CONSTRUCTION OF A "CELEBRATED FABLE." -We said some time ago, apropos, of the Albany Law Journal's suggested heroic treatment of the maladies of the Federal judiciary:

"We are not so much addicted to iconoclasm as our contemporary, and hesitate to assail a l'outrance, and without appropriate preliminaries, so venerable and venerated an idol as the life tenure of Federal judicial office. Milder measures are first in order, and contrary to the philosophy of the spellingbook fable, we would use tufts of grass first to dislodge the naughty boy from the appletree, before 'trying what virtue there is in

stones.

Upon this our contempory remarks:

“But what an iconoclast our brother is, who thus misrepresents the celebrated fable in Webster's spelling-book. For 'contrary' read according.'"

Doctors will differ, judges sometimes dissent, and even editors cannot always agree. Under deep submission we adhere to our construction of the philosophy of the "celebrated fable." The husbandman used tufts of grass-in vain, but upon trying what virtue there was in stones, the naughty boy quickly came down from the tree and hnmbly "begged the old man's pardon." The philosophy of the story is, that milder measures will fail, but pebbles from the brook will, as we learn from an ancient precedent, prove very efficient.

Hence, our kind-hearted leaning to milder methods was contrary, not according, to the philosophy; the lesson taught by the celebrated fable.-Q. E. D.

NOTES OF RECENT DECISIONS.

CONTRACT-IMPLIED PROMISE-QUANTUM— MERUIT EVIDENCE.-The Supreme Court of Vermont recently decided a case1 which is chiefly remarkable for what it does not decide. The facts were that the plaintiff began to work for defendant in his livery stable without any contract more definite than that defendant assured him that "it would be all right." While so engaged he received an of

1 Stone v. Tupper, 6 East. Rep. 465.

fer of employment, upon what terms does not appear, from Morgan, and defendant told him that he, defendant, would do as well for him as Morgan would. Afterwards, the parties signed a written agreement by which it was stipulated that plaintiff's remuneration should be his board and clothes. Nevertheless, he brought suit for his wages as upon an implied contract or a quantum meruit, proved by Ridge, a livery stable "help," what his services were in his (Ridge's) opinion, worth, and recovered judgment therefor. And this judgment the appellate court affirmed.

It does not appear that defendant failed to perform his part of the board and clothes contract, and we cannot understand how, in the absence of averment and proof of a breach of that contract, any judgment at all could have been rendered in favor of the plaintiff. The evidence showed that his health was poor, and the written contract showed that both parties regarded a mere subsistence as full compensation for such services as he could render. The opinion of the court ignores the written contract altogether except in an immaterial point of construction, decides that Ridge's opinion as to value of plaintiff's services was competent evidence, and that no presumption against the validity of a creditor's claim arises from his failure to dun, unless he is not only poor, but in need of ready money for present use.

The case is very remarkable because the opinion of the appellate court utterly ignores the only substantial question between the parties, and the judgment of the trial court is affirmed upon issues manifestly immaterial.

It is well settled law that, when one agrees to serve gratuitously, no promise to pay any compensation will be implied. And if by written contract, compensation for services is made contingent upon the happening of a particular event, if the event does not happen, the compensation is lost and the written contract cannot be varied by parol evidence.3 In an old Massachusetts case, Parsons, C. J., said: "As the law will not imply a promise where there was an express promise, so the law will not imply a promise of anyone against

2 Woods Mast. and Servt. § 66; Bartholomew v.Jackson, 20 Johns. 28.

3 Zerrahn v. Ditson, 117 Mass. 583.

his own express declaration." 4 It is very true that when one party renders services of which the other avails himself, the law will imply a contract to pay for them what they are reasonably worth. But if the suit is brought upon a quantum meruit, and it appears that the subject matter was covered by an express contract, the recovery will be limited by the amount specified by such express contract. The gradations are well settled; an implied contract is always overruled by an express parol contract; that by a written contract, and that by a specialty.

NEGLIGENCE MASTER AND SERVANT-FELLOW-SERVANT PERILOUS EMPLOYMENT. There seems to be no limit to the infinite variety of combinations of which the subject of negligence is capable. The Supreme Court of Minnesota recently decided a case, in which it appeared that plaintiff's intestate was engaged in handling disabled cars on the "repair track" in the yard; that on that track all cars are in "bad order," and are only moved to and fro as occasion may require for the purposes af repair. Plaintiff's intestate was killed in attempting to mount one of the "bad order" cars which was in motion, but it did not appear why he attempted to mount it at all.

