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Page:Popular Science Monthly Volume 32.djvu/249

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THE DANGERS OF RECEIVERSHIPS.

distribute the proceeds equitably; in fact, he may, with propriety go further: for instance, if part of the property in his charge was a warehouse, stored with goods, from which the roof were blown, there is no doubt he would be sustained in using funds in his hands to put on a new roof, as it is self-evident that such an expenditure is for the benefit of the creditors. The court may, if part of the estate is a factory filled with partly-finished goods, go further, and authorize the assignee to finish the same. But what would be thought of the assignee who went beyond this; who used the funds in his hands not only to mend roofs and finish goods, but to build new mills; who paid interest to some creditors and refused others; who, in a word, treated the property as though it were his own? Would he not be brought up with a sharp turn, and either displaced or made distinctly to understand that he was exceeding his authority, and would be held personally responsible? And are not the duties of an assignee, and that of a court taking possession of an insolvent estate, essentially the same? I think they are, and that our courts in the license they have allowed their officers, the receivers, have gradually but surely been drifting away from both the law and equity.

It is held that receivers' certificates are a lien preceding all mortgages, and were receivers restricted to the lines I have laid down, there would be some plausibility in the argument, as, if the money so raised were only used for what is absolutely essential to conserve the property, and is manifestly for the benefit of all, it may be just that all should bear the burden. But even this is an open question, as, what might be essential to a junior creditor, may not be so to one at the head of the line. For instance, in the case of a railroad, with a first mortgage of $5,000,000, and subsequent mortgages amounting to more than $100,000,000, it can hardly be claimed that the $5,000,000 would be imperiled were even so essential a thing as a bridge left unbuilt if it fell down, as it is plain, if the court use proper diligence in deciding the case, a decision must be reached, and a sale had before their margin of safety is gone, and by consequence it would seem but justice that receivers' certificates should only take rank as a lien preceding the class of creditors who ask for the appointment of receivers; and that this would work no hardship is self-evident, as, if those certificates were not marketable and the work really essential, the next preceding class of creditors would, in their own interest, make the application; it is true that the answer to this is that the trustees of all preceding mortgages are sometimes (perhaps always) notified of the application for permission to issue certificates, and that if they, as the official representatives of the mortgagees, do not object, the court has a right to suppose there is no objection to the certificates becoming a lien preceding their mortgages; and while this is technically true, still it is unfortunately a fact that the average trustee will not act until compelled to do so by the bondholders, and frequently the first the latter