Bank of Montreal v. C., C. & W. R.

Servers, J.

i . receivers powers of. We have been advised that the authority of the court to make the order in question is denied by certain parties in interest who are not represented on this appeal, nor are we advised as to the facts and' circumstances before the court when the order was made, therefore that question has not been considered.

The authority of the receiver to issue the certificates owned by the South St. Louis Iron Company is not questioned. The only contested matter before us is as to his authority to issue and the'validity of those owned'by the plaintiff. A solution of this question requires a consideration, to some extent at least, of the nature and extent of the powers of a receiver, and the construction of the order of the court.

Counsel for the appellant insist that, if a court undertakes to build a railroad by an order* entered of record, and directs a receiver to superintend such construction, and authorizes him to do and perform all acts and things necessary to be done to build the road; to borrow money, make contracts, incur debts and issue certificates; that such- order would be subject to the same rules of construction as a like power granted by the board of directors to a superintendent of construction. The correctness of this proposition, thus broadly stated, admits of serious doubt.

Ordinarily the duties of a receiver of a railroad only “comprise the operation and management of the road, the payment of current expenses, and the application of the residue of the earnings and receipts to the extinguishment of the indebtedness, to secure which the receiver was appointed. The receiver is seldom authorized to enlarge the operations of the company, or to extend its line of 'road, his functions being usually limited to the management of the property in its existing condition, for the protection of creditors, and subject always to the supervision of the court.” High on Eeceivers, § 390.

As to such matters the receiver, no doubt, possesses all the [ incidental and necessary power to effectuate the object of his / appointment, in the absence of any specific direction from the\ court. The details of the business intrusted to him must of ’■ necessity be left to his discretion. But he is uniformly ( regarded as an officer of the court, and, being such, the fund i! or property intrusted to his care is regarded as in the custody of the law, the “court itself having the care of the property by its receiver, who is merely its creature or officer, having no powers other than those conferred by the order of his appointment, or such as are derived from the established practice of courts of equity.” High on Eeceivers, § 1.

In construing the order it must be borne in mind it confers upon the receiver extraordinary and unusual powers, which, however, it will be assumed were necessary and proper for the preservation and protection of the property committed to his charge.

He was authorized to “put those portions of said line already constructed or partly constructed in good order and condition, and to this end he was empowered to borrow money and incur indebtedness which was made a ‘first lien’ on the entire line of said railroad, including the road-bed, right of way, rolling stock, taxes, income and earnings of said road, ” including all after acquired property.

Under such a grant we are constrained to believe the claimed right or power should appear in express terms, or possibly it would be sufficient if it appeared by necessary implication.

Now, while it is true the receiver is authorized to “do and perform all the acts and things necessary to be done and performed to construct said line of railroad,” yet the means to this end, as we think, are fixed and defined in the order. “For such-purpose” (the construction contemplated) the receiver is expressly authorized to iss.ue certificates “for money borrowed, material furnished, labor performed, or on account of contracts made by him for or on account of the construction or completion of said road, or any part thereof.” The receiver, being an officer of the court, has no implied powers other than those derived from the order of the court. Such being true, we think it clear he could not issue certificates which would constitute a first lien on the road, except for money borrowed, material furnished, or labor performed. When the material was furnished or labor performed he was authorized to issue the certificates in payment therefor, and not until then. And if he made a contract for the construction of the road he might issue certificates as the material was furnished or the labor performed, and on the completion of the road he could issue his certificate in final payment. But the power is not conferred to issue certificates in payment for material not furnished, or labor not performed. On the contrary, we are of opinion, it fairly appears he was prohibited from so doing. If the necessity existed for enlarged powers they should have been applied for. Cases have been cited by counsel where courts have expressly authorized their receivers to issue negotiable securities. But such are not applicable.

2._._. negotiability. It is insisted, however, that the certificates are negotiable, and, as the plaintiff is an innocent holder for value, they are not subject to the equities between the parties adjudicated case precisely in point has been cited by counsel.

As the certificates on their face state they were “issued under and by virtue of certain provisions of an order duly entered by the District Court of Clinton county, Iowa, on July 27, 1876,” the plaintiff is chargeable with notice of all such order contains. Whether under the order, the receiver had the power to issue negotiable securities, or for property agreed to be delivered at a future day, were legal questions which the plaintiff was bound to determine at its peril. The receiver’s authority was bounded and limited by the order. He had no general powers, except such as could be derived therefrom. It is true he had the power to issue certificates, but this was not unlimited. It was only in certain cases he could do so. And being an officer of the court, intrusted with the care of property in his charge as such officer, we think the plaintiff was bound to know whether these certificates were issued in accordance with the terms and contingencies contemplated by the order.

We conclude, therefore, that plaintiff is not such a holder as will cut off the equities existing between the original parties to these certificates.

Affirmed.