Opinion of the Court.

ential claims here precludes the inference that there was any such diversion of earnings applicable to the payment of rental, and the priority asked cannot be rested on that ground.

In Wallace v. Loomis, 97 U. S. 146, 162, it was said by Mr. Justice Bradley, speaking for the court: "The power of a court of equity to appoint managing receivers of such property as a railroad, when taken under its charge as a trust fund for the payment of incumbrances, and to authorize such receivers to raise money necessary for the preservation and management of the property, and make the same chargeable as a lien thereon for its repayment, cannot, at this day, be seriously disputed. It is a part of that jurisdiction, always exercised by the court, by which it is its duty to protect and preserve the trust funds in its hands. It is, undoubtedly, a power to be exercised with great caution; and, if possible, with the consent or acquiescence of the parties interested in the fund."

But here this rental was certainly not an expense originated in the process of administration by the court, and the road was surrendered as soon as the lessor would take it. Nor did the mortgagees consent to have the claim charged upon the corpus of the property in preference to their mortgages. The case does not come within Kneeland v. American Loan and Trust Co., 136 U. S. 89; Miltenberger v. Logansport Railway Co., 106 U. S. 286, 313; or any other of the authorities cited.

We do not discover any equitable ground upon which appellants are entitled to a preference in the distribution of the proceeds of the sale of the mortgaged property. The cost of the maintenance of the Quincy road by the receivers exceeded its total earnings; and the net earnings of the whole Wabash system, before the Quincy Company retook its road, did not amount to one-quarter of the amount of preferred debt existing when the receivers were appointed. The property was surrendered to it freed from any charge for that debt, to the payment of which it contributed nothing. The action of the court in making the appointment of receivers on the application of the mortgagor cannot be successfully challenged

Statement of the Case.

upon this appeal. The theory of the bill and the action of the court and its officers left all the creditors with their rights existing as they existed before the appointment was made; and we find no legal or equitable grounds upon which the prior liens of the mortgagees can be displaced.

The decree of the Circuit Court dismissing these petitions was right, and it is

Affirmed.

ST. JOSEPH AND ST. LOUIS RAILROAD COMPANY v. HUMPHREYS.

APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF MISSOURI.

No. 287. Argued and submitted April 12, 1892. - Decided April 25, 1892.

Following Quincy, Missouri & Pacific Railroad Co. v. Humphreys, ante, 82, it is, with regard to the lease of the St. Joseph and St. Louis Railroad Company by the Wabash Company, now Held,

(1) That, the circumstances in the latter case being similar to those in the former, the receivers were entitled to a reasonable time to ascertain the situation of the leased railroad before they could be held to have assumed the lease;

(2) That the time taken by them in deciding not to assume it was a reasonable time;

(3) That the course pursued by the court below towards the various independent roads which made up the Wabash system was equitable and just and will not be disturbed in this case.

THE Court stated the case as follows:

June 1, 1874, the St. Joseph and St. Louis Railroad Company leased its road to the St. Louis, Kansas City and Northern Railroad Company for the full term of ninety-nine years. The lessee agreed to pay the lessor on the first days of March and September in each year, as a rental, thirty per cent of the gross earnings of said line, and it also agreed that such percentage should not be in any one year less than $20,000; and agreed to pay all taxes, and put the road in good running

Statement of the Case.

order and keep it in good condition during the whole of said term. The lease also contained the following provision :

"But in case default shall be made by the party of the second part in the payment of the rents herein reserved and the same or any part thereof shall remain unpaid for the space of thirty days from and after the day when the same shall become due and payable, or if said party of the second part shall fail to comply with its covenants to pay taxes aforesaid or in all things keep and observe all and every the' covenants, stipulations, and agreements herein contained and on its part to be observed and kept, then it shall be lawful for the said party of the first part to enter upon and take possession of all the property hereby leased, together with all the improvements thereon constructed, and to have again, repossess and enjoy the same as in the first instance, and upon such default in the payments of rent or taxes or the breach of any such covenants as aforesaid this lease shall cease, terminate, and be forfeited, at the option of the party of the first part."

