284. Limitations on receiver's power. The receivership property being held by the receiver in behalf of mortgagees, creditors, or stockholders, and thus impressed with a species of trust relationship, it follows that there must of necessity be certain limitations upon his power in his dealings therewith. All his contracts, likewise, are made with reference to the receivership fund or property in his custody, and the res or the income is impressed with the ultimate payment of all indebtedness incurred in the management of the road. Hence it is that the rule has become well settled that all persons dealing with the receiver in his official capacity must do so with the knowledge, and are chargeable with notice, of the limitations on his power. If his contracts and transactions have not received in advance the sanction of the court, they are at all times subject to the annulment of the court as not being for the best interests of the estate. Occupying as he does a fiduciary relationship, he is not permitted to become personally interested in the receivership property, or make contracts in his official capacity resulting in his personal gain. Operating the road, in one sense, in the interest of the public, he cannot make unjust discrimination as to freight rates, or form pooling arrangements for discriminating purposes. He has no discretionary power as to the payment of the corporate debts from the assets or earnings of the road. He has 1 3 v. Franklin Ins. Co. 115 Mass. 278; Berry v. Gillis, 17 N. H. 9; Re Oak Pits Colliery Co. L. R. 21 Ch. Div. 322; Sunflower Oil Co. v. Wilson, 142 U. S. 313, 35 L. ed. 1025. In Dawson Mfg. Co. v. Brunswick & A. R. Co. 51 Ga. 136, it was held that where the contract between the manufacturing company and the railroad company was rescinded for nonpayment of the money stipulated, the railroad company was liable for rent and for damages to the cars while used, on the ground that it could not be presumed to keep and use the cars and not pay for them. Farmers' Loan & T. Co. v. Chicago & A. R. Co. 42 Fed. Rep. 6. In this case it was held that the receiver retaining and using the cars made him liable for the rental according to the terms of the lease. 1State v. Edgefield & K. R. Co. 6 Lea, 353. Farley v. St. Paul, M. & M. R. Co. 4 McCrary, 138. 3 Biers v. Wabash, St. L. & P. R. Co. 34 Fed. Rep. 244, 35 Am. & Eng. R. Cas. 646; Handy v. Cleveland & M. R. Co. 31 Fed. Rep. 689. 4 Missouri P. R. Co. v. Texas & P. R. Co. 31 Fed. Rep. 862, 28 Am. & Eng. R. Cas. 1. Ellis v. Buston, H. & E. R. Co. 107 Mass. 1. no power to appropriate receivership funds in the promotion or defeating of parallel lines of road,' or to grant permission to another road to cross his line of road,' or to contract for municipal aid in building, completing, or equipping a road, or lease the receivership road,' and unless specially authorized cannot contract debts on the faith of the receivership property,' and as a rule his power is confined to the property in litigation. He has no power to grant an annual pass for life,' and has no power to lease for a term of years general offices and thereby bind his successors or the property without the sanction of the court. § 285. Liability of railway receivers. The general liability of receivers has been considered heretofore and only the liability of railway receivers will be considered in this connection in so far as their liability may be different from that of ordinary receivers such as grows out of the varied and more extended duties imposed upon them. The fiability of railway receivers is measured by the functions and duties pertaining to his office. Being a common carrier of passengers and property and exercising the franchises of a corporation, he assumes corre sponding duties to the public and the patrons of the road, and in 1 Cowdrey v. Galveston, H. & H. R. Co. 93 U. S. 352, 23 L. ed. 950. Howlett v. New York, W. S. & B. R. Co. 14 Abb. N. C. 328. Smith v. McCullough, 104 U. S. 25, 26 L. ed. 637. 4 In McMinnville & M. R. Co. v. Huggins, 3 Baxt. 177, it is held that a receiver of a railroad company has no power to lease the receivership road so as to vest in the lessees an interest in the road and its franchises, which could not be devested by a subsequent act of the legislature. In Hand v. Savannah & C. R. Co. 17 S. C. 219, it was held that claims against the receiver of an insolvent railroad company for moneys, services, supplies, damages, and necessary expenses of the management cannot be paid from the proceeds of the mortgaged property where such proceeds were insufficient to pay the mortgage debt; that, unless specially authorized by the court to contract debts on the faith of the property, the receiver is restricted to the income and profits of the road. In Noyes v. Rich, 52 Me. 115, it is held that the receiver's right to custody of the property extends only to the property which is the subjectmatter of the litigation, but the rule is otherwise where the receiver is appointed under a creditor's bill, in which case he takes the whole estate. To the same effect is Smith v. McCullough, 104 U. S. 25, 26 L. ed. 637. Martin v. New York, S. & W. R. Co. 36 N. J. Eq. 109. 