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carriage are often sought to be evaded; but in vain. Public policy demands that the right of the owners to absolute security against the negligence of the carrier, and of all persons engaged in performing the carrier's duty, shall not be taken away by any reservation in the carrier's receipt, or by any arrangement between him and the performing company.

It has been urged on the part of the defence that, though the contract does not attempt to exempt, and could not have exempted the express company from liability for loss occasioned by the neglect of itself or its servants, yet, when it is sought to charge the company with neglect it must be such as it is responsible for upon the general principles of law, and that upon these principles no one is responsible for damage occasioned by neglect unless it be the neglect of himself, his servants, or agents. The argument mistakes, we think, when it asserts that upon general principles of law no one is responsible for the consequence of any neglect except his own or that of his agents or servants. Common carriers certainly are, and for very substantial reasons. These defendants, it is agreed, were common carriers, and they remained such after the exception in their receipt. If it be said the exception reduced responsibility to such an extent as to make them liable only for such neglect as fastens a liability upon persons who are not common carriers, the answer is, such an averment assumes the very thing to be proved. And even if the argument were sound, the question would still remain whether the railroad company employed by the defendants to effect the carriage is not properly to be regarded as their agent, though not under their control. That question we have already considered.

Again, it is urged that though the defendants remained common carriers notwithstanding their contract, their responsibility was limited by their receipt to that of an ordinary bailee for hire. And as such bailee is not held liable for the neglect of persons over whom he has no control, it is argued that these defendants are not liable for the negligence of the railroad company. This also assumes what cannot be admitted. Although we are told all the authorities agree that when a common carrier has by special contract limited his liability, he becomes, with reference to that particular transaction, an ordinary bailee — a private carrier for hire - or reduces his responsibilities to those of an ordinary bailee for hire; yet we do not find that the authorities assert that doctrine, if by the phrase " that particular transaction” is meant the undertaking to carry. Certainly those to which we have been referred do not. We do not deny that a contract may be made which will put a common carrier on the same level with a private carrier for hire, as respects his liability for loss caused by the act or omissions of others. The consignor may by contract restrain him, may direct how and by what agencies he shall carry. Under such an arrangement he may become a mere forwarder, and cease to be a carrier. But what we have to do with in these cases is, whether the contract proved has that operation. We have already said we think it has not. The exception in the bills of lading has sufficient to operate upon without being a cover for negligence on the part of any person engaged in the service undertaken by the carriers. It exempts the defendants from responsibility for loss by fire caused by the acts or omissions of all persons who are not agents or agencies for the transaction.

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That is a large restriction, and beyond that, in our judgment, the exception in the present case does not extend.

To the opinion we have thus expressed we find direct support in the case of Hooper v. Wells, Fargo & Co. 27 Cal. 11. There an express company had undertaken to transport gold dust and bullion from Los Angeles to San Francisco, and deliver to address. The receipt for the property contained the following stipulation : “In no event to be liable beyond our route, as herein receipted. It is further agreed, and is part of the consideration of this contract, that Wells, Fargo & Co. are not to be responsible except as forwarders, nor for any loss or damage arising from the dangers of railroad, ocean, or river navigation, fire, &c., unless specially insured by them and so specified in this receipt.” In the course of the transportation the messenger of the carriers, who had the property in charge, took it on board a steam-tug for the purpose of placing it on a steamer bound to San Francisco. On the way to the steamer the boiler of the steam-tug exploded, in consequence of carelessness of its officers, and the gold dust and bullion were thereby lost. The steam-tug did not belong to the express company, nor was it or its officers under their control. Yet the court adjudged that the managers and employees of the steam-tug were, in legal contemplation, the managers and employees of the carriers, and that the restrictive clause in the receipt did not exempt the carriers from liability for loss occasioned by the carelessness of those employees. To the same effect is the case of Christensen v. American Express Company, 15 Minn. 270 ; and the case of Machu v. London f Southwestern Railway Company, 3 Exch. 415, though arising under the carrier acts of 11 George 4, and 1 William 4, is very analogous. The statute declared that the carrier should be liable to answer for the felonious acts of any coachman, guard, book-keeper, porter, or other servant in his employ. The court considered that all parties actually employed in doing the work which the carrier undertook to do, either by himself or his servants, were to be regarded as his servants within the meaning of the act. Baron Rolfe said, the right as against the carriers arises, not from the relation of master and servant, but by virtue of the contract into which they have entered to deliver the goods. This was said in answer to an argument like the one relied upon in this case, that the relation of master and servant could not exist between the carriers and the servants of a sub-contractor.

