Fosdick v. Schall

APPEAL from the Circuit Court of the United States for the Northern District of Illinois.

The Chicago, Danville, and Vincennes Railroad Company, an Illinois corporation, on the 10th of March, 1869, executed a mortgage to William R. Fosdick and James D. Fish, trustees, to secure an issue of $2,500,000 of bonds. This mortgage covered all the franchises, issues, and profits of the company, and all the property it then owned or possessed, or might thereafter acquire, either in law or equity. Provision was made to the effect that, in case of default in the payment of interest on the bonds continuing for six months, the trustees in the mortgage, on demand of the holders of at least one-half the bonds then outstanding and unpaid, might take possession of all the mortgaged property, together with all the books, records, papers, accounts, and money of the company, and enter into the management and control thereof, paying all the expenses of taking, holding, managing, and operating the property from the income and profits thereof, or, if the property should be sold, from the sale thereof. The property might be sold as an entirety, and the proceeds, after deducting the expenses of sale, applied to the payment of the interest and principal of the bonds.

On the 12th of March, 1872, a second mortgage was executed to the same trustees, to secure a further issue of bonds to the amount of $1,500,000.

On the 1st of February, 1873, after both these mortgages were executed, the railroad company and Michael Schall entered into a contract in writing, a copy of which is as follows:--

'NEW YORK, Feb 1, 1873.

'Sold this day for account of Mr. Michael Schall, of York, Penn.,

'To the Chicago, Danville, and Vincennes Railroad Co.

'Office 38 Pine Street, New York:

'Two hundred (200) eight-wheel gondola coal-cars, as per specifications and agreement made by J. E. Young, and herewith attached.

'Price, delivered on the track at Pittsburg, at adpot of P. C. & St. L. R. R., seven hundred dollars per car. Cars to remain the property of Michael Schall until paid for.

'Delivery to commence, and cars to be taken, on or before March 1, and at least twenty-five (25) cars in each week thereafter until all are delivered, the seller having the option of increasing the number of cars to be delivered per week, if desired.

'Settlement to be made on delivery of each twenty-five (25) cars or more, at the opinion of sellers, with the notes of the Chicago, Danville, and Vincennes Railroad Company, payable in the city of New York, and adding interest at the rate of ten per cent per annum. The first notes are to be drawn at sixty days from date of delivery, and for twenty (20) dollars on each car, and the balance for a like amount and payable monthly thereafter.

'Cars to be lettered and numbered as per directions of Mr. Young.

'Invoice and shipping receipts to be sent to the railroad company's office, No 38 Pine Street, New York.

'It is understood the sellers shall not be responsible for the acts of Providence, strikes of workmen, or other causes beyond their control, which may retard and delay the manufacturing and delivery of the said cars as above stated.

'Shipping receipts to be evidence of delivery.

'(Signed) MICHAEL SCHALL.

'I hereby accept the above proposition for the R. R. Co.

'(Signed) J. E. YOUNG, Gen. Manager.'

Under this contract two hundred and twenty-five cars were delivered into the possession of the railroad company by Schall, numbered from 0141 to 0365, both inclusive, and lettered, 'This car is the property of Michael Schall, York, Pa.' Notes were executed by the company, according to agreement, for the price of the cars as they were delivered. Of these notes $44,323.43 have been paid by the company, and $110,334.04 are outstanding. The cars were used by the company in the usual course of business.

On the 22d of February, 1875, Stephen Osgood, who held $9,000 of the bonds secured by the mortgage of 1869, and $2,000 of those secured by that of 1872, filed a bill in chancery in the Circuit Court of Will County, Illinois, against the railroad company and Fosdick and Fish, trustees, with others, for a foreclosure of the two mortgages and a sale of the mortgaged property for the benefit of the bondholders, according to their respective priorities; and on the same day the court appointed Henry B. Hammond and John B. Brown receivers in the cause, with authority to take the moneys, property, and effects of the company into their possession, and run and operate the railroad under the orders of the court until discharged. In the order making the appointment it was specially provided that out of the moneys which should come into the hands of the receivers by reason of the operation of the road, the collection of debts, or the sale of the property, they should pay without further order as to particular demands—

1. The necessary current expenses of carrying out the duties of the trust;

2. 'All debts now [then] due and owing by said railroad company for labor and services rendered in operating the railroad within the [then] last three months, and all indebtedness for engines, iron, wood, supplies, cars, or other property purchased within said period of three months for the use of the company;'

3. Taxes, insurance, and charges of litigation; and,

4. Liabilities for animals killed by engines or cars upon the line of the road.

On the 5th of May, 1875, the cause was removed to the Circuit Court of the United States for the Northern District of Illinois on the application of Fosdick and Fish, trustees, two of the defendants, and on the 17th of the same month the receivers appointed by the State court filed in the Circuit Court an account of their receivership for the months of February, March, and April.

