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French v. Gapen Spears/Opinion of the Court

The State of Indiana constructed the Wabash and Erie Canal from La Fayette, on the Wabash River, through Delphi and Fort Wayne, to the Ohio State line. To meet the expense of this undertaking a large bonded debt was created, and secured in a general way by statutory provisions of a character similar to those contained in sect. 5 of an act of Jan. 9, 1832, authorizing the first issus of bonds, and which is as follows:--

'That for the payment of the interest, and the redemption of     the principal of the sums of money which may be borrowed undr      the authority of the General Assembly, for the construction      of said canal, to the extent of the estimated cost thereof,      in the first section of this act stated, there shall be, and      are hereby, irrevocably pledged and appropriated all the      moneys in any manner arising from the lands donated by the      United States t this State for the construction of said      section of canal, the canal itself, with the said portion of      land thereto appertaining, or as much thereof as will realize      by sale the sum borrowed, and all privileges thereby created,      and the rents and profits thereof belonging to the State, and      the net proceeds of tolls collected on said canal, or any      part thereof as finished; the sufficiency of which, for the      purposes aforesaid, as above allowed and provided for, the      State of Indiana doth hereby irrevocably guarantee.' Acts      1832, p. 2.

From the beginning, the use of water for hydraulic purposes, when not needed for navigation, seems to have been contemplated, and ample provision was made by statute for acquiring the necessary land and effecting leases of power. With a view to this end, the following 'Act relative to water-power at the town of Delphi' was passed and approved Jan. 9, 1842:--

'SECT. 1. Be it enacted by the General Assembly of the State     of Indiana, that it shall be the duty of the engineer, or      other person having charge of the Wabash & Erie Canal, on or      before the first day of May next, to let by contract, to the      lowest bidder, the clearing out and removing all obstructions      from the bayon which extends from the canal, at the said      town, to the Wabash River, for the purpose of creating      water-power upon the said canal at that place.

'SECT. 2. Be it further enacted, that said engineer or other     person, before letting the said work, shall give public      notice of the terms, conditions, and also the time of the said letting, by      publishing the same in the newspapers printed in the said      county, for two months, at least, previous to the time of      said letting: Provided, that the said works shall be finished      within six months from the time of said letting.

'SECT. 3. Be it further enacted, that the said engineer, or     person having charge of that part of the canal, shall cause      the work to be estimated when the same is completed, and      shall give to the person doing the same a draft or other      evidence of indebtedness, specifying what the same was given      for, and the amount due him as by the said contract, and for      the purpose of paying for the said work, the rents that may      be received by the State for water-powre created by this act      shall be appropriated for that purpose, and to no other      purpose; and the person or persons doing the said work shall      look to the said rents for their pay, and to no other source      whatever; and as fast as the said rents may be due or      received, they shall be expended in paying for the said work      until the whole amount is paid.

'SECT. 4. Be it further enacted, that so soon as the said     work is let to some responsible person, it shall be the duty      of the said engineer, or other person, to lease out a portion      of the water-power by this act created, not exceeding in all      what would be sufficient to propel thirty run of stones, at      the same prices and upon the same terms and conditions as      water-power under similar advantages is leased at other      places upon the said canal, and it is made the duty of the      said engineer, or other person, before leasing the same, to      give at least two months' notice of the time, terms, and      conditions upon which the same will be leased, in the      newspapers published in the said county.

'SECT. 5. Be it further enacted, that it shall be the duty of     the said engineer, or other person, as the agent on behalf of      the State, for the purpose of securing to the State the      advantages by this act contemplated, to purchase of the owner      or owners of land lying adjacent to the place where said      water-power is to be located, such real estate, not exceeding      in all four acres, as may be necessary to carry into effect      the provisions of this act, at such reao nable prices as may      be agreed upon by the said agent and the owner or owners      thereof; and in case of disagreement at such prices as may be      fixed by persons chosen by the said agent and the said      owners: Provided, that in no case shall the prices paid by      the State for such land exceed what has heretofore been paid      for such property under the same or similar advantages, and      for such real estate so purchased the said agent shall take a      conveyance to the State by deed in feesimple: And Provided further, that nothing in this act contained      shall be so construed as to authorize any interference      whatever with the navigation of said canal.

