A party bidding at a foreclosure sale of a railroad makes
himself thereby a party to the proceedings, and subject to the
jurisdiction of the court for all orders necessary to compel the
perfecting of his purchase, and with a right to be heard on all
questions thereafter arising affecting his bid which are not
foreclosed by the terms of the decree of sale or are expressly
reserved to him by such decree.
Where not concluded by the terms of a decree of foreclosure of a
railroad, any subsequent rulings which determine in what
securities, of diverse valve, the purchaser's bid shall be made
good are matters affecting his interests, and in which he has a
right to be heard in the trial court and by appeal in the appellate
court.
The appointment of a receiver of a railroad vests in the court
no absolute control of the property, and no general authority to
displace vested contract liens, and when a court makes such an
appointment, it has no right to make the receivership conditional
on the payment of any unsecured claims except the few which by the
rulings of this Court have been declared to have an equitable
priority, it being the exception and not the rule that the contract
priority of liens can be displaced.
A court which appoints a receiver acquires, by virtue of that
appointment, certain rights and assumes certain obligations, and
the expenses which the court creates in discharge of those
obligations are necessarily burdens on the property taken
possession of, and this irrespective of the question who may be the
ultimate owner, or who may have the preferred lien, or who may
invoke the receivership.
When a court appoints a receiver of railroad property, it may,
in the administration, contract debts necessary for operating the
road, or for labor, supplies or rentals, and make them a prior lien
on the property.
When, at the instance of a general creditor, a receiver of a
railroad and its rolling stock is appointed, and among the latter
there is rolling stock leased to the company with a right of
purchase, and, there being a deficit in the running of the road by
the receiver, the rental is not paid, and the lessor takes
possession of his rolling stock, his claim for rent is not entitled
to priority over mortgage creditors on the foreclosure and sale of
the road under the mortgage.
When the holder of a first lien upon the realty alone of a
railroad company
Page 136 U. S. 90
asks a court of chancery to take possession not only of the
realty, but also of personal property used for the benefit of the
realty, that personalty thus taken possession of and operated for
the benefit of the realty should be first paid in preference to the
claim secured by the realty.
Where, on the application of the trustee of a railroad mortgage,
a receiver is appointed and takes possession of the road and of its
rolling stock, and among the latter is rolling stock which the
company was operating under lease, and the receiver continues to
operate it, its rental at the contract price (and not according to
its actual use), if not paid from earnings, will be a charge upon
the proceeds of the sale under the foreclosure of the mortgage
prior to the mortgage debt.
In equity. The case is stated in the opinion.
MR. JUSTICE BREWER delivered the opinion of the Court.
These cases were argued and are considered together, the
questions involved being similar and growing out of the same
foreclosure suits. In a general way, it may be stated that they
arise between a purchaser at foreclosure sales of certain railroad
property, and intervening creditors. The initial question is as to
the right of appellant, the purchaser, to his appeal. It is urged
that a purchaser at a sale under a decree has no right to appeal
from its terms. He takes under it. His purchase is a voluntary act,
and, coming in voluntarily to take under a decree, he may not
challenge that under which he takes. The contention of appellant is
that his attitude is not thus limited; that his appeal is not from
the decree of sale
Page 136 U. S. 91
under which he purchased, but from orders made thereafter
respecting his bid, the modes of payment thereof, and the debts to
which it should be applied -- matters in which he was interested
and in respect to which, by the terms of the decree of sale, he was
given a right of appeal, and that such right springs not alone from
the grant of the right of appeal, but also from his relations to
the matters determined and adjudged in these subsequent
proceedings, and by the final decree. For a correct solution of
this question, a statement more in detail of the facts is
essential.
Decrees of foreclosure (for there were separate divisions, the
Toledo and the St. Louis divisions, separate suits, and several
mortgages) were entered on the 12th day of November, 1885. It is
sufficient, however, to notice the proceedings in one, for there
was no substantial difference between the cases. It contained these
provisions:
"The complainants herein, and the purchaser or purchasers at the
foreclosure sale under this decree, reserve the right to appeal
from any orders and final decrees made by the court directing and
decreeing the payment of claims and debts found and determined and
adjudged and decreed to be due and payable as court receiver's
indebtedness, and to be prior and superior in equity to the lien of
said first deed of trust and mortgage herein, and hereby
foreclosed, if they shall be so advised. . . . In making payment of
any surplus of said purchase money left after full payment of the
court and receiver's indebtedness, the purchaser or purchasers
shall be allowed to pay said surplus in the bonds and coupons to
which the same may be applicable, as hereinabove provided, each
such coupon and bond being received by the master for such sum as
the holder thereof is entitled to receive under the distribution
herein provided, and according to the priorities herein
adjudged."