On the 20th of May, Fosdick and Fish, as trustees, filed in the same Circuit Court of the United States their bill against the railroad company and certain other defendants, for the foreclosure of the two mortgages of which they were trustees; and on the same day an order was entered in that court appointing Adna Anderson receiver, with authority to take possession of all the books, papers, vouchers, and evidence of indebtedness, moneys, and assets of the company, and all other effects of every kind, name, and nature which belonged to the company, or were held for its use and benefit, or in which it had any beneficial interest. He was also authorized to run, operate, and manage the road and pay the expenses thereof, and manage and control all the property and affairs of the company. Authority was also given him to use the moneys of the company for any and all the purposes specified in the order, and he was required, as speedily as possible, to examine into the condition of the property and assets of the company, its contracts, leases, running arrangements, its business affairs, and take an inventory of its movable property and make a schedule of its floating indebtedness for labor and supplies, and report the same, as soon as might be, with his recommendation as to the proper disposition of the same and payment thereof. Under this order Anderson took possession of the property, and on the 11th of June the receivers appointed by the State court filed their final accounts, and asked to be discharged from their trust.

The cars delivered under the Schall contract were in use by the company when the receivers appointed by the State court took possession. Those receivers also continued to use the cars during all the time they operated the road, and Anderson took the possession of them when he entered upon his receivership. On the 27th of November, 1875, Anderson having ascertained what the claim of Schall was, and finding that they were necessary for the use of the road, entered into an arrangement with him, subject to the approval of the court, by which they were valued at $420 each; and it was agreed that Schall should be paid seven dollars a month for each car as rent. The aggregate of payments at this rate for five years would equal the value of the cars; and it was further agreed that if the rent was paid promptly, and in addition an amount which would be equal to interest at the rate of seven per cent per annum on the deferred instalments, the cars should, at the end of that time, become the property of the company.

On the 19th of July, 1875, the Circuit Court denied a motion of Osgood to consolidate his suit removed from the State court with that of Fosdick and Fish, but made an order allowing him and his associates to intervene in the latter suit for the protection of their respective interests, upon taking the necessary steps therefor. Accordingly, on the 6th of January, 1876, Stephen Osgood, Frederick W. Huidekoper, Thomas W. Shannon, John M. Dennison, George W. Gill, Alanson A. Sumner, Chandler Robbins, and William T. Hickok, owners and holders of a large amount of bonds secured by the several mortgages which were in the process of foreclosure, filed, with the permission of the court, their petition of intervention.

On the 27th of January, 1876, Schall filed an intervening petition, in which, after setting forth the facts of his claim substantially as they have already been given, and averring that he had been paid at the rate of seven dollars a month as rent during all the time the cars had been in use by the present receiver, he asked that the balance, his due, might be paid him out of any funds to the credit of the cause not otherwise appropriated, and that the cars might be returned to him.

Fosdick and Fish and the intervening bondholders answered this petition, claiming that the title of the cars had passed to the company under its contract with Schall, and that consequently the lien of the mortgages had attached to the cars as after-acquired property. They denied his right to payment for the cars out of the income of the road or out of the proceeds of the sale, and they denied his right to a return of the cars.

On the 5th of December, 1876, the court entered a decree in the suit of Fosdick and Fish for a sale of the mortgaged property, not, however, including the cars of Schall; and on the 7th of February, 1877, the property was sold in accordance with the provisions of the decree to Huidekoper, Shannon, and Dennison for $1,450,000. On the 12th of April the sale was approved by the court, and the master ordered to convey the property to the purchasers.

