OONTINENTAL NAT. BANK V. ELIOT NAT. BANK. CONTINENTAL NAT. BANK V.
869
ELIOT ·NAT. BANK and others. May 21,1881.)
(Circuit Court, D. Mas8achu8etts.
L
NATIONAL BANKS-TRANSFER OF STOCK-ATTACHMENT.
An unrecorded transfer of national bank stock will take precedence of a subsequent attachment in behalf of a creditor without
In Equity. W. G. Loring and J. G. Gray, for complainants. A. A. Ranney, for defendants. LOWELL, C. J. R. B. Conant was the cashier of the Eliot National Bank, of Boston, and owned 158 shares of its capital stock. Each of his cetjiificates contained these words: "Transferable only on the hooks of the bank by the said Conant, or his aUorney, on the surrender of this certificate." The Continental National Bank, of New York, was the regular correspondent of the Eliot Bank. In April and May, 1877, Conant borrowed $9,500 of the Continental Bank, in two sums of $5,000 and $4,500, and sent them as collateral se· curity certificates for 95 shares of stock of the Eliot National Bank, with a power of attorney to transfer them upon the books, but they were not so transferred. The by-laws of the bank provide that the stock shall be 'assignable only on the books; that when stock is transferred the certificate shall be returned to the bank and cancelled, and a new certificate issued. In July, 1878, Conant confessed to the directors of the Eliot Bank that he had embezzled the funds of the bank to the amount of about $70,000. They required him to resign his position as cashier, which he did, and he .has since been convicted, and is now serving a sentence of imprisonment for his fraud. The Eliot Bank attaehed his shares in an action which is still pending in the superior court for Suffolk county. Afterwards the Continental Bank sent to tho Eliot Bank the certificates and powers of attorney, and demanded a transfer and new certificate, which was refused. This bill is filed to require the transfer to be made, or fOl damages, or other relief. Conant is made a defendant, and v.7,no.4-24
870 . the bill as against him has been taken pro confesso. The officer is likewise a defendant, but it is admitted that no decree'can be made against him. The only question of fact in dispute is whether the Eliot Bank, before attaching the shares, had notice that they had been pledged, or mortgaged, to the complainants. Conant testifies that at the meeting of the directors at which he con· fessed his misdoings, he was asked what assets he had, and mentioned certain shares of mining stock, and other things; and that the president asked about these bank shares, and was informed of the fact that they were pledged to the New York banks for their face value. Conant, soon after leaving the directors' room, consulted Mr. Morse, an attorney of this court, who went at once and saw the directors before they had left the bank; and he testifies .that he was told there by some one or more of them that this stock was pledged. On the other hand, none of the directors remember such a conver· sation; and some of them are confident that none such can have occurred. If it occurred, it is admitted that the attach, ment could not hold because the attaching creditor had notice of the transfer. Black v. Zacharie, 3 How. 483. I am inclined to think that the affirmative evidence mQ.st prevail in this cas,e; but there is so much doubt in my own. mind, that I have thought best to examine the disputed question of law, whether the attachment would take precedence if made without notice;to the attaching creditor of the unrecorded transfer. The arguments have been very thorough on both sides, and a great maI).yqases have been cited. It has been very ably urged that by i the law of Massachusetts the woul,d have the ,preference. This I consider doubtful; but, the decision dOkls:w;>t depend upon the law of Massachusetts. 1. It is not important to considerwhetherthe.conttaat was consummated in Massachusetts or in New York., Thenegotiability or transferable quality of the stock of a national bank depends upon .the laws of the United States. Dickinson v. .Central National Bank,· Mass. 279. In Merchants' Bartk v. State Bank, 10 Wall. GOJ, the admittetllaw and usage
CONTINENTAL NAT. BUlK V. ELIOT NAT. BANK.
