and cannot be justified on the ground of profit to the carrier allowing them. Harris v. Cockermouth & W. R. Co., 3 C. B. (N. S.), 693; Evershed v. The London & N. W. R. Co., 2 L. R., 3 B. 254.

In the first of these cases the judges in the opinion pointed out that if they were to justify a discrimination upon such reasons a railway company might in any case grant a preference to one person over another, provided it acted bona fide in the belief that such a course would be to its advantage. In the second case the court in pronouncing against the validity of the justification used this language:

"We think that a railway company cannot, merely for the sake of increasing their traffic, reduce their rates in favor of individual customers, unless at all events there is a sufficient consideration for the reduction which shall lessen the cost to the company of the conveyance of their traffic or some other equivalent or other services are rendered to them by such individual in relation to such traffic."

The Interstate Commerce Act would be emasculated in its remedial efficacy, if not practically nullified, if a carrier can justify a discrimination in rates merely upon the ground that unless it is given the traffic obtained by giving it would go to a competing carrier. A shipper having a choice between competing carriers would only have to refuse to send his goods by one of them unless given exceptional rates to justify that one in making the discrimination in his favor on the ground of the necessity of the situation.

The order is granted.

Discrimination in Rates-Undue Preference-Effect of Competition.-The above case would seem to be not entirely in harmony with the recent decision of the English Court of Appeal in Phipps v. London, & N. W. R. Co., 50 Am. & Eng. R. Cas. 494, where it was held that the fact that a trader has access to a competing route for the carriage of his goods may be taken into consideration by the Railway Commissioners or the court in deciding whether lower tolls or rates charged to such trader by a railway company constitute an undue preference within the meaning of the Railway and Canal Traffic Acts, 1854 and 1888. See also the case of Liverpool Corn Trade Assoc. v. London & N. W. R. Co. (Eng.), 45 Am. & Eng. R. Cas. 216, and cases cited in note, 234.

QUINCY, MISSOURI & PACIFIC R. Co. et al.

ข.

HUMPHREYS et al.

(145 U. S. 28.)

Receiver-Appointment upon Petition by Railroad Company-Protection of Vested Liens.-When a railroad company is insolvent, its preferential indebtedness large, its credit gone and its property liable to be seized by different courts, its assets dissipated and its system disrupted, a court of equity, upon petition by the company, setting forth these facts may appoint a receiver to take charge of the property. But the company cannot thus on its own petition displace vested liens by unsecured claims and the court must require that the property shall be held by the receiver for the benefit of all concerned therein.

Same Operation of Leased Road-Rentals as a Lien on Earnings of General System. The receiver appointed took possession of a line which had been leased to the insolvent company and operated it for a certain time, keeping its accounts separate however, and applying none of its earnings for the benefit of the general system. The court in appointing the receiver expressly recognized the right of the lessor to take possession on making proper application therefor. Held, that the receiver did not become the assignee of the lease or adopt it so as to render the agreed rentals a lien on the earnings of the general system superior to the rights of the general mortgagees.

Same-Same-Diverted Earnings-Expense of Receiver's Administration.— It appearing that the net earnings of the general system were but a small fraction of the preferential indebtedness, the payment of the rental could not be set up as an equitable claim on the theory of diverted earnings as previously announced by the court. Nor was the rental entitled to priority over the mortgage liens as being an expense originating in the course of the receiver's administration. Fosdick v. Schall, 99 U. S. 241, distinguished.

APPEAL from U. S. Circuit Court for eastern district of Missouri.

The Quincy, Missouri & Pacific Railroad Company of Missouri owned in 1879 about 77 miles of road extending westward from West Quincy towards the Missouri river; had issued mortgage bonds to the amount of $2,000,000; and owed, in addition to the principal of said bonds, a large amount of overdue interest accrued thereon. By an indenture made. August 21, 1879, the railroad of this company was leased to the Wabash Railway Company for a period of 99 years, with the option to the lessee to renew the same perpetually. By the terms of this contract a majority of the common stock of the Quincy Company was to be transferred to the Wabash Company, so as to give the latter control of the former, and

a majority of directors in its board was to be elected in the interest of the Wabash Company. The Wabash Company was to supply $125,000 to the Quincy Company to enable it to complete the construction of its road to Milan, to a connection with the line of the Burlington & Southwestern Railroad, and was itself authorized to extend the road from Milan to its contemplated terminus at Brownville, on the Nebraska state line. A new mortgage was to be made, covering all the property of the Quincy Company, and securing bonds at the rate of $9,000 per mile, which was to be used in retiring the bonds then outstanding, and providing for future construction. Preferred stock of the Quincy Company was also to be issued and used in connection with the new bonds to liquidate its outstanding indebtedness, then estimated to be about $600,000.

The Wabash Company agreed to set aside certain percentages of the gross earnings derived from the operation of the Quincy Company's road, and to apply these percentages -First, to the payment of interest on the new bonds; and, second, of dividends on the stock. The company guarantied to pay interest on the bonds in the event that the said percentage of gross earnings should be insufficient for that purpose; to maintain and operate the railroad of the Quincy Company, keeping the same in good condition and repair for the full term of the lease; and to pay all taxes.