On the 28th of April, 1877, the master, to whom the matter of the intervening petition of Schall had been referred, reported the facts as they have already been stated, and also that the cars were necessary for the use of the road, and that the arrangement which had been made by the receiver was a beneficial one, whether the road remained in the hands of the receiver or passed into the possession of other parties.

To this report Fosdick and Fish and the intervening bondholders excepted, in substance, because the master found the title to the cars to be in Schall, and not in the company. Upon the final hearing, the court held that Schall had not parted with his title to the cars, and was entitled to the possession. Accordingly it was ordered that the receiver, if in possession, or the purchasers at the sale, should restore the cars to Schall, and that the clerk of the court, out of the funds standing to the credit of the cause, should pay him the sum of $9,450, as rent for the cars, at the rate of seven dollars each per month for the six months preceding the 22d of February, 1875, the date when the receivers of the State court were appointed and took possession, and the further sum of $5,118.75, for a like rent during the time the cars were used by the receivers of the State court. It nowhere appears from the record that there are any funds in court to the credit of the cause except such as arose from the sale of the mortgaged property.

From this decree Fosdick and Fish and the intervening bondholders have appealed.

Mr. Henry Crawford and Mr. Ashbel Green for the appellant.

Even should it finally be decided that the title to the cars has always been in Schall, the court below could not appropriate any part of the proceeds of sale to discharge a liability for the rent of the cars incurred by the mortgagor, years after the lien of the mortgage had become fixed and paramount.

The lien of the appellants by the recorded mortgage became effective March 10, 1869, and a subsequent creditor of the company, who claims under a contract into which he entered without privity of the mortgagee, must hold his rights subject in all things to that mortgage. Rogers v. Humphreys, 4 Ad. & El. 299; Haven v. Adams, 4 Allen (Mass.), 80; Crosby v. Harlow, 21 Me. 499; Ellis v. B. H. & E. Railroad, 107 Mass. 1. The Statute of Illinois is express. Gross, Stat., c. 24, sect. 19. The judicial construction of it has with unvarying strictness charged him with full notice of the rights of the holders of the first recorded lien, and ruled that it was impossible for him to acquire any greater interest or equities in the incumbered estate than the mortgagor possessed. Warner v. Helen, 1 Gilm. (Ill.) 220; Kruse v. Scripps, 11 Ill. 98.

The lien given to a mechanic by express enactment is treated as an in invitum hypothecation of the premises on which the work is done or materials are delivered; and if it be subsequent in date to duly recorded incumbrances, he accepts it with full notice. He cannot recoup the improvements incorporated in the mortgaged premises, nor postpone the claim of the mortgagees.

The action of the court below in repudiating this doctrine is contrary to all the authorities. Reed v. Bank of Tennessee, 1 Sneed (Tenn.), 262; Jesup v. Stone, 13 Wis. 466; Otley v. Haviland, 36 Miss. 19; Prior v. Munn, 4 Cal. 175; Hughes v. Edwards, 9 Wheat. 500; Minnesota Company v. St. Paul Company, 2 Wall. 609; Butt v. Ellett, 19 id. 544; Getchell v. Allen, 34 Iowa, 562.

The governing principles upon which priority of lien is based are that the vested rights of purchasers or incumbrancers cannot in any manner or to any degree be impaired or displaced, when once attached, by any rights subsequently accruing to mechanics. Williams v. Chapman, 17 Ill. 423; McLagen v. Brown, 11 id. 519.

In an ordinary foreclosure, it would be conceded that these principles control, and that the statutory priority of the bondholders cannot be defeated by devoting any part of the proceeds of the sale to the payment of any junior liability or contract of the mortgagor.

The only claim to exempt this case from the control of the rules applicable to real-estate mortgages must be based upon the exploded hypothesis that mortgages upon railways are in this respect exceptional in their character. The legislature gave this corporation power to 'mortgage' its property to secure its bonds. The mortgage, as to its execution, acknowledgment, record, and effect, was determined by those laws and statutes applicable to mortgages made by natural persons. On default, it is enforceable by chancery, and the rights of the creditors secured thereby are protected by the same principles as to registry and priority which preserve the vested rights of other mortgagees. The attempt to make a distinction to the prejudice of the mortgagees of a railroad was repudiated by this court at a very early period in the history of this class of securities. Dunham v. Railway Company, 1 Wall. 268. See also Palmer v. Forbes, 23 Ill. 248.

