599


interest,  and  during  failure  to  take  possession,  would  necessarily
and  logically  be  given  priority.  Vested  rights  of  property  would
be  subjected  to  great  detriment  under  such  holding.  The  bonds
of  American  railways  are  scattered  throughout  Europe,  and  are
held  in  many  hands.  It  requires  much  time  to  institute  con-
certed action  by  the  holders  after  default  in  payment  of  interest.
Meantime  unprincipled  directors,  anxious  to  retain  possession  of
the  road,  could  contract  indebtedness,  —  given  priority  by  such
ruling,  —  working  ruin  to  the  mortgage  interest.  The  bondholder
would  be  '  improved  out  of  his  estate,'  and  his  vested  rights  placed
at  the  mercy  of  hostile  directors.  I  am  unwilling  to  assent  to
such  doctrine.     I  do  not  understand  it  to  be  the  law."  ^


Article  II.  —  Priority  op  Back  Claims.
§  603.  Povrer  of  Court  on  Appointment  of  Receiver  to  impose
Conditions  as  to  Payment  of  Back  Claims.  —  The  pOWer  of  the
court  to  require  the  payment  of  certain  back  claims  as  a  condi-
tion of  granting  a  receivership  is  made  to  rest  upon  the  fact  that
it  is  within  the  discretion  of  the  court  to  give  or  refuse  this  kind
of  relief.  The  assumption  being  that,  for  the  reasons  already
enlarged  upon,  the  bondholders  are  bound  in  equity  to  see  these
claims  paid  before  they  themselves  have  any  right  to  the  income,
it  follows  that  the  court  may  require  them  to  do  equity  in  order
that  they  may  receive  equity .^


^  Farmers'  Loan  &  Trust  Co.  v.  Green
Bay,  W.  &  S.  W.  R.  Co.  (1891),  45  Fed.
Rep.  664 ;  s.  c.  46  Am.  &  Eng.  R.  R.  Gas.