The other objections urged against the charge given by the court below to the jury require but brief notice.

We find no error in what the circuit judge said upon the question, whether the bills of lading with the exceptions constituted the contract between the parties. The charge in this particular is justified by very numerous authoritative decisions : York County v. Central Railroad Company, 3 Wall. 107; Grace v. Adams, 100 Mass. 505 ; Wells v. The Steam Nav. Co. 2 Comstock, 204 ; Dorr v. New Jersey Steam Nav. Co.1 Kernan, 485; 6 How. 344; 3 Wall. 107; 6 Blatchf. 64; Kirkland v. Dinsmore, 62 N. Y. 161.

Nor was there error in the instruction given respecting the iron safe. Taken as a whole it was correct.

The charge covered the whole case, and except in those particulars in which we have indicated our opinion that it was erroneous, we find no just reason to complain of it.

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MEYER v. Johnston.

(No. 3.

But for the errors we have pointed out, new trials must be awarded.

The judgment in each case is reversed, and the record is remitted with directions to award a

Venire de novo.


[DECEMBER, 1876.]




A court of equity has power in a proper case to allow the issuing by a receiver of nego

tiable certificates of indebtedness creating a first lien upon the property in his hands.

MANNING, J., delivered the opinion of the court.

On the day after the appointment of the first receiver, he petitioned the chancellor for leave to borrow $90,000, or such other sum as his honor might prescribe; and the chancellor thereupon, and in vacation; made an order authorizing him to borrow $150,000 on certificates of indebtedness which should have priority of payment over any other claim, out of the proceeds of sales of any property in the receiver's possession. And the authority thus granted not having been used, the two receivers subsequently petitioned the chancellor for leave to borrow, instead, $700,000, to be used in purchasing rolling-stock and putting the railroad and its appurtenances in repair. The chancellor thereupon made an order authorizing them to do so, directing what portion of the amount should be expended in rolling-stock (about $450,000); prescribing, in accordance with suggestions in the petition, the form of the certificates to be issued therefor, making them negotiable, and interest thereon payable semi-annually at the office of the New York Guaranty and Indemnity Company, and undertaking to charge these certificates upon the railroad and its appurtenances and equipments as a prior lien, having precedence of liens created by the first and other prior mortgages. The receivers were also authorized to sell the certificates at ninety cents on the dollar ; and it seems to have been intended that the proceeds should be used, in part, in enlarging and completing the work beyond what was necessary for the preservation of the property.

Counsel for the first and other early mortgage creditors, alarmed by this decree, object to and protest against having their liens on the property of the company, existing by virtue of instruments solemnly executed long before the receiver's certificates were thought of, postponed in favor of charges created by the latter; and they deny that the chancellor has rightfully the power to give such precedence to new creditors. The chancellor has not in his opinion discussed this question, or presented any arguments or authorities in support of the disputed power. But this has been ably done by the counsel for appellees.

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A claim of very large authority in the courts has been made in argument under this head ; and the subject is a very important one, and sufficiently new to require an investigation at some length.