So that by the decree, the bidders at the sale were notified in
advance of their right to be heard, both in the trial and appellate
courts, upon the question of what amounts should be paid to
intervening creditors and what in the bonds secured by the
mortgages. Common experience is that intervening claims have to be
paid in cash, while the mortgage bonds of a defaulting and
insolvent
Page 136 U. S. 92
corporation are generally purchasable much below par. In this
case, the enormous disproportion between the amount of outstanding
bonds and the value of the property suggests that those bonds must
have been purchasable at a very low price, and therefore that the
question of the amount of intervening claims finally to be charged
upon the property was a matter affecting materially the interests
of the purchaser and the right to be heard upon it, one which would
largely determine the amount of his bid.
Further, on February 23, 1886, when the master had reported upon
the intervening claims, the appellant, among others, filed
exceptions to that report, in the following words:
"Come now James M. Quigley, Charles T. Harbeck, John McNab,
Halsey J. Boardman, and Warren D. Hobb, complainants in said
causes, and committees representing bondholders holding bonds
secured by mortgages on said railroad and property in said causes
involved, and the Central Trust Company, trustee in the mortgages
in said causes foreclosed, and Sylvester H. Kneeland, purchaser of
said railroad and property sold at foreclosure sale under decrees
rendered and entered in said above-entitled causes, and owner of
and trustee for a vast majority of said mortgage bonds, and now
except to each and every of the master's findings and report
herein, and said complainants and said purchaser, for their
exceptions, assign the following causes."
And in the final decree thereon the exception and allowance of
appeal are stated as follows:
"To this decree the said Sylvester H. Kneeland, as purchaser and
trustee representing the first mortgage bondholders on said entire
line of railroad, concerning both divisions from Toledo, Ohio, to
East St. Louis, Illinois, now excepts, and prays an appeal to the
Supreme Court of the United States, which is granted, to operate as
a supersedeas, on giving bond in the sum of two hundred thousand
dollars, which is now filed, with the American Surety Company of
New York as surety, and the same is approved by the court, the
court, however, reserving the right to resume possession of the
property on the terms mentioned in the order confirming the sale
and approving the deed. "
Page 136 U. S. 93
It appears also that in the early part of these foreclosure
proceedings, a committee consisting of James M. Quigley and others
was appointed to represent the bondholders, with authority to
employ agents, etc. This committee, by leave of the court, was made
co-complainant. It is stated by counsel, though that fact does not
appear in the record, that a contract between this committee and
Mr. Kneeland with reference to a purchase in the interest and for
the benefit of the bondholders, was presented to the court at the
time of signing the decree of sale, and that it was upon that that
the provision reserving an appeal to the purchaser was inserted.
While no such agreement is found in the record, and therefore
cannot be a subject of consideration, yet obviously the language in
the decree of foreclosure, as well as that of confirmation,
suggests that something of the kind must have been presented to the
attention of the court. Upon these facts, can the appellant's right
to an appeal be sustained?
It was adjudged in
Blossom v. Milwaukee &c.
Railroad Co., 1 Wall. 655, that a bidder at a
marshal's sale makes himself thereby so far a party to the
proceedings that for some purposes he has a right of appeal. It was
said by Mr. Justice Miller in the opinion of the Court that
"it is certainly true that he cannot appeal from the original
decree of foreclosure, nor from any other order or decree of the
court made prior to his bid. It however seems to be well settled
that after a decree adjudicating certain rights between the parties
to a suit, other persons having no previous interest in the
litigation may become connected with the case in the course of the
subsequent proceedings in such a manner as to subject them to the
jurisdiction of the court and render them liable to its orders, and
that they may in like manner acquire rights in regard to the
subject matter of the litigation which the court is bound to
protect. . . . A purchaser or bidder at a master's sale in chancery
subjects himself
quoad hoc to the jurisdiction of the
court, and can be compelled to perform his agreement specifically.
It would seem that he must acquire a corresponding right to appear
and claim at the hands of the court such relief as the rules of
equity proceedings entitle him to."
It
Page 136 U. S. 94
follows from this decision that his right of appeal must extend
to all matters adjudicated after his bid which affect the terms of
that bid or the burdens which he assumes thereby and which are not
withdrawn from his challenge by the terms of the decree under which
he purchases. If by the decree the sale is to be made subject to
certain conditions, the purchaser acquires no right to be heard as
to those conditions either in the trial or appellate courts. Such
was the ruling in
Swann v. Wright's Executor, 110 U.
