This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
The receiver of a quasi-public corporation may, if acting under order of a court having jurisdiction, incur debts in order to carry on the business, which debts may be given priority over prior liens. This principle is most frequently applied to debts created by receivers of railway companies.1 Thus acting under order of the court he may issue certificates, and the debts thus evidenced may be made a first lien on the trust property displacing prior liens thereon.2 Under special circumstances the expenses of completing a road may be made a lien prior to a pre-existing mortgage.3 The receiver should be given authority to issue certificates which displace prior liens only in case the lienor is a party to the suit,4 and is given notice of the application.5 While this is undoubtedly the safer practice, it seems that if those who furnish money or property to the receiver are willing to take the risk of the final action of the court, prior notice is not necessary; it being sufficient if notice is given before the final order is made.6 The general power of a receiver of a railroad to bind the trust-fund by his contracts is limited to expenses incurred in the ordinary daily administration of the railroad.7 Thus without special authority from the court he cannot bind the fund by accepting a lease of general offices for a term of years which extends beyond the receivership,8 nor can he be allowed expenditures incurred in defeating a proposed subsidy, from a city to aid in constructing a parallel road.9 The power of a court to authorize a receiver to incur obligations which shall incur private liens has been recognized as existing in corporations of a quasi-public character other than railroads, such as electric lighting companies which are under contract to furnish light for the public,10 or to telephone and telegraph companies.11
1 Kneeland v. Luce, 141 U. S. 491; Morgans, etc., Co. v. R. R., 137 U. S. 171; Kneeland v Trust Co., 136 U. S. 89; Union Trust Co. v. Ry., 117 U. S. 434; Miltenberger v. Ry., 106 U. S. 286; Barton v. Barbour, 104 U. S. 126; Wallace v. Loomis, 97 U. S. 146; Vilas v. Page, 106 N. Y. 439; 13 N. E. 743.
2 Union Trust Co. v. Ry., 117 U. S. 434; Swann v. Clark, 110 U. S. 602; Shaw v. R. R., 100 U. S. 605; Browning v. Kelly, 124 Ala. 645; 27 So. 391; Illinois, etc., Bank v. Ry., 115 Cal. 285; 47 Pac. 60; Fletcher v. Waring, 137 Incl. 159;
36 N. E. 896; Hoover v. Ry., 29 N. J. Eq. 4; State v. R. R., 6 Lea (Tenn.) 353; Vermont, etc., R. R. v. R. R., 50 Vt. 500.
3 First National Bank v. Ewing, 103 Fed. 168.
4 Metropolitan Trust Co. v. Ry., 100 Fed. 897.
5 Osborne v. Colliery Co., 96 Va. 58; 30 S. E. 446.
6 Union Trust Co. v. Ry.. 117 U. S. 434.
7 Cowdrey v. R. R., 93 U. S. 352.
8 Chicago Deposit Vault Co. v. McNulta, 153 U. S. 554.