United States Supreme Court Cases & Opinions

U.S. Supreme Court

Burnham v. Bowen, 111 U.S. 776 (1884)

Burnham v. Bowen

Argued April 10, 1884

Decided May 5, 1884

111 U.S. 776

Syllabus

Debts contracted by a railroad corporation as part of necessary operating expenses (for fuel, for example), the mortgage interest of the company being in arrear at the time, are privileged debts, entitled to be paid out of current income if the mortgage trustees take possession or if a receiver is appointed in a foreclosure suit.

If the current income of the road is diverted to the improvement of the property

Page 111 U. S. 777

by the trustees in possession or by the receiver, and the mortgage is foreclosed without payment of such debts for operating expenses, an order should be made for their payment out of the fund if the property is sold, or if a strict foreclosure is had, they should be charged upon income after foreclosure.

An assignee of such a debt has the same rights as the original holder.

When commercial paper is the evidence of such a debt, it is no waiver of the privilege to renew the paper at maturity.

It is not intended to decide that the income of a railroad in the hands of a receiver for the benefit of mortgage creditors can be taken away from them and used to pay the general creditors.

The facts are stated in the opinion.