"It is therefore declared that this order appointing the receiver herein is made upon this express condition, namely: That all debts, demands and liabilities due or owing by the defendant company which were contracted, accrued or were incurred in this district, or are due or owing to any residents of this district, for ticket and freight balances, or for work, labor, materials, machinery, fixtures and supplies of every kind and character, done, performed or furnished in the repair, equipment, operation or extension of said road and its branches in this district and all liabilities incurred by the said defendant company in the transportation of freight and passengers, including damages for injuries to employes or other persons and to property, which have accrued or upon which suit has been brought or was pending or judgment rendered in this State, within twelve months last past, and all liabilities of said company to persons or corporations who may have become sureties. for said company on stay or supersedeas bonds or cost bonds, or bonds in garnishment or other like proceedings, without regard to the date of said bonds, or whether such bonds were furnished in actions or proceedings pending in this district or elsewhere, together with all debts and liabilities which the said receiver may incur in operating said road, including claims for injuries to persons and property as aforesaid, are hereby declared to be preferential debts and shall be paid by the receiver as the same shall accrue, out of the earnings of the road if practicable, or out of any funds in his hands applicable to that purpose, and if not sooner discharged, then the same shall be paid out of the proceeds of the sale of the said road which shall not be discharged from the custody of this court until said debts and demands are paid."

All parties acquiesced in this order and the debts of the company falling within its provisions were paid. The order undoubtedly included some debts and demands not preferential, as that term is at present defined, but under the circumstances it was deemed not only just and equitable to the creditors, but it was also believed to be for the best interests of the owners of the property that the debts mentioned should be paid. Experience has shown that a railroad cannot be safely and successfully

operated through an enemy's country, and nothing excites a more hostile or dangerous feeling towards a railroad than the repudiation of the debts justly due from the railroad company to the people living along the line of the road. The people look to the road for the payment of their debts, and when payment is denied them, their animosity and malice are vented on the offending thing. And if there be among them a desperate or lawless character, an act of malicious mischief, destructive alike to life and property, is the consequence. Again, those creditors who have been extensive patrons of the road, will withdraw their patronage and bestow it upon some rival road. There is always danger that the repudiation of such debts will in the end cost the trust estate more money than it would take to pay them.

IV. OF THE ORDERS NECESSARY TO INSURE PAYMENT OF THE OBLIGATIONS OF THE COURT AND OTHER PREFERENTIAL DEBTS.

To make such an order effective and to render it certain that all the obligations and liabilities of the court incurred in the operation of the road by its receiver will be paid, an appropriate provision for that purpose should be inserted in the decree of foreclosure and in the order approving and confirming the sale.

In the case of the Union Trust Company of New York v. The Atchison, Topeka & Santa Fe R. R. Company, the decree of foreclosure contained the following provision on this subject: "The purchaser or purchasers, his or their successors and assigns shall, as part consideration and purchase price of the property purchased, and in addition to the sum bid, take the same and receive the deed therefor upon the express condition that he or they, or his or their successors or assigns, shall pay, satisfy and discharge any unpaid compensation which shall be allowed by the court to the receivers, and all indebtedness and obligations or liabilities which shall have been legally contracted or incurred by the receivers before delivery of possession of the property sold, and also any indebtedness and liabilities contracted or incurred by said defendant railroad company in the operation of its railroads prior to the appointment of the receivers, which are prior in lien to said general mortgage, or

payment whereof was provided for by the order of this court dated January 10, 1894, and filed January 16, 1894. [This was the order requiring the payment of certain debts of the railroad company which I have read] and which shall not be paid or satisfied out of the income of the property in the hands of the receivers, upon the court adjudging the same to be prior in lien to said mortgage and directing payment thereof, provided that suit be brought for the enforcement of such indebtedness, obligation or liability, within the period allowed by the statute of limitations of the State of Kansas1 for the commencement of such suit thereon after such indebtedness, obligation or liability was contracted or arose.

