Farmers' Loan & Trust Co. v. Oregon P. R. Co.

• Decision Date: 01 May 1897
• Parties: FARMERS' LOAN & TRUST CO. v. OREGON PAC. R. CO. et al.
• Court: Oregon Supreme Court

48 P. 706

31 Or. 237

FARMERS' LOAN & TRUST CO. v. OREGON PAC. R. CO. et al.

Supreme Court of Oregon

May 1, 1897

Appeal from circuit court, Benton county; J.C. Fullerton, Judge.

Foreclosure proceedings by the Farmers' Loan & Trust Company, as trustee, against the Oregon Pacific and the Willamette Valley & Coast Railroad Companies. From an order denying the petition of certain employés of the receivers of the first-named company that plaintiff mortgagee be required to pay the wages of petitioners, the latter appeal. Affirmed.

This is an appeal from an order of the circuit court of Benton county denying the petition of certain employés of the receivers of the Oregon Pacific Railroad Company for an order requiring the plaintiff in the foreclosure suit in which such receivers were appointed to pay the wages of the petitioners. On October 28, 1890, the Farmers' Loan & Trust Company, as trustee for the bondholders of the Oregon Pacific Railroad Company and the Willamette Valley & Coast Railroad Company commenced a suit in the circuit court of Benton county to foreclose a mortgage on the franchise and property of the defendant corporations, to secure the payment of the bonded indebtedness thereof, amounting, as alleged, to $15,000,000 and, on its motion, T. Egerton Hogg, the president of the corporations, was appointed receiver, and clothed by the court with authority to operate the railroad, and receive the income and earnings thereof; and, to that end, he was empowered from time to time to time to employ and discharge all needful assistants, managers, clerks, servants, agents and employés, at such salaries and compensation as he might deem advisable. Under this appointment, Hogg operated the road as receiver until March 6, 1893, when he was removed and one Hadley appointed in his place, who continued the operation thereof until January 6, 1894, when he was also removed, and another receiver appointed. Under the management of Hogg and Hadley, the earnings of the road were wholly insufficient to pay the expenses of the receivership, and, as a consequence, the wages of the employés were allowed to fall greatly in arrear, so that, at the time of Hadley's removal, there was due the petitioners herein a very large sum for wages, and no funds whatever in the hands of the receiver with which to pay it; and we take it (although not directly averred in the petition) that the receiver had exhausted his power to float receiver's certificates. Prior to this time, several unsuccessful attempts had been made to dispose of the road under the decree in the foreclosure suit rendered on the 27th of April, 1891. In this condition of affairs, some of the employés despairing, and with reason, as the sequel showed, of ever being able to obtain payment of their wages from either the earnings or the corpus of the mortgaged property, filed a petition on January 26, 1894, setting out substantially the facts hereinbefore detailed, and praying an order of the court requiring the plaintiff in the foreclosure suit to deposit in court sufficient money for the payment of their wages. This petition was denied, and hence this appeal.

G.G. Bingham, for appellants.

H.C. Watson, for respondent.

BEAN, J. (after stating the facts).

This is, so far as we can ascertain, the first recorded instance in the judicial history of railroad receiverships in which the trust fund was insufficient to pay the employés of the receiver engaged in the operation of the road; and hence we are unaided in the determination of the question before us by any judicial decision directly in point. The contention of the petitioners seems to be that a receiver of a railroad appointed in a suit to foreclose a mortgage on the road, and clothed with authority to operate it, is as much the representative of the plaintiff as a sheriff who levies upon property under a writ of attachment, and that the operating expenses incurred by him are costs or fees of the litigation and, like the fees of the sheriff in the case referred to are collectible from the plaintiff. But this argument is based upon an entire misapprehension of a railroad receiver's position and duties. He is not, like a sheriff in an attachment action, the agent of the plaintiff in the litigation, nor does the plaintiff have any control or authority over him whatever. He is the agent and executive officer of the court, which, by virtue of its high prerogative powers, lays its judicial hand upon the property which is the subject of controversy, and controls and operates it for the use and benefit, not of either of the parties to the litigation, but for the public and whomsoever in the end it may concern. His acts and possession are the acts and possession of the court. His contracts and liabilities in contemplation of law are the contracts and liabilities of the court. The parties to the litigation have not the least authority over him; nor have they any right to determine what liabilities he may or may not incur. His authority is derived solely from the act of the court appointing him, and he is subject to its order only. "A receiver of a railroad," says Mr. Justice Caldwell, "is a person appointed to receive and preserve the property of a railroad company, and is clothed with authority to operate the railroad and receive the earnings and income therefrom during the pendency of the foreclosure suit. In contemplation of law, the railroad is in the custody of and operated by the court appointing the receiver. The receiver is the agent of the court. He is an officer of the court, and his possession of the property is the possession of the court. He is not the agent of either party to the suit, and neither party is responsible for his contracts or for his malfeasance or misfeasance in office. ...