Opinion by
Me. Justice Mesteezat,
These three appeals are from two decrees of the Court of Common Pleas of Northumberland County, sitting in equity, and as the questions raised in all the appeals are practically identical they may be considered and disposed of in one opinion. The facts will be found in detail in the reporter’s notes. They are principally of record and none of them, essential to the decision, is in dispute. The Sunbury and Susquehanna Railway Company, herein called the “Merged Company,” was formed by an agreement, dated January 16, 1912, merging and consolidating the Northumberland County Traction Company, herein called “Traction Company,” the Sun-bury and Selinsgrove Electric Street Railway Company, herein called “Selinsgrove Company,” the Sunbury, Lewisburg and Milton Railway Company, herein called “Lewisburg Company,” and two other railway companies, the merger being made in pursuance of the Act of May 3, 1909, P. L. 408. Prior to the merger, the three specifically named constituent companies independently owned and operated street railways. They each secured an issue of first mortgage bonds by a mortgage or trust deed to a trustee on all the property and franchises then owned or thereafter to be acquired by them respectively, and the bonds are still outstanding and are due and unpaid. The merged company also secured a bond issued by a top mortgage and those bonds are outstanding and default in payment was made. - On December 15, 1913, on a creditors’ bill filed by the Pennsylvania Steel Company, the merged cpmpany was adjudged insolvent and receivers were appointed by the court below. Subsequently, the court declined to permit the Philadelphia Trust Company, trustee in the traction company mortgage, to foreclose its mortgage and sell the mortgaged premises, and granted the receivers an order to sell, as an entirety, the property and franchises' of the merged corporation and its constituent corporations, divested of all liens against the consolidated and constituent companies. [164]*164From, these decrees, the Philadelphia Trust Company and the Scranton Trust Company, trustees in two of the underlying mortgages, have taken appeals.
The principal and controlling questions in the appeals are substantially the same, and may be stated as follows: (1) Can a court of equity deny the trustee under the traction company mortgage the right upon default to foreclose and sell the mortgaged property; (2) Can the court decree a sale of the merged road as a unit by the receivers divested of the lien of the underlying mortgages of the constituent companies; (3) Does the Public Service Company Law require consent of its commission to foreclose the underlying traction company mortgage?
The learned judge of the court below refused to permit a separate foreclosure and sale under the traction company mortgage, and the reasons assigned are that it would work irreparable injury to the bondholders of the other constituent companies and the merged company, would be to the manifest injustice of all classes of creditors, would result in imposing additional burdens upon the traveling public and materially inconvenience the public travel upon the railway, would disconnect the roads of the other two constituent companies and compel the receivers to operate them as a unit without any means of connection, would greatly impair the value of the rolling stock which is used on the whole system, would prevent marshalling the assets as between the liens and preferential claims and between the units composing the merged company, and the road would sell for a better price as a whole than if sold in parts.
We are not convinced that these or any other reasons brought to our attention are sufficient, under the facts of these cases, to justify the court in refusing to permit the trustee under the traction company mortgage to .enforce its rights and those of the bondholders acquired by and in accordance with the terms of the mortgage. This obligation was given to secure a bond issue and is the contract between the company and its creditors, the [165]*165holders of its bonds. The mortgage, in specific terms, imposes the obligation to pay the debt and interest of the bonds according to their tenor, and provides remedies, in case of a default in the performance of-any covenant or stipulation of the contract, for enforcing the rights and liens of the bondholders. These remedies, as the mortgage discloses, are by a foreclosure or other appropriate proceeding, or by a sale of the mortgaged property by the trustee, and it is declared that “nothing herein contained shall be construed as abridging the power of the trustee to foreclose this indenture by bill in equity at any time after any default shall have been made and shall have continued as above provided.” It is stipulated in the mortgage that, in any foreclosure or other sale of the property and franchises of the company in the execution of its provisions, the purchaser may use any of the matured and unpaid bonds and coupons toward payment of the purchase-price. It is conceded, and the court finds, that default was made in payment of interest on the bonds whereby the principal thereof had become due, and that the trustee had been requested