8'71
of MaElsachusetts, where both the national banks were situated, and where the transactions took place, were wholly disregarded by the majority of the supreme court. The negotiability offoreign scrip in England is not governed by the law of England, but by the law of the foreign country,_which may be proved by the general usage of brokers and others dealing with such scrip. Goodwin v. Robarts, 1 App. Cases, 476. The time and mode of attaching property, and its effect in general, are part of the law of the forum; but its operation upon unrecorded transfers of shares in national banks is regulated by the law which creates the shares and provides for their conveyance and registration. That law is section 5139, Rev. St., which provides that shares may be transferred on the books of the association in such manner as may be prescribed by the by-laws or articles of association. Such a law. in Massachusetts, might possibly mean that creditors could attach the shares as the property of the recorded owner. Blanchard v. Gas-light Co. 12 Gray, 213. I have already said that I doubt if this is now the law of Massachusetts, and I shall return to the subject presently; but that law favors attachments in certain classes of cases to an unusual extent. 2. It is a general rule that creditors, whether they proceed by an attachment on mesne seizure on execution, creditor's bill, or through an assignee in bankruptcy, must take their debtor's property subject to all equitable as well as legal charges, liens, or opposing titles. WiUes, J., in giving judgment in the Queen's Bench in 1868, in a case quite analogous to this, against the right of seizing shares of the apparrent owner, saId that it was a rule applied by that court more than a hundred years before, in the analogous case of the statutory execution under the bankrupt law, that the credo itors can have no more than a debtor was entitled to in equity Or at law. Pickering v. lljracombe By. Co. L. R. 3 C. P. 235, 251. It has been the law of the lord mayor's court in London, from the time of Richard I., that an equitable assignment of a chose in action should prevail against an attachment.
FBDERAL REPORTER.
oby v. Day, 2 E. & B. 605. This application of the rule obtains in Massachusetts, and in the United States genera ally, though a few courts hold otherwise. Drake on Attach· ments, c. 24; Thayer v. Daniels, 113 Mass. 129, and cases cited. The doctrine is so familiar that I will merely cite authorities _to show that it is the general rule in Massachusetts as well as elsewhere. The exceptions to it in this state I will consider afterwards. See Wakefield v. Martin, 3 Mass. 558; Dix v. Cob, 4 Mass. 508; Kendall v. Lawrence, 22 Pick. 540; Kingman v. Perkins, 105 Mass. 111; Thayer v. Daniels, 113 Mass. 129; Boston Music Hall Ass'n v. Cory, 129 Mass. 435 .. 3, The ineorporea.l ;pl'operty of the .shareholder in a ,com· pany of this sort is represented by his certificates; and, if these, alllil conveyed, the failure to record the conveyance is not flvi. dence .of such. a. constructive fraud· as sometimes arises £tom the.possession of chattels after the property has been parted with.. On the contrary, it was proved in early cases ,to, tne usage, and is now aQ,opted by the courts as law,based.on such usage, that the possession of· the certificates, with. a power to transfer them, is prima facie evidence of title-j' and if; in fact) the possessor has given value,. bis title cannot be impeached even by subsequent purchasers who did not re... ceive the certificates, much less by creditors of the trans· ferrer.In late cases these certificates are liken.ed to ,bills of la,ding and other quasi negotiable securities. See Black· v. Zacharie, 3 How. 483; Bank v. Lanier, 11 Wall. 369; John. sony. Laflin, (S. C. U. S.)12 Cent. L. J.440;, U. S. v. Vaugha.n, 3 Binney, 394, approved in U. S. v. Cutts, 1 Sumn. 133; Finney's App. 59Pa.St. 398; Wood's App. 10 Weekly Rep. 125; Smith v. Crescent City Co. 30 La. Ann. 1378; B1'idgeport Bank v. Schuyler, 84 N. Y. 30; McNeil v. Tenth Nat. Bank, 46 N. Y. 325; Winter v. Belmont Mining Co. 53 Cal. 428; Fraser v. Charleston, 11 S. C. 486; Strong v. Huuston R. Co. 10 Weekly Rep. 28; Broadway Bank v. McEl. wrath, 13 N. J. Eq. 24; S. C. 24 N. J. Eq. 496; Prall v. 28 N. J. Eq. 483; Merchants' Bank v. Richards, 6 Mo.
