Hand v. Railroad Co. ( 1878 )

The opinion of the Court was delivered by

Willard, C. J.

The Savannah and Charleston Railroad Company has been sued by D. Hand, a bond creditor, upon the allegation of insolvency, with the usual demand for a Receiver and for the collection and distribution of its assets in payment of its debts. C. T. Mitchell was thereupon appointed such Receiver and assumed the management and control of the franchises and property of the company under orders of the Circuit Court for the First Circuit. The road was, at the time of the commencement of this suit, operated as a passenger and freight road between the cities of Charleston and Savannah. The Receiver continued to operate the road. At the time the Receivership was created the Charleston terminus was separated from the terminus of the Northeastern Railroad, with which road the company’s traffic to the Northward was principally connected. The Receiver applied to the Court for authority to change a portion of the line of the road, commencing Southerly of the existing terminus, by building from that point a new line to the Ashley River, North of the city of Charleston, and thence, over a bridge to be constructed for that purpose, across the Ashley River, alleging that from that point to the Northeastern Railroad a company duly authorized for that purpose was prepared to extend a line of road and that suitable arrangements for transmitting trains over such road and connecting with the Northeastern Railroad could be made with both companies. A stipulation, purporting to be signed by the solicitors of all the parties in interest, was presented to the Circuit Court, consenting to an order for that purpose. It appears, however, that the appellant, a party in interest, did not consent, but opposed the granting of such order on various grounds. Upon such application the order was made from which the present appeal has been taken. The propriety of this order can only be considered as it regards parties who did not assent to it. Under this order the work has been completed, and it is understood that parties who have made advances towards the construction, claim, under the terms of the order, a first lien on that part of the line thus constructed, including the bridge across the Ashley River. It appears, also, that a portion of the original line, as it went into the hands of the Receiver, has been abandoned and is worthless in consequence of the opening of the new line.

Before considering the questions presented by the appeal, we cannot pass without notice the evidence furnished by this case of the disregard of the customary precautions proper to prevent injustice where Courts are dealing with the interests of parties represented before the Court as a class or classes. In such cases there is ordinarily no such strict representation that the Court can safely act on stipulations purporting to be with the consent of parties without inquiry, and therefore the practice prevails, and should be adhered to, of referring matters of that description to a Master-or Referee for a hearing and report on such matters as may be deemed requisite to inform the Court as to the propriety of the order. Had that course been pursued in the present case, it is probable that we should be able to form a better judgment of the nature and effect of the order in question than can possibly be formed from the meager statement of the facts and proceedings in the case brought before us in this appeal. It cannot be doubted that the Court might, under proper circumstances, order a change to be made in the state of the property in its hands for distribution among creditors with a view to increase the value of the fund, but it is clear that the pursuit of speculative advantages would not present a proper case for its exercise. To preserve the property from all causes tending to its depreciation, to render it reasonably productive during the period it remains in the hands of the Court, are objects proper for the attention of the Court, and its hands should not be too rigidly tied in the pursuit of these objects. On the other hand, for the Court to undertake to weigh the merits of projected improvements, and to assume in behalf of the parties in interest that class of experimental risks -that appertain to the development of material industries, is both inconsistent with the nature of a Court and the objects with which it holds assets for the satisfaction of creditors. A Court is compelled to inform itself through allegations and proofs — a channel unsuitable for drawing correct judgments as to the relative advantages of projected lines of railroad. Sometimes it is true that Courts are called upon to devise schemes that involve more or less of the exercise of business prudence and foresight, but such eases are of rare occurrence, and the necessity of the case is the ground upon which the Court departs from its customary functions. On the other hand, the sole ground for holding property in cases of this class is the preservation of the property and its application to the demands of creditors. It should be the interest of all parties that distribution should be speedily made; but if the Court can assume to carry out projects that look to the ultimate successful establishment of a railroad, it may become the interests of some of the parties to work out their plans through the instrumentality of the Court, firmly holding .the property against the immediate demands of creditors, while if the hands of the Court were removed such projects would be likely to be interrupted through causes arising from its indebtedness. Such temptations for indefinitely continuing the control of the Courts over insolvent institutions should be removed as far as possible, not only for the sake of preserving purity in the administration of justice, but for the sake of the parties entitled to distribution, — as experience shows that funds in the hands of a Court for distribution cannot by any act be made to grow while in that custody.

We are led by these considerations to conclude that before the order in question was made, as affecting the interests of parties not assenting to it, it should have been shown that some necessity existed for the change projected in the location of the line of the railroad, such necessity having relation to the production of the property or business of the railroad. No such case is presented. The advantages presented to the Court as likely to arise from the change are of such a nature as to call for the exercise of business sagacity and foresight, rather than prudence, for the formation of a judgment in regard to them. This, in our judgment, is reason sufficient for the refusal of the order when objected to. The order, as it regards the appellant, must be set aside.

Mclver, A. J., and Haskell, A. J., concurred.