The bondholders' right grows out of their lien upon the entire railroad and appurtenances whose sale produced the fund. According to fundamental principles, Schall's claim, arising years later, is subordinate, and therefore not entitled to any share of the fund until full payment of the bonds.

No warrant can be found in the legislation of Illinois for a preference to the car manufacturer. A railroad being a quasi public work, owned and operated by an artificial person, having only such capacity as the legislature choose to grant, it is usual, by express statute, to vest borrowing powers and the authority to create even an express contract lien. In the absence of positive enactment, a railroad company cannot create a statutory charge upon its road by incurring a liability for improvements. Dunn v. North Missouri Railroad, 24 Mo. 493; McAuley v. West Vermont Railroad, 33 Vt. 323. The only statute of Illinois purporting to cover this class of liabilities and authorize a lien upon railroads is that of July 1, 1872 (Rev. Stat. Ill. (1874), p. 671, sect. 51), which embraces, inter alia, fuel, ties, material, supplies, or any other article or thing necessary for the operation of the road. We do not ask any narrow construction of the statute as to the class of claims included in it. Cars are necessary for the operation of a railroad; should an owner of them, by a contract for rent, lease his equipment to an Illinois railroad corporation, he might, under a fair construction of the law, be considered as furnishing a supply or an article or a thing necessary for the operation of the road, and as entitled to the precise rights and remedies of the statute.

The nature and extent of this statutory right, and especially when invoked as against prior and fixed incumbrances, are not matters of doubtful construction.

In determining whether such a construction is to be put upon the statutes as would overreach prior incumbrances, very strict canons of construction are adopted by the courts. Morgan v. Cincinnati, 3 Wall. 275; Davis v. Alvord, 94 U.S. 545; Cook v. Heald, 21 Ill. 425; Brady v. Anderson, 24 id. 112; Stephens v. Holmes, 64 id. 336.

This construction given to the local statute by the highest judicial authority of the State is controlling on the Federal courts. Leffingwell v. Warren, 2 Black, 599; Nichols v. Levy, 5 Wall. 433; Railroad Tax Cases, 92 U.S. 575.

The statute, instead of displacing prior liens to any extent whatever, has been cautiously framed to protect them, in precise harmony with the correct principles which we have noted, and most explicitly defines and bounds the lien. It is 'upon all the property, real, personal, and mixed, of said railroad corporation, as against such railroad, and as against all mortgages or other liens which shall accrue after the commencement of the delivery of said articles,' &c. Prior mortgages or other liens are left wholly untouched. Their priorities, already assured by the registry laws, were further designed to be protected by express legislation, and as against them the material-man has no lien. His only claim is to take his incumbrance as of the date when his supplies were first delivered; and, if any surplus is left after full payment of the precedent mortgages, to assert it upon that, as against the liens which accrued after his had become vested.

Davis v. Bilsland (18 Wall. 659) and Fox v. Seal (22 id. 424) were decided upon statutes whose provisions are directly the reverse of those which apply to this case.

The first mortgage which the Circuit Court displaced by this decree did not accrue after, but five years before, the sale of the cars or their delivery to the company, and Schall's statutory charge was wholly inoperative. If he had, in apt time, instituted an equitable action in his own name, to enforce his lien on the railroad property by reason of his claim, he could only have obtained a decree limited to the company's title, and to that of such mortgagees as had accrued after the date when the delivery of his cars began. His rights cannot be amplified because he seeks to enforce them as an intervener in a pending foreclosure case. The statute only fixes the lien 'provided suit shall be commenced within six months after such material shall have been furnished.' When Schall filed his petition the bar of the statute was complete. Green v. Jackson Water Co., 10 Cal. 374; Green v. Ely, 2 Greene (Iowa), 508; Lunt v. Stephens, 75 Ill. 512; Arbuckle v. Illinois Midland Railway, 81 id. 431; Pryor v. White, 16 B. Mon. (Ky.) 605; Phillips, Mech. Liens, sect. 281.

The mechanic's lien derives its existence and efficacy from positive legislation, and not by reason of any superior natural equity. It can never be enforced, unless he brings himself within the provisions of the statute.