'SECT. 6. Be it further enacted, that this law shall be in     force from and after its passage.'

Under the authority of this act, James Spears and Reed Case entered into a contract with the State to do the work required upon the terms proposed, and before the 1st of December, 1843, had it all done. On the 19th of January, 1846, another act was passed, by which it was made the duty of the officer having charge of the canal east of Tippecanoe to settle as soon as possible with the contractors, and give them a certificate for the amount found their due, to be paid out of the rents derived from the power created by what had been done, and also providing that the certificate should draw interest from the time the contract was completed until paid.

The settlement contemplated by this act was effected on the 29th of September, 1847, and the following certificate issued:--

'DELPHI, Sep. 29, 1847.

'I hereby certify that Spears & Case have performed work to     the value of $10,354 20/100 in cleaning out the bayou which      extends from the canal at Delphi to the Wabash River,      estimating according to the terms of a contract between said      Spears & Case and S. Fisher, commissioner of the W. & E.      Canal, dated May 1, 1842, made in pursuance of an act      entitled 'An Act relative to waterpower at the town of      Delphi, in Carroll County, approved January 20, 1842.' And      according to the provisions of an act entitled 'An Act      authorizing a settlement with Spears & Case for work done on      the side cut at Delphi, in Carroll County, approved January      19, 1846,' the said Spears & Case are entitled to receive      interest on said sum until paid. And I certify also that said     work was performed prior to the first day of December, 1843.

'S. FISHER,

'Gen'l Sup't W. & E. Canal.'

On the twenty-ninth day of May, 1846, the State leased to George Robertson, at an agreed rent, a sufficient amount of power made available by the work done by Spears & Case to propel three run of stone. Of this lease Enoch Rheinhart is the present assignee and owner. He still uses the water. All the rents derived from this lease down to Nov. 1, 1875, have been paid and accounted for to Spears & Case.

In the construction of the canal it became necessary to take the water from the St. Joseph River, near Fort Wayne. In doing this the power which supplied certain mills that had been erected on that river by Henry Johns was taken away, and on the 11th of February, 1843, the following statute was passed for his relief:--

'AN ACT for the relief of Henry Johns.

'WHEREAS, Henry Johns, of the county of Allen, previous to     the commencement of the Wabash & Erie Canal, was the owner of      a valuable mill privilege or water-power on the St. Joseph      River, and had erected valuable mills thereon; and whereas,      the State of Indiana did afterwards erect a feeder-dam, to      supply with water the summit level of the Wabash and Erie      Canal, above the mills erected by said Johns, on the St. Joseph River, thereby abstracting from the mills aforesaid     about 5,000 cubic feet of water per minute, which, in low      stages of water, is all the water contained in the said river      St. Joseph, and renders wholly useless the mills erected by      said Johns; therefore—

'SECT. 1. Be it enacted by the General Assembly of the State     of Indiana, that the commissioner of the Wabash and Erie      Canal be, and is hereby, directed to cause to be supplied t      the said Henry Johns, his heirs and assigns forever, from the      Wabash and Erie Canal, at the town of Fort Wayne, in the      county of Allen, on land now owned or to be purchased by said      Johns, a sufficient quantity of water to propel three pair of      burr millstones free of any toll or water-rent, and continue      to supply the same for the use of said Johns, his heirs and      assigns forever, at all times when the same shall not be      needed to fill the contracts heretofore made with Samuel      Edsall and Hamilton & Williams, or required for the purpose      of navigating said canal: Provided, that the said Johns      shall, for himself, his heirs and assigns, release to the      State of Indiana all claims against the State for the      abstraction of water from the St. Joseph River to supply the      Wabash and Erie Canal, and shall also credit in full any or      all awards or judgments that shall have been recovered by      said Johns against the State for the abstraction of any      water-power.

