§ 405. Acts outside of receiver's duty. Where the receiver commits acts outside of the line of duty, as where he takes and holds possession of property not included in the order of appointment and to which the debtor never had title, he is not entitled to the protection of the court, is a trespasser and liable as such. He is not, however, a trespasser if he takes possession of property under an improvident order of court, or at least not liable for damage.1 § 406. When receiver refuses to act. When a receiver fails to prosecute officers of a corporation for neglect of duty or illegal acts the right of action is in the party interested making the receiver a defendant." take possession of, but does not extend to property not embraced in the decree and of which the debtor never had any title. Parker v. Browning, 8 Paige, 388; Paige v. Smith, 99 Mass. 395; Leighton v. Harwood, 111 Mass. 67. In Atlas Bank v. Nahant Bank, 23 Pick. 480, it appeared that attachment suits were brought against an insolvent bank, and the receivers filed a petition praying that the attachment might be dissolved and the respondents be restrained from other attachments; that the petition was a distinct proceeding, unconnected with the original suit against the bank, and was held to be irregular, but that the receivers were entitled to proceed in a summary mode, by a petition filed in the original suit, to obtain a decision of the court upon the rights of attaching creditors, and that a supplemental bill was not necessary. In Ft. Wayne, M. & C. R. Co. v. Mellett, 92 Ind. 535, it was held that where a receiver was in possession of land under decree of the circuit court of the United States no action could be maintained in the state courts to recover possession thereof. In such case the court which holds by its re ceiver is the only court to try the question of title. In Staples v. May, 87 Cal. 178, it is held that if the receiver appointed in a mortgage foreclosure works ores in lands of the mortgagor, which are not included in the mortgage foreclosed, he becomes liable as a trespasser for the net proceeds of the ore extracted and the general creditors of the mortgagor may avail themselves of such liability by proceedings supplemental to execution. In Kenney v. Ranney, 96 Mich. 617, it is held that a receiver should see to it that he sells none but the property covered by the mortgage under the order of court, for its sale, and an ac tion of trover will lie against him for the value of other property held by the mortgagor as bailee and delivered by him to the receiver without demand and without order of court. Cf. Gibbons v. Farwell, 63 Mich. 344; Pingree v. Detroit, L. & N. R. Co. 66 Mich. 148; Allen v. Kinyon, 41 Mich. 281; Scudder v. Anderson, 54 Mich. 122; Hake v. Buell, 50 Mich. 89; Daggett v. Davis, 53 Mich. 35; Gutsch v. McIlhargey, 69 Mich. 377. In Fisher v. Andrews, 37 Hun, 176, an action was brought by the plaintiff § 407. Leave to compromise. The court in the interest of the estate may authorize and empower the receiver to compromise disputed and doubtful claims, by receiving less than the amount due if it shall appear expedient so to do and to the best interest of creditors, stockholders, or those interested.' § 408. Power to enforce assessments. The receiver of an insolvent mutual fire insurance company has to recover a sum of money due her as widow of a member of a mutual benefit association. The action was brought against the trustees and receiver. The complaint alleged in substance negligence of the trustees and that they had converted and applied to their own use moneys collected under an assessment for and belonging to the plaintiff without right or authority. It was held that the complaint was properly dismissed because of its failure to allege that plaintiff had requested the receiver to prosecute the defendant and that he had refused to do so, and that she had applied to the court for leave to sue the defendants and that the same had been granted or refused. The court say: "The receiver represents the corporation, and also the creditors, and the funds and causes of action which became vested in him on his appointment are in custodia legis and should not be diverted and taken from his hands or placed beyond the control of the court whose duty it is to see that all the funds of the corporation are justly and equitably distributed among its creditors and members. *** If it had been made to appear that the receiver was in league with the other defendants or had been guilty with them in misappropriating the funds of the company that would perhaps be a sufficient excuse for not applying to him to prosecute the defendants in a proper action." Greaves v. Gouge, 69 N. Y. 154; Brinckerhoff v. Bostwick, 88 N. Y 52. In Monitor Furnace Co. v. Peters, 40 Ohio St. 575, a receiver of a corporation was appointed to administer the estate for the benefit of creditors and stockholders. Before the receiver's appointment the company made sale of its real estate and other property for the