The whole doctrine was summed up in Ellison v. Jackson Water Co., 12 Cal. 554. 'The plaintiff cannot, therefore, maintain the lien he asserts under the statute, and outside of the statute there is no lien which can be enforced. Equity raises no lien in relation to real estate except that of a vendor for purchase-money.' See also Spencer v. Barnett, 35 N. Y. 94; McNeil v. Borland, 23 Cal. 144; McCoy v. Quick, 30 Wis. 521; Clark v. Moore, 64 Ill. 275; Croskey v. N. W. M. Co., 48 id. 480; Brady v. Anderson, 24 id. 112; Stephens v. Holmes, 64 id. 336; Rothgerber v. Dupy, id. 452; Phillips v. Stone, 25 id. 80; Cook v. Heald, 21 id. 425; Canal Company v. Gordon, 6 Wall. 561; Fountain v. Reneval, 17 How. 384.

The charter of the company authorized it to mortgage all its then existing or after-acquired property. The lien was thus to be paramount, continuous, and effectual. The power of sale in that instrument was a part of the security which mortgage creditors had the right to have enforced. Shaw et al. v. Norfolk County Railroad Co. et al., 5 Gray (Mass.), 162; American Bridge Co. v. Heidelbach, 94 U.S. 798; Dows v. Muller, id. 444; Gilman et al. v. Illinois & Mississippi Telegraph Co., 91 id. 603.

The appointment of a receiver in such cases is equivalent to an entry by the mortgagees, and thereafter the income of the property is theirs. American Bridge Co. v. Heidelbach, supra; Gilman v. Illinois & Mississippi Telegraph Co., supra; Galveston Railroad v. Cowdrey, 11 Wall. 482; Noyes v. Rich, 52 Me. 116; Boyd v. Burke, 8 I. R. Eq. 660; Howell v. Ripley, 10 Paige (N. Y.), Ch. 43; Ellis v. Boston, Hartford, & Erie Railroad Co., 107 Mass. 1.

The Circuit Court had no more authority to take a portion of the mortgage security and devote it to subsequent creditors, than to order it paid over to the corporation itself, and then let it pay its own floating debts. Douglass v. Cline, 3 Cent. Law J. 659.

An exceptional case of hardship or equity does not authorize a court to disregard the legal priority of the mortgages. Denniston v. Chicago, Alton, & St. Louis Railroad Co., 4 Biss. 415; Ellis v. Boston, Hartford, & Erie Railroad Co., supra; Galveston Railroad Co. v. Cowdrey, supra; Duncan v. Mobile & Ohio Railroad, 2 Woods, 545; Coe v. Columbus, Peoria, & Indiana Railroad Co., 10 Ohio St. 404; Dillon v. Barnard, 1 Holmes, 394; Dunham v. Railway Company, 1 Wall. 268; Nelson v. Iowa Eastern Railway Co., 2 Cent. Law J. 741.

Schall cannot lawfully recover possession of the cars, nor compensation for their use by a receiver, in the foreclosure suit, because the trust-deed became a subsisting and paramount lien thereon, as soon as they were purchased by and delivered to the company, and the written contract under which Schall claims title is, as against the appellants, void under the laws of Illinois. Pennock v. Coe, 23 How. 117; Minnesota Company v. St. Paul Company, 2 Wall. 609; Shaw v. Bill, 95 U.S. 10; Galveston Railroad v. Cowdrey, supra.

The Supreme Court of Illinois, in Palmer v. Forbes (23 Ill. 248), announced the same view, holding that engines and cars were in the nature of chattels real, and, whenever they came into the possession of the company by purchase, became immediately subject to the mortgage.

This construction of the mortgage was, therefore, at its date, a fixed rule of property.

The bondholders' title to the cars is based on the fact that they are described in the mortgage, and that their lien has been still further ripened and enforced by an actual possession taken in their interest.

Schall sold the cars to the company. The sale was perfected by actual delivery, and part payment was made. The title was attempted to be retained in him, but solely by way of security for the unpaid portion of the contract price. He had no right of possession, use, or disposition of them, and the risk of the property was with the company.

