Mercantile Trust & Deposit Co. v. Southern Iron Car Line , 113 Ala. 543 ( 1896 )

HARALSON, J.

1. The correctness of the account marked Exhibit C, in the first of the foregoing cases, for rents and repairs, we do not understand to be questioned.

Its itemized correctness is fully proved, and there is no evidence to the contrary.

The rentals for the gondola cars accruing prior to the appointment of the receivers was properly abandoned by the intervenor, and was thus eliminated from consideration. The only questions for review are, as to the time up to which rentals may be charged and a lien declared therefor; and the right of the intervenor to claim and be allowed his account for rents as proved.

As to these let it be premised, that the complainant itself, in the bill filed in this case, prayed that the receivers, when appointed, should, in addition to the ordinary powers possessed by such receivers, have full power and authority to manage, run and operate said railway company, and to carry out and renew any and all contracts the said company may have made, connected with the conduct of their business. The decree appointing them, responsive to the prayer of the bill, directed that the receivers should continue the operation of the company, the same as then being operated, should keep the premises and property, both real and personal, in good condition and repair, and at their discretion, carry out any and all contracts that said company may have made, and renew the same. Here was the amplest authority to the receivers, -without further orders of the court, to continue these contracts for the rental and repair of cars in full force and effect, or to enter into others such as they deemed necessary for the proper conduct and operation of the business of said railway company. When, therefore, they came to these cars, and found them rented from the intervening companies, and being used in the business of the railway company, the receivers- had the discretion and authority invested in them, to continue the business and to renew or continue in force said contracts, as completely as if they had applied in the course of their receivership for special authority to contract. When contracts are continued of force, under such license from the court, they become binding on the receivers; and the property and money of the company in their hands, become liable for the money obligations of the contracts, and are entitled to -payment prior to the mortgage debt. Nothing more was done by the receivers, than was prayed for by the mortgagee. The decree was rendered at its instance and request, and for its special benefit. If more authority was given to the receivers than was proper or necessary, it was the mistake of complainant. The court could not be presumed to be experienced in such matters, and to know exactly how many cars were needed for the continued operation of the business of the company. It is to be assumed that the receivers, in doing what the mortgagee requested they might be allowed to do, did what was necessary and proper to be done. This very question has been well and ably considered by the Supreme Court of the United States in the case of Kneeland v. American L. & T. Co., 136 U. S. 89, holding, that where, on the application of a trustee of a railroad mortgage, a receiver is appointed who takes possession of the road and its rolling stock, a part of which was being operated under lease, as in this case, and the receiver continues to operate it, its rentals at the contract price, and not according to its actual use, if not paid from the earnings, will be a charge upon the proceeds of the sale under the foreclosure of the mortgage, prior to the mortgage debt. The same doctrine is maintained in the later case of Thomas v. Western Car Co., 149 U. S. 95. In this latter case, the question of the expenses for the repair of the rented cars came also for consideration. The contract there, as here, bound the receivers to keep the cars in good running order. The court held that the receiver was bound to make the necessary repairs, and if he did not do so, he should be charged with what was reasonably expended by the car company in that behalf after they were surrendered.

Exhibit C. to the petition, shown to be correct in its items, shows the entire sums for rentals and repairs to be $1,024.66. Of this amount, $396.75 was for rent before the receivers were appointed, which, is not claimed. Deducting this sum and the bill for repairs — $236.42— together making $635-18, from the entire bill, — $1,024.66, — and there is left, the sum of $389.48 for rents alone. If to this be added the bill for repairs, we have $627.91, the entire charge for rents and repairs. The court allowed $601.37. By what process this sum was arrived at, is not shown.

The itemized bill makes no charge for rents for any month prior to March, 1894. It contains the monthly rentals for each month from and including March, to and including September, 1894. We take this to be an admission that rents for months prior to March had been paid. It is contended that no rentals should have been allowed after 28th August, 1894. But our conclusion from the evidence is, that the 1st of October is the time, to which rents for the gondola cars should be computed. The receiver, Montgomery, on his examination, was asked if the contract was not subsequently modified, by which the cars were surrendered to the lessor. He replied, that all the gondolas were surrendered about the 1st October, 1894. He does show that the receivers did not use the cars after June, 1894, when they leased the mines they were operating to Drennen & Oo. But that lease did not relieve them from obligation to pay rents. The lessor company had nothing to do with it, and was in no way connected with or consenting to it. Drennen & Co. made no reports or payments to the lessor company, and so far as appears, it did not know of the arrangement between the receivers and that firm. The receivers had not modified or in any way repudiated their contract with the lessor, nor had the lessor done anything in repudiation or surrender of it.