'SECT. 2. This act shall take effect and be in force from and     after its passage.' In accordance with the provisions of this statute, and to carry it into effect, the following agreement was entered into between Johns and the State on the 6th of July, 1843:--

'This agreement, made this sixth day of July, 1843, between     the State of Indiana, party of the first part, by S. Fisher,      commissioner of the Wabash and Erie Canal, thereto duly      authorized by law, and Henry Johns, of the second part,      witnesseth:

'That said party of the first part, in consideration of the     covenants and releases hereinafter contained, and upon the      express condition that the party of the second part shall at      all times comply with all and singular the limitations and      conditions hereinafter contained, and shall, in every      respect, perform all the stipulations of the agreement by      said party to be performed, agrees to lease to said party of      the second part forever, subject to the restrictions,      limitations, and conditions hereinafter contained, the use      and occupation of so much of the surplus water (not required      for purposes of navigation, or to fill the contracts      heretofore made with Samuel Edsall and Hamilton & Williams),      at the town of Fort Wayne, to be used on lot number nine (9)      of the county addition to said town, as will be sufficient,      when properly applied on an overshot wheel of sixteen feet      diameter, with the proper gearing, to be approved by the      commissioner of said canal, to propel three run of      four-and-a-half-feet millstones, grinding at the rate of five      bushels per hour each, to be applied to such manufacturing      purposes as the said second party may choose. It is     understood that the second party to this agreement is      entitled to the same quantity of water, whenever there is a      surplus in the canal as above, that Allen Hamilton and Jesse      L. Williams are entitled to under the lease bearing date 29th      of November, 1842. The water will be taken by a head-race     from the canal, at the place above described, and after      passing over the wheel will be conducted by a suitable      tail-race, into the St. Mary's River. The flow of water to     the wheel will be regulated and controlled by a permanent      regulating weir, to be constructed in the most substantial      manner, with stone side and breast walls, agreeably to a plan      to be furnished by the commissioner of the canal, to be built      in every respect according to his directions, as not to      endanger the safety of the canal in any manner whatever. And     it is understood that the necessary regulating weir,      head-race, and trunk to conduct the water to the wheel, and      the tail-race to pass it from the wheel as above specified,      are to be constructed by the party of the second part at his      own expense and according to the direction of the commissioner aforesaid, and      to be kept in good repair, so as to prevent the waste of      water; and if at any time during the continuance of this      lease any breach or other injury shall occur to the canal in      consequence of the race or trunk not being faithfully      constructed, or being suffered to be out of repair, or from      any negligence of any e rson employed about the mills, then      the said party of the second part shall forfeit and pay to      the State the whole cost of repairing such breach or injury;      and if the said party of the second part shall refuse or      neglect to rebuild, repair, or strengthen said regulating      weir or other works necessary to the security of the canal,      after being notified in writing by the commissioner,      superintendent, or other proper agent of the State that such      removal is necessary is necessary for the safety of the      canal, such refusal or neglect shall subject the party of the      second part to a forfeiture of this contract or lease at the      option of the commissioner or other agent of the State      thereto duly authorized.

'It is expressly understood by the parties hereunto that the     first party does not agree to furnish water to the second      party except at such times as there is a surplus over and      above what is required for purposes of navigation and to      supply existing contracts with Samuel Edsall and Hamilton &      Williams. And the right is also reserved by the first party     to draw the water from the canal whenever it may be necessary      to repair or prevent breaches, take out bars, or make any      repairs whatever.

'And the second party, for and in consideration of the right     to the use and occupation of said water, agrees to release,      and does hereby release, for himself, his heirs and assigns      forever, all claim or claims against the State of Indiana for      damages heretofore done or that may hereafter be done to any      property now or heretofore owned by him, the said Henry      Johns, in consequence of diverting water from the St. Joseph      River to supply the Wabash and Erie Canal and the mills      erected or to be erected thereon or supplied therefrom.

'And the said Henry Johns hereby releases to the State of     Indiana all his right and title to the water flowing in the      St. Joseph River whenever the same may be necessary for the      supply of the canal and mills aforesaid.

