RECEIVERS' CERTIFICATES. Ac knowledgments of indebtedness issued by a receiver under the order of the court by which he was appointed; either directly in dis charge of obligations incurred in the man agement of the property, or for borrowing money for the maintenance and operation of the property, and redeemable out of its pro ceeds. They may be made a lien on the property when that is necessary for its prop er management and operation in the interest of all who may be concerned in it, as direct ed in the order under which they are issued, and are usually made a first charge on the fund in the receiver's hands, after payment of the operating expenses.
They are not negotiable instruments, so as to relieve the purchaser or his assigns from equities arising out of the proceedings in the case ; Bernard v. Trust Co., 159 Fed. 620, 86 C. C. A. 610, 16 L. R. A. (N. S.) 1118. The view is that they lack every ele ment of negotiability ; Gluck & Becker, Recrs. § 95. The leading (early) case is Mey er v. Johnston, 53 Ala. 237. A holder takes subject to prior equities ; Central Nat. Bank v. Hazard, 30 Fed. 484.
In the case of property such as a railroad, which is of a character to give the public a right to its continued operation and use, the court in a proper case may impose the ex penses and obligations of operation upon the property regardless of the question of who may be the ultimate owner of the property ; Illinois T. & S. Bank v. Ry. Co., 115 Cal. 285, 47 Pac. 60. A court of equity has power to appoint a receiver for a railroad and to au thorize the issue of certificates for raising money necessary for the management and preservation of the road, and make the debt thereby created a first lien ; Wallace v. Loo mis, 97 U. S. 146, 24 L. Ed. 895 ; Union Trust Co. v. Ry. Co., 117 U. S. 434, 6 Sup. Ct. 809, 29 L. Ed. 963. But a court of equity cannot order the issue of certificates, to be a paramount lien, by the receiver of an in solvent private corporation, where the busi ness is affected with no public interest unlss such issue is essential to preserve the prop erty or franchises; Florida Land & Imp.
Co. v. Merrill, 52 Fed. 78, 2 C. C. A. 629 ; International Trust Co. v. Decker Bros., 152 Fed. 78, 81 C. C. A. 302, 11 L. R. A. (N. S.) 152 ; Fidelity Ins., T. & S. D. Co. v. Iron Co., 68 Fed. 623 ; as against lienors who have not assented to their issue ; Doe v. Transp. Co., 78 Fed. 62. But where the receiver and 85 per cent. of the creditors petitioned the court to allow an issue of receivers' certifi cates, to conserve a valued property, and only one small creditor objected, the court allowed him to be paid and certificates to be issued ; Borchardt Co. v. Naval Stores Co., 206 Fed. 366.
In Lockport Felt Co. V. Paper Co., 74 N. J. Eq. 686, 70 Atl. 980, the insolvent corporation owned eighteen mills ; after a receiver was appointed foreclosure on one of them was threatened ; the court ordered receiver's cer tificates to issue, to become a lien on all the mills, and prior to existing mortgages.
In the case of a mining company the court cannot, against the objection of even a small minority of the mortgage bondholders, au thorize the issue of certificates to be a first lien, to enable a continuance of the operation of the mines ; Farmers' L. & T. Co. v. Coal Co., 50 Fed. 481, 16 L. R. A. 603 ; nor can such certificates be issued for payment of taxes in the case of the foreclosure of the second mortgage of a private corporation, to be a paramount lien, against the consent of the first mortgagee ; Hanna v. Trust Co., 70 Fed. 2, 16 C. C. A. 586, 30 L. R. A. 201; or in the like case for carrying out contracts for improvements made with purchasers of the company's land ; Hanna v. Trust Co., 70 Fed. 2, 16 C. C. A. 586, 30 L. R. A. 201, 36 U. S. App. 61. In the case of a railroad such certificates cannot be issued and given a first lien, on an application ex parte without no tice to lienholders, the proceeds to be used for the maintenance of the road ; State v. R. Co., 45 S. C. 464, 23 S. E. 380 ; Bernard v. Trust Co., 159 Fed. 620, 86 C. C. A. 610, 16 L. R. A. (N. S.) 1118.