CLYDE II. RICHMOND &: D. R. CO.

21

one of them took supper with him, and was sent home in a carriage provided by the respondent; that another one of the commissioners, after the report was signed, accepted from respondent a sum of money for his services and expenses in excess of the amount allowed by statute. The court said:
"The acts referred to probably had no effect upon the result in the present case, but it will not do to make a precedent of them, for, if such practices were to become common, it would be easy for designing men to make them a cover for corruption."

In Thompson & Merriam on Juries the authors, in treating of the subject of tampering with the jury by the successful party, say:
"Where the successful party to the suit Is shown to have attempted, by improper means, to influence the verdict in his favor, whether by corrupting intimidating particular jurors, by arousing prejudice in their minds against the opposite party or his cause, or by undue hospitalities or civilities, the verdict will be set aside, on grounds of public policy, as a punishment to the offender, and as an example to others, without reference to the merits of the controversy, and without considering whether the attempt was suc.cessful or not" Thomp. & M. Jur. § 348 (3), p. 406, and numerous authorities there cited; Hayne, New Trial, § 48, and authorities there cited.

Petitioners' counsel cited no authorities whatever in relation to the questions discussed in this opinion. Their contention was that the report should be set aside upon the grounds of excessive ,damages appearing to have been given under the influence of passion or prejudice; insufficiency of the evidence to justify the report; that it was against the weight of evidence, and contrary to law. But the conduct of one of the parties and of the commissioner has placed it beyond my power to examine the report upon the merits, further than to say that the reading of it has not removed the impression that the conduct of defendant may have biased the com:missioner in his favor, whether it was so intended or not. The report of the commissioners is set aside, and the commission-ers are discharged. Upon proper application, three disinterested persons will be appointed as commissioners herein, as provided by statute, and they will be admonished to keep themselves "disinter.ested" until their duty in the proceedings is fully performed.

CLYDE et aI. v. RICHMOND & D. R. CO. et at. CENTRAL TRUST CO. OF NEW YORK v. SAME. Ex parte CHESTER & L. N. G. R. CO. Ex parte HARDEN. (CIrcuit Court, D. South Carolina. August 9, 1894.)
RAILROAD RECEIVERS-LEASED LINES-DIVERSION OF MONEy-TAXES.

ReceIvers who take possession of and operate leased lines for more than a year,and receIve the earnIngs thereof, are bound to disburse the same in accordance with the terms of the lease; and where they apply such earnings to the payment of interest on the bonds, when the lease requIres that the taxes shall be flrst paid, the court will require them, even after the leased roads have been sUlTendered, to restore the diverted :money by paying the taxes in question.

P2DJlRAL

REPORTERj:vol. 63. :

were petitloBSd:filed, by the Chester & LenoirN'arrow-GaugeRallrolldrtJompany and: WiUium Henry Hardeh, recMver, of the Chevl\w &! Ohester'Narrow-Gauge Railroad Company, against: the' receivers ,appointed in the suits brollghtagaiilst the Richmond & Danville Railroad Company by William; P. Glyde and otheraood by the, Gentral, Trust Company. of New, York. ' The objectrotthe petitions was to 'require thes!1id receivers to pay certain arr.ea.i's Of taxes upon the roads of the petitioners. " , " L. N. G. R. Co. N. G. R. Co. H.:4t{9Iid, Jr., for receivers. ,.'.,"J ' . . _",' ' ; . · ' . . ·
· 1.'

A.g..,B.rice, for

';',W'['iJ,'"

Thesetwo petitions, sim,ljlnd the of law, Fere heard and WIll decided together. , ' The 8;, Railroad CompanY,controlled a railr9adhavingitS1:ermiD:Ifn C., Ga,. It passed throug4 the town of Chester, S. and at that pomt met the two ::harrow·gauge railrtlads owrredby the' petitioners above named,,:reapectively.'On 22dSeptember, 1882, a leaMe was executed by tbe'Ohester' & Lenoir Railroad' Oompany to the Charlo'ttel'Columbia: & AugUsta:, Railroad .of all its track, rolling .· and· property, for the term of 99 years. On 29th SepteMbEn-oftheslltne year'a leasefofthe same period and for the sametipl1irposewRs ;execnted1to the same lessee 'by the Cheraw &; Ral'lroad 'Company. The leases are identiterms. 'Under thein:, the Cllarlotte, Columbia & Augusta>' cal Railroad! to pay a dIvidend of Ijpercent. to. the stockholders ()f the'leashfg companies, annually;' to pay the coli.'! pons;'ori'Jfhe debtQf each of 'them as mature, to proprincipal'df the mol'tgage debt; incase the earnings can pay. aU the current expenses,dividen,ds,' inslj.i'ance, and debt" to divide thesllrplus'lUhong of the leasing companies., Under hleach lease, the lef\See "asslimes to pay the floating indebtedness of the lessor," and all its valid obligations, of every kind and character, and also all unpaid state, county, and municipal ,'Xbese leal'lel!l, being. in full force, and, the lessee in possession thereunder, the Charlotte, Columbia & Augusta J,l,ailroad Company, on 1st :May, 188ti, executed to the Richmond & DanVille Railroad lea,se for 99, years of all·,jts own main line, and also all the estate, of the lessor in and to the railroad, etc., of the Chester & Lenoir' Narrow-Gauge Railroad Company, and also of .the Ch-eraw & 'Chester. Narrow<Gl1llgeRailroad Company, under the estate, etc., of every natllre,in each and every of $aid main leased lines of road. The bearing upon the <issu.es now /'U:boer ,cohsi'dttrl,l.tion. are, third, totirth, and sixth. whQ1e of .the receipts, income, or receilVed from the use and operation of the said demised lines of railways and property in a deftriite and fixed,