alleged purpose of defrauding creditors. Two years after the appointment a judgment creditor filed a bill for the purpose of declaring the sale void in the same court that appointed the receiver, in which the stockholders, receivers, and creditors were made defendants, and the bill was sustained on the ground that it was substantially an application to the court to direct the receiver to do his duty in the case stated. In this case the court can make the proper order as effectively and justly as if instituted by the receiver. Re Croton Ins. Co. 3 Barb. Ch. 642, a receiver of an insolvent corporation, on application, was authorized to compromise disputed and doubtful claims by the allowance of so much of said claims as to him should seem just and equitable and to compromise with debtors who are unable to pay in full upon receipts any part of their debts, if it should seem reasonable and for the best interest of creditors. power to make an assessment upon the premium notes necessary to pay the debts of the company to the same extent as possessed by the board of directors; but his power is not more extensive than that of the board. In such case his power does not depend upon the order of court but the existence of such facts and circumstances as render the assessment necessary. He acts ministerially and not judicially, and in enforcing the assessment must allege such facts as would entitle the company to sue.' In Thomas v. Whallon, 31 Barb. 172, the receiver of a mutual insurance company in making an assessment upon the premium notes is held to be an actor and his authority depends not upon the order of court, but upon the existence of facts making the assessment necessary and proper. In ordering the receiver to make the assessment courts do not adjudicate upon the liability of the company or determine the amounts for which assessments shall be made, at the ratio of an assessment, but merely sanction and authorize the acts of the receiver who acts ministerially and not judicially. In Williams v. Babcock, 25 Barb. 109, it is held that the receiver of a mutual insurance company, by his appointment, has power to make assessments upon premium notes and determine the time of payment in the same manner as the directors had, and is authorized to give notice in the same manner, but the appointment does not determine the amount of indebtedness or the time of payment. If the obligation to pay is determined by the premium note upon an assessment and notice, it is the receiver's duty to proceed forthwith and make an assessment and give the notice. This is a prerequisite to an action on the note; otherwise there would be no breach on the part of the maker and these things are necessary allegations in an action against the maker. In Kinsela v. Cataract City Bank, 18 N. J. Eq. 158, it appeared that a sum of money was placed in a bank as a special deposit to meet a contingency of the bank which never happened, and the receiver was required to repay the sum to the depositor. In Wood v. Standard Mut. L. S. Ins. Co. 154 Pa. 157, a decree was rendered ordering the receiver to collect an assessment from members of the company, and in such case a liberal allowance should be made for uncollected assessments, expenses, etc. In Bangs v. Duckinfield, 18 N. Y. 592, an assessment made by a receiver of a mutual fire insurance company under an order of court on applica tion of the receiver without notice is held to be upon the same footing as if made by the board of directors and not conclusive upon the person assessed as a judicial determination. In Sands v. Sanders, 28 N. Y. 416, it is held that a general assessment is good by which the receiver declares each premium note is assessed to the full amount thereof. In Downs v. Hammond, 47 Ind. 131, suit was brought by a receiver of a mutual fire insurance company to collect an assessment on a premium note and it was held that the complaint must show on its face that the court from which the receiver derives his authority has determined the validity of the claims for which the assessment is made. The amount of claims which 409. Leave to sell. Where leave is given to the receiver to sell subject to the order of court, an order of confirmation by the court is necessary in order to transfer the title. The sale in such case is conditional and the purchaser buys subject to the condition, but as in the case of minors the contract is enforceable against him.' $410. Leave to contract debts and liens. The receiver without leave of court has no power to create indebtedness and charge the receivership property with the payment thereof. The court may in its discretion ratify the act of the receiver afterwards, in which case the effect is the same as previous leave given. The order and not the act gives the transaction validity. As to the existing mortgage liens, and the power to displace them by prior liens, the power of the court is limited, as elsewhere seen, to legitimate operating expenses." the receiver or court will allow as just demands against the company, together with any indebtedness previously allowed by the directors of the company as shown by their books must be ascertained before an assessment can be made to pay such indebtedness. In Manlove v. Burger, 38 Ind. 211, it is held that under the statute of Indiana the receiver of a mutual insurance company is authorized to sue in his own name in bringing an action against the stockholders of a mutual insurance company. Also, that in an action by a receiver to recover assessments he must allege all the facts necessary to show a liability on the premium notes and that the claim for losses had been adjusted, or were justly due to the parties making or setting up the claims. 