'And the said Henry Johns acknowledges the foregoing lease as     being in full payment for all awards of damages heretofore      made and for all damages done or hereafter to be done by      diverting the water as aforesaid.

'And it is understood by the parties hereto that the second party is to pay no rent other than releasing the first party     from the payment of damages as above; and this agreement is      made in pursuance of and with a view to carry out an act of      the legislature, entitled 'An Act for the relief of Henry      Johns,' approved Feb. 11, 1843.

'In testimony whereof we, the parties to this agreement, have     hereunto set our hands and seals the day and year first above      written.

'S. FISHER, [SEAL.]

''Com. W. & E. Canal''.

'HENRY JOHNS. [SEAL.]

'Signed and sealed in presence of—

'ALEX. McCULLOCH.'

All the rights conferred by this agreement or grant are now owned by French, Hanna, & Co.

The State having become embarrassed by reason of its large indebtedness, growing out of the construction of this canal and other public improvements, passed an act, on the 19th of January, 1846, to provide for the liquidation of the debt, by which new certificates of State stock were to be issued. One of these certificates, representing one half the debt, was to be provided for by taxation in the usual way, and the other, representing the other half, out of the lands, tolls, and revenues of the canal. As an instrument for carrying into effect the arrangement in respect to the half of the debt payable out of the tolls, &c., the board of trustees of the Wabash and Erie Canal was created and constituted a body corporate, to which, on the 30th of July, 1847, a conveyance was executed as provided for in sect. 8 of the act, which is as follows:--

'SECT. 8. So soon as said trustees shall have been elected or     appointed as aforesaid, it shall be the duty of the governon,      in the name and under the seal of the State, to execute and      deliver to said trustees, by the corporate name of the board      of trustees of the Wabash and Erie Canal, a deed or patent      for the bed of the Wabash and Erie Canal, and is  extensions,      finished and to be finished and to be finished, from the Ohio      State line to Evansville, including its banks, margins,      tow-paths, side-cuts, feeders, basins, right of way, locks,      dams, waterpower, and structures, and all materials provided      or collected for its construction; and all the property,      right, title, and interest of the State in and to the same,      with all its appurtenances; and also all the lands and lots (not sold or disposed of) heretofore given,      granted, or donated by the general government to the State,      to aid in the construction of said canal, or any part of it,      or which may be hereafter acquired under or by reason of any      existing grant, and all moneys due and to grow due, and      remaining unpaid on account of any sale or sales heretofore      made of any canal lands so donated, and all moneys due or to      grow due on account of any existing leases of any water-power      or other privilege on said canal, its side-cuts, feeders,      basins, or other appurtenances; said board of trustees to      have, hold, possess, and enjoy the same as fully and      absolutely as the State can or could do; subject,      nevertheless, to all existing rights and equities against the      State on account of the same, or any part thereof, or      liabilities of the State growing out of, or in relation      thereto; and the same to be held by said trustees in trust      and security for the uses and purposes following, that is to      say--'

In is unimportant in this case to notice the specifications in respect to the trust any further than to say that the trustees were given no power to sell the canals.

The trustees took possession under this conveyance, and on the 5th of July, 1852, executed to Spears, Case, and James P. Dugan a lease of water at Delphi equivalent to three millstone power, reserving a certain agreed rent. This lease is now owned and the power used by Abner H. Owen, and the trustees accounted to Spears & Case for all rents collected under its provisions down to Nov. 1, 1875.

On the 19th of November, 1874, Jonathan K. Gapen, a holder of certain of the certificates of stock provided for in the conveyance to the trustees, filed a bill in equity in the court below, against the trustees, in behalf of himself and the other holders of the same class of securities, setting forth, in substance, that by reason of the failure of revenues from the canal it was impossible to keep it in a condition for use; that the trust was insolvent and the trust property rapidly falling into decay, and praying 'that the plede and appropriation recited in said stocks shall be effectuated and the said canal and its appurtenances and lands may be decreed to be sold in such manner and on such terms as the court may deem best for the interests of those entitled to share in the proceeds thereof, and so as to bring the highest price therefor, and so as to vest title in the purchaser or purchasers thereof, with the right and duty to impose, maintain, and operate the same and receive and enjoy the future tolls and revenues thereof as fully in all respects as the State might originally have done, and on such sale being made and the proceeds brought into court, your orator prays that the said fund may be divided among himself and all other holders of said canal stocks according as their several ownerships, amounts, and priorities may be from time to time established to the satisfaction of the court and so decreed.'

