Clark v. Central Railroad & Banking Co. of Georgia

TOULMIN, District Judge, after stating the case as above, delivered the opinion of the court. From what appears in the record we are satisfied that the debts claimed by the interveners for coal delivered prior to the appointment of the receivers were current debts for operating expenses of the Central Railroad lines, made in the ordinary course of business, to be paid out of the current earnings. The coal was purchased in the name of the Central Railroad. It was delivered on its lines, and was furnished for their operation, and, with the exception of a small amount, was used by them. There was evidence that the contract for the purchase of the coal was made by the Central Railroad, and the master so found. The circuit court, however, differed with and overruled the master in such finding. In our view of the case), it makes no difference whether the contract for the purchase' of the coal was made by the Central Railroad or by the Richmond & Danville Railroad. The coal was delivered on Hie lines of the Central Railroad, and was furnished for and used in their operation. The Richmond & Danville Railroad Coinjiany had the possession of the Central Railroad lines, was operating them, collecting (heir revenues, and was under the obligation to pay out of their earnings the current expenses and the interest on 806 their bonds. But whether that possession was lawful or otherwise, or whatever-the relations between the two railroads may have been, we think that the Central Railroad was liable for the necessary supplies furnished and used for the purpose of keeping its road in successful operation, and carrying on its business as a common carrier. Such debts are preferential, and the persons to whom they are due are entitled to have the income of the receivership used in payment of them as the railroad company would have been bound in equity and good conscience to use it if no change in the possession of the property had been made. Farmers’ Loan & Trust Co. v. Kansas City, W. & N. W. R. Co., 53 Fed. 182; Burnham v. Bowen, 111 U. S. 776, 4 Sup. Ct. 675; Fosdick v. Schall, 99 U. S. 235. In this case the equities are especially favorable to the interveners, for it appears that there was a diversion of the income for the payment of interest on bonds of the Central Railroad in January, 1892, some two months before the receivers were appointed; and it also appears that the receiver expended from the income for improvements on the railroad property a sum much larger than the claims of the interveners. Our opinion is that the receivers are liable not only for the coal which they received after their appointment from unloaded cars, but that they are equally liable for the coal which was' in the bins at the date of their appointment, and which they took possession of and used in the operation of the Central Railroad lineg, and that, as representatives of the Central Railroad & Banking Company of Georgia, they are also liable for the coal delivered to and used by the Central Railroad lines prior to their appointment, and which was then unpaid for. For that portion of the coal used at Augusta by the three railroads there, as shown by the evidence, the Central Railroad and the receivers are liable, except as to that used by the Charlotte, Columbia & Augusta Railroad. It appears that the other roads mentioned were under the control of the Central Railroad, and were a part of its system. The Charlotte, Columbia & Augusta Railroad was not. It does not appear that the court in appointing the receivers made any provision for the payment of the interveners’ claims, but, as there is evidence in the record showing that current earnings, before the receivers were appointed, were diverted to paying interest on the bonded debt, and that after their appointment they made large permanent improvements on the railroad property, the interveners should be allowed payment of their claims from the corpus of the property, should the earnings in the hands of the receivers be insufficient to pay them. The interveners are only allowed the price stipulated for, and which they expected to receive when the coal was delivered, and which is in fact the price claimed in their petition of intervention. In our opinion, the view which the circuit court took of this case was an-erroneous one, and the decree must be reversed, and the case is remanded to the circuit court with instructions to enter a decree in favor of the interveners for the amounts respectively due them for coal delivered to the lines under the control, and forming a part of the system, of the Central Railroad & Banking Company of Georgia, as shown by the evidence in this case, including the coal furnished 807 before the appointment of the receivers, and that found in the bins at the lime of such appointment, and of which the receivers took possession, as well as the coal delivered to the receivers after their appointment, the amount due being determined by the contract: price, and an order that they recover from the Central Railroad & Banking Company of Georgia and the receivers of the same such sums thus found to be due. No decree will be entered in favor of the interveners for tbe payment of that portion of the coal which was used by tbe Charlotte, Columbia & Augusta Railroad Company. Reversed and remanded.