8 Chicago Deposit Vault Co. v. McNulta, 152 U. S. 554, 38 L. ed. 819. general is liable to the same extent, and his liability is governed by precisely the same principles as are applicable to ordinary carriers. His relations to the public and to his employees are in no manner limited or modified by reason of his official position or trust relationship. It may be stated in general terms therefore: (a) A receiver exercising the functions of a common carrier by virtue of the franchises of a railway corporation should be held amenable in his official capacity to the same rules of liability that are applicable to the company while it exercises the same powers in operating the road.' In Klein v. Jewett, 26 N. J. Eq. 474, the vice chancellor says: "I think the rule may be considered settled that where the injury results from default or misconduct of a receiver appointed by the court of equity while acting under the color of authority of the court,—there being no dispute as to the power of the court to make the order under which he claims to have acted,-the court may, in its discretion, either take cognizance of the question of the receiver's liability and determine it, or permit the aggrieved party to sue at law. But if the power of the court is disputed the court has no choice; it must assume exclusive jurisdiction and inhibit the aggrieved person from seeking redress against the receiver in any other tribunal. Any other course when its jurisdiction is assailed would be an abandonment by the court of both its power and dignity. Aston v. Heron, 2 Myl. & K. 390; Parker v. Browning, 8 Paige, 388. * * * It was not seriously dis puted that the receiver must be held liable if actionable negligence was shown. It would seem to be clear that no person can be permitted to exercise the rights and power of a common carrier, especially when they embrace the franchise granted to a railway corporation, except subject to the duties and liabilities of a common carrier. Whether a receiver is regarded as an officer of the law, or the representative of the proprietors of the corporation, or its creditors, or has combined all these characters, he is intrusted with the powers of the corporation, and must therefore necessarily be burdened with its duties and subject to its liabilities. There can be no such thing as an irresponsible power, force, or authority without being subject to duty under any system of laws framed to do justice. It is an inseparable condition of every grant of power by the state, whether expressed or not, that it shall be properly exercised, and that the grantee shall be liable for injuries resulting directly and exclusively from his negligence in its use. Both upon principle and authority I think it must be held that a receiver operating a railroad under an order of a court of equity stands in respect to duty and liability just where the corporation would were it operating the road, and the question whether or not the receiver is liable for negligence must be tested by the same rules that would be applied if the corporation was the actual party defendant before the court." Blumenthal v. Brainard, 38 Vt. 402; Paige v. Smith, 99 Mass. 395. To this rule there are the following exceptions: (1) Where a liability is created by statute against the corporation itself which In Ex parte Brown, 15 S. C. 518, it was held that a passenger injured upon a railway while in the hands of a receiver was entitled to damages for such injuries received and to be paid out of the fund in court realized from the earnings of the road during the receivership in preference to mortgage or other debts. It is held it cannot be denied that a company, while managed by its own directors, is liable to demands of this kind, and when managed by a receiver as an officer of the court it is equally liable out of its property to respond to unpaid claims of this kind, whether the cause of action arose before or after the judgment of insolvency and appointment of a receiver. Ex parte Johnson, 19 S. C. 492. In Meara v. Holbrook, 20 Ohio St. 137, it is held that a receiver of a railroad operating the same under the order of court in the same manner as a railroad company, and having the exclusive control of the road and its agents and employees in the business, is answerable in his official capacity to his employees and others for injuries sustained through the negligent discharge of his duties by himself or his agents where the railroad company, if it had been operating the road, would have been liable. See also Potter v. Bunnell, 20 Ohio St. 150, where it is held that in an action for injuries against the receiver exercising the franchises of the company it must be determined by the principles applicable to a like action against the company when it operates the road. In Erwin v. Davenport, 9 Heisk. 