To this suit neither Spears & Case, nor Johns, nor any one representing their interests, was made a party. The trustees of the canal were the only defendants, and on the 24th of December, 1875, a decree was made 'that the Wabash and Erie Canal, including its banks, margins, tow-paths, side-cuts, feeders, basins, rights of way, locks, dams, water-powers, and structures, together with all its appurtenances; also all lands and lots. . . belonging to the trust and vested in the trustees of the Wabash and Erie Canal,' be sold. Under this decree all that part of the main line of the canal from the western boundary of the city of Lafayette to the Ohi State line was sold to William Fleming for $85,500. This sale was confirmed on the 12th of February, 1877.

On the 7th of July, 1877, before any final distribution of the proceeds of the sale had been made, Spears, for himself and as surviving partner of the late firm of Spears & Case, and the widow and children of Case, who had before that time died, filed an intervening petition, called in the record a cross-bill, in which they set forth their connection with the water-power at Delphi, substantially as has been already stated, and alleged that there was still due them from the State, on the certificate which they held, the sum of $24,678.86. They then averred that the purchasers of the canal had collected the water-rents under the leases owned by Rheinhart and Bowen that fell due after Nov. 1, 1875, and refused to account to them, and that there was sufficient surplus water in the canal at Delphi to supply power for the stipulated amount of thirty run of stone, which the trustees had declined to lease previously to the sale.

The prayer of their petition is as follows:--

'That upon the final hearing of this cause the court will order, adjudge, and decree that the sum which shall be found to be due to the plaintiffs shall be paid by the said Samuel B. Gookins, as such receiver, out of the funds now in his hands; or if the court shall be of opinion that the plaintiffs are not legally entitled to any relief hereinbefore prayed for, then they pray that it shall be ordered, adjudged, and decreed by the court that they be entitled to demand and receive from the said lessees and their assigns all sums of money due from them for the rent of the water-power, as aforesaid, or that may accrue from the first day of May, 1877; that a receiver be appointed to take charge of the said water-power, manage and control the same, and collect the rents therefrom, and apply the same to the payment of the claim of the plaintiffs until the same is fully paid, and that the said receiver shall be authorized and empowered to make such additional leases of the said water-power as can be safely done without interfering with the navigation of the said canal, but not to exceed thirty run of stone; that the said purchasers and owners of the said canal from the city of Logansport to the city of Lafayette, as aforesaid, be required to keep and maintain the dam, lock, and canal in good condition; to preserve and maintain said water-power at the said city of Delphi, and that the said receiver be required to compel the lessees of the said water-power to keep and perform the stipulations contained in the leases aforesaid, as to making of repairs of the said canal; and for all other and further relief to which the plaintiffs are entitled by virtue of matters and things hereinbefore stated.'

On the 15th of May, 1878, French, Hanna, & Co., as assignees of Johns, filed their intervening petition in the cause, also called in the record a cross-bill, in which they set forth the facts in relation to the power granted to Johns, substantially as has already been stated, and then averred as follows:--

