Fountain v. Stickney

Weaver, J. The railway went into tbe hands of tbe defendants as receivers under tbe appointment of tbe Circuit Court of tbe United States on January 9, 1908. Prior to tbat date, and while said railroad was in tbe possession of tbe Great Western Eailway Company, tbe plaintiff, an employee of said company in its shops at Oelwein, received an injury which be alleges was occasioned by tbe company’s negligence. On April 24, 1908, be brought bis action to recover damages resulting from said injury, making tbe receivers alone parties defendant. Tbe defendants demurred to the petition on the ground tbat an action of this kind would not lie against tbe receiver upon a cause of action arising before their appointment to tbat position. Tbe demurrer being overruled, tbe defendant pleaded tbe same matter in defense, and also took issue upon tbe merits of plaintiff’s claim. Tbe cause was tried to a jury, resulting in a verdict and judgment for plaintiff, and defendant appeals. As tbe point first made, if well taken, is fatal to plaintiff’s right to maintain this action, we give precedence to its discussion. Will an action lie against tbe receiver of a railroad to recover damages resulting from an injury sustained by the plaintiff before tbe road passed' into tbe receiver’s possession or control? While tbe record does not show tbe terms of the order naming tbe receivers who are the defendants herein, it is manifest thát they were not appointed to close up tbe business of tbe corporation, but rather to perform tbe usual office of a receivership which is a provisional and pro tempore scheme for tbe preservation of tbe property and estate of tbe. corporation pending tbe adjustment of tbe rights which are involved in tbe litigation in which tbe appointment is made. It has no effect to dissolve tbe corporation or to divest its title to its property, but the possession of such property passes for [169] the time being to the receivers, and, as its value is largely dependent upon the continued and regular operation of the road, the receivers are generally empowered and authorized to operate it. Except as thus interfered with, the corporation retains its corporate functions unimpaired, and may sue and be'sued. Ohio Ry. Co. v. Russell, 115 Ill. 52 (3 N. E. 561) ; Decker v. Gardner, 124 N. Y. 334 (26 N. E. 814, 11 L. R. A. 480). Such receivers are neither bound nor authorized to pay corporate debts which accrued before their appointment, though by order of court operating expenses incurred within, a limited time prior to such appointment are sometimes excepted from the rule here stated. Outstanding corporate contracts of the corporation can not be enforced against the receivers unless the latter adopt them. 24 Am. & E. Ency. L. (2d Ed.) 22. If not liáble on corporate contracts made before their appointment, it would seem to follow for equally strong, if not for stronger, reasons that the receivers in taking temporary possession and control of the property for the purpose of preserving it- pendente lite do not assume liability for corporate tortSj the injurious effects of which had culminated' while the road was still operated by the corporation. Northern Pacific Ry. Co. v. Heflin, 83 Fed. 93 (27 C. C. A. 460); Decker v. Gardner, 124 N. Y. 334 (26 N. E. 814, 11 L. R. A. 480). This rule seems to be impliedly recognized by this court in Brockert v. Railroad Co., 82 Iowa, 369. Whether such action could be maintained against the receiver on leave being obtained therefor from the court having jurisdiction of the receivership proceedings we need not consider, as it is conceded that no leave was asked for or given. The receiver, it must be borne in mind, is not the representative of the company, but is rather an officer or representative of the court, who holds the property as nearly as may be in the condition in which he receives it. As we have already said, he does not become a party to its [170] outstanding contracts unless he sees fit to adopt them, and even in this his acts are subject to the approval and authority of the court. Instead of being an agent or representativo of the corporation,' his relation thereto is more analogous to that of a sheriff holding its property under judicial order or process awaiting final order for its disposition. Whether this rule would apply to a receiver in proceeding to wind up the corporate business and dissolve the corporation, or whether an action for the 'tort of the company may be maintained against the receiver on leave being granted by the court appointing him, we need not consider, as the record presents no such condition. We are constrained to hold that under the record before us plaintiff shows no cause of action against the defendants, and the judgment of the superior court must therefore be reversed.