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of the property; and even when it became apparent that the original bill was likely to fail, and the appointment of receivers in suits to foreclose has been sought, the same secrecy has surrounded the application, and the greatest pains have been taken to see that the interested parties had no notice and no opportunity to be heard, in order that the same receivers might be retained in office with a new and better title.

The results of this first step are inevitable. The debtor, through its selected representative, becomes the agent and adviser of the court. No man in the least degree familiar with railroad methods is ignorant that in a railroad system the interests of the whole and of a part may be wholly divergent. The receivers must determine how expenses shall be divided between different lines, how business shall be routed, how rates shall be fixed, how branches can best be used to swell the earnings of the main line. They have it in their power to increase or diminish the earnings and the expenses of any road. They can spend the income in repairs or improvements and can so state their accounts as to raise or depress the apparent value of its securities. Their action in matters of this sort is of vast importance to many men; but while in name they act as the agents of the court, their action is not judicial. The court cannot hear and determine the questions which they must decide any better than it could direct the progress of a military campaign. After the receivers have acted the mischief in most cases is done; and when creditors discover at a later day what has happened, the usual course of judicial proceedings affords them no remedy. The receivers, therefore, are virtually and necessarily in irresponsible control of the property. If the representatives of a single interest, and that the interest of the insolvent debtor, are trusted with this power, what must be the consequences? A creditor interested only in a branch line naturally wishes to know what his security is worth. To whom shall he apply for information? He thinks that his property is managed improperly. To whom shall he apply for redress? He wishes to establish the facts upon which to found some application to the court. How shall he obtain the evidence? The receivers are in possession of all the books, and control all the witnesses. No employé dares to communi

cate any information if he thinks that his employers will object. No shipper wishes to antagonize men who can facilitate or injure his business.

Instead of approaching a trustee anxious to give him all possible information and to respect all his rights, he deals with a party to the controversy, who, perhaps, tells him that he is acting for the whole system, and that the interests of the whole require an injury to his part. Instead of finding as the officers of the court men whose only object is to deal justly with all, and who have no personal interests, he finds men definitely committed to a policy and determined to carry it out.

Many creditors have become dissatisfied with such representatives, and, while in no way disputing their honesty, have felt it obviously improper that the same persons should represent at the same time entirely diverse interests. Where the terms of a lease or traffic contract cannot be carried out, a new agreement must be made, or the owner must be restored to possession. If the first course is to be adopted, it is clear that the same persons cannot act for both sides in making the new agreement. If the latter, there can be no restoration of possession while the property is operated by receivers who control it in the interest of the defaulting debtor. The trustees of divisional mortgages or lessors, for these reasons, have in many instances sought an independent control of their property. They have pointed to the letter of their contract, they have relied upon the clear justice of their claim, they have been encouraged by the assurance given by high authority that "while the court will continue to operate a division of the system until some application be made; yet the right of the lessor or mortgagee whose control is impaired to insist upon possession or foreclosure will be promptly recognized" and the disruption of the system, if it comes," will come from those who seek separation and have a legal right to do so." But in every case, their application has been opposed by the receivers and their counsel. This shows the true position of receivers thus appointed. The officers of the court, "the eyes and ears" of the court-in a representative capacity the court itself— have resisted the application of the court's wards for the appointment of a separate trustee to represent a distinct

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interest. As the official advisers of the court they sit by its side on the bench, while at the same time they appear before it as parties.

In many cases the organization of the debtor corporation has been kept alive at the expense of the creditors, through an allowance made for the purpose by the court out of funds in the hands of the receivers, so that the corporation is provided with the means of resisting the enforcement of its contracts. Sometimes in the name of this corporation through counsel nominally employed by it, sometimes directly and through their own counsel, the receivers have resisted foreclosure proceedings, and every other attempt by creditors to assert their contract rights which could lead to the disintegration of the system. The result has been that the action of the courts in these suits, through receivers of their appointment, has resulted in a practical denial of justice.