OONTINENTAL NAT. BARK V. ·:ELIOT NAT. BANK.
878
App.454; Conant v. Seneca Co. Bank, 1 Ohio St. 298; Duke v. Cahawba Navigation Co. 10 Ala. 82; ROBB v. S. W. R. Co.
53 Ga. 514. In many of the foregoing cases there were laws providing for the transfer of shares upon the books of the company. But the courts held that this registration was intended chiefly for the convenience of the to enable it to know who should have dividends and who should vote. No doubt it is sometimes intended as It. record,of persons liable fodhe debts of the company, and:is so in the case of national banks;. but the great weight of authority is that it is not. intended for the benefit of creditors of the individual shareholders. Some of the courts hold that the ,passes only an equitable title,; others, that it ·gives.a legal title.. I assume that by deciaions'in the courts of the United <mly an equitable title is acquired. ,That .poin:t is unimpor,tnp-t. " 4. The statqtes of, most,·()f provide t4at clilrtain c4atteisshllll ftnd shall have no parties, cases, those havjng ·. A,n ia.ttachmg or; fle.iziug. creditor, a · e4ly, within the words of these ,; and"so such: Qfedit-l or;shave come to 'be treated,;allq,eJen, spoken.of, as·in'sc;nue purchasers. A few of theatatotesrequiring registration, of the shares of companies follQW ;thee:x;aet language of these registry laws, an,d declare that no unrecorded title shall be good, or only against persons having notice. In Califor-. (Winter v. nia, even, such a law is held not to avail Belmont Co. 53 Cal. 428;) but in, Maine and Massachusetts,; the decision, and perhaps the better one, is that such a law must be construed like other similar registry laws.Skowhegan Bank v. Cutler, 49 Me. 315; Rot;k v. Nichols, 3 Allen, 342. It was in this state. of things that the case which is the support of the defence here was decided. In Fisher v. Essex Bank, 5 Gray, 373, the charter of a bank incorporated in Massachusetts provided that the shares should be transferred only at the banking house, and upon the books of the com.
874 pany, and the court held that an attaching creditor could hold against an earlier unrecorded transfer for value. I have studied this decision with care. It seems to proceed upon the theory that by the charter, which is a public statute, there can be no such thing as an equitable transfer, or, at any rate, none except by a sort of equitable estoppel between the parties, and that it was a part of the intent of the act that a creditor at law should have the legal right to attach the legal title. This decision has been followed in Illinois, (People'8 Bank v. Gridley, 91 457,) but rejected in the other states, so far as their courts have pa,ssed upon it. It is sometimes spoken of as being the law of Connecticut and Vermont, but the early cases in the former state are much modified by Colt v.lve8, 81 Conn. 25. The case cited from Vermont (Rice v. Curtis, 82 Yt. 464)'is not in point. It is opposed directly to many of the cases already cited under the third point, and to the general principle that attaching creditors are bound by all equities, including equitable estoppels. It has, moreover, OOen8eriously modified, if not wholly overruled, in Massachusetts, in Dickinson v. Central Nat. Bank, 129 Mass. 279, printed, but not yet published. The centra.l National Bank had a by-law like that now in question,llond A., the owner of ten of its shares, had transferred them by' wa.y of security, precisely as Conant transferred his shares, and afterwards became bankrupt. The transferee, still later, 80M the shares at public auction, under his power, after due notice to A. and to his assignee. The bank, notwithstanding a notice and demand by the assignee in bankruptcy, transferred the shares to the purchaser. The assignee sued the bank for damages, but was defeated. Colt, J., delivering the opinion of the court, says that Fisher v. Essex Bank, ubi supra, does not apply, because in that case the charter had the force of a general law, but that a by.law has no such effect, (citing Sargent v. E8sex Marine R. Co. 9 Pick. 201,) and that in the absence of such a general law the transferee took an equitable title which should prevail against the assignee in bankruptcy of the transferrer. The only circumstances in Fisherv. Bank, not found in
m.
