Kneeland v. American Loan & Trust Co.,
136 U.S. 89 (1890)

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U.S. Supreme Court

Kneeland v. American Loan & Trust Co., 136 U.S. 89 (1890)

Kneeland v. American Loan and Trust Company

Nos. 252, 1537

Argued April 3, 7, 1890

Decided May 19, 1890

136 U.S. 89


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.

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