Southern Ry. Co. v. Adams

This case involves a foreclosure proceeding against the Richmond & Danville Railroad Company. Adams Bros. & Paynes, creditors who furnished supplies to the railroad prior to receivership, petitioned to have their claim paid from the mortgaged property proceeds in preference to mortgage debts. The receivers had accepted a draft covering the account plus interest. The Circuit Court allowed the claim, and on appeal, the Circuit Court of Appeals affirmed, holding that by accepting the draft, the receivers approved the claim, and since they received earnings exceeding operating expenses (with surplus applied to improvements and interest), the claim should be paid preferentially. Judge Morris dissented regarding the allowance of interest.

Creditors who supplied the railroad prior to receivership petitioned for preferential payment of their claim from mortgaged property proceeds ahead of mortgage debts. The receivers accepted a draft covering the claim plus interest, and courts held this approved the claim, allowing priority payment since earnings exceeded operating expenses with surplus applied to improvements and interest. The lower court's decree was affirmed on appeal, despite a dissent on interest.

• Receivers accepted draft covering account and interest, approving claim
• Receivers received earnings exceeding operating expenses
• Surplus applied to permanent improvements and interest
• Claim should be paid preferentially from property proceeds

• Appeal taken from decree in favor of petitioners Adams Bros. & Paynes

• Priority of claim for supplies furnished prior to receivership
• Allowance of interest on the claim