REPORTER,

.vol. 50.

he would at 'the -sametiQie have note, as ,his duty required. The bill muat bo .uatained, .and. decree may be prepared accordingly.

MnCANTILE TRUST

Co.

t1. KANAWHA

& O. Ry. Co. d

aL

(CWcuU Court, B. D. Ohio, E. D. .June" 18l1'.a.)
\.

,,'

........,

The lienal receiver'scertUloates continuesu louru order authorizing thetr luu&JIce remains in farce,thougb suoh order was made wltbout noticeto parties Inf.ei'e8ted; and the facttnat a reference is had to detennille all olaims against the noeiver and a report ill oonllrD:led wbioh D:Iakes no allusion to tbe certillcates, ill not against t.hl;tm, when It appears tbat they were not preaented or co... IIldered, and that their holder had no notioe of the reference.
:,

, to pre.ume that the 'tecelver will notify him when the loan is to be called or tbe
aoneypaid. .

BY RECBJVEB.

.. wllioh are ordered to be paid out of the income of the from time to time, 'are In the nature of a call loan, and the holder has a righ'

.. " 'Wh4!ire a purchaser orreoeiver'lI certificates has paid their par value to tbe neiVer, without notice 01 any faots to.put him upon Inquiry, his lien is not affected by the fact that the receiver appropriates the money to his o.wn uee. ,aeoeher's certUloates 'were issued in a railroad foreclosure SUit, and thereafter tl\$ road wu sold to a qommittee of· :the bondholders, to be paid for by a deposit of the boildll.';r/le decree eonfirming tbe sale directed the oonveyance to be made ex' .....ly sUbjec,t to the payment of any,lIums in oub on .account of the purchase price the JJOurt ht,#terwards direot, and a vendor's lien to be served for Cllrlty. .These prov 10Dswere incl!rporated in the deed to tbe committee, and in tbeir:.l1eed to a new 'rporation organized by tbe bondbolders. Held,that the reser-,atlon hall tbe torqe ,01 a oovenant runniDg with the land, and, as no cash was paid in, the lien of the Oflrtifl.cates was not, transferred to the fund arising from the 'We; but was continlled on the property,
8.UtB-S'-:LlI: or PROPBRTT-CONTINUANOB or LIEN.

"

&'.

,

tIle road extends, j;be,latter oourt has jurisdiction to enforce the lien of the even in a ,separate suit and against a OQmpany which purchased the . zioad'atter tne aale in We original proceedIng. .'

"tate, and anoilliary proceedings, are had Ina federal court of another state, into

Where ,receiver'8C4!1rtillcates. are IssuE!d by direction of a federal court In one

J..

In Equity. Bill by the Mercantile Trust Company against the KanaWha & Ohio Railway Company for the foreclosure of a mortgage. Reardon the intervention of the Adams Express Company to enforce the prior lien of certain receitver'ecertificates. Decree for intervener. .Simpeon, Thatcher tJ 'Barnum and Alexander Gretm, for complainant. BamBI!JI,MazweU for Adams Express Company.
SAG'Ill,Distriot Judge. This is before the court upon the intervening petition of theA,dams Express Company and the proofs and exhibitsotrered by the parties. It is set up in the petition that in 1883 the Obi() Central Railroad Company was the owner and in possession of the railroad involved in this suit, the river division of which extends fronl town: of Corning, in the' state' of Ohio, to a point in the county

MERCANTILE TRUST

co. v.