to declare all the bonds due and payable and to proceed to enforce the rights and liens of the bondholders, as provided in the mortgage. The parties, therefore, not only stipulated in the mortgage for the payment of the bonds with their interest; but provided therein the remedies to enforce the payment of the indebtedness. The federal and state constitutions forbid the impairment of the obligation of contracts, and, as a mortgage is a contract, its terms are, therefore, inviolable. This inhibition extends to the remedy specified in the contract which becomes a part of the obligation and, without consent, cannot be altered, defeated or otherwise affected by subsequent legislation or by the judgment or decree of a judicial tribunal. This is settled on principle and authority, and of the numerous decisions in all jurisdictions enforcing the doctrine we need cite but two of our own cases. In Billmeyer v. Evans & Rodenbaugh, 40 Pa. 324, 327, Mr. [166]*166Justice Woodward, delivering the opinion, said: “A statute strictly remedial may impair the obligation of a contract, and when this happens the act is unconstitutional : Bronson v. Kinzie et al., 42 U. S. 311. This always happens where the parties make legal remedies a subject of their contract and subsequent legislation conflicts with what they have expressed in their agreement. If they do not prescribe the rule of remedy in their contract, the law making power is free; but if they do, they become a law to themselves, and the legislature must ret them alone.” In the subsequent case of Breitenbach v. Bush, 44 Pa. 313, the same learned judge, speaking for the court, restates the doctrine as follows (p. 318) : “It sometimes happens that the parties contract concerning the remedy—that they stipulate in the body of the contract that, in case of the failure of payment by a certain day, there shall be no stay of execution, or that the mortgagees may enter and sell the mortgaged estate—or that all exemption rights shall be waived. In such cases, the rule is that the remedy becomes a part of the obligation of the contract, and any subsequent statute which affects the remedy impairs the obligation, and is unconstitutional.”
The constitutional provision, federal and state, forbidding the impairment of the obligation of contracts, lays its hand on the legislative department of the government, but the principle has like force when invoked for a similar purpose in the judicial department. There is no authority, common law or statutory, in the courts which empowers them to exercise functions expressly under the ban of the constitutional inhibition. In the language of Chief Justice Beasley in New Jersey Midland Ry. Co. v. Strait, 35 N. J. L. 322, 324, “neither the court nor the legislature can alter the bargain between these parties.” We have distinctly so held in Galey v. Guffey, 248 Pa. 523, 528, where it is said: “It is true that what is prohibited is legislative action the effect of which would be the impairment of a contract; but what the [167]*167legislature may not do iu this regard certainly the courts may not do. The power that is here denied the legislature was not reserved to the courts.”
It is, therefore, clear that the terms of the mortgage contract cannot be altered or impaired by either the legislature or the courts, and this applies to the remedies, or specific provision for its enforcement, as well as to the obligation to pay the bonded indebtedness. The learned judge found that the traction company mortgage is a valid and subsisting mortgage and constitutes a first lien upon all the real and other estate, property and franchises of that company, with the right of the mortgagee, on default, to sell the mortgaged property, or foreclose the mortgage, and the right of the purchaser to use the bonds in payment of the purchase-price, but refused to permit the mortgagee trust company to enforce the lien and rights of the bondholders in accordance with the specific provisions of the mortgage contract. If, as said by Mr. Justice Woodward in the Billmeyer case, the courts may do this, the constitutional provisions are a vain parade of words, a mere theoretical rule without any practical force or value. This action of the court not only violated tbe contractual rights of the holders of the bonds secured by their mortgage but also the express provisions of the merger agreement, as well as the .provisions of the Act of May 3,1909, P. L. 408, under which the several constituent companies were consolidated. The merger contract provides, as will be observed, “that all the rights of creditors and all liens upon the property of either of the said corporations, parties hereto, shall be preserved unimpaired, and the said corporations may be deemed to continué in existence to preserve the same.” This is the identical language of the third section of the Act of 1909, and, therefore, the rights and remedies conferred on the holders of the bonds under the traction company mortgage were protected and assured by agreement of the several constituent companies entering the merger, and by the express mandate of the statute au[168]*168thorizing and legalizing the agreement which unified the several constituent systems of electric railways.