The St. Louis Company took possession of the leased line and operated it until November, 1879, at which time that company consolidated with the Wabash Railway Company, the consolidated company taking the name of the Wabash, St. Louis and Pacific Railway Company. On the first of June, 1880, the Wabash Company executed to the Central Trust Company of New York and James Cheney a mortgage on its entire system to secure what were known as its general mortgage bonds, of which seventeen millions of dollars were issued, and subsequently a mortgage to the Iron Mountain Company to indemnify that company for certain advances; and also a collateral trust mortgage. On May 27, 1884, the Wabash Company filed in the Circuit Court of the United States for the Eastern District of Missouri its bill of complaint, which has already been sufficiently set forth in the preceding case, No. 223, Quincy &c. Railroad v. Humphreys, ante, 82, and upon the filing of which receivers were appointed as therein detailed.

On June 15, 1884, the Wabash Company filed by leave of court an amended bill of complaint, setting forth with greater

Statement of the Case.

particularity the various lines of railway belonging to its system; the liens and incumbrances thereon; and the financial condition of the company; and stating the lease between the St. Joseph Company and the St. Louis, Kansas City and Northern Railway Company; and the consolidation between the latter company and the Wabash Company.

On June 26, 1884, the receivers asked instructions from the court, but the St. Joseph Company is not mentioned in their petition of that date, nor in the master's report thereon. The petition states, however, that the Wabash Railway Company and the St. Louis, Kansas City and Northern were possessed of certain valuable lines of railroad, which were subject to mortgages and deeds of trust, and gives a list of them, not including the St. Joseph, and after excluding certain lines or divisions whose earnings had not theretofore been sufficient to pay operating expenses, cost of maintenance and interest, says that from the incoming rents and profits of the property now in their possession under the court's former order they believe they can, until otherwise directed, pay the expenses, cost and interest, on bonds or other obligations secured by mortgages or deeds of trust on the lines or divisions that were owned or possessed either by the Wabash or by the St. Louis, Kansas City and Northern before their consolidation, which lines they thought would continue to yield sufficient to make such payments.

The order of appointment directed, among other things, that the receivers should pay rental on all leased lines, "out of the income that shall come into their hands from the operation of said railroad or otherwise," and "keep such accounts as may be necessary to show the source from which all such income and revenues shall be derived, with reference to the interests of all parties herein and the expenditures by them made." By its confirmation of the master's report June 28, 1884, the court ordered the receivers to keep the accounts of the earnings and incomes from, as well as the accounts of, all the operating expenses, cost of maintenance and taxes of certain enumerated lines, not including the St. Joseph Company, separately, and report quarterly in respect thereto. On Sep

Statement of the Case.

tember 20, 1884, the court announced, upon an application for instructions with respect to payment of interest on that branch line of the Wabash system known as the Havana division, that the earnings belonging to other branches in the consolidated system would not be taken to support concerns that did not pay running expenses.

November 25, 1884, the St. Joseph Company filed its intervening petition, asking for the payment to it of rentals claimed to be due from the receivers, from March 1, 1884, to August 31, 1884, together with a penalty of one-tenth of one per cent a day as provided by the terms of the lease, and on January 2, 1885, filed its amended intervening petition, setting up the lease, the general mortgage and the indemnity mortgage, and charging violations by the Wabash Company of its covenants in respect of payment of taxes, keeping up repairs, etc., etc.

The petition further averred the filing of the bill and the appointment of the receivers, and that "said receivers are now using and operating said road and have recognized and adopted said lease and have elected to enter thereunder upon the premises therein demised and to avail themselves of the powers, privileges, and rights therein conferred on 'said lessee."

Petitioner further stated that on the first day of September, 1884, there was due to it for rent $27,420.79, of which $11,441.14 had accrued during the time the receivers had been operating the road; and that the taxes for 1884 were unpaid. It was alleged upon belief that its road was "absolutely necessary to the proper and profitable operation of the said Wabash, St. Louis and Pacific Railway," and that it was "a most valuable feeder to the main line of the Wabash Company."

And, after various other averments, petitioner prayed that t. court direct the receivers to pay the rent then accrued and unpaid, forthwith, together with the penalty, and the taxes for 1884; and that they immediately proceed to put the leased property in thorough repair; and for general relief.

On the 11th of February, 1885, the receivers filed a demur