In a railroad receivership the court will not order the receiver to pay the rental of a leased portion of the road, when he has not received therefrom sufficient to pay such rental, over and above operating expenses, and when the trustee of the leased property has asked the court for its surrender, but has permitted it to remain in the receiver's hands and has not taken possession of it un der an order granted by the court; Quincy, M. & P. R. Co. v. Humphreys, 145 U. S. 82, 12 Sup. Ct. 787, 36 L. Ed. 632.
Receivers are not assignees and are not bound to adopt a lease, but have an option to do so or not ; New York, P. & 0. R. Co. v. R. Co., 58 Fed. 280 ; Ames v. R. Co., 60 Fed. 966. A receiver is not compelled to adopt the contracts or leases of the railroad com pany, but is entitled to a reasonable time to elect, and a court will not order him to pay rental when the income is not sufficient to pay running expenses ; U. S. Trust Co. v. R. Co., 150 U. S. 287, 14 Sup. Ct. 86, 37 L. Ed. 1085 ; Seney v. R. Co., 150 U. S. 310, 14 Sup. Ct. 94, 37 L. Ed. 1092. A receiver of an insolvent corporation, who takes possession of a leasehold estate held by the corporation, does not thereby become an assignee of the term, nor liable on the covenants of the lease ; Metropolitan L. Ins. Co. v. Sanborn, 34 Misc. 531, 69 N. Y. Supp. 1009 ; but is lia ble only for a reasonable rent while in pos session; Bell v. Protective League, 163 Mass. 558, 40 N. E. 857, 28 L. R. A. 452, 47 Am. St. Rep. 481; and in some cases for the rental specified in the lease ; Spencer v. Columbian Expo., 163 Ill. 126, 45 N. E. 250. See LEASE.
A receiver of a railroad is entitled to a reasonable time in which to elect whether or not to retain rolling stock formerly obtained by the company on periodical payments. If be retains it, he must pay the contract price ; if he retains it for a time and then releases it, he must pay a fair price for its use, which is usually based on the mileage of the cars and is not the stipulated "rental" under the contract ; Farmers' L. & T. Co. v. R. Co., 42 Fed. 6.
The receiver of a railroad is not liable for his refusal to carry the plaintiff on a ticket issued by the company before his appoint ment. The plaintiff has only the right to come in as a general creditor for the price of the ticket; Casey v. R. Co., 15 Wash. 450, 48 Pac. 53.
Freight money paid to a company before the appointment of a receiver does not en title the company to sue the receiver for refusal to carry the goods ; Central Trust Co. v. R. Co., 51 Fed. 15, 16 L. R. A. 90.
Damages accruing during the time a rail road is in the hands of a receiver are part of the operating expenses, payable out of the income, if there is any; if not, out of the corpus of the property ; Cross v. Evans, 86 Fed. 1, 29 C. C. A. 523 ; Memphis & C. R. Co. v. Hoechner, 67 Fed. 456, 14 C. C. A. 469, 31 U. S. App. 644.
Equity may order a receiver of a railroad to buy rolling stock when necessary for the continued operation of the road and charge the price as a first lien on the property ; Un ion Trust Co. v. R. Co., 117 U. S. 434, 6 Sup. Ct. 809, 29 L. Ed. 963 ; Wallace v. Loomis, 97 U. S. 146, 24 L. Ed. 895.
Separate receivers will not be appointed in two suits against the same railroad com pany. The existing receivership should be extended ; Lloyd v. R. Co., 65 Fed. 351.
A receiver appointed in a federal court is required to manage the property in ac cordance with the laws of the state where in it is situate; U. S. Jud. Code § 65.
Where a receiver has been discharged and a railroad turned over to the company, it was held that the company was liable to an action by one who had suffered personal injury by the negligence of the employs while the road was in the hands of the re ceiver; Texas & P. R. Co. v. Bloom, 60 Fed. 979, 9 C. C. A. 300, 23 U. S. App. 143.
A mortgagee plaintiff at whose instance a receiver has been appointed for a railway cannot be compelled, if expenses of opera tion and management exceed the value of the property, to make good a deficit, unless the order of appointment was made on that condition, and he is not liable to the em ploy& of the receiver for their wages ; Farm ers' L. & T. Co. v. R..Co., 31 Or. 237, 48 Pac. 706, 38 L. R. A. 424, 65 Am. St. Rep. 822.
The doctrine of Fosdick v. Schall, 99 U. S. 252, 25 L. Ed. 339 (first suggested by Judge Dillon), is that the income of a railroad com pany, out of which a mortgage is to be paid, is the net income obtained by deducting from gross earnings what is required for operat ing expenses, proper equipment, and useful improvements. Every mortgagee impliedly agrees that the current debts made in the ordinary course of business shall be paid from the current receipts before he has any claim on the income. Also, that when there is a diversion of income from the payment of current debts to pay fixed charges, thus increasing the security of the latter, this must be returned to the current debt fund before the mortgagee is paid. This was followed in Burnham v. Bowen, 111 U. S. 781, 4 Sup. Ct. 675, 28 L. Ed. 596, where it was held that a supply claim incurred prior to the receiver ship was a charge on the income coming into the receiver's hands, as well as that received before his appointment. Such a claim is pay able out of the receiver's surplus earnings, whether or not, during the company's opera tion of the road, there was a diversion of in come, either in paying interest or in better ments ; and even where the company has misappropriated such income to purposes not beneficial to the mortgagee ; Virginia & A. Coal Co. v. R. & B. Co., 170 U. S. 355, 18 Sup. Ct. 657, 42 L. Ed. 1068. See Miltenberger v. Ry. Co., 106 S. 286, 1 Sup. Ct. 140, 27 L. Ed. 117.