only so far as they have come before the courts for construction.

These various factors are taken up in detail in the appropriate subdivisions of the annotation.

Receivership an ancillary remedy.

Before proceeding to the distinctive questions relating to the subject of the annotation, it has seemed advisable to call attention to some general principles which affect the decisions in applications by mortgagees for the appointment of receivers. But upon these general principles the annotation does not purport to be exhaustive of the cases.

It is a general rule that the appointment of a receive is an ancillary remedy in a proceeding that has some other primary object.

Brinkman v. Ritzinger (1882) 82 Ind. 358; Pope v. Hazen (1914) 4 Tenn. C. C. A. 224; Houston & B. Valley R. Co. v. Hughes (1916) Tex. Civ. App., 182 S. W. 23. According to the court in Pope v. Hazen (1914) 4 Tenn. C. C. A. 224: "A bill filed alone for the purpose of having a receiver appointed, and which seeks no other relief, is a novel procedure to this member of the court. A receiver is usually and generally asked for to take charge of, and to care for and protect, property involved in a pending litigation. Or, in other words, where property is involved in a litigation, and a party in possession of it is committing wastes, or allowing it to get in bad repair, or permitting it to deteriorate in value, or exposing it to danger of fire, then a receiver is appointed to take charge of it and preserve it for the benefit of those the court finds are entitled to it at the hearing of the case. But we have never known a case where a bill was simply filed, and the only special prayer for relief therein was the appointment of a receiver." In Houston & B. Valley R. Co. v. Hughes (Tex.) supra, a suit by a bondholder against a railway company for a receiver, the court says: "We do not wish to be understood as holding that the insolvency of a corporation is not a ground for the appointment of a re

ceiver, for such holding would be directly contrary to the provisions of the statute above quoted; but what we think that the cases referred to hold, and what we mean to hold, is that a receiver should not be appointed on the ground of insolvency unless the plaintiff shall, by his suit, seek the recovery of a judgment of some kind against the insolvent corporation, and pray for the appointment of a receiver as a purely ancillary remedy. In no case ought a receiver to be appointed on the ground of insolvency of a going concern, as the primary and sole object sought to be effected by the suit. . . . It is well settled by Texas decisions that the appointment of a receiver is an ancillary remedy, and that before a receiver will be appointed the plaintiff's petition under which the appointment is sought must state a cause of action against the defendant. If it does not, the prayer for the appointment of a receiver should be denied." An order appointing a receiver was held void in Merchants' & M. Nat. Bank v. Kent Circuit Judge (1880) 43 Mich. 292, 5 N. W. 627, in case of a chattel mortgage, for the reason that it was made when there was no suit pending.

Ordinarily a receiver will not be appointed until the mortgage can be foreclosed. American Loan & T. Co. v. Toledo, C. & S. R. Co. (1886) 29 Fed. 416, where it is stated that, although a court of equity will sometimes interfere by injunction to prevent a waste or destruction of the mortgaged property, before the conditions of the instrument have been broken and a right to foreclose has accrued, it does not thereby result that the court will appoint a receiver to manage the property until the mortgage can be foreclosed.

But the right to foreclose does not carry with it the right to a receiver as a matter of course. Mercantile Trust Co. v. Missouri, K. & T. R. Co. (1888) 1 L.R.A. 397, 36 Fed. 221.

The rule that the appointment of a receiver is a remedy ancillary to a suit having some other primary object has some exceptions. It is stated in Davis v. Alton, J. & P. R. Co. (1913) 180 III..

App. 1, that "the weight of authority seems to be that, if such a showing is made by a lien holder or other interested person as convinces the court to whom application is made that it is in the interest of all persons concerned to appoint a receiver, then he has jurisdiction to act." In Thompson v. Natchez Water & Sewer Co. (1890) 68 Miss. 423, 9 So. 821, a bill by the holders of second mortgage bonds executed by a water and sewer company, to procure a receiver before default in the mortgage, it was alleged that the assets of the company were insufficient to pay the mortgage debt; that the company was in a failing condition, and would not be able to continue its business and carry out its contracts with the city of Natchez and with its other patrons; that, while default under the mortgage had not taken place, it was certain to occur very soon; that many creditors of the company, who were without liens, had sued out attachments and had levied upon the mortgaged property, and had garnished the debts due to the company, which debts were also covered by the mortgage; that it had become impossible for the company to collect its revenues, and it was without resources to carry on its business; and that its property and franchises were in imminent danger of waste and loss. It was held error to dismiss the bill on demurrer. The court said that it was not intended to decide that a receiver should have been appointed, but only that the bill was not properly dismissed on demurrer. And in Brassey v. New York & N. E. R. Co. (1884) 22 Blatchf. 72, 19 Fed. 663, it is stated that although, as a rule, the mortgagee cannot ask for relief until his mortgage debt has become due, he can go into a court of equity before that time has arrived, and ask for an injunction and a receiver to prevent the subject-matter of his mortgage from being impaired and wasted. In Long Dock Co. v. Mallery (1858) 12 N. J. Eq. 431, it is stated that if a bill shows a case for an injunction and a receiver, the exercise of that power is called for, although the time of payment set in the mortgage has not yet

come, unless the equity of the bill is met by the answer.