The court held that as the employment of handling these bad order cars was essentially and avowedly perilous, the deceased must be presumed, in entering upon it, to have assumed all the risks growing out of the bad order and imperfections of the cars. It says:

"The subject of the case is, then, this: The plaintiff's intestate is notified, generally, that the car is in bad order, so that it has been necessary to withdraw it from ordinary service and lay it up for repairs. When he comes to handle it, he does so knowing that, for some reasons, not disclosed to him, it is not suitable for use in the ordinary way. Not knowing what, in particular, those reasons are, if he handles the car at all, he handles it as a car unsuitable for use, and at his own

4 Whiting v. Sullivan, 7 Mass. 107.

5 Crane v. Bandouine, 55 N. Y. 556.

6 Mansur v. Botts, 80 Mo. 651.

7 Kelley v. Chicago etc. Co., Sept. 6. 1886: 29 N. W. Rep. 173.

risk, not only for its defects,—at least, for such as are apparent to or would fairly be suggested by ordinarily diligent and careful observation, like those of the brake on this car, but also at the risk of the negligence of his fellow-servants in handling the same. We discover nothing in the testimony to take the case at bar out of the full application of this proposition. The plaintiff's intestate must be taken to have assumed the risk of handling this car as one in bad order, which it therefore might be dangerous to handle in the ordinary way, and as to which, in the absence of any definite information as to the respect in which it was defective, the burden of ascertaining the defect and source of danger was cast upon and assumed by him. As he took this risk and burden upon himself, he cannot hold the defendant responsible for it." 8

8 Fraker v. R. Co., 32 Minn. 54; s. c., 19 N. W. Rep. 349; Watson v. H. & T. C. R. Co., 58 Tex. 434; Flannagan v. Chicago & N. W. R. Co., 45 Wis. 98; s. C., 50 Wis. 462 and 7 N. W. Rep. 337; Chicago R. Co. v. Ward, 61 Ill. 130; McCosker v. Long Island R. Co., 84 N. Y. 77; Whart. Neg. § 214; Thomp. Neg. 1009.

THE DOCTRINE OF RECEIVERS CERTICATES.

I. WHEN AUTHORIZED.

The practice of issuing receiver's certificates has grown up in the past few years. At first resorted to as an extraordinary expedient and only allowed on the ground that their issue was indispensable to make necessary repairs in order to preserve the property from destruction, the courts have, by degrees, relaxed somewhat from the strictness of rule and principle originally adopted, and now sanction their issue for a variety of purposes. In regard to certificates issued for necessary repairs, there appears to be no doubt, either on authority or principle. In a case' decided by the Supreme Court of the United States, Mr. Justice Bradley says: "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 encumbrances, and to authorize

1 Wallace v. Loomis. 97 U. S. 146.

such receivers to raise money necessary for the preservation and management of the property, and make the same chargeable thereon for its re-payment cannot at this day be seriously disputed. It is part of the jurisdiction always exercised by the court by which it is its duty to protect and preserve the trust fund; it is undoubtedly a power to be exercised with great discretion and, if possible, with the consent of the parties interested in the fund."

The criterion of the propriety of issuing receivers certificates is the necessity of the expenditures which demand their issue.2

Is the issue of such certificates necessary for the preservation of the road. To preserve its value it generally must be continued in operation and sold as a going concern, and if the court has been obliged to take possession of it, to prevent the rapid diminution of value, the derangement and disorganization that would otherwise result, it is but proper that the court should borrow money for that purpose if it cannot otherwise do so, in sufficiently large sums by causing certificates of indebtedness to be issued. They are but a substitute for common methods by which money is raised for the use of a receiver in a particular case, a mode of appropriating, in advance, a portion of the value of the property in order to enable the court to save a greater portion thereof from destruction.3

Before authorizing the issue, the court should require a detailed statement specifying the items of the sums needed, and the purposes to which they are to be applied, supported by clear proof of the correctness thereof, and of the necessity for raising the money, and after proper notice to and hearing the parties interested. There cannot be too great caution exercised.1

In a case where it appeared by the report of the receiver that the railroad was in such need of repairs that it could not be operated with safety to the travelling public unless the repairs were made, the court authorized the making of the repairs and the issuing of receivers' certificates of indebtedness therefor, and declared the same to be a debt incurred

2 Jones on Railroad Securities, § 535.

3 Meyer v. Johnston, 53 Ala., 237, 348.

* Meyer v. Johnston, 53 Ala. 350; Wallace v. Loomis, 97 U. S. 146.

for the benefit and protection of the property.5

In another case, the receivers upon their appointment, found in the possession of the company several locomotives held under a lease from the makers, and for which the rent was unpaid. Upon their application they were authorized to issue certificates of indebtedness to provide for the payment of such rent."

