§ 118. For supplies, labor, etc.

As has been seen elsewhere the receiver in a foreclosure proceeding is authorized to purchase on credit the necessary supplies, and such indebtedness is payable out of the net earnings, and if they are insufficient then it may be a charge upon the funds realized on a sale of the mortgage premises.' He is not personally liable, however, for services rendered by employees in charge of receivership property. Where an employee of a receiver of a railroad company is injured in the line of his duty and without his apparent fault he may recover his wages for the time during which he is disabled. Where materials are furnished to a receiver the proper court to present a claim therefor is the court appointing the receiver and not the court of another state where the receivership has been extended over leased lines by ancillary proceedings. The employees of a receiver alleging a grievance against him may be heard by the court upon making proper application, and if the court shall be of opinion that further investigation is demanded he may require the receiver to answer and hear evidence upon the issue made, but the court will not reverse a decision of the receiver in reducing the wages of his employees where it involves an extensive investigation."

good standing and no negligence appearing on the part of the receiver. See § 118, note 2; § 120.

'Kneeland v. Bass Foundry & Mach. Works, 140 U. S. 592, 35 L. ed. 543; Kneeland v. American Loan & T. Co. 136 U. S. 89, 34 L. ed. 379; Miltenberger v. Logansport, C. & S. W. R. Co. 106 U. S. 289, 27 L. ed. 119; Union Trust Co. v. Souther, 107 U. S. 591, 27 L. ed. 488; Wallace v. Loomis, 97 U. S. 146, 24 L. ed. 895.

Rogers v. Wendell, 54 Hun, 540. 3Missouri P. R. Co. v. Texas & P. R. Co. 41 Fed. Rep. 319.

Clyde v. Richmond & D. R. Co. 56 Fed. Rep. 539.

Continental Trust Co. v. Toledo, St. L. & K. C. R. Co. 59 Fed. Rep. 514. See also Railroad Receivers.

As to the payment of claims from the proceeds of sale it is held in Knee

land v. American Loan & T. Co. 136 U. S. 89, 34 L. ed. 379, that where the receiver is appointed at the instance of a general creditor, such creditor is not entitled as against the lien of the mortgage bondholders to a preference in payment from the proceeds of sale. But in Kneeland v. Bass Foundry & Mach. Works, 140 U. S. 592, 35 L. ed. 543, a claim was allowed for supplies furnished to a receiver, appointed on the application of a judg ment creditor, and ordered to be paid from the proceeds of sale, where so far as the record showed that was the only fund available for its payment and where the supplies were necessary for the continued operation of the road, and had gone into the general property covered by the mortgage, which was sold at the foreclosure sale, upon the authority of Fosdick v.

§ 119. For money deposited in bank.

A receiver having money in his hands has no right to part with the actual custody of such money by depositing it in a bank or otherwise, save at his own risk, without order of court and he must make good the loss.' While a receiver may keep money in a bank as a safe place of deposit, or he may use the bank as a means of transmitting money to distant places, and if in doing so he uses reasonable care and diligence he will not be held liable for loss in case of a failure of the bank, and where the receivership money is already in a place of permanent custody and which is one of safety the receiver is not authorized in removing such deposit to a bank, or otherwise save at his own risk without an order directing him to do so from the court, but if a receiver in the exercise of sound business judgment deposits money in a bank of good credit in preference to taking the money with him to London to pass his accounts, and in the meantime the bank fails the receiver is not liable. But where he has the receivership money on deposit in a bank to his credit as receiver and withdraws such deposit and places it to his private account in another bank and declines to explain the transaction he is chargeable with interest, and if he places the fund with private bankers without security and it is loaned out on stock collaterals without his knowing to whom, or on what stock, or the interest to be received, he is chargeable with the interest he received.'

Schall, 99 U. S. 235, 25 L. ed. 339; Miltenberger v. Logansport, C. & S. W. R. Co. 106 U. S. 286. 27 L. ed. 117; Union Trust Co. v. Souther, 107 U. S. 591, 27 L. ed. 488; Wallace v. Loomis, 97 U. S. 146, 24 L. ed. 895; Burnham v. Bowers, 111 U. S. 776, 28 L. ed. -596.

'Ricks v. Broyles, 78 Ga. 610; State, Collins, v. Gooch, 97 N. C. 186.

