COMER et al. v. POLK COUNTY et al., 81 F. 921

MAXEY, District Judge, after stating the case, delivered the opinion of the court. We think the circuit court erred in confirming the master’s report, and ordering the receivers of the Savannah & Western Railroad Company to pay the taxes for the collection of which fi. fas. had been regularly issued by the comptroller general of Georgia in favor of the appellees against the property of the Chattanooga. Rome & Columbus Railroad Company.

It is alleged in the intervening petition of the appellees, and conceded by counsel for the appellants, that the taxes included in the fi. fas. operated as a lien upon all the property of the Chattanooga, Rome & Columbus Railroad Company superior to all other liens. At the time, however, when the interventions were filed, the appellants had no voice in the management and operation of that road. Their connection with it ceased on the 1st day of February, 1894, when E. E.

Jones was appointed receiver of the property under the bill filed by the Central Trust Company of New York against the Chattanooga, Rome & Columbus Railroad Company. But it is contended by t lie appellees, and their petitions of intervention are framed upon that theory, ,,that the taxes assessed against the Chattanooga, Rome & Columbus Railroad constituted an equitable charge against the Savannah & Western Railroad Company by reason of the fact that the latter was in possession of the property of the former, and enjoyed its revenue, during the years in which the taxes accrued.

It may he that during the time the appellants, as receivers, were in possession of and operating the Chattanooga, Rome & Columbus Railroad property as a part of the Savannah & Western Railroad system, the taxes theretofore due on the Chattanooga, Rome & Columbus property were properly chargeable against the property and assets in their hands; this, however, not as a debt or obligation assumed by the receivers, but as an obligation carrying a first lien on the Chattanooga, Rome & Columbus property itself. In other ■words, it was a debt o£ the property, and not of the receivers.

After the severance, however, of the connection of the receivers with the Chattanooga, Rome & Columbus property by the appointment of a separate receiver for that property in an entirely distinct suit, the appellants could only be chargeable with the payment of such taxes, if at all, upon proof showing that they had assets belonging to the Chattanooga, Rome & Columbus Company, or that they had diverted the revenues derived from its operation to the improvement and betterment of the Savannah & Western Railroad, or had paid the same to the holders of its bonds.

In such case equity would require restoration to the extent of the funds diverted. But, if there was no diversion, there could be no restoration. Upon this point the allegations of the intervening petitions are denied by the answer of the appellants, and there is no proof tending to show the state of accounts between the respective receivers, or to elucidate the transactions between the parties. The duty of making the necessary proof devolved upon the appellees.

If there was a diversion of funds by the appellants, it ' could have been easily shown, and the question should not have been left to mere speculation and presumption. The taxes as disclosed upon the face of the fi. fas. are clearly a charge and superior lien upon the property of the Chattanooga, Rome & Columbus Railroad Company, and may be paid out of assets in the hands of Receiver Jones, or from the proceeds of the sale of the property, as the trial court may determine.

It follows from what we have said that the order of the circuit court should he reversed, and the intervening petitions dismissed, and it is so ordered. MeCORMICK, Circuit Judge, dissents.