The effect of the decree refusing the trustee of the traction company mortgage the right to foreclose and sell under its mortgage is far-reaching, and deprives the bondholders of contractual rights essential to the full protection of their securities. It is conceded and was found by the court that default was made by the three constituent companies, and, hence, the principal and interest of the whole bond issue was due and unpaid at the time permission was asked to proceed on the traction company mortgage. By the terms of the decree, therefore, the traction company is barred from its equity of redemption in the mortgaged premises and the mortgagee is denied the right to foreclose the mortgage and to collect the indebtedness. This, as is apparent, is an important right possessed by the mortgagee, especially as the mortgage provides no other source from which the bonds can be paid. The decree also deprives the bondholders of the valuable right, in case of their being compelled to purchase the property to protect themselves, of applying the bonds in payment of the purchase-price, which is permitted, as provided in the mortgage, “in case any foreclosure or any other sale shall be made of the said property and franchises in execution of the provisions of this mortgage.” The denial of the right to proceed on the mortgage take away this right, a right'which unquestionably enhanced the value of the bonds. It is true, the decree of sale issued to the receivers permits the use of the bonds in payment of the purchase-price; but it requires a cash deposit of $10,000 by each bidder, and a cash payment of $100,000 on acceptance of the bid, and imposes other terms different from those provided in the merger agreement, which renders this contractual right practically valueless. The denial of a foreclosure and sale under the traction company mortgage also seriously affects the bondholding creditors, in that it deprives the purchasers of the property and franchises [169]*169of that company of the statutory right to organize a corporation and. operate the property as an independent railway.
The reasons assigned by the learned court below for refusing to permit the trustee to make a separate sale in foreclosure of the mortgaged property, as will be observed, are, in effect, that it would be detrimental to the interests of the holders of the bonds of the other constituent companies and of the merged company, would result in inconvenience to public travel on the merged railway by disconnecting the roads of the underlying companies, and that the road as a whole would sell for a better price. These reasons are not sufficient to sustain the court’s action. They entirely ignore and put aside the conceded rights of the traction company bondholders which are secured by their mortgage and of which all subsequent creditors had full notice. These creditors are not in a position to insist that their property interests and the convenience of the public will be endangered or sacrificed by a decree permitting the holders of the traction company bonds to enforce payment by availing themselves of the remedies granted them in the mortgage. Such a decree will violate no rights of those creditors, although their interests may be injuriously affected, and 'hence they cannot successfully invoke the aid of a court to defeat the prior rights of the traction company’s creditors which are sought to be enforced in strict compliance with the company’s contractual obligation. The language of the court in Pairpoint Mfg. Co. et al. v. Philadelphia Optical & Watch Co. et al., 161 Pa. 17, may well be applied here. In reversing a decree which enjoined a sale by the sheriff at the instance of the receivers of the defendant company, we said (p. 22) : “The confession of judgment to the appellant being lawful, the only remaining reason presented by the petition for interfering with the writ of execution is that a sale can be more advantageously conducted in the interests of all the creditors by the receivers. This is not a sufficient reason. The [170]*170appellant is pursuing the regular and orderly course for the collection of a judgment lawfully obtained for a debt admittedly due. This is its right. The interests of other creditors may be affected thereby, but, until it is shown that their rights are violated, no one has a standing to challenge the appellant’s right to use the means provided by law for the enforcement of its claim.”
We do not agree that the so-called preferential claims take precedence of the bonds secured by the underlying-mortgages. They are debts incurred by the receivers of the merged company, and hence were contracted subsequently to the then existing indebtedness created by the prior mortgages of the constituent companies. They can and doubtless will be paid out of the funds arising from the operation of the road by the receivers.
1 The learned chancellor held that the court had authority to decree the sale of the merged road as an entirety, by its receivers, freed and discharged of all liens, including the mortgages of the underlying companies. In considering this question, it is well to keep in view the fact that the parties objecting to the court’s conclusion are the holders of the bonds of the underlying companies and not the holders of the bonds of the merged company. The reasons assigned for the court’s conclusion are the same as those for refusing to permit a separate sale in foreclosure of the traction company mortgage, and that the jurisdiction of the court in equity having attached by virtue of the proceedings resulting- in placing the merged road in the hands of receivers, the court had authority to give complete and adequate relief by decreeing a sale of the property discharged of all liens against the merged company and its constituent companies. The chancellor further suggested, as a reason for his action, that a separate sale in foreclosure of the traction company unit would interfere with the administration of the receivership, and consequently with the jurisdiction of the court to administer adequate relief [171]*171in the initial suit wherein the jurisdiction of the court first attached.