'Your petitioners further show that, in expectation of the permanent enjoyment of said water-power, they have erected large and extensive woollen mills on said lot nine (9) in Fort Wayne, at a cost of $25,000, and for many years have been operating the same by means of said water-power on said canal so granted to said Johns, and thence conveyed to them; that the part of said canal in Allen County, including that supplying said water-power, is still kept up by said purchasers. That said water-power is of great value to your petitioner, as was the grant made by said Johns on the river for the same; that the annual value of said water-power is at least $1,500, nd the aggregate value of the same is not less than $25,000, and in the sale of said canal the water-power so granted to said Johns and now owned by petitioners added at least $20,000 to the price paid, and to the fund now in court. Your petitioners further show that by said sale so made f said canal property, of every nature and description, a large fund, to wit, $150,000, has been realized, and is now in the custody of this court, and that of said fund at least $50,000 has been derived from the sale of that part of said canal which is supplied with water only by the feeder constructed to divert the water, and from the water in fact diverted from the St. Joseph River above the mill of said Johns, as aforesaid, and which was so ceded by said Johns to the State, as aforesaid, and that of said $50,000 so realized, at least four-fifths was derived from the sale of the water-powers on said canal made by the water so diverted from the mill of said Johns and ceded to the State, as aforesaid, as the condition for the grant of said perpetual water-power to him; that said purchasers contend that said property was sold to them absolutely free and clear of all claims of your petitioners; while it is, on the other hand, pretended by the receiver and said trustees that your petitioners have no claim whatever on said funds, whereas your petitioners insist that, as they had a claim in the nature of a personal liability against said State, that the same was assumed by said trustees, and that their said claim was and is a charge not only on said fund, but that it also follows said property into whosesoever hands it passes.'

The prayer of the petition is as follows:--

'But insomuch as there is great danger that, from the abandonment of said canal as a public highway, it may go to ruin, and your petitioners' claim upon the property itself become of little value, and by reason of your petitioners' manifest equity in the premises, and forasmuch as this large fund, so derived from the sale of said property, is now in the custody of this court for distribution to all parties equitably interested therein, and forasmuch as all the parties, as well the purchasers as the original complainants and defendants herein, are still before the court for the settlement of all equities in the premises;

'Your petitioners pray that they have leave to file this their intervening petition; that said parties to this original suit, the said Samuel B. Gookins, as such receiver, and the said William Fleming, John H. Bass, Oscar A. Simons, James Lillie, George J. Bippus, and Robert Simonton, as purchasers, and each of them, be required to make full and true answer in the premises, and show, if they can, why your petitioners should not be paid out of said fund any damages which they may sustain by reason of the abandonment of said canal by the State and by said trustees, and why the estate of said purchasers in said property shall not be declared to be servient to that of your petitioners, and upon the hearing will your Honors grant to your petitioners all such relief as may be just, equitable, and proper.'

In each of the petitions it was stated that Fleming, the original purchaser, had transferred a part of the property to others. All these purchasers, as well as Fleming, the trustees of the canal, Gapen, and Gookins, who in the progress of the cause had been appointed receiver, were named in the petitions as defendants, and they all appeared and filed demurrers. These demurrers were sustained below and the petitions dismissed. From the decrees to that effect the present appeals were taken.

The first questions to be settled relate to the rights of Spears & Case, Johns, and the trustees of the canal respectively, under their several contracts with the State.

1. As to Spears & Case.

To our minds it is clear that the effect of what was done with these parties was to convey to them a property right in the rents produced by leasing the water-power made available through their work, to continue until the compensation stipulated for was paid in full. The State assumed no pecuniary obligation in the contract that was made, and Spears & Case agreed to look only to the rents for their pay. To this end, the State 'appropriated,' that is to say, set apart, the rents for the use of Spears & Case, and made itself a trustee to col ect and pay them over as fast as received. No other reasonable construction can be given to the language of the statute on which the rights of the parties depend. In effect the State said to the contractors, 'If you will do the work necessary to create the power, or, in other words, if you will make the water in the canal available for power at the place designated, you shall have the revenues which accrue from the use of the power so created and made available, until you are paid for your work at the agreed rate.' The undertaking on the part of the State was not to pay out of a particular fund, but that the fund when raised should belong to the contractors. The debt was in reality not a charge against the State, but against the water-power. The language of this statute is even more explicit than that of the fifth section of the act of 1832, which this court held, in Trustees of the Wabash & Erie Canal Co. v. Beers (2 Black, 448), created, as security for the bonds that were issued, a lien on the canal, its lands and revenues, which could not be divested by any subsequent legislation. Here the very statute which authorized the creation of the power 'appropriated' the revenue to be derived from the power primarily to the payment of the expense of its creation, and expressly provided that payment of such expense should not be made in any other way. Not only did the contractors agree to look alone to the rents for their compensation, but the State appropriated the rents to their use. The giving and taking operated, at least in equity, as a complete transfer.