'In Koontz v. Northern Bank, 83 U. S. 16 Wall. 196, 21 L. ed. 465, it is held that if the receiver omit to perform his whole duty by which the parties are injured, or if he commits a fraud upon the court and the rights of third parties have intervened to prevent the setting aside of the transaction, the remedy is against the officer personally on his official bond. In Phelps v. Masterton, 3 Robt. 527, it was held that a receiver of a corporation to which a note was given, cannot recover upon such note after he has sold the same at public auction to a bona fide purchaser. In Hanke v. Blattner, 34 Ill. App. 394, a receiver was held to be authorized to bring suit without special leave of court, under Ill. Rev. Stat. chap. 32, § 25. In this case it appeared that the receiver had made a sale of property pursuant to the order of court, and the purchaser had failed to give a note due for the property pursuant to the terms of sale, and suit was brought therefor. In Rogers v. Wendell, 54 Hun, 540, an action was brought to dissolve the corporation in which a receiver was appointed, who employed a person to take charge of the property of the company at a designated place and pay certain disbursements necessary. This The court may, however, under certain limitations and restrictions, empower the receiver to issue receiver's certificates and bind the receivership funds for their payment, but in such case express authority must be given the receiver, and his expenditure of the money derived therefrom or use of the certificates must strictly follow the order and direction of the court.' employment was continued for some time by the person so employed, he making reports to the receiver weekly and drawing drafts upon him for various sums until the death of the receiver. An action was brought by the employee against the executor of the receiver for services and disbursements and it was held that the receiver assumed a personal liability on account of services and disbursements. This case is based upon analogous cases applicable to administration and trustee matters as follows: Cf. Schmittler v. Simon, 101 N. Y. 557; Willis v. Sharpe, 113 N. Y. 591; Davis v. Storer, 16 Abb. Pr. N. S. 227; Noyes v. Blakeman, 6 N. Y. 580; Mygatt v. Wilcox, 45 N. Y. 309; Bowman v. Tallman, 2 Robt. 385; People v. Universal L. Ins. Co. 30 Hun, 142; Kedian v. Hoyt, 33 Hun, 145; Ryan v. Rand, 20 Abb. N. C. 314; Putten v. Royal Baking Powder Co. 114 N. Y. 4. The principle upon which the administrator, trustee, or receiver is held liable in the foregoing cases is that there is no responsible principal back of them for whom they may contract and against whom the creditor may force his demand. A receiver cannot, of his own motion, contract debts chargeable upon the fund in litigation and while a court may allow expenses incurred by a receiver for the preservation of the property, it is nevertheless the order of court and not the act of the receiver which creates the charge and upon which its validity depends. Vilas v. Page, 106 N. Y. 451. Cf. Wyckoff v. Scofield, 103 N. Y. 630. In Cowdrey v. Galveston, H. & H. R. Co. 93 U. S. 352, 23 L. ed. 950, it is held that the receiver is not authorized, without previous direction of the court, to incur any expense, on account of property in his hands, beyond what is absolutely essential to its preservation as contemplated by his appointment. In Ryan v. Rand, 20 Abb. N. C. 313, the receiver was held personally liable for fees of a stenographer employed by him on the ground that there was no authority from the court making the plaintiff's demand a charge upon the estate. In Union Trust Co. v. Chicago & L. H. R. Co. 7 Fed. Rep. 513, under a special order of court, receivers' certificates were issued, placed in the hands of the payee for negotiation and sale, and subsequently were purchased by the plaintiff for forty cents on the dollar, he having notice of the order under which the certificates were is sued. It was held that the purchaser took subject to all equities between the receiver and payee. The negotiation and sale of certificates is a trust personally to the receiver and he cannot delegate it to another and relieve himself from responsibility. In Bank of Montreal v. Chicago, C. & W. R. Co. 48 Iowa, 518, the receiver was authorized to borrow such sums of money as were necessary for |