Tire evidence, taken together, shows probably, that the month of September was consumed in making repairs by the lessor. But, as the lessee was to do the repairing, the time it took to do the work, was property chargeable to the lessee. The same time would have been consumed by the receivers, who were bound to repair, if they had done the work.

The bill for repairs seems to come well within the terms of the contract. Nothing is charged for wheels, axles, springs, or painting, but all the items were for work such as we may suppose the receivers bound themselves to do.

We find much looseness in the evidence. The counsel do not agree as to the items claimed. We can not discover that the clerk and register followed the claim as filed, — Exhibit C. The court allowed a sum less than is shown by that exhibit, the correctness of which is not disputed. The court made up for itself the amount of its decree, and not by confirmation of the report of the register. We presume in favor of the correctness of the decree of the court. It has not been shown to be incorrect in its amount, damaging to appellant.

We refer to the opinion in the foregoing case as decisive of the legal principles governing the intervention between the Mercantile Trust & Deposit Company v. Atlanta Stone, Goal & Lumber Company, No. 782, both causes having been submitted together as one. In addition to what is there said, as applicable to this case, it may be well to add, that the contract of the Coal & Railway Company, as renewed for the rent of the cars in this case, was for five years from the 5th of May, 1891. The receivers were appointed and took possession of the property on November 28th, 1893. On the 9th December, 1893, by contract with the Atlanta Stone, Coal & Lumber Company, they continued the contract of the Coal & Railway Company for the rent of these cars, as it stood with said Stone, Coal & Lumber Company, so that it would be in operation and effect between the railway and that company, until the end of the lease, on May 6th, 1896.

There is nothing to show that the contract as continued was thereafter, before it expired of its own limitation, changed or abandoned by the receivers with the consent of the complainant. It is true the receivers, as was testified by one of them, J. A. Montgomery, leased the mines to Drennen & Co. in June, 1894, and did not themselves, after that time, operate the mines or use the cars. But with this the lessor company had nothing to do. It was a private arrangement between the receivers and Drennen & Co. The witness testified that there was no contract in respect to the cars between Drennen & Co. and the receivers except the lease to them ; that the contract of lease with Drennen & Co. -was made un-cler the order of the court, and that the cars have never been received by the lessor company. Drennen & Co. made no reports or payments to the lessor company, or in any manner recognized that company as the lessor, so far as is made to appear.

In the foregoing opinion, we showed that the continuance of this lease by the receivers was at the instance and request of the complainant, as prayed for in its bill, and, as must be presumed, for their benefit, as they believed, and that they were consequently bound by it. This renewed lease was not for a part of the term, but for all of it, .and was expressly authorized by the decree of the court in accordance with the prayer of the bill. There can be no question as to the power of the court to authorize the continuance of the lease, on the application of the mortgagee, for its entire term. The mortgagee cannot be heard to question this authority, its exercise having been invoked by it.

In the other case, it appears satisfactorily by the evidence, that the lease terminated by act of the parties on 1st October, 1894. In this case, as we have stated, the evidence is wanting to show that it terminated by any act of the parties, or that the lessor took possession of the cars, before the end of the lease, on 5th May, 1896. They were bound by principle and authority to pay rent up to that time. — Authorities supra; Weeks v. Weeks, 106 N. Y. 626; Woodruff v. Erie Railway Co., 93 N. Y. 609; High on Receivers, § § 394 a, 394 b, 394 k. The authorities referred to by complainants’ counsel are not, as we consider them, opposed to this view.

The account of the intervenor as itemized is not disputed. The court allowed as rent of this particular lot of cars, the sum of $1,485.94, and we have been unable to discover that such sum was not due on that account, if rents are estimated to May 5, 1896,

The decree of the chancellor is affirmed in both cases.

Affirmed.