14 , FEDERAL Rnronrna, vol. 38; , ‘
’ Hre of goods while in- possession of ·said railroad company as a com-
mon carrier is"generall`y,`and perhaps properly, classed as an operating
expense; but, when presented against an insolvent railroad company
over four months after the railroad property is placed in the hands of
a receiver in aforeclosure suit,-and urged as a lien upon the income
of the property earned bythe receiver, it is necessary to discriminate
such a debt from debtsarising for labor, supplies, equipment furnished
for and necessary for keeping upwthe railroad as "a going concern."
l " There is authority for holding——·in fact it is practically decreed by
the supreme court of the United States—that debts contracted by a rail-
road corporation, as a part of the necessary operating expense, for labor
and supplies, or for necessary equipment or improvement of the mort-
gaged property, are privileged debts entitled to be paid out of the cur-
‘ rentincome, if themortgage trustee takes possession, or if a receiver is
appointed in a foreclosure suit. 1*bsdick.v.»Schall, 99 U. S. 235; Burn-
ham v. Bowen, 111 U. S. 776, 4- Sup.-Ct. Rep. 675. And if current
earnings are used for the benefit, of mortgage creditorsbefore current
expenses are paid, the mortgagesecurity is chargeable in equity with
the restoration of the fund, which has thus been improperly applied to
their uses. General creditors of a railroad corporation, which includes
those claimingdamages for negligence in operating the railway, have
never been held as having any privilege on the income of. the property,
*. * * but there are many cases to the etiect that no. such privilege
or equity exists. s Davenport v. Receivers, 2 Woods, 519-; In re Manufact·
wring Oo., 4 Fed..Rep. 873; Hilee v. Receiver, 14 Fed. Rep. 141 ; Her-
vey v.·Ra·llway -00., 28 Fedr Rep. 169; Olyphant v. Steel. Oo., Id. 729;
. Trust Co. v. Rn·ilwc·y~C'o.,-Id; 87.1." See Trust Oo. v-. Railroad Oo., 30
Fed. Rep. 895. In the case of Davenport v. Receivers,-cited above, Mr.
Justice Woons said: ~ I   » . ~ ; .· »
f' "It cannot be said that the giving of a prior lien to a traveler for damages
is an expense incident to the execution of the trust which was created in be-
half of the mortgagees. Such a claim is-, in fact, no .—·. expense' at all, in the
proper or ordinary sense of the word. It is a liability-resulting secondarily-
from operating the road, and thatis all." ` y
e · The case of Trust Co. v., Railway Co., cited above, was a case identical,
except in point of time, with.the one now in hand. In all the cases
that I have examined, where debts arising before the receivership have
been allowed as prior in equity to the claim of the bondholder on the
¢ earnings during fthe receivership, the underlying principle is that the
debtf when incurred, operated in a direct way to the advantage of the _
mortgage holders; and in all the cases that I have examined debtsarising
for damages growing out of the transportation of passengers and freight
have been classed as general debts, except in relation to tratiic balances due
other roads at the time a receiver was appointed, and such traffic balances
have been put upon the special footing that-the payment of the same
operated as a speciiic advantage to the property. "Many circumstances
may exist which may make lit necessary and indispensable to the busi·
ness of the road and the preservation of the property for the receiver to —