CONTINENTAL NAT. BANK V, ELIOT NAT. BANK.
Dickinson v. Central Bank, ,are these: (1) .Thelaw in, the former case contained the word "only"-that the spares should be transferred only so and so; (2) that au attaching Cl:editor and not an assignee in bankruptcy was concerned ;(&). that ihe law governing the company was a Massachuse,tts law, which might be differently construed from a national banking act. The first and third points,of course, are the satpe in ihis case as in the later one in Massachusetts. The f1econd is not sound in this court; an assignee and attaching credo itor stand precisely alike, according to the law which governs this controversy· ..5. The doctrine of Dea,rle v. Hall, 3 Russ. 1, conftrmedi).1 Foster v. Cockrell, 3 01. &. Fin. 466, is much relied on by the defendants. This doctrine is that of two innocent. purchasers of merely equitable interests he shall be preferred who first gives notice to the trustee or holder of the legal title. To this there are, several 1. Though corporation is for some purposes a trustee for the shareholders, the latter have an independent legal property in their shares which they can convey, and whether their actual conveyance is legal or equitable is of no cOIisequenoe. 2. The doctrine applies in England only to purchasers, and not to creditors seizing or attaching, even though a statute gives a right to seize all shares standing in the debtor's name in his own right. Tbis statute was once held by the Queen's. Bench to mean that the creditor might seize what the register showed to be apparently the property of thE! debtor, (Watts v. PO'l'ter, 3 E. & B. 743;) but this has been overruled, on the ground that; the legislature cannot be supposed to have intended to property for, another man's debt, without the statement of such a purpose; and therefore the right" refers to the equitable as well as legal rigl\t. Duns,tell'.v.Lord Glengall, 3 Ir. Oh. 47; Scott V., Lord Hastings, 4 K. &. J, 633; Beavan v. Earl oj Oa;ford, 6 D. M.. & G. ,524; ,Eyr.e M,cDonald, 9H.L. 619; Robinson'V'. ,Nes.bitt, U.R. 3 G.P. 264; Picke,ring v. Ilfracombe Railway Co. L. R. 30.P.,235; Gill v. Continental GasCfJ. L. E. 7 Ex. 6 1 9 . " A few courts in this"country have carried the doctrine of
376
Dearle v. Hall so far as to uphold the garnishment of a nonnegoti.able debt whioh had been equitably assigned without notioe. We have already seen that this is not the law in England nor in Massachusetts. Neither is it the law of the United States generally. Drake, Attachments, c. 24; Cornick v. Richards, 3 Lea. 1. The supreme court of Tennessee in that case refused to extend the rule to shares of stock, though it applies in that state to choses in action. As shares are not chases in action, and as attaching creditors are not purchasers, Dearle v. Hall is not in point. 6. It remains only to cite two decisions of the supreme court, which, in principle, are decisive of this case. In Bank v. Lanier, 11 Wall. 369, a national bank was required to make good to the holder of an unrecorded certificate the value of his shares, although they had be{ln transferred on the books to a subsequent purchaser for value. That purchaser, to be was not before the court, but if his title was better than th8lt of the plaintiff, the bank was justified in transferring the shares and would have had a perfect defence. Dickinson v. Central Nat. FJank, 129 Mass. 279 ; Gill v. Continental Gas Co. L. R. 7 Ex. 232. If a purchaser for value could not hold against the holder of the unrecorded certificate, a fortiori of an attaching creditor. Bullard v. The Bank, 18 Wall. 589, is in the same line of thought. It decides that certificates of shares in national banks are so far negotiable, or quasi negotiable, that a by-law of the bank, which undertakes to make them subject to the debt of the transferrer to the bank itself, is void. On the same ground it was held that a by-law like that of the Eliot National Bank, if intended to give attaching creditors a better title than transferees who had not recorded their certificates, was void. Sargent v. Marine Ry. Co. 9 :rick. 201. Here, again, the argument is afortiori. If the bank cannot create a lien by its by-law, much less can it obtain one indirectly, by attachment, upon the construction of an ambiguous by-law. My conclusion is that the attachment of Conant's shares cannot prevail against the complainants' earlier title, whether
TAYLOR
v.
pmLADELl'llIA & READING a. 00.