1. “The object sought by the appointment of a receiver,” says Mr. Kerr, in his work on Receivers, “ may be generally described to be, to provide for the safety of property, pending the litigation which is to decide the right of litigant parties.” P. 3. “ The duty of the court, upon a motion for a receiver, is merely to protect the property in the mean time for the benefit of those persons to whom the court at the hearing of the cause, when it will have before it all evidence and materials for a determination, shall think it properly belongs.” Ib. p. 6. Blakeney v. Dufaur, 15 Beav. 42. In Gardner v. L. G. & D. Railway Co. Law Rep. 2 Ch. App. 201, an appeal was taken to the court of appeal in chancery, from an order of the vice-chancellor, appointing the general manager and the secretary of the company, on the application of a creditor with a lien, managers and receivers of the company's "undertaking" or railroad business. The lords justices discharged the order, saying: “When the court appoints a manager of a business or undertaking, it, in effect, assumes the management into its own hands; for the manager is the servant or officer of the court, and upon any question arising as to the character or details of the management, it is the court that must direct and decide. The circumstance that, in this particular case, the persons appointed were previously the managers employed by the company” (as was one of the persons appointed in the case before us), “is immaterial. When appointed by the court, they are responsible to the court, and no orders of the company, or of the directors, can interfere with this responsibility. Now, I apprehend that nothing is better settled than that this court does not assume the management of a business or undertaking except with a view to the winding up and sale of the business or undertaking. The management is an interim management; its necessity and its justification spring out of the jurisdiction to liquidate and to sell; the business or undertaking is managed and continued in order that it may be sold as a going concern, and with the sale the management ends.” P. 212. This is stated by Cairns, Lord Justice, as the rule in such matters. And in addition (pertinently of views hereinafter to be presented), he says : “ When parliament, acting for the public interest, authorizes the construction and maintenance of a railway, both as a highway for the public and as a road on which the company may themselves become carriers, .... it confers powers and imposes duties and responsibilities of the largest and most important kind, .... upon the company which parliament has before it, and upon no other body of persons. . .. . It is impossible to suppose that the court of chancery can make itself, or its officer, without any parliamentary authority, the hand to execute these powers; and all the more impossible when it is obvious there can be no real and correlative responsibility for the consequences of any imperfect management. It is said that the railroad company did not object to a manager. This may well be so. But in the view I take of the case, the order would be improper, even if made on the express agreement and request of the company.”

A court of equity in this country may, in certain cases, interpose, and appoint a receiver, when a company, receiving tolls and income more than Vol. IV.]

Meyer v. Johnston.

[No. 3.

sufficient to pay the expenses of an economical administration, refuses to apply the surplus to the payment of a judgment or mortgage creditor.

The Covington Drawbridge Co. v. Shepherd, 21 How. 112, presents an instance of the exercise of this power. The receiver in that case was also directed, out of the tolls and income of the bridge, to keep it in repair. In Stevens et al. v. Davison et al. 18 Grattan, 819, a board of directors, some of whom “had been concerned in the fraudulent issue of a very large amount of spurious stock, greatly exceeding in amount the lawful stock of the company," on the very day when their term of office was to expire, and the annual meeting of the stockholders, which the directors failed to call, should have been regularly held, made a lease of the railroad, of which they were directors, for a period of ten years, at an inadequate rent, without authority from the charter to do so, and in violation of a by-law adopted by the stockholders. Some of the lawful stockholders filed a bill to have the lease declared void, and for other relief; and a receiver was appointed to take possession and control of the road and operate it under directions contained in the decree. The court of appeals of Virginia, reviewing the proceedings, said : “ While for the reasons assigned in Gardner v. The L. C. f. D. Railway Co. Law Rep. 2 Ch. App. 201, a court of chancery will be reluctant to appoint a receiver to take charge of and manage a railroad, it is competent to do so, when such a course is indispensable to secure the rights of the legitimate stockholders, and to prevent a failure of justice. And the court is of opinion that, under the circumstances of this case, it was proper for the court to appoint a receiver to take charge of and manage the railroad until it can be ascertained, by a proper inquiry to be made in this cause, who are the legitimate stockholders of said company, to whom the custody and management of said railroad should be committed.”

The foregoing instances have been selected as illustrative of the authority of courts of equity to take charge of the management of property in litigation. Their interference by receivers and managers in such cases, and for such purposes, is easily vindicated. In doing so, they put forth a power merely incidental and subsidiary to their functions of ascertaining and enforcing the rights of the persons concerned in the subject matter in controversy. They take and preserve the property, in order to uphold and maintain the rights of creditors and others therein, and to enforce the obligation of contracts. It is in the exercise of the judicial function only that a court obtains jurisdiction between litigant parties, of the cause in which it is authorized to take such control, for the preservation of the property involved. And we are not aware of any principle of law, or element of wise policy, which would justify such court, after so getting possession, in laying aside its judicial character, and engaging, however hopeful the scheme, in the completion of unfinished undertakings, and in raising money for this purpose, as the parties themselves could not, by setting up liens which shall displace other and older liens, without the consent of the persons to whom they belong. The objections to such transactions are, that they are necessarily, to some extent, speculative; that they arbitrarily unsettle interests founded on the most solemn contracts; and that the court, in conducting them, abdicates its judicial function, and exercises another more akin to that of a bureau of an executive department of the interior.

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