S. 590, in which it was adjudged that where a decree
directed that a sale should be made subject to liens established or
to be established, on references previously had or then pending
before a master, a purchaser at such sale would not be heard,
either in the trial or appellate court, to dispute the validity of
the liens thus established. This ruling was placed distinctly on
the ground that by the very terms of the decree, the purchaser was
to take the chances of the allowance of all the claims then
pending, and therefore their validity and extent was a matter
simply between the claimants and the parties to the mortgage; but
the contingency now presented was foreshadowed in the opinion, for
it says:
"If the court had in the decree of sale reserved to the
purchaser, although not a party to the proceedings, the right to
appear and contest any alleged liens then under examination, and
therefore not established by the court, an entirely different
question would have been presented. But no such reservation was
made, and the purchaser was required, without qualification, to
take the property, upon confirmation of the sale, subject to the
liens already established, or which might on pending references be
established, as prior and superior to the liens of the first
mortgage bondholders."
The right of purchasers at a foreclosure sale to be heard on the
question of compensation to trustees and others, both in the trial
and appellate courts, was affirmed in
Williams v. Morgan,
111 U. S. 684,
when, as in that case, by the terms of the decree, the amount of
such compensation placed an additional burden upon the purchasers.
The case of
Swann v. Wright's Executor, supra, was
referred to in the opinion and
Page 136 U. S. 95
distinguished on the ground of the express provisions in the
decree as to the terms of sale.
See also Stuart v. Gay,
127 U. S. 518;
Central Trust Co. v. Grant Locomotive Works, 135 U.
S. 207. Deducible from these authorities, as applicable
to the facts in this case and supported by sound reasons, are the
following propositions. First. A party bidding at a foreclosure
sale makes himself thereby a party to the proceedings, and subject
to the jurisdiction of the court for all orders necessary to compel
the perfecting of his purchase, and with a right to be heard on all
questions, thereafter arising affecting his bid which are not
foreclosed by the terms of the decree of sale or are expressly
reserved to him by such decree. Secondly. Where not concluded by
the terms of the decree, any subsequent rulings which determine in
what securities of diverse value his bid shall be made good are
matters affecting his interests, and in which he has a right to be
heard in the trial court, and by appeal in the appellate court. In
the case at bar, it is obvious that the amount of intervening
claims to be subsequently allowed was a matter affecting the
interests of the purchaser, and in terms reserved to him by the
decree of sale. Supplementing and strengthening this right,
reserved and substantial, is the recital in the allowance of the
appeal that the party purchasing is himself a bondholder, and
trustee and representative of the other bondholders, which, if not
conclusive as to the extent of interest in the litigation, is not
to be ignored as wholly a matter of surplusage, but ought to be
assumed as correct, and which is not to be disregarded simply
because the evidences of that fact are not preserved in the
record.
These conclusions compel an inquiry as to the validity of the
adjudications in respect to the intervening claims. They were for
the rental of rolling stock, and our examination must therefore
proceed to the facts upon which the adjudications were made. This
rolling stock was obtained by the railroad company, a consolidated
corporation, from certain manufacturers, the appellees herein, on
contracts of purchase. These in form were leases, but in substance,
and properly so adjudged, were contracts of purchase reserving
title in the
Page 136 U. S. 96
vendors until after the payment of certain annual sums, called
"rents," and with the right to retake possession on default in
payment. Full payment of the purchase price was never made.
The first bills under which the receiver was appointed were
filed August 1, 1883, by a judgment creditor. The trustees in the
several mortgages were made parties to these bills. They entered
their appearance, and, neither objecting nor consenting, the
receiver was appointed. Such receivership was continued four
months, and until December 1, 1883 at which time bills were filed
by the trustees for the foreclosure of their mortgages, and a
receiver was appointed thereunder. The first inquiry presented is
whether rentals for such period were properly given priority over
the mortgage debts. That question must be answered in the negative.
It is important to note these facts. First. This case is not
embarrassed by any matter of surplus earnings, for it appears
beyond any possibility of doubt that from the time of the purchase
of this rolling stock to the time of the final disposition of these
cases, the receipts did not equal the operating expenses. There was
no diversion of the current earnings either to the payment of
interest, or the permanent improvement of the property. In fact,
but little interest was ever paid on the bonds.
Railroad Co. v.