2State, Collins, v. Gooch, supra. He will not be authorized, however, in making a loan to the bank without security.

Ricks v. Broyles, 78 Ga. 610; Knight . Plymouth, 3 Atk. 480.

Routh v. Howell, 3 Ves. Jr. 565.

Cf. Atlantic & N. C. R. Co. v. Cowles, 69 N. C. 59.

Hinckley v. Gilman, C. & S. R. Co. 100 U. S. 153, 25 L. ed. 591.

"Atty. Gen. v. North American L. Ins. Co. 89 N. Y. 94. In this case the receiver acted in good faith and no money was lost.

A firm suspended and became insolvent and at the time of such suspension had on deposit with them from another firm a large amount of money to secure advances made to the latter from time to time. It was not understood that they were to keep on hand the same money deposited or any particular money or property, the

§ 120. For costs and expenses.

Where proceedings were instituted by a bank, and after its insolvency and the appointment of a receiver the latter carried on the proceedings, the defendant is entitled to his costs on the rendition of a judgment in his favor, to be paid from the fund in the receiver's hands,' but the court will not order paid expenses incurred in legal proceedings where such proceedings were not authorized by the court, nor where the receiver contests a claim in bad faith, and where he voluntarily embarks in litigation without funds from which to pay the costs thereof he is guilty of bad faith and must pay such costs personally.' Costs incurred for the benefit of a fund in the hands of a receiver will be paid from such fund, though an order of court authorizing the action has been held necessary. Where a judgment for costs has been rendered against a receiver he will not be ordered on motion to pay such costs from the funds in his hands, even upon a showing that he has paid other larger amounts, or recently had sufficient funds to pay the judgment. He is not bound to render the account to each individual creditor. Other creditors with suits pending or to be commenced have an equal claim upon the funds in the receiver's hands. Such a motion cannot be converted into a creditor's bill. Expenses for repairs are a charge on the funds in his

account being a debit and credit account, interest being allowed on one side and credited on the other. After the suspension and appointment of a receiver, the depository firm sought to compel the receiver to pay over the balance in his hands of said deposit on the ground that it was a special deposit. Held, that the receiver was not liable for the deposit as a special deposit; if a special deposit had been made and the same money had been found or property in which it had been wrongfully invested, or which had been wrongfully substituted for it then such money or property could have been followed into the hands of the receivers and recovered. Butler v. Sprague, 66 N. Y. 392. Cf. Re Franklin Bank, 1 Paige, 249; Chap

man v. White, 6 N. Y. 412; Cook v. Tullis, 85 U. S. 18 Wall. 332, 21 L. ed. 933; Clark v. Iselin, 88 U. S. 21 Wall. 360, 22 L. ed. 568; Van Alen v. American Nat. Bank, 52 N. Y. 6.

'Camp v. Niagara Bank, 2 Paige, 283.

'Dudgeon v. Bowen, Hayes & J. 717. 'Bourdon v. Mantin, 74 Hun, 246. A receiver of an estate cannot charge the heirs and legatees with the cost of an unsuccessful litigation over his accounts. Henry v. Henry, 103 Ala. 582.

4Locke v. Covert, 42 Hun, 484. Swaby v. Dickon, 5 Sim. 629; Conyers v. Crosbie, 6 Ir. Eq. 657; Bristowe v. Needham, 12 Phill. Ch. 190. Derendorf v. Dickinson, 21 How. Pr. 275.

hands, and so are salaries, including receiver's certificates, a charge upon mortgage property taking precedence to the mortgage.'

§ 121. For rents.

Where a receiver as such takes possession of premises which were held as lessee by those whose estate he is administering and has paid rent therefor, according to the terms of the lease, from the time of his appointment for a considerable period thereafter, he becomes liable for the rent accruing thereafter, and it is not a defense that there is no privity of contract between himself and lessor. The title to the demised term passes to and becomes vested in the receiver and he is liable for the subsequently accruing rent. This principle is based upon the fundamental doctrine applied to parties generally, that possession and use of property carries with it a corresponding liability to pay therefor according to the terms of the lease under which the property was held by the receiver's predecessor, during the time he occupies the demised property.' But it by no means follows from this that he becomes liable for the entire unexpired portion of the term, for he is liable for such covenants only as are broken while privity of estate is continued, and it is at all times within his power to escape further liability by abandoning possession even if done for the express purpose of avoiding further payment for rent, and thereby destroy the privity of estate.*

A receiver will be liable for the rents collected by him although his bond was not approved until sometime afterwards, but he is not liable where he refuses to take possession of the leasehold

'Sterling v. Wynne, Hayes & J. 817; Ellis v. Vernon, 4 Tex. Civ. App. 66. See § 117.