It is stated in Farmers' Loan & T. Co. v. Meridian Waterworks Co. (1905) 139 Fed. 661, that the trustee in bonds issued by a corporation may ask the appointment of a receiver to prevent the subject-matter of his mortgage from being impaired and wasted, without waiting until there has been a default in the payment either of the principal or of the interest on the indebtedness secured.

A foreclosure proceeding for instalments of interest, which has proceeded to judgment and from which an appeal has been taken by the mortgagor, is still pending for the purpose of an application for a receiver of the rents and profits, within the rule that there must be an action pending. Brinkman v. Ritzinger (1882) 82 Ind. 358. The trial court was held to have jurisdiction to appoint a receiver after an appeal, in Philadelphia Mortg. & T. Co. v. Goos (1896) 47 Neb. 804, 66 N. W. 843. Philadelphia Mortg. & T. Co. v. Goos was followed, on this point, in Buck v. Stuben (1901) 63 Neb. 273, 88 N. W. 483.

Probability of prevailing.

Another general test as to the right to a receiver is the probability that the mortgagee will succeed in obtaining the general relief sought. American Loan & T. Co. v. Toledo, C. & S. R. Co. (1886) 29 Fed. 416; Ashurst v. Lehman, D. & Co. (1888) 86 Ala. 370, 5 So. 731; Warren v. Pitts (1896) 114 Ala. 65, 21 So. 494. A receiver should not be appointed where the mortgage is void. Rogers v. Southern Pine Lumber Co. (1899) 21 Tex. Civ. App. 48, 51 S. W. 26. The appointment of a receiver is not a matter of course, in all cases, upon a default and a bill to foreclose. American Loan & T. Co. v. Toledo, C. & S. R. Co. (Fed.) supra. The right to a foreclosure does not necessarily carry with it the right to have a receiver appointed. Farmers' Loan & T. Co. v. Winona & S. W. R. Co. (1893) 59 Fed. 957. In Whitehead v. Hale (1896) 118 N. C. 601, 24 S. E. 360, where the mortgagor denied that there was any balance due on the mortgage, and alleged that the mort

gagee was indebted to him, and asked for an account and a cancelation of the mortgage, the court refused a receiver. See infra, under heading "Discretion of court."

Discretion of court.

It has been stated in a number of cases that the appointment of a receiver rests in the discretion of the court.

United States.-Morrison v. Buckner (1843) Hempst. 442, Fed. Cas. No. 9,844; Tysen v. Wabash R. Co. (1878) 8 Biss. 247, Fed. Cas. No. 14,315; Farmers Loan & T. Co. v. Winona & S. W. R. Co. (1893) 59 Fed. 957; Central Trust Co. v. Chattanooga, R. & C. R. Co. (1899) 36 C. C. A. 241, 94 Fed. 275.

Alabama.-Lehman Bros. v. Tallassee Mfg. Co. (1879) 64 Ala. 567; Ashurst v. Lehman, D. & Co. (1888) 86 Ala. 370, 5 So. 731; Warren v. Pitts (1896) 114 Ala. 65, 21 So. 494; Albritton v. Lott-Blackshear Commission Co. (1910) 167 Ala. 541, 52 So. 653. District of Columbia. Grayson (1900) 16 App. D. C. 174. Illinois. Garrett v. Simpson (1904) 115 Ill. App. 62.

Wood v.

(1877) 12 Bush, 608. Minnesota. Lowell v. Doe (1890) 44 Minn. 144, 46 N. W. 297.

Mississippi.-Myers v. Estell (1873) 48 Miss. 373.

Nebraska. Jacobs v. Gibson (1879) 9 Neb. 380, 2 N. W. 893.

New York.-Syracuse City Bank v. Tallman (1857) 31 Barb. 201; Ross v. Vernam (1896) 6 App. Div. 246, 39 N. Y. Supp. 1031.

North Carolina.-Whitehead v. Hale (1896) 118 N. C. 601, 24 S. E. 360. Wisconsin. Peters v. Bossmann (1923) — Wis. —, 192 N. W. 465.