It was further provided that, if the principal of the bonds secured by the mortgage should become due in consequence of default in the payment of interest, the Quincy Company should have the option to forfeit the lease, and reenter without process of law.

Under date of October 1, 1879, a mortgage was made by the Quincy Company to Humphreys and Browning as trustees, whereby all its property, including leases and leasehold interests, was conveyed to the trustees to secure the payment of bonds to be issued at the rate of $9,000 per mile, and the mortgage provided that a default of six months in the payment of interest might be availed of by the bondholders as a cause for declaring all the bonds forthwith due.

November 10, 1879, the Wabash Company was consolidated with other railroad companies, the consolidation forming the Wabash, St. Louis & Pacific Railway Company. This company received possession of the railway of the Quincy Company on July 1, 1880, and by the 1st of July, 1881, had extended the road from Milan to Trenton, a distance of about 31 miles.

On the 27th of May, 1884, the Wabash, St. Louis & Pacific Railway Company filed its bill in equity in the circuit court

of the United States for the eastern district of Missouri, stating that it was insolvent; that it had accumulated a floating debt for its maintenance of $4,784,145; that it was about to make default in interest payments; that such default would be ruinous to all parties interested in its maintenance and its revenues; and that the interest of all the creditors and bondholders would be thereby imperiled.

The bill made various persons and corporations parties defendant having interests in the lines of the Wabash Company as lessors, mortgagors, or trustees under deeds of trust covering the lines or portions thereof, including the Central Trust Company and Cheney, trustees in a general mortgage, the trustee in a collateral trust mortgage, the Quincy Company, and others; and prayed the court to appoint successors to trustees deceased, or to make such other order with respect thereto as would cause the respective trusts to be properly represented in the matters of the litigation; and to require the defendants to set up their several interests, so that the same might be fully represented.

The bill alleged that by their terms nearly all, if not quite all, the mortgages and trust deeds, whether executed by complainant or other companies on any portions of the line prior to the time when complainant acquired the same, not only embraced the roads and tangible property of the companies executing the instruments, but also the revenues and incomes to be derived from the use of the parts of the roads so mortgaged; that the bondholders had always insisted upon their right to look to the revenues of the sections of the road upon which their mortgages rested as a means of paying and discharging their bonds; that all, or nearly all, of the mortgages embraced all rolling stock to be thereafter acquired by the companies executing the mortgages; but, as the lines of the original companies had been absorbed into complainant's system, the rolling stock on the entire system had become so intermingled as to be incapable of division according to the ownership of the several lines of road or according to the several mortgages; and that any attempt to control or dispose of portions of such rolling stock by courts not having jurisdiction of the whole and not competent to deal with the entire property as a unit would produce great confusion and uncertainty, and result in great loss to all persons interested in the rolling stock or in complainant's property or securities.

The bill further averred that the complainant's directors and officers had thoroughly considered and already resorted to all proper means for obtaining the funds by which to pay the floating indebtedness of the company and meet the ac

cruing interest falling due at the beginning of the month of June then next, and continuing to mature by installments at very short intervals, but had wholly failed to provide the means with which to discharge the floating indebtedness and meet the interest; and the company was powerless to accomplish such purpose, and was practically insolvent, and it was certain that a default would occur in June, and complainant be also without means of meeting the floating indebtedness.

It was further stated that complainant's interest in the road and the interests of all its creditors and bondholders were greatly imperiled by the existing prospect of the disruption of the road on the happening of the default; and that, if the lines of railroad were broken up, and the fragments thereof placed in the hands of various receivers, and the rolling stock, materials, and supplies seized and scattered abroad, the result would produce irreparable injury and damage, not merely to complainant, but to all persons having any interest in the road and the securities thereof. Complainant, therefore, "to prevent the breaking up of said lines of road, and the scattering abroad of its assets," and "in order to the preservation of the interests of large numbers of persons, stockholders, and creditors unknown to orator, and in order to the protection of the interests of all concerned, and to prevent a great multiplicity of suits," prayed the court to appoint one or more receivers, and empower and direct such receiver or receivers to take possession of said entire property, and to preserve, operate, and manage and control the same, collect all indebtedness due or to become due to orator, and otherwise to discharge all the duties ordinarily imposed by courts of equity on the receivers of railroad property by such courts appointed; that on a final hearing of said cause your honors will, under this bill, or under such amendments as may be made thereto, or such supplemental bills as shall be filed herein, or such cross bills as parties in interest may also file, decree the sale of said entire property, whether such decree shall judicially foreclose said general mortgage or any of the other mortgages aforesaid, or whether such decree shall dispose of said property as a trust fund on general equitable principles; that your honors will cause all the liens upon said property, or any part thereof, and all rights, claims, and equities of all persons interested therein to be ascertained, defined, and determined, and that the proceeds arising from the sale of such property, or any part thereof, be applied under the orders and decrees of this court, according to the rights, interests, and equities of parties or persons interested in said.