The statutory merger of the constituent companies, as already pointed out, did not affect the liens against those companies nor the rights of their creditors existing at the time of the merger, and the consolidated company took the property of the underlying companies with notice of and subject to such rights and liens. The merger agreement specifically protects the mortgage liens on the property of the constituent companies, and the Act of 1909 provides that they shall continue unimpaired after the consolidation. The underlying mortgages were first liens on the mortgaged property and franchises, as found by the court, and, “such being the fact, the bondholders are entitled to the money as against the company and all persons holding under it with notice of their position”: Fidelity Ins., Trust & Safe Deposit Co. v. West Penna. & Shenango Connecting R. R. Co., 138 Pa. 494, 504. The effect of the statutory merger of corporations on the constituent companies is well expressed by Mr. Justice Cray in the case of the Utica National Brewing Company, 154 N. Y. 268. The learned justice says (p. 273) : “It is argued......that by the terms of the consolidatioii agreement the new corporation was freed from the debts and liabilities of the corporations merging into it. If we might assume that such Avas intended as a result of •consolidation under the agreement, nevertheless it would be wholly inoperative to accomplish any such thing as to creditors who were not parties to the agreement. Such creditors were not bound by any of its provisions. The statute protected them, and consolidation pursuant to its permission and provisions, whatever it may mean for the stockholders because of their agreement, leaves the creditors precisely in the situation which the statute defines. If they have not done anything to impair or to release their rights, it is not, and could not be, within the purview of the statute that those rights may be impaired through the action of members of the consolidating cor[172]*172porations.” To tlie same effect aré Baltimore & Susquehanna R. R. Co. v. Musselman, 2 Grant (Pa.) 348; Wabash, St. Louis & Pac. Ry. Co. v. Ham et al., 114 U. S. 587, 595; New Jersey Midland Ry. Co. v. Strait, 35 N. J. L. 322; Smith v. Los Angeles & Pac. Ry. Co., 98 Cal. 210; State, use of Dodson et al., v. Baltimore & Lehigh R. R. Co., 77 Md. 489.
The receivers were appointed on a creditors’ bill filed on the equity side of the court by the Pennsylvania Steel Company against the merged company, averring the insolvency of the latter company and praying for the appointment of receivers to take possession of its property and franchises and operate its railway system. The effect of the receivership was to place the property of the merged company in the hands of the receivers to be fidministered for the benefit of the insolvent corporation. It did not and could not affect or impair the liens or contractual rights of the creditors of the merged company or of any of the constituent companies: Galey v. Guffey, 248 Pa. 523. A receiver of the insolvent corporation stands in the shoes of the owner and takes only his interest in the property subject to all valid liens against it. He can acquire no other greater or better interest than the debtor had in the property, and to this extent the receiver has been held to stand in the shoes of the debtor; • and he has the. same right which the insolvent would have had, and can set up no rights against claims which the debtor could not have set up: 34 Cyc. 191, and cases cited. The appointment of a receiver for property does not affect preexisting liens upon the property, or vested rights or interests of third persons therein. A receiver, it is held, succeeds only tb such right, title and interest in the property as the individual or corporation for which he is appointed receiver had at the time the appointment was made: 23 Amer. & Eng. Encyc. of Law (2d Ed.) 1091. “The appointment of a receiver,” says Mr. Justice Brewer, delivering the opinion in Kneeland v. American Loan & Trust Co., 136 U. S. 89, 97, “vests in [173]*173the court no absolute control over the property, and no general authority to displace vested contract liens...... One holding a mortgage debt upon a railroad has the same right to demand and expect of the court respect for ' his vested and contracted priority as the holder of a mortgage oh a farm or lot.......We emphasize this fact of the sacredness of contract liens, for the reason that there seems to be growing an idea that the chancellor, in the exercise of his equitable powers, has unlimited discretion in this matter of the displacement of vested liens.” This language is quoted with approval in Thomas v. Western Car Co., 149 U. S. 95, 111, and other federal decisions.
In view of the effect of the consolidation of the several constituent companies and of the appointment of receivers for the merged company, we cannot assent to the conclusion that the court appointing the receivers had jurisdiction to decree a sale of the merged road divested of the liens of the underlying mortgages. Its jurisdiction extended only to the administration of the assets of the insolvent merged company, and those assets, to the extent they had been the property of the underlying companies, were subject to the liens and contractual rights of the creditors of those companies which, by the contract and the statute, were “deemed to' continue in existence to preserve the same.” The constituent companies were not brought within the jurisdiction of the court by the appointment of receivers for the consolidated company. It was, therefore, clearly beyond the power of the court by its decree to divest the liens of the underlying companies. The creditors of these companies Avere not parties to the merger agreement and, so far as appears, could not prevent the consolidation. The bondholders of the respective underlying corporations and their mortgage trustees were not required to give their assent and did not agree to the merge! of the corporations. The rights of the holders of the bonds and other creditors, are, as we have seen, expressly preserved [174]*174by the statute and the merger agreement executed by the constituent companies. If, as already pointed out, the court, in the administration of the assets of the merged corporation, were permitted to decree a sale by the receivers, divesting the liens of the mortgages of the underlying companies, it would- be in plain violation of the contractual rights of the holders of the mortgage bonds protected by the federal and State constitutions. We repeat what is said above: What the legislature cam not do, the courts are without authority to do. The sacredness of a contract is protected by the fundamental law of the land and cannot be invaded by a court of law or equity.