.

CLYDE V. RICBM01\D &: D. R. CO.

23

order, apparently settling the priorities of the objects appropriated for: First. the payment of current costs and expenses of maintaining, repairing, and perpetuating during the term, for public use, the said lines of railway; all liabilities growing out of the operation and management of the said lines of railway; premiums of insurance, "and all taxes, rates, charges, liens, and assessments, ordinary and extraordinary, which now are, or may at any time during the said demised term be, by the United States of America or by the states of South Carolina, Georgia, and North Carolina, or other competent authority, charged or unpaid on aU or any part of said demised lines of railway." Then come provisions for the payment of interest on the several mortgages according to their relative rank, and f9r the disposition of a surplus. In the sixth clause of the lease the lessee agr.ees to assume and perform all existing contracts of the lessor relating to the operation and traffic of the demised lines of railway, so far as it is lawfUlly bound or required to perform the same. Under this lease the Richmond & Danville Railroad Company entered upon all the lines of railway, including these two narrow'gauge roads,and received all the earnings of the whole system, performing the covenants in the lease. In June, 1892, under a bill filed by William P. Clyde and others, stockholders and creditors, against the Richmond & Danville Railroad Company, in the drcuit court of the United States for the eastem district of Virginia, Reuben Foster and Frederick W. Huidekoper were appointed receivers of all the property of the Richmond & Danville system, and, as such receivers, entered into possession of all of it, including this least' of the Charlotte, Columbia & Augu'sta Railroad, and in auxiliary proceedings in this court this appointment was confirmed and recognized. Subsequently, . the Central Trust Company of New York, representing mortgage . creditors of the Richmond & Danville Railroad Qompany, instituted proceedings in the same court, in the eastern district of Virginia, against that company; and R.euben Foster, Frederick W. Huidekoper, and Samuel Spencer were appointed receivers of all the property, of every kind, of the Richmond & Danville Railroad Company, including this lease aforesaid, and on 1st August, 1893, entered into possession and control thereof. But on the same day proceedings for foreclosure were instituted in this court by the Central Trust Company of New York, on behalf of mortgage creditors of the Charlotte, Columbia & Augusta Railroad Company, against that company; and under these proceedings Samuel Spencer, Frederick W. Huidekoper, and Reuben Foster were appointed receivers of all the property of the Charlotte, Columbia & Augusta Railroad Company, except these leases of these two narrow-gauge railroads. As these mortgages bore date anterior to the lease, and were paramount thereto, these last-mentioned proceedings, in effect, abrogated the lease, and thenceforward the system of the Charlotte, Oolumbia & Augusta Railroad Company was separated; the receivers in the last-named case being in possession and control of the main line, representing mortgage creditors of the Charlotte, Oolumbia & Augusta Railroad Company, and the receivers appoint-

24

FEDERAL UPORTER,

vol. 63·.