Railway Co., 125 U. S. 658,
125 U. S. 673.
Second. The receivership was at the instance of a judgment
creditor, and was with a view of reaching the surplus earnings for
the satisfaction of his debt. It was not at the instance of
mortgagees, nor were they seeking foreclosure of their mortgages.
They were asking nothing at the hands of the court. They were not
asking it to take charge of the property, or thus impliedly
consenting to its management of the property for their benefit.
Third. This rolling stock was not included in the sale, but was
returned to the intervenors upon orders entered prior to the decree
of sale. So that only that property was sold which was covered by
mortgages executed prior to any contract with the intervenors with
respect to rolling stock, and it is the proceeds of this sale which
the intervenors are seeking to appropriate. They cannot say that
their property was sold, or that by such fact they have an interest
in the proceeds of sale. Fourth.
Page 136 U. S. 97
The sale realized only a small proportion of the mortgage debts.
There was no surplus above the mortgages for distribution to the
intervenors or among general creditors. In fact, only a small
fraction of the mortgage debt was realized. Fifth. During these
four months, no demand for possession or rental was made of the
receiver by any of the intervenors or anyone for them, with the
single exception of what may be known as the "Grant" claims, and in
respect to them the demand for possession was met by refusal on the
part of the receiver, and a proposition for purchase at the unpaid
portion of the purchase price, which proposition was accepted by
such intervenors, but never finally carried into effect.
Upon these facts, we remark first that the appointment of a
receiver vests in the court no absolute control over the property,
and no general authority to displace vested contract liens.
Because, in a few specified and limited cases, this Court has
declared that unsecured claims were entitled to priority over
mortgage debts, an idea seems to have obtained that a court
appointing a receiver acquires power to give such preference to any
general and unsecured claims. It has been assumed that a court
appointing a receiver could rightfully burden the mortgaged
property for the payment of any unsecured indebtedness. Indeed, we
are advised that some courts have made the appointment of a
receiver conditional upon the payment of all unsecured indebtedness
in preference to the mortgage liens sought to be enforced. Can
anything be conceived which more thoroughly destroys the sacredness
of contract obligations? One holding a mortgage debt upon a
railroad has the same right to demand and expect of the court
respect for his vested and contracted priority as the holder of a
mortgage on a farm or lot. So when a court appoints a receiver of
railroad property, it has no right to make that receivership
conditional on the payment of other than those few unsecured claims
which, by the rulings of this Court, have been declared to have an
equitable priority. No one is bound to sell to a railroad company
or to work for it, and whoever has dealings with a company whose
property is mortgaged must be assumed to have dealt with it on the
faith of its personal
Page 136 U. S. 98
responsibility, and not in expectation of subsequently
displacing the priority of the mortgage liens. It is the exception,
and not the rule, that such priority of liens can be displaced. We
emphasize this fact of the sacredness of contract liens for the
reason that there seems to be growing an idea that the chancellor,
in the exercise of his equitable powers, has unlimited discretion
in this matter of the displacement of vested liens.
Railroad
Co. v. Railway Co., 125 U. S. 658,
125 U. S. 673.
So that these intervenors acquired no right of priority by virtue
of their antecedent contracts of sale.
But it is urged, and with force, that the court did not allow
contract price, but only rental, and the question is asked: "May a
court, through its receiver, take possession of property, and pay
no rental for it?" If it may legitimately compel the operation of
the railroad in the hands of its receiver in order to discharge the
obligations of the company to the public, may it not also, and must
it not also, burden that receivership, and the property in charge
of the receiver, with all the expenses connected with the operation
of the road, together with reasonable rentals for the property used
and necessary for the operation of the road? As to the general
answer to these inquiries we have no doubt. A court which appoints
a receiver acquires by virtue of that appointment certain rights,
and assumes certain obligations, and the expenses which the court
creates in discharge of those obligations are burdens necessarily
on the property taken possession of, and this irrespective of the
question who may be the ultimate owner, or who may have the
preferred lien, or who may invoke the receivership. So if at the
instance of any party rightfully entitled thereto, a court should
appoint a receiver of property, the same being railroad property,
and therefore under an obligation to the public of continued
operation, it, in the administration of such receivership, might
rightfully contract debts necessary for the operation of the road,
either for labor, supplies, or rentals, and make such expenses a
prior lien on the property itself, and it is in reliance on this
general proposition that the intervenors insist on an affirmance of
the decree.