377
that is equitable or legal. There is no conflict of jurisdiction, because no state court or officer has taken possession of anything. The question is merely one of title. A bill in equity will lie, because the <lomplainant company has, or might have, a right to require the shares to be transferred to it. As values are at present, it would be more just to enter a decree for the debt due the complainants, and interest, which would leave a considerable value for the defendant bank if the present market price holds. I understood· counsel to say that the precise form of the decree could probably be agreed on. ' Decree for the complainants.
THE PmLADELPHIA
&
READING RAILROAD
Co.V.
FARMERS'
& MECHANICS' NAT. BANK OF PHILADELPHIA THE SAME.
(Circuit Court, E. D. Pcnns1/lfJania.
August 6, 1880.) CJ.AIMS FOR
1.
RAU.ROAD-REcEIVERB-ApPLIOATtON OIl' INCOME TO INGS.
LAllOR AND MATERIAL FURNISHED BEFORE FORECLOSURE PROCEED-
Where the holders of railroad mortgage bonds obtain the appointment of receivers pending proceedings for foredosure, the court will apply the net income, in its discretion, to ,the payment of the employes and of the material men, who have, prior to the appointment of the receivers, furnished the labor, materiAls,and supplies necessary for the operation of the road.
2.
SAME-METHOD OF PAYMENT-REllEIVERS' CERTIFICA'l'ES.
As the fund is produced by the administration of the court, it may be distributed, at the discretion of the court, in such manner as not to embarrass the receivers, and prior claims for labor and materials may be p\lid by certificates, bearing interest, and payable out of any funds applicable thereto, at such dates as may be afterwards fixed by the receivers.
This was an application by receivers for authority to pay claims for labor, material, etc., furnished for the operation of ""Reported by Frank P. Prichard, Esq., of the Philadelphia bar.
318:
PEDERAL aEPORTER.
the road within five months previous to their appointment. The special masters in the cause reported upon the application a.s follows: "By the decree of honorable court, of May 24, 1880, appointing the receivers, it was; among other things, ordered: ". That the receivers be, and they are hereby, authorized to collect the income, tolls, and profits of the .said railroad and canals, and to make appropriate payments' therefrom on account of the 'accruing rents, and necessary charges "/lIso all the, sums now due and maturing to the employes of the said corporations defendant, and the amounts due and maturing, and to arise and 'mature,fO'l' materials and supplies about the and for t!J.e. use of the said. and '!\' .'if 'if and to contmue the mllllllg operation of the saId The PhIladelphIa & Reading Coal & Iron Company, and to sell and dispose of the coal already mined or to be mined, either for cash or on the usual credits, and out of' the proceeds thereof to pay the wages, taxes, royalties, rents, freights, debts for supplies, and interest due on securities charged on the property, to protect the same from forfeiture.' "We luwe carefully considered the terms of thIs decree with respect to, the present SUbject, and understand that it is in substance the sallle in its· application to each of two companies defendant, and that it plainly authorizes the receivers to make payments, from the income of each of them, of all sums due or maturing for materials or supplies by said companies respectively. Such being the decree of your honorable "ourt, it does not appear to be necessary 'thaI< we should inquire whether the authority which it has conferred should have been granted; but in view of the large amount involved, and of the fact that mortgage creditors, who might be supposed to be prejudiced by allowing a preference to these claims, are not actually before the court, the receivers and their counsel have requested us to make such a report upon the whole matter as we 'might deem to be due to its importance, We have accordingly made a careful examination of the authorities, and have found that the decree is, in the particular now under consideration, fully supported by previoussimilar orders and ad;udications in other cases. "In Trotter v. The Oatawissa, Williamsport Erie R. 00" (supreme court of Pennsylvania, January term, 1860, No.8,) the receivers were" 'Authorized to collect the income, tolls, and profits of the same, [the railroad, etc.,) and to make appropriate payments therefrom, and of the expense of this proceeding, and also all the sums now due and maturing to the employes upon said railroad, and the amOy,ntB d'ue and rlMlturing, (md to arise and mrttm'e, for material8 and 8'upplies about the operation and for the lIse of said railroad,' etc. "In the case of the Ohio Vent. R. 00. (circuit court of the United States for Ohio) the court, McLean, J., in appointing a receiver, directed the surplus earnings to be applied to makmg payments m a designated order of priority; and"'First, to the payment of all dehts due for labor, materials, and mrplies furnished the company within the six months prior to the date of the' decree, and a balance due for construction.'