Wells v. Higgins, 132 N. Y. 459; Woodruff v. Erie R. Co. 93 N. Y. 609; Frank v. New York, L. E. & W. R. Co. 122 N. Y. 197.

Frank v. New York, L. E. & W. R. Co. supra. In such case the receiver occupies the premises and makes himself liable by reason of his privity of estate and not by any priv. ity of contract, and by reason thereof

becomes liable to pay rent which is a covenant running with the land.

A service of notice upon the lessee in a forcible entry and detainer proceeding will be binding on a receiver of his property subsequently appointed in another suit. Woodward v. Winehill (Wash.) 44 Pac. 860.

Frank v. New York, L. E. & W. R. Co. supra; Childs v. Clark, 3 Barb. Ch. 52; Tate v. McCormick, 23 Hun, 218; Durand v. Curtis, 57 N. Y. 7.

5 Western Canada & I. Co. 8 Prec. Rep. (Ont.) 262.

premises;' but if it is his duty to take possession of real estate and he neglects to do so during the period of his appointment he is chargeable with rent for such premises. Before a landlord is entitled to a lien under the statute of 8 Anne, chap. 14, § 1, his rent must be due, and when his rent is not due until after the goods are sold he cannot be a preferred creditor. A person having a claim for rent upon property in the possession of a receiver appointed by the court should apply to the court upon notice to the receiver, for an order upon the receiver to pay the rent or for leave to proceed by distress or otherwise. The rental value of rolling stock while it is in the hands of the receiver appointed at the instance of a mortgagee in a proceeding instituted to foreclose a mortgage, if used by the receiver in operating a railroad is properly allowed as a prior lien to the mortgage indebtedness." § 122. On unexpired leases.

An ordinary chancery receiver appointed in a foreclosure proceeding does not, simply by virtue of his appointment, become liable upon the covenants and agreements of the person or corporation over whose property he is appointed; and in case of a receivership of a railroad he is entitled to a reasonable time in which to elect whether he will adopt a lease in which the railroad company is the lessee or return the leased property to the lessor or owner. He does not by reason of his appointment become an assignee of the term,' and in such case it is a proper matter of

Fidelity Safe Deposit & T Co. v.
Armstrong, 35 Fed. Rep. 567.
Downs v. Allen, 10 Lea, 652.
Gaither v. Strockbridge, 67 Md. 222.
4Noe v. Gibson, 7 Paige, 513.

Kneeland v. American Loan & T Co. 136 U. S. 89, 34 L. ed. 379. Such rental should be fixed not at the actual mileage but at its reasonable value.

"Quincy, M. & P. R. Co. v. Humphreys, 145 U. S. 82, 36 L. ed. 632; St. Joseph & St. L. R. Co. v. Humphreys, 145 U. S. 105, 36 L. ed. 640. And the same rules apply to leases of rolling stock, which are coupled with an option to buy and the privilege of returning in case of an inability to pay

therefor, on the payment of the stipu lated rental. Sunflower Oil Co. v. Wilson, 142 U. S. 313, 35 L. ed. 1025; Com. v. Franklin Ins. Co. 115 Mass. 278; Sparhawk v. Yerkes, 142 U. S. 1, 35 L. ed. 915; Southern Exp. Co. v. Western N. C. R. Co. 99 U. S. 191, 25 L. ed. 319; Coe v. New Jersey M. R. Co. 27 N. J. Eq. 37; United States Trust Co. v. Wabash & W. R. Co. 150 U. S. 287, 37 L. ed. 1085; Woodruff v. Erie R. Co. 93 N. Y. 609; Re Otis, 101 N. Y. 580; Farmers' Loan & T. Co. v. Chicago & A. R. Co. 42 Fed. Rep. 6.

"Glenny v. Langdon, 98 U. S. 20, 25 L. ed. 43; American File Co. v. Garrett, 110 U. S. 288, 28 L. ed. 149; Re