Page:Harvard Law Review Volume 10.djvu/173

147 secured. How it became so, it is not for us to det when called upon to appoint a receiver for a corporation totally insolvent, who is to be the mere servant of the court, upon whose fidelity and ability to manage during the pendency of the suit the property intrusted to him the court must rely, ought not, and ought not to be expected, to appoint a person under whose charge and control the resources of the road had been exhausted and its property seized on execution, and the necessity for a receiver brought about.

"The receiver is not the receiver of the bondholders or secured creditors. He is the mere hand of the court. The unsecured creditors, whose chances of a dividend are remote, have a deep interest in knowing the road, while its assets are being marshalled and its creditors, their claims and priorities, ascertained, is free from the control of those whose administration of its affairs ended in bankruptcy."

This example has remained controlling in that circuit, and more recently the same judge said in a similar case, " Unless in cases of imperative necessity, no person will be appointed receiver of a rail- road company who is a party to, or of counsel in, the cause, or who has been an officer in, or ani official of, the insolvent company." More recently in the same jurisdiction the eminent and very learned successor of the judge just referred to said, " Under the rule adopted in this court, after careful consideration, this makes him [the pro- posed receiver] ineligible for the appointment of permanent receiver. The whole question was discussed in Finance Co. v. Charleston, C. & C. R. Co., 45 Fed. Rep. 436, and for this reason alone, against the prejudice of both judges then sitting, Mr. Lord was not continued as receiver. See also Phinizy v. Augusta & K. Ry. Co. (decided at this term), 56 Fed. Rep. 273.

If it is said that courts have it in their power to prevent such a result, the answer is that courts do not, in most cases, prevent it. The essential impropriety and injustice of appointing the former heads and managers of railroads as receivers need not- be argued. If there has been mismanagement, such receivers will be interested in covering it up; if there has been favoritism, or any one of a hundred faults of management, such receivers will be likely, if not certain, to continue it. It would seem to be the right of creditors who are in jeopardy, not only to initiate proceedings for the ap-