"In the event that said purchaser or purchasers shall refuse, after demand made, to pay any such indebtedness, obligation or liability, the person holding the claim therefor, whether established in a State court or any other court of competent jurisdiction, may, upon fifteen days' notice to said purchasers, their successors or assigns, file his petition in this court to have such claim enforced against the property aforesaid in accordance with the usual practice in relation to claims of a similar character; and such purchaser or purchasers, and his and their successors or assigns, shall have the right to appear and make defense to any claim, debt or demand so sought to be enforced, but either party shall have the right to appeal from any judgment, decree or order made thereon. And jurisdiction of this cause is retained by this court for the purpose of enforcing the foregoing provisions of this decree, and the court reserves the right to retake and resell said property in case the purchaser or purchasers, his or their successors or assigns, shall fail to comply with any order of the court in respect to the payment of such prior indebtedness, obligations or liabilities within thirty days after service of a copy of such order " In the same case the master's report of the sale of the prop

1 There is no reason why the debts and liabilities of the court incurred in the operation of the road should be barred in any shorter time than it would take to bar the like demands

against the railroad company, though it is the practice of some courts to make the limit much shorter, and sometimes so short as to prevent the assertion of meritorious claims.

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erty was ratified, approved, confirmed and made absolute, subject, however, to the payment of the receivers' compensation, receivers' debts and preferential claims, and to all equities reserved, and to all and singular the conditions of purchase as recited in such decree; and this court expressly reserves and retains jurisdiction of this cause and power to enforce all the provisions of said decree, including the right to retake and resell the said railroad and franchises, stocks, bonds and other property sold, in case the said purchasers, their successors or assigns, shall fail to comply with any order of this court in respect to the payment of any of the prior indebtedness, obligations or liabilities provided for in said decree within thirty days after service of a copy of such order upon such purchasers, their successors or assigns."

The purchaser upon confirmation of the sale should make himself a party to the foreclosure suit by petition of intervention, and he cannot appeal from the judgments or decrees of the court until he has done so. The proper practice to be pursued by the purchaser and the court in such cases is particularly pointed out in Fitzgerald v. Evans.1

All the debts and liabilities incurred in the operation of a road by the receiver are the debts and liabilities of the court appointing the receiver. The court should not, therefore, permit the road to pass out of its custody without making the amplest provision for securing the payment of its obligations. "Courts should pay their debts if nobody else does.' Instances have occurred where the court has parted with the property without making any provision for the payment of its outstanding obligations.

The citizen can have little confidence in, or respect for a court that will put the property out of its possession and beyond its reach without making provision to pay its debts. If a citizen was to do such an act, the law would brand it as a fraud.

It is better to make the unknown and unascertained liabilities of the court a preferred charge upon the property payable by the purchaser or his assigns in the mode indicated in the foregoing order, than it is to require the payment into the registry

1 49 Fed. Rep. 426.

VOL. XXX.

2 Dow v. Memphis & Little Rock R. Co., supra.

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of the court of a sum of money estimated to be sufficient to meet such demands. The sum paid into the registry of the court may prove inadequate for the purpose, and there is always the danger that the fund may be lost; besides, it is putting an unnecessary burden on the purchaser to deposit money to pay debts that have not been and may never be established.

V. THE RECEIVER MUST OPERATE THE ROAD ACCORDING TO THE REQUIREMENTS OF THE STATE Law.

At one time the notion prevailed in some quarters that when a Federal court took a railroad into its custody and control through its receiver, the road was thereby taken out from under the operation of the constitution and laws of the State, and that the receiver was a law unto himself, and could operate the road without regard to the requirements of the State laws, and, indeed, contrary to the requirements of those laws. An end was put to this erroneous doctrine and practice by sec. 2, act of Congress, March 3, 1887,1 which provides:

"That whenever in any cause pending in any court of the United States there shall be a receiver or manager in possession of any property, such receiver or manager shall manage and operate such property according to the requirements of the valid laws of the State in which such property shall be situated in the same manner the owner or possessor thereof would be bound to do if in possession thereof. Any receiver or manager who shall willfully violate the provisions of this section shall be deemed guilty of a misdemeanor, and shall, on conviction thereof, be punished by a fine not exceeding three thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court."

VI. RENUNCIATION OF EXECUTORY CONTRACTS.

A receiver of a railroad company may, at his election, with the approval of the court, renounce a large class of the execu

124 Stat., Chap. 373, p. 554.