182 Ind. 61 | Ind. | 1914
The Cincinnati, Bluffton and Chicago Railroad lies between Huntington and Portland, and is a local line about fifty miles in length. When constructed, several miles of track eastward from Huntington were laid upon the right of way of the Erie railroad. On March 13, 1908, a general creditor brought his action against the company, and among other things, charged .that it was insolvent, and prayed for the immediate appointment of a receiver. On the same day John C. Curtis was appointed receiver, took possession, and has been operating the road at all times since. On May 22, 1908, the receiver filed a petition showing that the road was indebted largely on construction accounts which were or could be secured by mechanics’ liens; that large sums were due for labor performed within six months prior to his appointment and there were judgments of foreclosure of mechanics’ liens and material men about to be enforced; that there were many right of way claims unpaid; that he needed money to pay the current payroll, to purchase a locomotive and a passenger coach, etc., and to pay them, asked the court to direct an issue and sale of re
William A. Guthrie purchased the issue and the same is now held by the Union Trust Company. Nothing has ever been paid thereon except the first semiannual instalment of interest. The trustees and bondholders under the mortgage consented to the issue as made. Shortly before the appointment of the receiver, the railroad company, to obtain a subsidy from Huntington Township, made an agreement with it through the board of county commissioners, to the effect that in consideration of the payment of the subsidy, the railroad would permanently maintain its line of railroad from the city of Portland to the city of Huntington; that it would permanently maintain its shops and terminals at Huntington ; and that its freight and passenger rates should not exceed those charged by other railroads in Indiana.
In the year 1910, the Union Trust Company brought its action in the Huntington Circuit Court against the railroad company, the receiver, trustees, bondholders, and all persons claiming to have any lien upon, or interest in, or claim against, the railroad or the receiver, for the enforcement of its lien under the certificates and the sale of the property; and such proceedings were had that a special finding was made and a final decree was entered on December 5, 1910, determining and marshalling the amounts of each and every lien and charge, and adjudging that the lien held by the Union Trust Company, after taxes and certain named claims, was the first and prior lien on the corpus of the property, directing the sale, and ordering the proceeds to be dis
The receiver’s indebtedness, including the certificates and unpaid taxes, aggregates $287,284.20. Since the decree of sale of date December 5, 1910, the receiver has from time
The equipment as acquired both before and since the receivership, and now on hands is worn out. During the year 1912, the State railway commission condemned the passenger cars as unfit for use. Thereupon the receiver bought of the Barber Car Company and put in use three gasoline motor passenger cars which are operated something like a trolley line. The remainder of the equipment consists of twelve second-hand freight cars, some old gravel cars, an old steam shovel, and four old locomotives which have been in use for about twenty years. The track is laid mostly with rails of 60 pounds to the yard. During the year 1912, a controversy arose between the receiver and the Erie railroad which resulted in the latter’s throwing the track off of its right of way, and the receiver relaid it for the distance along the Erie property and is using it in an uncompleted condition. The ties are old, many unfit for use, and the whole property is out of repair and going to waste. And so the trust dragged along at a great and continuing loss. With this situation of affairs, the Union Trust Company began its action on December 5, 1912, against the receiver and the holders of the subsequent receiver’s certificates for the purpose of having it adjudicated that such certificates were inferior to the lien of the Union Trust Company; to remove the condition of sale requiring the purchaser to comply with the contract with the township and to maintain the shops and to operate the road with steam motive power; and to set aside the direction touching the “upset price”; and to require the property to be sold and the receivership to be wound up and the trust closed, ' In short the action was to
At the conclusion of the evidence the court rendered a judgment against the appellant that it was not entitled to the relief prayed for; that the “upset price” of $800,000 should not be removed or reduced; that the direction that the receiver should sell on condition that the road should be maintained and operated in accordance with the subsidy contract with steam motive power by any purchaser should not be eliminated nor modified; and that the question of the priority of the receiver’s obligations should be deferred to the time of making order for distribution. The correctness of each of these three conclusions of the court is assailed by appellant in this appeal.
Now as to the action of the court in refusing to free the decree from the condition that the shops and road should be maintained and the road operated as a steam road. The trial court doubtless acted in good faith for the protection of the taxpayers of Pluntington Township who had paid the subsidy. But ample reasons exist why the court should not have attached such a condition to the sale in the first instance, and to those reasons another is added which required the court, in the administration of the trust, to eliminate the condition at this suit of appellant. A reason why such a condition should not have been placed upon the sale is found in the fact that the charter of the road, the act under which it was incorporated, did not confine it to the use of steam motive power. Subd. 5, §5195 Burns 1914, Acts 1911 p. 136; see also 33 Cyc. 380, and cases there cited. Nor did the contract with Huntington Township by its terms confine the railroad to the use of steam motive power. It did bind the company, in consideration of the subsidy, permanently to maintain “its shops and terminals” at Huntington and “its line of railroad” from Huntington to Portland and that its rates of transporation of freight and passengers should not exceed those of other roads in the State. But whatever the construction of the contract, it bound neither the court nor the' receiver in administering the property of the insolvent concern for the benefit of the creditors. The rule is that the receiver is npt bound by a contract made by the company before his appointment, which does not constitute a lien on the property, and he can not be compelled to perform it. The contract is that of the company and for a breach of it the company and not the receiver is liable. 33 Cyc. 623; 34 Cyc. 258-267 and eases there cited; 1 Elliott, Railroads (2d ed.) §579 and cases there cited. In Brown v. Warner, (1890), 78 Tex. 543, 14 S. W. 1032, 22 Am. St. 67, 11 L. R.
But aside from these considerations, the receiver had not broken the contract with the township and whether a prospective purchaser would do so is a mere speculation about which the court and its receiver were not concerned. Until such a breach occurs or is threatened, the rights of the township are not invaded and what their remedy might be in such a case we are not concerned with in this appeal. The condition was an improvident one in the first instance and as it materially obstructed the execution of sale the court should have removed it.
As to the action of the court in declining to fix the priorities of appellant’s debt and those incurred by the receiver in the maintenance and operation of the road since the decree foreclosing appellant’s lien and ordering sale of the property, but postponing that adjudication to the time of making distribution, which we are asked to review and settle, we can neither say that the court did not have the right to postpone this consideration nor assume in advance that the priorities when ultimately settled by the court will not be settled in accordance with appellant’s
The judgment is reversed with directions to the trial court to free its decree of sale of the conditions herein determined to be obstructive of the execution of it and to proceed to carry it into effect.
Note. — Reported in 105 N. E. 562. As to what are final and what interlocutory judgments, see 60 Am. Dec. 427. See, also, under (2) Actions 1 C. J. §172; (3) 2 Cyc. 586; (4) 34 Cyc. 317; (6) 16 Cyc. 505; (7, 8) 34 Cyc. 318; (9) 34 Cyc. 363.