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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 602 The defendants were trustees for the second mortgage bondholders of the Northern Railroad Company, and the bonds not being paid they foreclosed the same by suit in the Supreme Court, and by permission of the court, as declared in the decree, purchased in the property mortgaged and proceeded to operate the road, receiving the income and paying the expenses, etc., thereof. They held subject to the rights of the first bondholders. While so engaged they became liable to the plaintiffs, as they insist, for the lose of grain which the defendants undertook, as is alleged, to transport over said road as common carriers. This suit was brought to recover for such loss.
In the fifth and sixth answers by the defendants they set up the facts before stated, and aver that in regard to all the matters complained of, they acted with due and proper care, and with sound discretion, as receiving officers of the court of equity. They insist that they ought not to be held personally liable in the premises, as though they were "pursuing a business of that nature for personal profit," whereas they were only in charge of the property "temporarily, as appointees by the court, until the necessary legislation and judicial action could be had to enable the owners of the property to be ascertained and placed in possession."
To these answers the plaintiffs demurred.
The defendants insist that they stand in the relation of receivers of a court of equity, and that they are not liable to be prosecuted in a court of law for any liability incurred as receivers.
Without passing upon the question of the liability of receivers under such circumstances, it seems enough to say that the defendants occupy no such position. *Page 603
Prior to their having possession of this road they held the second mortgage bonds thereon as trustees for the owners. As such trustees, in the place and for the benefit of the owners, they filed their bill to foreclose and did foreclose. They had a provision inserted in the decree allowing them, as such trustees, to become the purchasers at the sale in case others did not; and if others did not bid sufficient, they were required to bid a certain sum, regarded as enough to cover the amount due with the costs. If they became the purchasers, the referee was to execute to them like deeds as directed to any other purchaser. In a certain event they were to transfer the property to another corporation to be formed; but they were to be entirely indemnified by that corporation against all legal and just liabilities then outstanding against them on account of any act or engagement in the management of the trust property." They retained a lien upon the trust property for the like purpose.
Thus these defendants were carrying out their original trust, assumed at the instance of the second mortgage bond owners. If the execution of that trust involved great responsibilities, these defendants should have been careful how they undertook its discharge, or they should have taken ample indemnity. The decree shows that they were careful to be fully indemnified, so far as the property would do it.
They were in fact, as to these second mortgage bonds, and as to this property so purchased by them, occupying the legal position of the bondholders themselves, and, as to the public, must be held to operate the road as owners. They were in no sense receivers or officers of the court. They were simply trustees, carrying out and executing the trusts and duties they had voluntarily assumed.
They have assumed to operate this road. They have made contracts with the public in the course of that business, and I can perceive no principle or policy that will shield them from liability, if they fail to fulfill the legal contracts they have thus made.
The cases cited by the defendant's counsel seem to me to *Page 604 have no application. They refer, generally, to attempted interference by third persons, in courts of law, with receivers or sequestrators as to property in their possession as such officers. In such cases suits at law are not allowed against the officers without permission of the court of equity. (Peale v.Phipps, 14 How. U.S.R., 368; Wiswall v. Sampson, id., 64;Watkins v. Holman, 16 Peters, 25; Vaughn v. Northrup, 15 Peters, 1; Angel v. Smith, 9 Ves., Jr., 355; Parker v.Browning, 8 Paige, 390.)
Here the defendants operated this road precisely as owners, so far as relates to the public, at least so far as the case shows. They employed and discharged the operatives, and entirely managed the road. Under such circumstances they are held liable, though they are trustees merely. (Ballou v. Farnum, 9 Allen, 47;Sprague v. Smith, 29 Ver't, 421.)
Some one, certainly, under these facts, ought to be responsible to the public. Very large contracts for transportation are made, heavy responsibilities as to freight and passengers incurred; the defendants alone conduct the business and receive the fruits thereof. Who shall discharge the liabilities? The defendants have voluntarily assumed this trust, and I think they must be liable for the contracts they have made. What they are, will be proved at the trial.
The equities are already adjusted, as well as they can be, for the defendants in the case, by the decree, and by the assignment of this property to the new corporation, retaining a lien to satisfy all demands against these defendants by reason of their operating the road.
The order should be affirmed, with costs.
All the judges concurring, order affirmed.
During the Session, after the Christmas recess, commencing on the 18th January, 1871, and closing the first of March, ANDREWS, J., was not upon the bench.
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