The general rule applies in such cases that the appellate court will not interfere with the lower court's determination unless there is an abuse of discretion. There was held to be no abuse of discretion in appointing a receiver in Patterson v. Clark (1892) 89 Ga. 700, 15 S. E. 641, a case involv

ing an absolute transfer which was admitted to be a mortgage. In Throckmorton v. Slagle (1882) 3 Ohio Dec. Reprint, 550, it was held to be within the discretion of the court to appoint a receiver in an action to foreclose a mortgage, to which the assignee in insolvency of the mortgagor is a party defendant, if the land is probably insufficient to satisfy the mortgage debt; or to refuse the appointment of a receiver and order the assignee to collect the rents and profits, keep an account of them separately, and, on final distribution, order the assignee to pay the same to the mortgagor.

A receiver was refused in Whitehead v. Hale (N. C.) supra, where the mortgaged property consisted of a newspaper, together with its press, types, subscription lists, etc., including its good will, and it was shown that the property was not depreciating, but in fact was appreciating in value, and that to appoint the receiver would be really to destroy the chief value of the property. The fact that the mortgagor was insolvent was held not to require a different ruling, where there was no allegation that he intended to conceal or destroy the property.

A reluctance to appoint a receiver for a railroad company is manifested in some cases. Milwaukee & M. R. Co. v. Soutter (1865) 2 Wall. (U. S.) 510, 17 L. ed. 900; Tysen v. Wabash R. Co. (1878) 8 Biss. 247, Fed. Cas. No. 14,315. This does not mean that a receiver of railroad property will not be appointed in a proper case. But a receiver will not be appointed in an action to foreclose a mortgage upon a railroad, because of dissatisfaction with the management of the road, or because the mortgagee's contract may not have been as favorable as it was supposed to have been. American Loan & T. Co. v. Toledo, C. & S. R. Co. (1886) 29 Fed. 416. When a court of chancery is asked by railroad mortgagees to appoint a receiver of railroad property pending proceedings. for foreclosure, the court may, as a condition of issuing the necessary order, impose such terms in reference to the payment from the income, dur

ing the receivership, of outstanding debts for labor, supplies, equipment, or permanent improvement of the mortgaged property, as may, under the circumstances of the particular case, appear to be reasonable. Union Trust Co. v. Souther (1883) 107 U. S. 591, 27 L. ed. 488, 2 Sup. Ct. Rep. 295. The mortgagee of a railway company was held entitled to a receiver in Gray v. Manitoba & N. W. R. Co. (1896) 11 Manitoba L. R. 42, but there is little discussion on this point.

The appointment of a receiver in a mortgage foreclosure upon a homestead was held to be a matter within the discretion of the trial court in Peters v. Bossmann (1923)

192 N. W. 465.

Wis.

It does not follow as a matter of course, because there is a default in interest, that a mortgagee has a right to the appointment of a receiver. Wabash, St. L. & P. R. Co. v. Central Trust Co. (1884) 22 Fed. 272. The appointment of a receiver of the property of a railroad company is not necessarily one of the consequences of its failure to pay its interest coupons at maturity, although such failure gives the right to foreclose the mortgage. Farmers' Loan & T. Co. v. Winona & S. W. R. Co. (1893) 59 Fed. 957. In such a case the existence of a reasonable dispute as to whether the conditions of the mortgage have been broken is sufficient cause to refuse a receiver. American Loan & T. Co. v. Toledo C. & S. R. Co. (Fed.) supra.

The court in Romare v. Broken Arrow Coal & Min. Co. (1902) 114 Fed. 194, refused the appointment of a receiver pending foreclosure, where the evidence did not show that the value of the property was being impaired, or that the mortgagor was insolvent, stating that on the supposition that the mortgagor, which was a coal-mining company, was insolvent, still there was no claim that the mines were being unskilfully, imprudently, or dishonestly worked. It is further stated to have been admitted that the mines should be worked, and the court concludes that if the mines are to be operated at all it should be done by the then management, subject to the

control of the court, rather than by a receiver.

II. General rules.

a. In general.

The right to the appointment of a receiver is dependent, in a certain degree, upon the theory prevailing as to the effect of a mortgage. The ancient theory of a mortgage, viz., that the legal title passed thereby, is the explanation of some early cases denying the appointment of a receiver on the ground that the mortgagee could, by an action at law, obtain possession of the property, where the mortgagor was in possession. Morrison v. Buckner (1843) Hempst. 442, Fed. Cas. No. 9,844; Williams v. Robinson (1844) 16 Conn. 517; Sturch v. Young (1842) 5 Beav. 557, 49. Eng. Reprint, 694, 12 L. J. Ch. N. S. 56; Berney v. Sewell (1820) 1 Jac. & W. 648, 37 Eng. Reprint, 515, 21 Revised Rep. 265. In Williams v. Robinson (1844) 16 Conn. 517, supra, one who took a mortgage from the owner of an undivided interest in real estate, who was in possession thereof, was denied the right to a receiver on the theory that the mortgagee should be left to his action at law to recover possession and take the rents and profits for himself.