As a general rule receivers will not be authorized to engage in the completion of unfinished roads, their legitimate function being

the conservation of the road as it is.

It was said in a recent case," "It is no part of the duty of a court of chancery to build railroads, and the assent of all parties interested in the property cannot make it one. A court of equity may authorize the receiver of a railroad to issue certificates of indebtedness * for the purpose of raising funds to make necessary repairs and improvements, but it is a power to be sparingly exercised, and only used from sheer necessity, and to a very limited extent."

*

There have been, however, exceptions to this rule. Where, to prevent a valuable land grant in favor of a railroad from lapsing, a receiver was appointed, at the instance of the bondholders, whose principal security was the land, and was empowered to borrow money by issuing certificates to complete certain unfinished portions of the road.8.

And again, where it became necessary, to insure the safety of the trains, that a portion of a railroad which had beeen built in a hasty and temporary manner should be rebuilt in a substantial and permanent way, the same method to meet the expenses was adopted."

Not for convenience or ornament; not to lay out money in ways not essential to the preservation of the property, although the court may think the value of it will be thus increased; "not for the completion of an unfinished work, or the improvement, beyond

4.

5 Hoover v. Montclair, etc. R. R. Co., 29 N. J. (Eq.),

6 Coe v. N. J. Midland R. R. 27 N. J. (Eq.), 37.

7 Credit Co. v. Arkansas Cent. R. R. 15 Fed. Rep. 46; Sandon v. Hooper, 6 Beav. 546; Shaw v. R. R. Co. 100 U. S. 602; Kennedy v. St. Paul & Pac. R. R. 2 Dill. 448: Stanton v. Ala. & Chattanooga R. R. 2 Woods, 506.

8 Kennedy v. St. Paul & Pac. R. R. 2 Dill. 448.

9 Stanton v. The Ala. & Chattanooga R. R. 2 Woods

506.

what is necessary, for the preservation of an existing one-but to keep it up, to conserve it as a railroad property," pending litigation, the court can borrow money for such purpose, if it cannot do so otherwise, by causing certificates of indebtedness to be issued; and then never in excess of such need. As from the nature of the property it must be continued in operation to prevent serious injury and impairment, the court may continue the running of trains and the usual business of the road, and if the income be insufficient for that purpose, it may provide the requisite means by creating charges upon the property, 10

II. PRIORITY.

According to the weight of recent decisions there appears to be no doubt of the power of a court of equity to authorize the issue of receivers certificates which shall constitute a prior and paramount lien upon the property and funds, irrespective of the consent of the holders of prior securities."1

*

*

In a recent case12 it was said: "It seems to be well settled that a court of equity has the power to authorize its receiver to issue certificates of indebtedness and make the same a first lien upon the road for the purpose of raising funds to make necessary repairs and improvements. But it is a power to be sparingly exercised. It is liable to great abuse, and while it is usually resorted to under the pretext that it will enhance the security of the bondholders, it not infrequently results in taking from them the security they already have, and appropriating it to pay debts contracted by the court."

The case of Wallace v. Loomis, supra, furnishes an instructive commentary on the authority of the court in this regard. In that case, upon the filing of a bill by the trustees of the first mortgage on a railroad, the court appointed receivers, "with power to put the

10 Meyer v. Johnston, 53 Ala. 237, 346; Jerome v. McCarter, 94 U. S. 734; Bank of Montreal v. Chicago, Clinton & Western R. R. 48 Iowa, 518; Barton v. Barbour, 104 U. S. 126; Un. Trust Co. of N. Y. v. Chicago & Lake Huron R. R. 7 Fed. Rep. 513; Turner v. Peoria & Springfield R. R. 95 Ill. 134; Swann v. Clarke, 110 U. S. 602.

11 Miltenberger v. Logansport R. R. 106 U. S. 286; Un. Trust Co. N. Y. v. The Illinois Midland R. R. 117 U. S. 434; Wallace v. Loomis, 97 U. S. 146.

12 Credit Co. v. Arkansas Cent. R. R. 15 Fed. Rep.,

46, 49.

road and property in repair, and to complete any unfinished portions thereof, and to procure rolling stock, and to manage and operate the road to the best advantnge, so as to prevent the property from further deteriorating in value, and to save and preserve it for the benefit and interest of the first mortgage bondholders and all other persons having an interest therein," and with power also for these purposes, to raise money by loan to an amount stated by issuing certificates, "which should be a first lien upon the property." The final decree declared that the moneys raised by loan or advanced by the receivers, and expended on the road pursuant to the order were a lien paramount to the first mortgage and should be paid out of the proceeds of sale before such first mortgage bonds.