KANAWHA

it

O. RY. 00.

876

of GaHia, on'the north side of the Ohio river, and thence, crossing the river bybridge,to the city of Charleston, W. Va., as mentioned and described in the bi1l of complaint herein, and had duly executed a mortgage thereon to the Central Trust Company of New York, to secure its bonds to the amount of $5,316,000. On the 20th of November, 1883, the Central Trust Company filed its bill in equity to foreclose said mortgage in the circuit court of the United States for the district of West Virginia, and on the 21st of November, 1883, upon the application of the Central Trust Company, and with the consent of all parties, the court appointed Thomas R. Sharp receiver of said railroad, with power to operate and manage the same. He accepted the appointment, and entered upon the performance of the duties of the position. On the 13th of December, 1883, the court made an order authorizing the receiver to issue certificates to an amount hot exceeding $50,000, bearing interest at the rate of 6 per cent. per annum; the court finding that that amount would be required for the repairing of bridges and ditching and ballasting certain portions of the roadbed, and for certain other expenses of maintenance, repairing, and management. It was further ordered that the certificates should be a first and paramount lien on the property of the railroad company then in the possession of the receiver. and upon that which he might afterwards take into his possession. Said certificates ,vere not to be negotiated at less than their face value, and it W8S further ordered that the receiver should pay them out of the revenues of the railroad company received by him from time to time. On the 24th of March, 1884, the court entered a further order, authorizing the receiver to sell or negotiate certificates upon such terms and at such rates as he might deem proper, and might be aLle to obtain. It is further set forth that the petitioner, on the laith of these orders, both of which remain in full force and are unreversed , and in consideration of receiver's certificates delivered to it by !laid Thomas R. Sharp, paid to him at various dates beginning April 16, 1884, and endilig August 29, 1884, $35,935.39, taking therefor certificates at par. A decree of foreclosure was subsequently entered under which the railroad was sold to a committee of the bondholders under said mortgage, who turned in their bonds in payment of all but a small portion of the purchase price, and thereupon organized the de:endant corporation, the Kanawha & Ohio Railway Company, executed the mortgage .sought to be foreclosed herein. and distributed the stock of said Kanawha & Ohio Railway Company, and the bonds secured by saill mortgage, pro rata among the owners and holclers of the bonds secured by sllid mortgage of the Ohio Cflntral Railroad Com pany and said Central Trust Company; and that the stock and mortgllge bonds of the Kanawha & Ohio Railway Company are still almost wholly, ifoot altogether, held by said original tlistributees. The petitioner further sets forth that no provision was made in the proceedings in the United States circuit court for the district of West Virginia for the payment of the receiver's certificates issued to and held by petitioner, and that the same are wholly unpaid and due to petitioner

, _DERAL REPORTER,

vol. 50,

with interest; also no notice was ever given to petitioner to present 'the same for payment. Wherefore petitioner prays that said certifmay be declared a first and paramount lien upon so much of said realty as is in the state of West Virginia, and that out of the proceeds thereof it may be first paid the amount of said certificates, with interest. The following are by stipuLation admitted to be facts: (1) That on the faith of the orders of December 13, 1883, and March mentioned in the inten'ening petition, and in consideration of receiyer's certificates simultaneously delivered to it by said Sharp, the Company paid to said Sharp, receiver, the sums stated upon the days stated in the intervening petition; the receiver's certifiqates heing in form as shown therein. .(2), 'rh\tt none of the money so as aforesaid paid to said Sharp by the Company was used for the purposes specified in said order 9fDecem1?er 13, 1883, odor any other purposes ofsaid receivership, or for the benefit of the property held therein or of the parties to said cause., ' ,' :, (3) neither ,the purchasers, nor their grantee, nor the Kanawha & ,9hj9Railway Company, nor the complainant herein, knew of the of said certificates until September, 1887; and that the Adams pOpjpa.ny never demanded oftb;eKanawha & Ohio Railway Compll-nr ;<j?aYqJent of said certificates, nor l:lverin anyway, until the filing of iW, petition herein, sought to enforce the alleged lien which it now asserts. Said certific(ltes have been paid, nor the money rep· . Jt ,is, 1obJected that the certificates, having been issued upon orders notice to parties interestedj,are not entitled to recognition ,because the cou;rt in West Virginia has not, after notice and themjciting Union Trust Co. v. Illinois M. Ry. Co., 117U, S. 476, 6!3up. Ct. Rep. 809. It is urged that in legal effect thrse cei'tificates have been by that court, because it directed a. for the determination of all claims against its receiver, and tpe report qf the referee was .approved and embpdied in the final deqree. of June, 1886, and that thus court in effect adjudged that nothing ,should be paid on these certificates. The objection will be Qverruled. The holding in Union Trust 00. v. illinois M. Ry. Co. was ;r@ceiver and thoseJending money to him on certificates issued qnorpers rpade without prior notice to parties interested, "take the risk oJ action of the court in regard to the loans." .So they do, but the aside; and it has not been set I\sidtt. As to the sQggestion that. the referenpe and the confirmation, of the report of the amounted to an adjudication against these certificates, it is only the facts that petitioner had no notice of the reference, and did not appear, and that its claim was not presented or considered, 8Jl0; cite the old case of Ravee v. Farmer, 4 Term R. 146, and the stm older c!l!!e of Golightly v. Jellicoe, Hit 9 Geo. 3 B. R. ,refarred to in tJIe note to Ravee v. Farmer. The certificates in question ,were issued aq; declared that they should be a first and para:-