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Opinion of the Court.

as all personal property and rolling stock purchased by him whilst receiver, to the purchasers of the railroad, or their assigns. This shows that he had receipts with which he purchased new property, real estate and rolling stock, which went to increase the corpus of the fund of which the bondholders received the benefit.

His case

The intervenor's equity is a very strong one. clearly came within the scope and intent of the decree made February 4th, 1878, which authorized the receiver to protect those sureties on appeal and injunction bonds, who ought to be protected in equity and good conscience by reason of the protection afforded the property and assets of the railroad company through or by means of the giving of such bonds. The complainants (the mortgagees) raised no objection to that decree. Until after the sale of the railroad, and until the trust came to be wound up, the only plea was that the receiver had not realized sufficient funds from the current receipts of the road to enable him to protect the intervenor. This plea, (if a good one,) as we have seen, is not sustained by the facts. He actually expended moneys in the purchase of new property, real estate and rolling stock, and paid over to the purchasers everything that came into his hands before and after the sale, not used for expenses. It is not shown what these purchases and payments amounted to; but they were probably considerable, and the complainants and receiver could easily have shown that they were insufficient for the indemnification of the intervenor, if such had been the fact. The proof was in their hands, and not in his.

It is further to be borne in mind, that the purchasers of the railroad accepted a deed therefor from the commissioner under an order of the court expressly declaring that they should hold the property subject to all taxes legally due, to the lien of all unpaid receiver's certificates; and also subject to the lien of any and all claims against the railroad property then before the court by intervening petitions, which should be, upon final determination and adjudication, decreed to be paid as liens paramount to the indebtedness secured by the mortgage. The intervenor's claim is precisely in that category.

Opinion of the Court.

The case is a special one; and in view of the discretion which the court of first instance is obliged to exercise in matters of this character, taking all the circumstances into consideration, we cannot say that equitable relief was unduly extended in allowing the intervenor's claim. An examination of the cases bearing upon the subject do not lead to a contrary conclusion. See Fosdick v. Schall, 99 U. S. 235; Miltenberger v. Logansport Railroad, 106 U. S. 286; Union Trust v. Souther, 107 U. S. 591; Burnham v. Bowen, 111 U. S. 776; Union Trust v. Ill. Midland, 117 U. S. 434; Dow v. Memphis &c. Railroad, 124 U. S. 652; Sage v. Memphis &c. Railroad, ante, 361. The appellants place much reliance on the case of Burnham v. Bowen, where it was held that debts for operating expenses are privileged debts, entitled to be paid out of current income; and that if such income is diverted by the mortgage trustees or the receiver for the improvement of the property, such debts will be decreed to be paid out of the mortgage fund. But it was added by way of caution: "We do not now hold, any more than we did in Fosdick v. Schall, or Huidekoper v. Locomotive Works, that the income of a railroad in the hands of a receiver, for the benefit of mortgage creditors who have a lien upon it under their mortgage, can be taken away from them and used to pay the general creditors of the road. All we then decided, and all we now decide is, that, if current earnings are used for the benefit of mortgage creditors before current expenses are paid, the mortgage security is chargeable in equity with the restoration of the fund which has been thus improperly applied to their use." It is this remark on which the appellants rely. It is not our intention, however, to decide anything in the present case in conflict with it. The claim in that case was for operating expenses only, and the rule laid down had special reference to them. The present claim is of a different character, based upon a bona fide effort made by the intervenor to preserve the fund itself from waste and spoliation after the mortgage was in arrears and the right to reduce it to possession had accrued. But even here, as we have seen, if the claimant could pursue only the earnings, it is shown that they have been appropriated to the purchase of property which has been added to the fund.

Opinion of the Court.

Much of the argument of the appellants is based on the hypothesis that the claim of the intervenor was a claim to be subrogated to the lien of the Holbrook judgment; and it is argued that this lien was subordinate to that of the mortgage held by the complainants. We do not understand that the claim was presented in any such view. The Holbrook judgment and execution could have greatly deranged the business of the company as a going concern. The rolling stock could have been seized and removed. Whether such seizure could, or could not, have been prevented by the mortgagees is a different question. It would, at all events, have required legal proceedings, and probably serious litigation; and this the mortgagees did not see fit to undertake. To save the property from being taken, to prevent the catastrophe which its taking would have caused, and the serious questions which would have arisen had it actually been sold, the intervenor gave his bond to obtain an injunction. It was not done for the purpose of being subrogated to the questionable rights of Holbrook under his judgment; but to prevent the certain injury to the property itself, which the attempted enforcement of those rights would have involved. It is unnecessary, therefore, to discuss the rights of an execution creditor, levying on the personal property of a railroad company in Illinois, as against those of a mortgagee. We express no opinion upon that subject. The claim was presented upon the equities arising in favor of the intervenor for taking the action he did, and thus securing the results which followed, and upon the other circumstances of the entire case taken together; and it was upon these grounds that the claim was allowed by the court below. The decree of the Circuit Court is affirmed.