" In the case of the People of N Y. v. Erie Ry. Co. (supreme court, city'
fAYLOR V.
& READING R. CO.
879
/lnd county of New York) the court, in appointing a receiver, ordered, amongst other things, that he should ascertain" · The amount due by said company; and unpaid, for current material' and supplies purchased for the use and operation of the of. the said company, within four months prior to the entry of this order, and he shall pay the amount found to be justly due; but he shall not have power to pay such debts of longer standing without further order of this court.' ., In the case of Clark v. The WiUiam,port Elmira R. 00. (supreme court of Pennsylvania) that part of the order appointing the receiver, which had directed him to pay"'All sums due or maturing to the employes of said railroad, and the amounts due and maturing for materials and supplies about the operation for the use of said railroad,'-" was objected to; hut the court held that this direction in the order was proper, and should' e retained, notWithstanding the objection, l:Jtrong, J., saying: " 'There is obvious justice in paying out of the gross bills of the railroad the workingmen and material men who have kept it in use. Their labor and supplies have enured to the benefit of the mortgage bondholders; and if they had been paid at the time when the and materials were furnished, as they should have been, even in preference to the mortgagees, no one could have complained. Their preferment now places the mortgage bondholders in no worse condition than they would have been if payment had been made when the debts were contraetPd. The equity of the employes was then superior, and I am unable to see why it is less now.' " The learned judge then refers to several authorities, and overrules the motion to amend the order to the receiver, either by striking out the direction which was complained of, or by adding thereto a proviso that nothing therein contained should in anywise affect or prejudice the rights at law or in equity of the first-mortgage bondholders. This opinion of Justice Strong has not been reported, but we have examined a printed oopy of it. It is 'amply supported by the supreme court of the United States in the case of Fosdick v. SchaU, 99 U. S. 235, hereafter referred to; and see, also, Gurney v. The Atlantic it Great Western R. 00. GS New York Court of Appeals, (13 Sickels,) 358. " The rule followed by your honorable court, in its decree appointing these receivers, thus appears to be firmly established; and the grounds upon which it is based, and which are set forth in the opinion of Justice Strong, to which reference has just been made, are also stated in the (Jpinion of Chief Justice Waite in the case of Fosdick v. Schall, supra" and it may now be taken to be the well-settled doctrine of the Amencan -courts, that where the holders of railroad mortgage bonds obtain the appointment of a receiver, pending proceedings for foreclosure, the court will apply the net income, in its discretion, to the payme!).t of the employes, ·and of the material men, who have furnished the. labor, materials, and supplies necessary for the operation of the road. In some of the cases, a limit as to the time within which the labor must have been performed, or the materials or supplies furnished, has been fixed; but there is no definite rule as to the time to be designated, and in every case it must depend upon
880
FEDERAL REPORTER.
