 177 U. S. 305; U. S.

v. De Coursey, 82 Fed. R. 302; U. S. v. St. Louis, A. & T. R. Co., 43 Fed. R. 414.

§ 251.1 Knight v. Lord Plimouth, 3 Atk. 480, 481; Kaiser v. Kellar, 21 Iowa, 95, 97; Koontz v. Northern Bank, 16 Wall. 196, 202, 203. 2 Skerrett's Minors, 2 Hog. 192. 3 Gunn v. Ewan, 93 Fed. R. 80.

4 Holcombe v. Johnson, 27 Minn.

353.

5 See Taylor v. Davis, 110 U. S. 330, 335.

personally upon a covenant entered into in his official capacity with the sanction of the court. Although it may be that in the courts of Massachusetts and New York he is personally responsible for rent when he retains possession of a leasehold,' the rule of the Federal courts seems to be that he is not liable in such a case, and that the court may authorize him to abandon a leasehold after experience has shown that it is unprofitable to the estate, even after he has retained it for nine months or more; and that then he incurs no personal liability, and the estate is responsible only for the use of the property during the time that he has remained in possession. The same principles apply to a lease of personal property such as railroad cars. A receiver, even when acting as a common carrier, is not liable personally for injuries caused by the negligence of his employees, when he exercised reasonable care in their selection.10

6 Livingston v. Pettigrew, 7 Lans. (N. Y.) 405; Newman v. Davenport, 9 Bax. (Tenn.) 538; Taylor v. Davis, 110 U. S. 330, 335; Central Tr. Co. v. Wabash, St. L & P. Ry. Co., 34 Fed. R. 259.

7 Com. v. Franklin Ins. Co., 115 Mass. 278; People v. National Tr. Co., 82 N. Y. 283; People v. Univ. L. Ins. Co., 30 Hun (37 N. Y. S. C. R.), 142; Wells v. Higgins, 132 N. Y. 459.

8 St. Joseph & St. L. R. Co. v. Humphreys, 145 U. S. 105; Ames v. Union Pac. Ry. Co., 60 Fed. R. 966; U. S. Tr. Co. v. Wabash W. Ry. Co., 150 U. S. 287; Seney v. Wabash W. Ry. Co., 150 U. S. 310; Quincy, M. & P. Ry. Co. v. Humphreys, 145 U. S. 82; Kneeland v. Am. L. & Tr. Co., 136 U. S. 89. For cases where it was held that the court had adopted and assumed the lease, see Central R. & B. Co. of Ga. v. Farmers' L. & Tr. Co., 79 Fed. R. 158; Mercantile Tr. Co. v. Atlantic & P. R. Co. (C. C. A.), 88 Fed. R. 140; s. c. as U. S. Tr. Co. v. M. Tr. Co. (C. C. A.), 80 Fed. R. 18; Central T. Co. v. Continental Tr. Co. (C. C. A.), 86 Fed. R. 517; U. S. Tr. Co. v. Mercantile Tr. Co., 88 Fed. R. 140. The question whether the

court should adopt the lease was said to be administrative rather than judicial in its nature, and not to be reviewed by an appellate tribunal, unless there were a manifest abuse of discretion. Mercantile Tr. Co. v. Farmers' L. & Tr. Co. (C. C. A.), 81 Fed. R. 254. Certiorari denied, 168 U. S. 710.

9 Sunflower Oil Co. v. Wilson, 142 U. S. 313. Cf. Platt v. Phila. & R. R. Co. (C. C. A.), 84 Fed. R. 535; Thomas v. Western Car Co., 149 U. S. 95; Farmers' L. & Tr. Co. v. Chicago, etc. Ry. Co., 42 Fed. R. 6; Easton v. Houston & T. C. Ry. Co., 38 Fed. R. 784. For the effect of other executory contracts by corporations upon their receivers, see Manhattan Tr. Co. v. Sioux City & N. R. Co., 81 Fed. R. 50; Central Tr. Co. v. East Tenn. Land Co.. 79 Fed. R. 19.

10

Kennedy v. I. C. & L. R. Co., 3 Fed. R. 97; Union Tr. Co. v. Chicago & L. H. Ry. Co., 7 Fed. R. 513, 516; Davis v. Duncan, 19 Fed. R. 477; Farmers' L. & Tr. Co. v. Central R. R. of Iowa, 2 McCrary, 181; s. c., 7 Fed. R. 537; Thompson v. No. Pac. Ry. Co., 93 Fed. R. 384, 389. See, however, Kain v. Smith, 80 N. Y. 458.

13

The only remedy of the person thus aggrieved is by an action against the receiver in his official capacity, seeking satisfaction out of the estate." When the receiver has been discharged and the estate sold, or returned to its owner, he has no remedy in a Federal court except against the employee, unless one has been preserved for him by the court; 12 for the owner of the property is not liable for the negligence of the receiver's employees. For this reason it is customary to insert in the order for the sale in bulk of property in the possession of a receiver, that the purchaser shall take it subject to all claims for injuries caused while it was managed by the receiver. Such a provision, although not mentioned in the order for the sale, may be inserted as a condition in the order confirming the sale, and the purchaser, after taking possession under the latter order, is estopped from disputing the validity of the condition.15 Such claims are usually enforced in the suit in which the receiver was appointed. By the former practice, following the old chancery rule, a receiver could not be sued without the permission of the court that appointed him." An act of Congress has changed the practice as follows: "Every receiver or manager of any property appointed by any court of the United States may be sued in respect of any act or transaction of his in carrying on the business connected with such property,

16

11 Kennedy v. L. C. & L. R. Co., 3 Fed. R. 97; Farmers' L & Tr. Co. v. Central R. R. of Iowa, 2 McCrary, 181; s. C., 7 Fed. R. 537; Union Tr. Co. v. U. & L. H. Ry. Co., 7 Fed. R. 513,

516.

12 Davis v. Duncan, 19 Fed. R. 477; White v. Keokuk & D. M. Ry. Co., 52 Iowa, 97. For cases where a State court gave a remedy, see Texas & Pac. Ry. Co. v. Johnson, 151 U. S. 81; Texas Pac. Ry. Co. v. Griffin, 76 Tex. 441; Fordyce v. Witters (Texas), 20 S. W. R. 266.

13 Davis v. Duncan, 19 Fed. R. 477. 14 Farmers' L. & Tr. Co. v. Central R. R. Co. of Iowa, 2 McCrary, 181; s. C., 7 Fed. R. 537; s. C. subsequently considered in 17 Fed. R. 758.

15 Farmers' L. & Tr. Co. v. Central R. R. of Iowa, 17 Fed. R. 758.

16 Ibid.

17 Barton v. Barbour, 104 U. S. 126. Such an order was revocable and might have been conditional. Central Tr. Co. v. Wabash, St. L. & P. Ry. Co., 26 Fed. R. 74. "The leave to bring suit in any form reserves the right to the receiver to set up any defense he may have, which can be done by plea, answer, or demurrer." Davis v. Duncan, 19 Fed. R. 477, 483. See also Jordan v. Wells, 3 Woods, 527. The court might direct that service of process be made upon the resident agent of a non-resident receiver. Central Tr. Co. v. St. Louis, A. & T. Ry. Co., 40 Fed. R. 426. As to the right to inspect a receiver's books, see Chable v. Nicaragua C. C. Co., 59 Fed. R. 846.