Counsel for Parties.

DEWOLF v. HAYS.

APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF CALIFORNIA.

No. 868. Submitted January 6, 1888. — Decided April 9, 1888.

Upon the proofs in this case the court finds that the settlement which the bill seeks to set aside was a prudent and fair one, made deliberately and under advice of competent counsel, and that, independently of any question of laches, no ground is shown for maintaining this suit.

THE original suit was a bill in equity, filed May 7, 1884, by Florence W. Hays, the widow of John J. Hays, against Frank E. DeWolf and wife and Horace M. Barnes, to set aside a deed of real estate from DeWolf and wife to Barnes, and to compel a conveyance to the plaintiff. Upon a hearing on pleadings and proofs, the Circuit Court entered a decree for the plaintiff, and the defendants appealed to this court. The case is stated in the opinion.

Mr. Benjamin F. Thurston and Mr. Louis T. Haggin for appellants, cited on the question of laches, and the presumption of acquiescence after considerable delay: Wollensak v. Reiher, 115 U. S. 96; Sullivan, v. Portland &c Railroad, 94 U. S. 806, 812; Beaubien v. Beaubien, 23 How. 190; Stearns v. Page, 7 How. 819; Moore v. Greene, 19 How. 69; Marsh v. Whitmore, 21 Wall. 178, 185; Godden v. Kimmell, 99 U. S. 201; Badger v. Badger, 2 Wall. 87, 95; Wood v. Carpenter, 101 U. S. 135; Lansdale v. Smith, 106 U. S. 391; Fisher v. Boody, 1 Curtis, 206, 219; Prevost v. Gratz, 6 Wheat. 481; Elmendorf v. Taylor, 10 Wheat. 152; Piatt v. Vattier, 9 Pet. 405, 416; Stearns v. Paige, 1 Story, 204, 217; Wagner v. Baird, 7 How. 234; Hough v. Richardson, 3 Story, 659.

Mr. W. Hallett Phillips, and Mr. Benj. Morgan for appellee, cited to the same points: Allone v. Jewell, 94 U. S. 506, 512; Insurance Co. v. Eldridge, 102 U. S. 545, 547.

Opinion of the Court.

MR. JUSTICE GRAY delivered the opinion of the court.

The question upon which the decision of this case turns is one of fact; and upon full consideration of the evidence, we are unable to adopt the conclusion of the Circuit Court.

Hays and wife and DeWolf and wife, connections by marriage and intimate friends, took up their residence in California in 1871. Hays was in ill health, and DeWolf had the confidence of Hays and wife and often transacted business for them. In 1872, DeWolf and wife owned a ranch of 4160 acres in Fresno County, California, and at his suggestion Mrs. Hays purchased an undivided half of the tract for the price of $23,425, part of which she paid out of her separate funds, and for the rest of which she gave them her promissory note for $10,135, secured by mortgage of the land.

It is alleged in the bill, and shown by the evidence, that afterwards DeWolf and wife, without consideration, assigned the note and mortgage to one Haggin, and he commenced an action of foreclosure, which was dismissed upon the plaintiff's executing and delivering to Haggin a deed of the land; that in 1877 the same was conveyed, without consideration, by Haggin to one Dimmock, and by him to Mrs. DeWolf; and that in all these transactions Haggin, as well as Dimmock, acted as agent of the DeWolfs.

The bill alleges, and the answers deny, that the plaintiff executed and delivered the deed to Haggin "at the urgent solicitation of her husband, who was at the time an invalid, unable to attend to business, and who importuned the plaintiff to make said deed, urging as a reason that he was unwilling to die and leave her involved in a litigation which might result in her pecuniary ruin, and the plaintiff, yielding to his entreaties and persuasions, consented to and did make said deed;" and that DeWolf and wife, at the time of the execution of that deed, "well knew that the same was made by the plaintiff under the influence of her said husband and because of his persuasion and solicitation, and was not her free and voluntary act."

In March, 1884, DeWolf and wife conveyed the land to

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