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
5upply,oflal}i)r and! materfa:ls!oeeessar,'lto this end. ' If persons Wl1G: gjvei.lnboti and materials 'lwererequitedin :everyinstancerto makel<Ul1ttJfuJiiexamination intoi too'conditipn of thecoinpany, 'so as to' So<lvent capacity'.'foll'pa.ylng[iebtsi all of its operations miglii'betbl'Ougbt to a'standstil}/,"Foziothis reason, persoI1S .d:e8:ljng witlla('c(l)tt1pany' to do 'SO, with. the kinow;}edge that the court will see that all 8nchsupplies ,o1Habor· material-, given, and not paid for within a reasonable period before the appointment of a receiver, wiUbe provided for by the court. This period never is beyond six months. But, in exercising this equity, the d6uil't gOO$Upon &:rigerou$ "gro'O'i1a," lukl theref.Ore cautiously, keeping rigidly wit11ln limits. No case can yet be eqlli,ty: tQ the, president of the insolvent company. He knows exactly its condition. He has full !10ticeof, notboun,g tp" f ll mi$. his, setv1 ,a,day,,3tter hI!! ,remlUl;erat1Q:U, !!eemsunce/.'Utln. Itecannotbe included' among ,thatdass ;of:employfSs whoohaveno. means of a.scem:aining w bethel' ashQi't credit t()lf the cqJUpnny is Slife or not. for labor and rnaFosdick v. Schall goes upon the idea that U:lrla1slJ,oulq :twttirst, anylJh,w,g paid from whieh is, diversion ';Bich, s-ppply.: div:ersionof this in this case, it was made by and under the direction of the president himself, and now he cannot complain., In the absence of aU authority for its the c'laim disallowed; and it is so ", ordered. nOEL v.' CARSON.1 (Circuit Court of AppeaJs, Sixth, Circuit. May 28, 1894.) No. 126. 1. NOTE-CONSIDERATION-EvIDENCE.
On an issue as to whether, a note for $8,000 executed by C. to his own OJ;'cier! indorseciPf,him ip blan!t,lj.nd held by a bank, was for a consideration, or, ali! claimed by hIm, was an accommodation for the bank, C. testified that having money in the bank, drawing DO interest, A" the cashier, said "I" or "We" (by which C. said' he understood reference was made to, the bank) "can use" it, and that a loan of $8,000 was made accordiJ:l.gl;v; that; bis asking repaYIllent, A. told him to draw on the bank, which he did .rl)l!e26,th; that, three qaYs later, A. asked him to execute an accommodllti,on note of $8,000 for the bank,antl'dated, June 26th, which he did, the note III question being' the last of tne renewals of it. 'ilt.,wM not clll,i)ned, ho,wevel'",that he thought tile bank was using his ,name to bOl;l'0lYmoney. A., WllO was asa witness by reason of of the bank's money, testified that C. made his loan expressly to hlip' and S;, partnerll in a coal-land !'Ipeculation, and that ,when C. demanded(l'epaymen1(l1e said he had not 'the money, but could procure it for, C., :from the banI, on Co's note. he agreeing tha,t he and S. would ta4e,.l;/lJEl. of it, apd pay the iDtetest on it, and that accordingly, on June2tith; C. executed the, note for $8,000, and A., as cashier, di.scounted placed the pr6ceeds to, the account of C. , A. used in the coalclandspecl1latfon the $8,000 loaned by C., and at tIle sallie time ex -
, Ii; Rehearing i denied.