Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/831

 CHAF. XVII.] LEGAL RELATIONS AMONG CREDITORS. [§ 823. classes of creditors and the stockholders ; and if they give to one class of creditors that which properly belongs to another, the court may, upon an adjustment of the accounts, so use the income which comes into its hands, as, if practicable, to restore the parties to their original equitable rights. While, ordi- narily, this power is confined to the appropriation of the income of the receivership and the proceeds of moneyed assets that have been taken from the company, cases may arise where equity will require the use of the proceeds of the sale of the mortgaged property in the same way. . . . The power rests upon the fact, that in the administration of the affairs of the company the mortgage creditors have got possession of that which, in equity, belonged to the whole, or a part of the general creditors." l § 823. In accordance with the principles indicated iu the foregoing opinion, it is held that a court of equity, which has appointed managing receivers of such ^raers Ver8 ' property as a railroad, when taken under its charge as a trust fund for the payment of incumbrances, has power to authorize the receivers to raise money necessary for the preser- vation and management of the property, and make such money chargeable as a first lien thereon. 2 This power is regarded as 1 Fosdick v. Schall, 99 U. S. 235, 251, etc. Affirmed and followed in Fosdick v. Car Co., ib. 256; Huide- koper v. Locomotive Works, ib. 258; Union Trust Co. v. Souther, 107 U. S. 591; Burnham v. Bowen, 111 U. S. 776; Southern Railway v. Car- negie Steel Co., 176 U. S. 257; Wil- liamson v. Washington City, etc., R. R. Co., 33Gratt. (Va.)624; Addi- son v. Lewis, 75 Va. 701; Atkins v. Petersburg R. R. Co., 3 Hughes, 307; Douglass v. Cline, 12 Bush (Ky. ), 608. See, also, Hale v. Frost, 99 U. S. 389; Meyer v. Johnston, 53 Ala. 237; Union Trust Co. v- Walker, 107 U. S. 596; Farmers' Loan, etc., Co. v. Missouri, etc., R'y Co., 21 Fed. Rep. 264. Compare Newport, etc., Bridge Co. v. Douglass, 12 Bush (Ky.), 673. The cases of Metropolitan Trust Co. v. Tonawanda Valley, etc., R. R. Co., 103 N. Y. 245, and Duncan v. Mobile, etc., R. R. Co., 2 Woods, 542, seem not to accord with the above deci- sions. But the rule of Fosdick v. Schall does not in general apply to the fund realized by sale of the mort- gaged railroad. St. Louis, etc., R. R. Co. v. Cleveland, etc., Ry., 125 U. S. 658. Nor does the rule apply to give priority to a debt arising for work done in the original construction of the road; and not in keeping up the railroad as a going concern. Toledo, etc., R. R. Co. v. Hamilton, 134 U. S. 296. - Miltenberger v. Logansport Rail- way, 106 U. S. 286; Wallace v. 811