Page 136 U. S. 99
But as against this, we are confronted with these facts: the
court never made any order for the rental of this rolling stock,
and the situation of all the parties during this four months'
receivership was this: the railroad company, with its franchises
for building and operating a railroad, was, in equity, whatever may
have been the location of the legal title, the owner of realty
subject to certain fixed mortgage indebtedness, and of personalty,
the rolling stock in question, subject to certain fixed liens. The
creation in the first instance of those liens gave to neither
lienholder, as against the other, priority in payment otherwise
than in respect to the property specially charged with those liens.
The holder of the lien on the real estate could not insist that
both the real estate and the personalty should be subjected to the
payment of his debt, before payment to the holder of the lien on
the personalty of his claim, out of the proceeds of its sale.
Neither, on the other hand, could the holder of the lien on the
personalty insist that his lien should be first paid out of any
proceeds of the realty. Each was limited to his priority of right
on the property on which his lien rested. Under those
circumstances, neither the holder of the lien on the real or the
personal property moving in the premises, a general creditor of the
common debtor invoked for the payment of his debt the intervention
of a court of equity, and the possession of all the property
charged with these two liens, and its operation with a view to the
collection of his unsecured claim. The operation of the road during
that receivership did not pay the operating expenses. May the
holder of a lien on the real estate insist that the deficiency be
charged to the holder of the lien on the personalty, or that the
latter shall become liable to the former for the rental of its
property? Unquestionably not. Neither lienholder asking the aid of
the court, no obligation was assumed by either in respect to the
management of the property as against the other. If the operation
of the property seized by the receiver did not result in the
payment of the operating expenses, and the common debtor was unable
to pay, the burden of the deficiency is as properly cast upon the
holder of a lien upon the personalty as upon the holder of a lien
upon the
Page 136 U. S. 100
realty, and when the court, in the administration of the
receivership, thereafter returns the personalty to the holder of
the liens upon it, such lienholder must be content to be relieved
from any burden for a
pro rata share of the deficiency,
and has no equity to claim that he shall be not only thus relieved,
but that he may also charge upon the realty, to the detriment of
the lienholder thereon, both the entire burden of the deficiency
and compensation to him for the use of his property. Hence it
follows that neither by reason of a contract of purchase of the
rolling stock nor by its use for four months at the instance of a
general creditor was any burden cast upon the holder of a lien upon
the real estate for the nonpayment of such contract price or the
rental value. The court therefore erred in charging rental value of
the rolling stock during those four months as a prior lien upon the
realty.
On the 1st of December, 1883, however, the situation was
changed. At that time, the mortgagees upon the realty commenced
suits to foreclose their mortgages, and at their instance a
receiver was appointed for all the property, both real and
personal. In respect to the question here involved, the case is as
though this was the commencement of judicial proceedings, and in
that respect the attitude is this: the railroad company owned real
and personal property, each subject to a separate lien. The holder
of the lien upon the realty commences suit to foreclose its lien,
and asks the court to take possession, through its receiver, of
both the real and personal property. In the latter it had a remote
interest, though subordinate to existing liens. The court,
responding to its demands, takes possession of all the property,
real and personal. Now when the holder of a first lien upon the
realty along asks the court of chancery to take possession not only
of the real, but also of personal property used for the benefit of
the real, that application is a consent on its part that the rental
value of the personalty thus taken possession of, and operated for
the benefit of the realty, shall be paid in preference to its own
claim. The proposition is a simple one. The application may not be
a consent that the contract price of the personalty shall be paid
in preference to his lien,
Page 136 U. S. 101
but it certainly is a consent that the rental value of that
personalty during the time of the possession by the receiver
appointed at his instance may have priority to his claim. If the
holder of a lien upon the realty does not think that the continued
possession of the personalty is a benefit to his lien, he should
simply omit the personalty from his bill and ask the court to take
possession of the realty alone. But, either because he believed
that the possession of the personalty was necessary for the
operation of the railroad and the security of his claim or else
because, by virtue of his secondary right, he expected to pay for
the personalty and retain both the personalty and the realty, he
has had the court take possession of both by its receiver, and by
that act, although subsequently the personalty was returned to the
holder of the lien upon it, he consented to the payment of
reasonable rental pending the receiver's possession. The conclusion
is irresistible, that under the circumstances, reasonable rental
value was properly allowed as a prior claim to the mortgage
indebtedness. Indeed, we do not understand that counsel for
appellant seriously contest this proposition. Their contention
substantially is that the basis of such rental value was wrong;
