66 F. 16 | U.S. Circuit Court for the Southern District of Georgia | 1893
The receiver is criticised for his connection with and approval of the Hollins & Co. scheme of reorganization, and is charged with the making of reports and representations as to the condition of the Central Railroad, which, it is claimed, have been misleading, and have had the effect to unduly depress the value of its properties and assets. These and certain specific acts of mismanagement constitute the general and special grounds on which the application for his removal is based.
It is not improper for a receiver, in cases iike the present, to advise, aid, and encourage reorganization schemes, which offer the prospect of securing the largest measure of protection to the various interests connected with or concerned in the property and assets in the custody of the court, and in the possession of such receiver, for administration and distribution. If the court said anything at Atlanta that was construed to be in conflict with this proposition or idea, it made a wrong impression. What the court intended to say at Atlanta, and what it means to say here and now, is that its receiver, as an officer of the court, should (hot become a partisan in favor of any particular interests or classes; that he should not so administer his trust as to represent and promote, either in his dealings with the property or in schemes of reorganization, one interest at the expense or to the prejudice of other interests equally entitled to the consideration and protection of the court and its officers; that it was the duty of the receiver, as it was the duty of the court, to act impartially as between all interests. While this is his duty, it is right and proper, and the circuit justice has instructed the receiver (as he wishes the counsel to know) that he may with propriety and in the line of his duty endeavor to- bring together the various conflicting interests here involved on some equitable basis or plan that will protect the properties and assets of the Central Railroad from wreck and ruin, and, as far as possible, save the debenture holders, general creditors, and stockholders from loss, or reduce their loss to the lowest minimum; that he could by advice and suggestions aid and encourage a reorganization scheme or schemes which would bring together the interests represented by the Farmers’ Loan & Trust Company, the Central Trust Company, the Terminal Company, Hollins & Co., Drexel, Morgan & Co., the Southwestern Railroad Company, the Augusta & Savannah Railroad Company, and any and all other interested parties, including the Central Railroad, and hold out the prospect of affording the largest measure of security and protection to all concerned, and according to their respective rights, but that in doing -this his action or actions should be impartial as between all interests. He may not, in his official
In respect to the receiver’s reports and representations as to the condition of the Central’s properties and assets, which it is said were misleading, and had the effect to unduly depress the value thereof in the estimation of the public, I And that the receiver has adhered to the same method of keeping his accounts and making his reports which prevailed when the railroad was in charge of its directory, and I fail to discover that he has intentionally misstated or misrepresented the company’s true condition and situation. I have , gone carefully over the reports of the company since 1887, examined its assets, and the earnings and expenses, not only of
Let us now come to the specific instances of mismanagement that are brought against him. First, in reference to the purchases of lumber, which certain brokers of this city have bought at one. price and billed to the Central Company or to the receiver at another and larger price. This transaction seems to have been done, or permitted to be done, by an agent — perhaps a purchasing agent — of The receivin'. Tt was promptly disapproved by the receiver as soon as it came 1o his knowledge, and the agent who did it or permitted it was discharged. The receiver is compelled, like the directory of a railroad, to act largely through agents. Neither the directory of the road nor the receiver of the court is to be held responsible for the fraudulent acts or misconduct of subordinate employes in a system like this of 2,(500 miles, when the principal’s personal presence and actual inspection, day by day. of any agent's actions and 'transactions, is a physical impossibility. No management could meet such a, responsibility as that. Acts of misconduct may he committed by agents here- and there without blame or any fault or want of proper care on the part of the receiver. A ticked agent at a distant point, or even at the home office, may commit acts of embezzlement for a series of days. Ts it to be expected that the receiver is to he held responsible for such acts because he did not discover them as soon as committed? Is the failure to promptly discover misconduct in subordinates, widely scattered, and discharging different functions, evidence of either incapacity or mismanagement? H is not claimed or pretended that the receiver in any way sanctioned the acts complained of; on the contrary, if is conceded that, upon discovering the same, he promptly dealt with the wrongdoer. All that could he demanded of him was the exercise of care in tin; selection of agents, and diligence in looking after them and the business intrusted to them. I suppose the receiver has thousands of agents or subordínales over this large system of 2,(500 miles. It would be a physical impossibility for him to supervise the daily transactions of every agent in his employment, and it involves no just charge of mismanagement that coirupt ants or misconduct of such subordinates take idaee and run on for a time before being discovered. The receiver's responsibility would commence with such discovery, and he would bo censurable and to be blamed if, after learning the facts, he continued to employ the wrongdoer. The receiver has not subjected himself to censure on the latter ground, and bis failure to discover the transactions complained of sooner than was done' does not establish want of good management. This charge against the receiver is not well taken.
The matters connected with the chert mine do not in any way involve the receiver. In orden- to introduce the product of this mine
It is proper, while on this subject, to say further that, if said Drawbar Company is composed of the superintendent and other officials of the railroad in the employ of the receiver, it would not be proper for the receiver to deal with said company in the way of procuring from it supplies or entering into contracts with it. Parties owing duties to the railroad by reason of their official relations thereto, and connected therewith, could not be permitted to deal, directly or indirectly, through the form of a company with the receiver, in respect to subjects or articles they might have to sell or contract about. Upon well-settled principles this could not be tolerated by the court. The dual trust relation occupied by parties in such situations would forbid such transactions. But the receiver has had no connection with the company, and, so far as appears, is in no way responsible for its organization or acts.
The next objection urged against the receiver is his relation to the South Bound Railroad, and his action in not making switching charges against that company at Savannah. ' Under the terms of
In the management of these extensive properties it is a great deal easier To look back and find faults than it is to guard in advance against mistakes. I see things in this case that 1 disapprove. Some things have been done that were not the best under the circumstances, but, after a careful consideration of the situation, I do not see that the receiver is to be blamed therefor. He has made some contracts which, in the light of subsequent-events, M: would have been better if they had not been entered into, — contracts which I would not perhaps have sanctioned; but, as far as I can see and judge, they were made in the exercise of an honest purpose and intention. There is no evidence of any corruption or intentional misconduct. There is evidence of deep interest and concern in the welfare of the interests committed to his management, if mistakes have been committed by the court in directing and au-ihorizing certain transactions by the receiver, it would be cowardly and unjust to make the receiver the scapegoat, and put on him the blame and responsibility therefor. The court must assume its share of responsibility for whatever has been done in an improper or wrongful manner by its sanction or direction. Having carefully examined into the receiver’s conduct and actions I find no corruption, no willful or intentional misconduct, and no such mismanage-xne’d as will warrant the court in directing his removal. The mo l ion to discharge the receiver is overruled and denied. In view of the decree of sale, and its probable execution in six months, it is not perceived that any good result could or would follow a change of administration. I doubt whether any single individual in the country could take charge of the properties in question, and relieve the embarrassed situation, or do much better than the present receiver is now doing; but, aside from this, no sufficient cause is shown for discharging the receiver.