44, an employee was run over and killed by a train of cars, and the receiver was sued under the provisions of the Tenn. Code for $10,000 damages. It was held that a receiver under § 1101 of the Code is vested with the powers and duties of the board of directors in managing the affairs of the company and as a public agent of the state; that where the public are concerned receivers are subordinate agents of the state in the discharge of their official duties, and are guilty of wrong to third persons, they are liable to the same extent as private agents and are responsible for misfeasance but not for nonfeasance. In Blumenthal v. Brainard, 38 Vt. 402, receivers were operating a railway under the order of a court of equity, and it was claimed that being agents and officers of that court they were subject to account only to that court, and were entitled to protection in all matters growing out of a performance of their duties as receivers, and therefore could not be made liable as a common carrier or warehouseman, but the court held that the mere fact that they were acting as receivers under the appointment of a court of chancery could not be recognized as a defense to a suit at law for a breach of any obligation or duty which was fairly and voluntarily assumed by them in mat ters of business conducted or carried on by them while acting as such receivers. In Lyman v. Central Vermont R. Co. 59 Vt. 167, where it appeared that the same person is receiver of one railroad and lessee of another, and both are operated by him together, the leased railway is not receivership property, and an employee could maintain an action at law against him without leave to recover for injuries resulting from the negligence of his servants in operating the leased road. It is also held that he would be liable as receiver for injuries resulting upon the receivership property to the same extent as a railway company itself. See Sprague v. Smith, 29 Vt. 421; Blumenthal v. Brainard, supra; Newell v. Smith, 49 Vt. 255; Paige v. Smith, 99 Mass. 191; Nichols v. Smith, 115 Mass. 332; Ballou v. Farnum, 9 Allen, 47; Barter v. Wheeler, 49 N. H. 9; Lam. phear v. Buckingham, 33 Conn. 237; Kinney v. Crocker, 18 Wis. 74; Allen v. Central R. Co. 42 Iowa, 683. Receivers running a road under ap pointment of a court of chancery in another state who act as common carriers, and are liable in actions at law in the state in which appointed, may be sued as common carriers, in Massachusetts. Paige v. Smith, 99 Mass. 395; Nichols v. Smith, 115 Mass. 332. In Ohio & M. R. Co. v. Davis, 23 Ind. 553, it is said: "The court cannot permit her possession to result in wrong to one without fault, but upon sufficient proof will grant the relief to which the sufferer may be entitled." It was further held that the railroad company is not liable for an act of negligence of the receiver having possession of such road. In Southern Erp. Co. v. Western N C. R. Co 99 U. S. 191, 25 L. ed. 319, the receiver declined to carry out a contract made by the railroad company over which he was receiver with an express company, and a bill for specific performance was filed by the express company. It was held, first, that the receiver was the only necessary party defendant; and, second, that the transaction between the companies was simply a contract for transportation which created no lien, and the specific performance thereof would be a form of satisfaction or payment A which the receiver could not be required to make. In Harding v. Nettleton, 86 Mo. 658, an action was brought in a state court against the receiver of a railroad by permission of the Federal court which appointed him, for the breach of a contract for the purchase of ties made by the railroad before the appointment of a receiver, and it was held that the judgment of the state court could not be enforced against the property of the corporation in the hands of a receiver, but must be presented to the Federal court for allowance and that the latter would determine the manner and time of paying the judgment out of the assets of the road. In Sloan v. Central Iowa R. Co. 62 Iowa, 728, it is held that where the receiver is operating a railroad under the appointment and direction of a court he is included under the terms "persons owning or operating railways" in contemplation of §§ 1278 and 1307 of the Iowa Code, and that such receiver, or rather the property in his hands, is liable for the claim of an employee for injuries received through the negligence of coemployees. In Brown v. Brown, 71 Tex. 355, it is held that the judgment for personal injuries should be against the receiver in his official capacity, leaving the matter of its enforcement to be determined by the court having jurisdiction of the receivership which is in view of the rights of all persons interested in the proper application of the fund in the custody of the court. In Missouri P. R. Co. v. Texas P. R. Co. 30 Fed. Rep. 167, it is held that where a receiver has exclusive charge of the management and of the employment of operatives and employees, the entire control of the company having passed to the receivers as fully as it was before exercised by |