The court in Morrison v. Buckner (Fed.) supra, does not adopt this rule to its fullest extent, but says that receivers in mortgage cases will never be appointed unless it is clearly shown that the security is inadequate, or that the rents and profits have been expressly pledged for the debts, or that there is imminent danger of the waste, removal, or destruction of the property. There must, according to this court, be some very strong special reason for the appointment. There being no special reason in this case, the court refused an appointment, on the ground that the mortgagee had another adequate remedy by ejecting the mortgagor. The mortgage involved in this case was of a slave.

It has been held that equity will not aid the mortgagee in obtaining possession pending the litigation; the most that will be done is to appoint a receiver, for the purpose, only, of pre

serving the property and its rents and profits from waste and diversion. Cheever v. Rutland & B. R. Co. (1867) 39 Vt. 653.

The above view, prevailing under the ancient theory of mortgages, is set forth, also, in Cortleyeu v. Hathaway (1855) 11 N. J. Eq. 39, 64 Am. Dec. 478, although a receiver was authorized in that case. A first mortgagee was held entitled to a receiver in Mahon v. Crothers (1877) 28 N. J. Eq. 567,, where it appeared that she had no personal security for the debt, that the mortgaged premises were an insufficient security, that the mortgagor, who was in receipt of the rents and profits, not only had not yet paid the interest, but had not paid the annual taxes, whereby a lien on the premises therefor, paramount to that of the mortgage and bearing a high rate of interest, had been created and still existed—a lien which, unless the property were redeemed therefrom, would extinguish the mortgage. Warwick v. Hammell (1880) 32 N. J. Eq. 427, a receiver was appointed at the instance of a second mortgagee who had obtained a decree for the sale of the mortgaged premises, on which execution had been issued and the property advertised for sale, when a third person attacked his title to the mortgage and obtained a stay of the sale, where the mortgagor, who was insolvent, was in possession of the mortgaged premises, paid no interest, and allowed the taxes to remain unpaid, and it was doubtful whether the property, at a forced sale, would bring enough to pay off the encumbrances.

In

In other cases a receiver has been appointed, although the legal estate vested in the mortgagee upon default. Hill v. Robertson (1852) 24 Miss. 373. This was held, in this case, to be a ground for the appointment of a receiver, independently of the fact that the premises were inadequate security and the mortgagor insolvent. Oldham v. First Nat. Bank (1881) 84 N. C. 304; Henshaw V. Wells (1848) 9 Humph. (Tenn.) 568; Bristow v. Home Bldg. Co. (1895) 91 Va. 18, 20 S. E. 946, 947.

It is the theory of some cases that after the mortgagor makes default in the payment of the mortgage, the mortgagee can claim the rents, income, and profits, and the right to a receiver to take charge thereof seems to be assumed as a matter of course. Johnston v. Riddle (1881) 70 Ala. 219 (obiter). But other cases in this jurisdiction require the showing discussed in the succeeding subdivisions of this annotation. In one such case it is expressly held that the appointment of a receiver is not a mere matter of course. Scott v. Ware (1880) 65 Ala. 174.

In Bidwell v. Paul (1875) 5 Baxt. (Tenn.) 693, a receiver was appointed at the instance of a beneficiary of a deed of trust, the court holding that a deed of trust is, in substance, a mortgage, though some immaterial differences may be found between them.

Where the mortgage includes real, personal, and mixed property, the remedy by ejectment is held not adequate, and a receiver may be appointed in a proper case. Dow v. Memphis & L. R. R. Co. (1884) 20 Fed. 260, modified on other grounds in (1887) 120 U. S. 287, 30 L. ed. 595, 7 Sup. Ct. Rep. 482.

That a receiver will not be appointed where the mortgagor is solvent and able to pay any deficiency has been held true. Myers v. Estell (1873) 48 Miss. 373.

That a receiver will not be appointed as a matter of course, however, see Pope v. Hazen (1914) 4 Tenn. C. C. A. 224, and Mercantile Trust Co. v. Missouri, K. & T. R. Co. (1888) 1 L.R.A. 397, 36 Fed. 221, supra, I.

It is stated in the North Carolina case, Kerchner v. Fairley (1879) 80 N. C. 24, that after the day of default a mortgagee is entitled to enter into the possession of the mortgaged premises, and take and apply the rents and profits in liquidation of his debts, his right to do so being incident to his legal estate, and part of his security. A receiver appointed where the common-law theory of mortgages prevailed was held to acquire the right to the rents and profits of the mortgaged