that the rental should only be on the basis of actual use -- the
"mileage system," as it is known in railroad parlance; that in fact
the railroad company had acquired too much rolling stock, and, so
averaging it, the mileage was quite small; whereas the master, as
approved by the court, fixed the rental not at actual mileage, but
at a reasonable value irrespective of the actual use. We think that
the decision of the court was right. The initiative in the matter
was taken by the trustees. They asked by their bill that the court
take possession of all the personalty. If more was taken possession
of than was needed, it was their mistake. The court is not to be
assumed to be an experienced railroad manager, knowing exactly the
amount of rolling stock needed for the operation of the road. It
may justly assume that what had been contracted for was necessary,
and if the trustees ask that all may be taken possession of, it may
act upon that as a declaration that all is necessary, and that
rental value is to be paid for all. Theirs is the inquiry, and not
the
Page 136 U. S. 102
court's. It is a mistake to suppose that their duties in respect
to the foreclosure proceedings are formal merely, or limited to the
employment of counsel and the handling of securities. They assume
all the obligations of a party to the suit. They are charged with
the care of the entire mortgage interest. They ask and receive
large allowances for caring for that interest, and it is a part of
their duty to make examination and become fully informed in respect
to the property, its liens, what is needed for its operation, and
what can prudently and safely be dispensed with. Upon such
information their application should be based. It is true the court
is not concluded by their representations, but its information is
in the first instance derived therefrom, and it may and does
generally act upon them, and its action based on them must be held
to be conclusive so far as concerns the interest they represent, in
respect to all liabilities and obligations flowing from the
possession of a receiver. Whatever action the court may take
thereafter, on information furnished by its receiver or by them, or
otherwise, in respect to the property not primarily chargeable with
their lien, its first action is the recognition of the validity of
their application, and the taking possession of all the property
they name is in reliance upon their representation that all is
needed for the operation of the railroad, and that they consent
either to the payment of the unpaid purchase price of any property
thus taken possession of or a reasonable rental for the use of the
same. Consider for a moment the ordinary experience of railroad
building, as developed in the story of this case. The franchise is
acquired, the corporation organized, and a first mortgage placed
upon the property, with the usual "after-acquired property" clause
in it. The construction of the railroad proceeds. It is finished.
Rolling stock is necessary, and the corporation acquires it under
conditional contracts of purchase. The enterprise is a failure. The
mortgage interest is unpaid. The trustee, discharging its duty, is
bound to know that the rolling stock is held subject to the liens
attending its purchase. It asks the court to take possession not
alone of the realty, but also of the rolling stock thus acquired
and held. The application is not resisted. The
Page 136 U. S. 103
court is ignorant of the history of the enterprise. It sustains
the application and appoints a receiver, and the rolling stock is
taken possession of by that receiver. Can it be held that such
possession, taken at the instance of the trustee, casts no burden
on the road either for purchase price or rental prior to the claim
of the original mortgage? Can the trustee forcibly, through the
power of a court, compel an appropriation of this rolling stock for
the benefit of the property subject to its lien without
compensation? Does not its application for possession carry with it
an assent that rental for such rolling stock shall be first paid,
as one of the expenses of the receivership which it has invoked?
But one answer can be made to this inquiry, and that is that its
application is a consent to the payment of reasonable rental during
the possession of the receiver -- a rental not based upon the use
actually made by the receiver, but on the ordinary value of the
rental of such property. So, although it may be true, as claimed by
counsel, that more was taken possession of than was needed, and
that there was only a limited use of each car and engine, yet the
case is to be taken as though all were needed, and full use made of
all, and that sum which would be reasonable rental value for such
use should be paid. Such value is not to be determined by the
amount of actual use, but by what in the first instance, and before
the use had been had, would be adjudged a reasonable rental value.
Upon such basis, no complaint can be made of the amount fixed by
the court, reducing as it did the amount reported by the
master.
These are the only matters which, by the exceptions filed to the
master's report respecting rentals, were reserved for our
consideration. Our conclusion, therefore, in the two cases is that
the decrees must be
Reversed, and the cases remanded with instructions to strike
out all allowances for rental prior to December 1, 1883, the time
when the receiver was appointed at the instance of the mortgagees,
and to allow the rentals as fixed for the time subsequent
thereto.
Counsel for the Grant claims expressly stated in open court,
in his argument, that in case certain appeals from the
Page 136 U. S. 104
Sixth Circuit were affirmed, there might result a double
allowance to his clients, which they did not insist upon. As the
details and sum are not clearly presented, we can only say that
this matter must be taken into account in the subsequent
disposition of the cases.
MR. JUSTICE BRADLEY dissented.