A decree directing a sale by the receivers discharged of all liens and fixing the terms thereof, not only violates the contractual rights of the bondholders of the constituent companies, as pointed out above, but does them manifest injustice. The mortgage provides that, in case of a sale of the mortgaged property in execution of its provisions, the purchaser shall be entitled to apply the bonds in payment of the purchase-price. The decree orders a sale' of the entire property of the consolidated company. If the bondholders of either of the constituent companies desire to protect their interests by purchasing the property, they must buy the three roads instead of one and, in accordance with the decree, deposit $10,000 as bidders, pay $100,000 on acceptance of the bid, and be permitted to use the bonds only in payment of the amount of the bid above the deposit and the down-money, and then be allowed a credit'for the bonds only in “such sums as would be payable on such bonds and coupons out of the purchase-price, if the whole amount thereof had been paid in cash.” The decree, therefore, imposes terms on the bondholders of the respective companies, if they become purchasers, which are violative of their contractual obligation and, in effect, compels them to purchase the three roads and thereby pay some part of the bonded indebtedness of the other companies.
[175]*175The creditors of the merged company have no just ground to complain if a sale of the property to be made by the receivers is subject to the lien of the underlying mortgages: Woodworth v. Blair, 112 U. S. 8. The records which they were bound to consult gave them notice of the bonded indebtedness of the underlying companies and the remedies provided for its collection. The holders of the bonds of the merged company, therefore, knew that they were taking the top bonds subject to the contractual rights of the creditors evidenced by the terms of the underlying mortgages which made the bonds of the constituent companies first liens on the property and franchises of those companies and provided specific remedies for their collection.
The learned court below is clearly in error in holding that the Public Service Company Law requires the consent of its commission before the trustee could foreclose the traction company mortgage and sell the mortgaged property. This is not a proceeding instituted by the merged company or the traction company to sell, assign, transfer, lease, consolidate or merge its property, powers, franchises or privileges to or with any other corporation, which, under the Public Service Company Law, requires the approval of its commission, but is a bill in equity filed by the trustee to enforce the contractual rights of the bondholders by foreclosing the traction company mortgage by which the bond issue is secured. In other words, it is a proceeding by the trustee, in strict conformity with the contract, to collect the bonded indebtedness of the traction company, and there is no provision in the Public Service Company Law which attempts to or can interfere with* or prevent it.
' There are other questions of minor importance raised by the assignments, but they do not affect our conclusion and, therefore, need not be- considered. -
We conclude that the learned court below erred in .refusing to permit the mortgagee in the traction company mortgage to enforce the rights of the holders of the bonds [176]*176under that mortgage by foreclosure and sale of tbe mortgaged property, one of tbe remedies stipulated in tbe contract of tbe parties, and in decreeing a sale of tbe merged roads as a unit divested of tbe lien of tbe underlying mortgages of the constituent companies.
May 22, 1917:
It is ordered, adjudged and decreed that the appeals of the Philadelphia Trust Company, trustee, at Nos. 272 and 273, January Term, 1916, and of the Scranton Trust Company at No. 275, January Term, 1916, be sustained to the extent of modifying the decrees in the respective cases so as to conform to the views herein expressed, and a procedendo is awarded.
Per, Curiam,
And now, May 22, 1917, the decree in the above entitled cases is modified and enlarged as follows: In the case in which the appeal was taken to No. 272, January Term, 1916, the receivers of the Sunbury and Susquehanna Railway Company are directed to pay all the costs incurred since the filing of their answer, including the costs of the appeal; and in the cases in which the appeals were taken to Nos. 273 and 275, January Term, 1916, the receivers are directed to pay the costs incurred in connection with their petition for an order of sale, including tbe costs of tbe appeals.