In another case, 13 where a decayed and dilapidated railroad came into the hands of receivers under a decree of the court, made in a cause brought by trustees of a first mortgage to foreclose the same, and it became necessary to borrow money in order to preserve the road and to complete some inconsiderable portions thereof, and to put it in a condition for the transaction of its business, the court authorized the receivers to borrow money for such purposes and made the sums so borrowed a lien upon the property superior to that of the first mortgage.

In a case11 which arose upon the petition of a receiver to make certain necessary repairs to a railroad, the chancellor after authorizing the making of the repairs and the issuing of certificates to provide the means therefor said, "the certificates will be declared to be a debt incurred for the benefit and protection of the property, and to be a first lien upon it."

A recent case 15 in the Supreme Court of the United States, is an exhaustive and authoritative decision on the question of priority. Upon it being represented to the court that the road was in great need of repair, and in an unsafe condition to be operated, and required an immediate outlay for iron, ties,

13 Stanton v. The Ala. & Chattanooga R. R. 2 Woods, 506.

14 Hoover v. Montclair & Greenwood Lake R. R. 29 N. J. (Eq.), 4.

15 Union Trust Co. of N. Y. v. Illinois Midland Co., 117 U. S. 434.

and other materials, balasting and labor, the receiver was authorized to borrow a sum, specified in the order, and issue his certificates of indebtedness therefore, and further declared these certificates to be a first lien upon the property. He was also authorized to pay off tax liens, to replace the net earnings diverted from paying the operating expenses and ordinary repairs, and to pay for betterments. The learned judge, in passing upon the power of the court to authorize the issue of the certificates and to constitute the same prior liens; held, "That in regard to those issued for necessary repairs, there could be no doubt either on authority or principle." That those issued to pay the liens be allowed priority, those issued to replace net earnings, and to pay for worn out portions of the road, also for items, for wages due employees of the receiver, debts due from them to other railroad companies, and for supplies and damages, wages due employees of the road within six months preceding the appointment of the first receiver, and debts incurred for the ordinary expenses of the receivers in operating the road, should be allowed priority out of the corpus of the property, if there was no income fund. And further, in commenting upon and defining the power the court possessed, when dealing with cases of this nature, said: "Property, subject to liens, and claims, and debts of various characters and ranks, which is brought within the cognizance of a court of equity for administration, and conversion into money, and distribution, is a trust fund. It is to be preserved for those entitled to it. This must be done by the hands of the court through officers. The character of the property gives character to the peculiar species of preservation which it requires. A railroad and its appurtenances is a peculiar species of property. Not only will its structures deteriorate, and decay, and perish if not cared for and kept up, but its business and good will will pass away if it is not run and kept in good order. Moreover, a railroad is a matter of public concern. The franchises and rights, of the corporation which constructed it, were given not merely for private gain to the corporators, but to furnish a public highway, and all persons with the corporation as creditors or holders of its obligations, must necessarily be held to

do so in the view that, if it falls into insolvency and its affairs come into a court of equity for adjustment, involving the transfer of its franchises and property by a sale into other hands, to have the purposes of its creation still carried out, the court, while in charge of the property, has the power, and under some circumstances it may be its duty, to make such repairs as are necessary to keep the road and its structures in a safe and proper condition to serve the public."

As we have before remarked, the principle upon which these certificates were originally issued, was to "preserve" the property. Bondholders and creditors were anxious that this should be done, and so a practice which was right, within its proper limits, has grown into a most dangerous abuse. The receiver is to take care of and "preserve" the property of the insolvent road, and for that purpose his certificates are good, but beyond that they are worthless. It is a monstrous perversion of well settled rights, that an officer of a court, subject to no supervision but that of the tribunal which appointed him, and which derives its information in most cases solely from him, should have the power to issue these certificates, as has been done in many instances, to the full value of the property to meet losses occasioned by his incompetence or desire to carry on a reckless railroad war, and make them a first lien upon it. Judge Baxter is reported to have expressed himself strongly, in a recent case before the Circuit Court of the United States, against the practice of placing railroads in the hands of receivers. He cited the case of a railroad in Georgia, which cost $15,000,000. The receiver, who was in charge for 3 years, issued certificates to the value of $1,500,000, and when the road was sold, the proceeds were insufficient to pay the certificates.

16

The language of Miller, J., is pregnant with the true sentiment of the law, viz: "That the appointment of receivers, by the court, to manage the affairs of a long line of railroads continued through 5 or 6 years, is one of those judicial powers, the exercise of which can only be justified by the pressure of absolute necessity."

Equally pertinent is the language of Bar

16 Jones on Railroad Securities, p. 508 (note). 17 Mil. & Min. R. R. v. Soulter, 2 Wall. 510.