the discretion of the chancellor as to what time, if any, should be named. In the present case, however, the absence of such provision is unimportant, as all the materials and supplies in question were furnished after the first of January, 1880, and the order appointing. the receivers was made upon the twenty-fourth of May of the same year, so that the period during which the materials and supplies were furnished does not extend beyond five months prior to the decree, and if the order had been limited to that period it would have been supported by the precedents. "The doctrine of which 'fe have been speaking is not in conflict with the priority secured by the mortgage' to the bondholders, nor does it defeat their lien. When foreclosure takes place no one can compete with the mortgage creditors in the distribution of the proceeds of the mortgaged property; but the fund which is now the subject of administration is that merely which arises from carrying on the business of the corporations defendant, under the orders and direction of the court, and it therefore may justly be applied as the chancellor shall find to be equitable. " This fund being produced by the administration of the court itself, is, it should also be stated, to be distribnted according to the weil-regulated discretion of the court, and it follows that material men, as well as others who participate in that distribution, must submit to such terms as the.court may impose j and no order will be made requiring payment at such times or in such manner as will embarrass the receivers in the conduct of the business. In the present case we fully concur with the counsel for the receivers that it will not be possible to fix a definite time for payment of the claims now under consideration. The receivers are Virtually in the position of trustees charged with the duty of prot ecting the properties in their hands for the benefit of all part ies in interest so far as it may be possible for them to do so. Many of the properties are subject to liens or rentals, but are of much greater value than the amount of the encumbrances or charges upon them. When the income from a particular property will more than pay the charges upon it, it is plain that the revenue should be first applied to such payments; and, even in cages where no income is received, it is still the obvious duty of J;he receivers to preserve those assets which have an undoubted margin of value. It may be neeessary, therefore, for the benefit of the estate as a whole, to apply earnings of either company to protect valuable investments, and for this reason to postpone somewhat the creditors holding these claims for materials and supplies. We are, however, satisfied that a certificate of indebtedness would be of much importance to t: ose who otherwise might be greatly inconvenienced by failing to receive payment as they had expected, and we see no objection to giving to this class of creditors certificates in the form embodied in the decree which we recommend at the end of this report. "In addition to.the facts which we have already stated, we report, from the evidence adduced before us, that the amount due and maturing for materials and supplies by the Philadelphia & Reading Railroad Company is about $1,265,000 to the twenty-fourth day of May, 1880, and that the amount due for materials and supplies by the Philadelphia & Reading Coal & Iron Company to the same date is about $550,500."
!AYLOR
V.
PHILADELPHIA
READING B. 00.
381
The masters reported a form of order authorizing the issue of (Jerlificates for the amount due, bearing interest, and payable out of any funds in the hands of the receivers applicable thereto at such date as might be fixed by the receivers after 30 days public notice. Samu.el Dickson, R. L. Ashhurst, and James E. Gowen, for receivers. . McKENNAN, C. J. The order referred to in the foregoing report was made with special reference to the principles anIlounced and discussed in Fosdick v. Schall, 99 U. S. 235. It was deemed to be a full warrant for the order, as was also the manifest justness of the method of appropriation pre.scribed. The masters have shown that it has also the support of other adjudications, and specially of the judgment of the eminent circuit justice of this circuit, which of itself commands controlling consideration in this court. The report of the masters is therefore approved, and it is directed that an order be entered in the form therein recom· mended by them.
TAYLOR and others v. THE PHILADELPIDA & READING R. Co.FARMERS' & MECHANICS' NAT. BANK OF
PUILADELPIDA v. SAME. January 21, 188!.)
(Circuit Court, E. D. Pennsylvania. 1. EQ,UITy-CORPORATION
IN HANDS OF RECEIVERS-WHAT MATTERS
NOT WITHIN JURISDICTION OF COUHT-ANNUAL MEETING OF STOOXHOLDERS.
As the object of the appointment of receivers of a railroad is to preserve the property for the benefit of creditors, the court has no other function to exercise than that which will assist in carrying out this object. 2. SAME.
The court will not, upon the petition of the company filed in the suit in which receivers were appointed, take jurisdiction of and decide a question as to the propriety of postponing a meeting called for the election of officers, which question has no relation to the objects for which the receivers were appointed. *Reported by Frank P. Prichard, Esq , of the Phfladelphla bar.