Cases argued and decided in the Supreme Court of the State of Texas, during the latter part of the Austin term, 1884, and the Tyler term, 1884. Volume 62. Page: 51
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1884.] RYAN v. HAYS. 51
Opinion of the court.
burse the current receipt fund, for the benefit of those having
claims on it.
It would have been the right of the receiver, unless otherwise directed
by the court, to hold the property sold until it was fully paid
for, if the proceeds of the sale under the facts existing, or any part,
of it, could have been applied by the court to any other purpose
than the satisfaction of the mortgage debts.
As between the railway company and the receiver, the former
could, by contract, assume the payment of any claim outstanding
against the receiver, or against such funds as would have been in
his hands, if the different classes of funds had been at all times appropriated
to such claims only as were primarily charges upon them,
and this, as a condition on which the receiver would surrender to it
the property and funds in his hands, liable to the satisfaction of any
claim there might be against him as receiver.
If Ryan had a valid claim against the receiver, which ought to
have been paid out of the current receipts of the railway while in
the hands of the receiver, then, if such current receipts were diverted
from the use to which they were primarily applicable, and were
applied to the payment of the mortgage debts, or to the improvement
of the mortgaged property and the purchase of machinery which
became a part of it, then the court appointing the receiver would
have been authorized to apply such portion of the proceeds of the
sale of the mortgaged property to the payment of the debts incurred
by the receiver during his management, as might be necessary,
to the extent of the current receipt funds applied to the payment
of the mortgage debts, or the betterment of the mortgaged property.
Fosdick v. Shall, 99 U. S., 252.
Sound principle may require the ultimate holding, in reference to
receivership through which extensive lines of railway are operated
and even built, that mortgagees holding mortgages which give them
the power to enter and operate a railway in default of the payment
of the mortgage debt, who, instead of protecting themselves through
the power thus given, and assuring the liabilities which ordinarily
attach to common carriers, apply to the courts for protection,
through receiverships, shall have such protection only upon terms
that the entire proceeds of sale as well as the income of the property
shall be subject to the payment of all current expenses, including
loss or damage to freight or injury to passengers.
The record in this case manifests that the earnings of the road,
while in the hands of the receiver, to some extent, had been applied
to the betterment of the mortgaged property; that the accounts of
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Texas. Supreme Court. Cases argued and decided in the Supreme Court of the State of Texas, during the latter part of the Austin term, 1884, and the Tyler term, 1884. Volume 62., book, 1885; Austin, Texas. (texashistory.unt.edu/ark:/67531/metapth28512/m1/73/: accessed November 19, 2017), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; .