ediilqthe case of The Central Trost Oompany v. The Richmond & Danville" Railroad Oompanyholding the narrow-gauge roads for the OW'ller of the one and the receiver of the other until December, 1893, when they formally released them,-the Chester & Lenoir Narrow-Gauge Railroad to its stockholders, and the" Cheraw & Chester Narrow-Gauge Railroad to its receiver appointed by the state court. It is well to recapitulate the dates. The leases of the narrowgauge railroads to the Charlotte, Columbia & Augusta Railroad bore date September, 1882. 'I'he lease of the Charlotte, Columbia & Augusta Railroad Oompany, including its main line and these two narrow-gauge railroads, to the Richmond & Danville Railroad Company bore date May 1, 1886. The receivers under Clyde v. Richmond & Danville Railroad Company were appointed June, 1892, and administered the whole property, receiving all its earnings, until lst August, 1893.. On 1st August, 1893, the receivers in the case of The Central Trust Company of New York v. The Charlotte, Columbia & Augusta Railroad Company took charge of the main line, and not of the two leased narrow-gauge railroads. On 1st December, 1893, these two narrow-gauge roads passed out of the control of the receivers appointed in the case against the Richmond & DanVille Railroad Company. The petitions we are considering aver that there remain due and unpaid balances of taxes on these narrow-gauge railroads for the fiscal years 1890-91, 1891-92, and 1892-93, and they claim that UDder the terms of the lease the receivers of the Richmond & Danville Railroad Oompany are bound to pay these unpaid taxes. When. receivers are appointed for a line of railroad embracing leased .lines, they do not necessarily assume the responsibility for the covenants of any of the leases, nor take the place of the lessees. They must ha,ve .reasonable time within which to determine what they will do, and whether it is for the of the trusts comm.itted to them to undertake the leases. United States Trust 00. v. Wabash W. Ry·. 00., 150 U. S. 289, 14 Sup. Ct. 86; Railroad Co. v. Humphreys, 145 U. S. 82, 12 Sup. Ot. 787. But if the receiver, after a. reasonable time,continues to use and operate the leased lines, he is bound by the terms of the lease (Woodruff v. Railway Co., 93N. Y.609; Brown v. Railroad Co., 35 Fed. 444); certainly, to the extent of the earnings olthe lines (Central Trust Co. v. Wabash, St. L. & P.Ry. 00.,34 Fed. 259). In the present case the receivers took possession of all these leased lines, ()perated them, received and disbursed the earnings, from June, 1892, to 1893. They practically,. by payments, recognized the terms of the lease, and acted under them. They paid operating expenses, a large part of the taxes, and the interest on the mortgages. By their report in evidence, they were in receipt of earnings from the system large enough to pay all operating expenses, insurance, and taxes, and.. a large part. of the inter "St. These earnings went into their hands because of· this lease. Whether they received them as lessees, or in any other capacity, they were bound to disburse these earnings in accordance with the ternlS of the instrument under

NATIONAL BANK OF AUGUSTA "'. CAROLINA, K. &: W. R. CO.

25

which the earnings were received. Under the lease, these earnings were to be applied first to the operating expenses, insurance, and taxes, before they were applied. to the coupons on the mortgage bonds. The payment of the latter was diversion of moneys appropriated to the taxes, and this diversion must be restored. These receivers must pay all balances of taxes for the periods stated which are lawfully due, and it is so ordered.

NATIONAL BANK OF A.UGUSTA at aI. v. CAROLINA, K. & W. R. CO. (HUMBERT, Intervener). (Circuit Court, D. South Carolina. Septembel: 3. lB94.)
RAILROADS-INSOLVENCY-ALLOWANCE OF PRESIDENT'S SALARY.

Where a railroad goes into the hands of a receiver without funds, and the earnings under the receiver are barely enough to pay cun'ent operating expenses, lUTearsof salary of the president will not be paid in preference to the mortgage debt out of the proceeds of the road, the mortgage giving the debt secured a first lien.

Action by the National Bank of Augusta, Ga., and others, against the Carolina, Knoxville & Western Railroad Company. Joseph B. Humbert intervenes, and asks for the allowance of a claim. Claim disallowed. Cothran, Wells, Ansel & Cothran, for petitioner. Joseph Ganahl, for respondent. SIMONTON, Circuit Judge. This is an intervention of Joseph B. Humbert, Esq., late the president of the defendant company, seek· ing payment of arrears of salary due to him as president. The petition, confirmed by the testimony, shows long and valuable service by Mr. Humbert, prompted chiefly by a desire to promote a pub· lie enterprise for the public good. There can be no doubt that good service was rendered, and that the amount claimed is justly due; but as the railroad company went into the hands of the receiver utterly insolvent, possessing no funds whatever, and as the receiver has barely paid current operating expenses, the earnings being insufficient to pay him any compensation, the question we are to meet is, shall these arrears of salary of the president be paid out of the proceeds of sale prior to and in preference over the mortgage debt? By the terms of the mortgage, the bonds secured by which were floated during Mr. Humbert's presidency and under his action, a first lien before all other liens is secured to these bonds. This is the contract between the parties, and all courts are bound by its terms. In Fosdick v. Schall, 99 U. S. 235, the supreme court of the United States recognized the equity of a certain class of claims controlling the conscience of the mortgage creditor seeking the aid of a court of equity, and to this class priority was given over the mortgage debt. The theory of this equity is this: It is the interest as well of the public as of all parties interested in a railroad that it be kept a going concern. To dQ this, there must be a ready