The exact legal character of the contract is thus defined by the Supreme Court of Illinois: 'It was a conditional sale with a right of rescission on the part of the vendor in case the purchaser should fail in payment of his instalments. A contract legal and valid as between the parties, but made with the risk on the part of the vendor of losing his lien in case the property should be levied upon by creditors of the purchaser while in possession of the latter.' Murch v. Wright, 46 Ill. 488.

The transaction is precisely as though the petitioner had executed a formal bill of sale for the cars, and taken back an unrecorded chattel mortgage for the deferred payments.

The invalidity of such an unrecorded and unacknowledged contract for a lien is settled by the Supreme Court of Illinois interpreting the statute. Ketchum v. Watson, 24 Ill. 591; Forest v. Tinkham, 29 id. 141; McCormick v. Hadden, 37 id. 371; Sage v. Browning, 51 id. 217; Frank v. Miner, 50 id. 444.

The whole subject has been recently adjudged by this court in Hervey et al. v. Rhode Island Locomotive Works, 93 U.S. 664.

Mr. R. Biddle Roberts, contra.

The cars furnished by Schall being in the nature of supplies, within the meaning of the Illinois statute of July 1, 1872, entitled him to a lien upon all the personal property of the company for the amount due him. That lien was not lost by the delay in filing his petition. The possession of the receiver was for the benefit of all parties who might at the termination of the suit be found to be entitled to the property, and it prevented the lapsing of the lien by limitation. Wrixon v. Vize, 3 Dr. & War. 104.

A contract of conditional sale of cars to a railway company by the terms of which the company takes possession, and the vendor retains the title to and the ownership of them until full payment for them is made-is, even in Illinois, a valid contract, without recording it as a chattel mortgage, and is binding upon the company and its receiver. Under it, as between the company and its privies and the vendor, the title to the cars does not pass to or vest in the company until full payment is made. 1 Parsons, Contr., p. 449; Benjamin, Sales, sect. 320; Story, Sales, sect. 313; Hilliard, Sales, p. 61; 2 Kent, Com., p. 497; 2 Schouler, Pers. Prop., p. 292; Murch v. Wright, 46 Ill. 487; Gibbs v. Jones, id. 319; Fawcett, Isham, & Co. v. Osborn, Adams, & Co., 32 id. 11.

That such a contract is valid and binding against everybody, and under it the vendor holds his title absolutely against not only the vendee and his privies, attaching creditors of the vendee, and sales on execution levied by them, but even against bona fide purchasers without notice, is sustained by the weight of authority. Copland v. Bosquet, 4 Wash. 588; Rogers Locomotive Works v. Lewis, 4 Dill. 158; Tibbetts v. Towle, 12 Me. 341; Hotchkiss v. Hunt, 49 id. 213; Edwards v. Grand Trunk Railway of Canada, 54 id. 105; Crocker v. Gullifer, 44 id. 491; Luey v. Bundy, 9 N. H. 298; Porter v. Pettengill, 12 id. 299; Kimball v. Jackman, 42 id. 242; McFarland v. Farmer, id. 386; West v. Bolton, 4 Vt. 558; Manwell v. Briggs, 17 id. 176; Bradley v. Arnold, 16 id. 382; Root v. Lord, 23 id. 568; Davis v. Bradley, 24 id. 55; Clark v. Wells, 45 id. 4; Armington v. Houston, 38 id. 448; Coggill v. Hartford & New Haven Railroad Co., 3 Gray (Mass.), 545; Sargent v. Metcalf, 5 id. 306; Burbank v. Crooker, 7 id. 158; Deshon v. Bigelow, 8 id. 159; Hirschorn v. Canney, 98 Mass. 149; Day v. Bassett, 102 id. 445; Crompton v. Pratt, 105 id. 255; Barrett v. Pritchard, 2 Pick. (Mass.) 512; Hussey v. Thornton, 4 Mass. 405; Marston v. Baldwin, 17 id. 606; Ballard v. Burgett, 40 N. Y. 314; Keeler v. Field, 1 Paige (N. Y.), 312; Herring v. Hoppock, 15 N. Y. 409; Forbes v. Marsh, 15 Conn. 384; Hart v. Carpenter, 24 id. 427; Rose v. Story, 1 Pa. St. 190; Agnew v. Johnson, 22 id. 471; Lehigh Company v. Field, 8 Watts & S. (Pa.) 232; Sage v. Sleutz, 23 Ohio St. 1; Roland v. Gundy, 5 Ohio, 202; Carmack v. Gordon, 2 Cin. (Ohio) 408; Thomas v. Winters, 12 Ind. 322; Shireman v. Jackson, 14 id. 459; Plummer v. Shirley, 16 id. 380; Hanway v. Wallace, 18 id. 377; Dunbar v. Rawles, 28 id. 225; Bradshaw v. Warner et al., 54 id. 58; Parmlee v. Catherwood, 36 Mo. 479; Griffin v. Pugh, 44 id. 326; Little v. Page, id. 412; Ridgeway et al. v. Kennedy et al., 52 id. 24; Bailey v. Harris, 8 Iowa, 331; Robinson v. Chapline, 9 id. 91; Baker v. Hall, 15 id. 277; Owens v. Hastings & Sexton, 18 Kan. 446; Sumner v. McFarland, 15 id. 600; Hallowell v. Milne, 16 id. 65; Couse v. Tregent, 11 Mich. 65; Fifield v. Elmer, 25 id. 48; Hunter v. Warner, 1 Wis. 126; Goldsmith v. Bryant, 26 id. 34; Bradshaw v. Thomas, 7 Yerg. (Tenn.) 497; Gambling v. Read, 1 Meigs (Tenn.), 281; Buson v. Dougherty, 11 Humph. (Tenn.) 50; Ellison v. Jones, 4 Ired. (N. C.) 48; Parris v. Roberts, 12 id. 268; Patton v. McCane, 15 B. Mon. (Ky.) 555; Chism v. Woods, Hard. (Ky.) 531; Goodwin v. May, 23 Ga. 205; McBride v. Whitehead, 1 Ga. Dec. 165; Thompson v. Ray, 46 Ala. 224; Mount v. Harris, 1 Smed. & M. (Miss.) Ch. 185; Williams v. Connoway, 3 Houst. (Del.) 63.