The debtor has been left in possession, not only of its own property, but of other properties to which its right has been forfeited, and has been enabled, from a position of apparent neutrality, and so of peculiar advantage, to prevent creditors from obtaining what their contracts gave them. The possibilities of delay in such cases are very great. Under the decisions a supersedeas bond may be given on an appeal from a decree of foreclosure without serious risk to the sureties; hence an appeal is always easy, and if the ingenuity of counsel can detect a flaw in the proceedings, another postponement is secured. In a word, the court through its officers holds the creditor at bay until he is ready to compromise his rights.

The result is that, after a long and expensive contest, the selfconstituted reorganization committee appears, and bondholders are offered their choice between a contest conducted at great disadvantage and expense, and the acceptance of such terms as may be offered. While in theory they need not accept, in fact they do not dare to refuse. No man can be sure that his associates in the contest will not yield, or sell their claims. The expense of the reorganization has been in many cases enormous, and in fixing it there is no one to audit the accounts, no one to represent the creditors who suffer while their trustees profit.

Whenever an agreement is reached, the obstruction ceases. The receivers are as willing to help as they were to hinder. The foreclosure proceedings move swiftly, and the officers of the court no longer resist the claims of suitors at its bar. The receivership has accomplished its purpose.

Proceedings like these are of very evil example. As was pointed out in England by a leading journal, when a cabinet minister resigned upon the failure of a corporation in which he had been an ornamental director, they strike at the very root of thrift in the nation. Many a man who has saved painfully and slowly, denying himself every little indulgence for the sake of his family, finds his savings swept away by the mismanagement of a corporation, and sees the managers continue in charge in spite of all opposition that creditors can make. When he finally receives a new security of less value than his first investment, secured by contracts in no respect stronger than those which proved worthless when needed to protect his rights, he resolves that in future he will spend and enjoy as he goes, rather than save that strangers may get the fruits of his toil. To the reckless use of power by the managers of great corporations and by those who profit in their downfall; who secure advantages at the expense of others powerless to defend themselves, and who pay themselves, out of money belonging to others, sums which are entirely out of proportion to the services which they render, we must attribute much of the discontent, the hatred of capital and capitalists, of corporations and their officers, which underlie the movement that now excites our alarm.

It is to the courts of the nation that we must look for protection against many of the heresies that are now prevalent. Their authority rests peculiarly on the respect of the people for their absolute impartiality, and in the long run they cannot preserve that respect unless they observe the well-settled rules of judicial procedure, and unless they respect and enforce every legal claim. Parties must be left to determine for themselves whether their interests will or will not be served by the assertion of their rights. The moment that the courts, from any consideration of temporary expediency or private opinion as to what will best advance the interest of litigants, undertake to

vary their contracts or deny their rights, that moment the confidence of the community receives a shock, and no man knows on what he can rely. It is easy to assert and impossible to prove, but I believe it to be true that if the courts had in every instance refused to entertain these applications for the appointment of receivers in fact made by the debtor corporation, or even if they had selected impartial receivers, and, making no effort to preserve existing systems, had facilitated the enforcement of every agreement, the railroads of the United States would have been reorganized more promptly and on a more enduring basis than is now possible, while the confidence of the community in the efficacy of law and the sanctity of contracts would have been far greater. Judicial action which impairs the obligation of contracts is more dangerous than any statute which aims at the same result.

When the court through its officers undertakes to manage a railroad for years, and by these officers to decide, as it must without hearing, the questions which arise in its operation, when it appoints these officers and in so doing grants the final relief sought without notice in ex parte proceedings, it violates what I believe to be the fundamental rule of our constitutional system, so well stated in the Massachusetts Bill of Rights by John Adams:

"The legislative department shall never exercise the executive and judicial powers, or either of them; the executive shall never exercise the legislative and judicial powers, or either of them; the judicial shall never exercise the legislative and executive powers, or either of them; to the end it may be a government of laws, and not of men."

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