The possession of a railroad and its equipments, which is taken by a receiver under an appointment by a court, changes no right of ownership of any part of the property, perfects no title to any part, gives no new or added right to any part, changes no contract regarding the ownership of any part; but is merely a holding by the same title, subject to the same contracts, limitations, and conditions under which the railroad company held the property, at the time of such appointment. Edwards, Receivers, pp. 3, 4, 4, 12, 165; 2 Dan. Ch., 28, sect. 3; Field, Corp., sects. 419, 420; High, Receivers, sects. 5, 318, 319; Hide v. Lynde, 4 Comst. (N. Y.) 387; Curtis v. Leavitt, 15 N. Y. 1; Skip v. Harwood, 3 Atk. 564; Portman v. Mill, 8 Law J. N. S. 165; Delany v. Mansfield, 1 Hog., 235; Receivers v. The Paterson Gas Light Co., 3 Zab. (N. J.) 283; In re Colvin, 3 Md. Ch. 280; Williamson v. Wilson, 1 Bland (Md.), 418; H. K. Chase's Case, id. 206; Ellicott v. Warford, 4 Md. 80; Ellis v. Boston & Hartford Railroad Co., 107 Mass. 1; Lincoln v. Fitch, 42 Me. 469; Devendorf v. Beardsley, 23 Barb. (N. Y.) 656; Williams v. Babcock, 25 id. 109.

The company not having acquired the title to the cars, they never became subject to the lien of the mortgage, and cannot be held by the receiver or the mortgagees, except upon complying with the conditions of the contract of sale. If he uses the cars in operating the railroad, and does not comply with that contract by paying for them, the owner has a just claim for the use of them, which should be paid out of the earnings of the trust property while in the hands of the receiver, or out of the proceeds of the sale of it, if the earnings have been applied to the benefit of it. United States v. New Orleans Railroad, 12 Wall. 362; State of Florida v. Anderson et al., 91 U.S. 667; Williamson v. New Jersey Southern Railway Co., 28 N. J. Eq. 277; Ellis v. Boston, Hartford, & Erie Railroad Co., 107 Mass. 1.

The railroad company never having acquired the title to the cars, the decree below ordering their delivery to the appellee, and the payment to him of the $14,568.75 as rent, was proper, and should be affirmed.

MR. CHIEF JUSTICE WAITE, after stating the facts, delivered the opinion of the court.