Our conclusion then is, that from the time Spears & Case completed the work under their contract, the State held the water-power made available by what they had done to the extent of the amount required to propel thirty run of stone, in trust to lease on the terms and conditions specified, whenever it could be done without detriment to navigation, and pay over the rents as received to Spears & Case until their claim was satisfied. In fact the State never became the beneficial owner of the power that was created. From the time of its creation it belonged in equity to Spears & Case until their charge upon it was paid. The State held the legal title coupled with authority to make the contemplated leases, but this was to be for the use and benefit of Spears & Case so long as anything remained due to them for what they had done. Such was the manifest intention of the parties, and that, in a court of equity, is enough. Ketchum v. St. Louis, 101 U.S. 306. It is no doubt true that Spears & Case in their contract assumed the risk of a loss of the power by the decay or destruction of the canal, and that the State was under no binding obligation to keep up the repairs so as to supply the power; but that is not the case presented by this demurrer, for it is expressly averred that the canal is still maintained, and that the water is being furnished to the different lessees under their respective leases. For all the purposes of the present appeal, we must take that averment as true. If the facts are otherwise, it may, perhaps, be shown in defence.

2. As to Johns and his assignees.

Here, we think, was an absolute grant, for a valuable consideration, by the State to Johns, of the right to draw water from the canal for the purpose and on the terms and conditions specified. It was not a grant of the lands on which the canal was built, but of the right to draw water from the canal to be used in lieu of that which had been taken away. Originally Johns took the power directly from the river to his mill. Under his grant he was allowed to draw it through the canal, subject to the limitations and restrictions provided for. The only substantial difference between his rights and those of the other lessees of power was, that they were to pay rent at stated periods for the water they used, while he was to draw without payment of rent, in consideration of his release of the damages he had sustained by the diversion of the water from the river to h e canal and draw water therefrom to his mill whenever on the canal and draw water therefrom to his mill whenever and so long as there was a surplus over what was wanted for navigation and the supply of the earlier leases. This was a property right, and the legitimate subject of grant. De Witt v. Harvy, 4 Gray (Mass.), 486. Johns could not, any more than Spears & Case, compel the State to keep the canal in repair so as to give him the water; but as long as the canal was maintained and the water furnished, he had the right to draw. In this petition, as in that of Spears & Case, it is expressly averred that the canal is still maintained and supplied with water.

3. As to the trustees of the canal.

By an express provision in the grant to the trustees their title was made subject to all existing rights and equities against the State on account of the property conveyed, or any part thereof, and to all liabilities of the State growing out of or in relation thereto. In other words, the State conveyed all its remaining interest in the canal, and the trustees took what they got, charged with the same trusts, and incumbered by the same liabilities that rested on it when the grant was made. It follows that whatever property rights Spears & Case or Johns had in the canal before the grant, they retained after it. All that the State was bound to do in respect to them before, the trustees must do afterwards. As the State was the trustee of the power at Delphi for the benefit of Spears & Case when the transfer was made, the trustees took the title, subject to the same trust, and became bound in respect to its management in the same way and to the same extent the State had been until that time. Rents collected after the transfer were as much the property of Spears & Case, in the hands of the trustees, as they were in the hands of the State. So, too, in respect to Johns. Whatever water he could draw from the canal before the transfer he was entitled to draw afterwards. All that the State could be required to do for his benefit at the time of the transfer, the trustees were bound to do while they held the property. The obligations of the trustees in respect to both these parties were precisely the same as those of the State; no more and no less.

It only remains to consider whether the petitioners are entitled to relief in this suit and under the form of proceeding they have adopted.

They were not originally parties to the suit. No sale of the trust property could be made in their absence which would dispose of their rights. All that could pass under such a sale would be that which was conveyed by the State to the trustees; to wit, the canal, &c., subject to the prior rights of the petitioners. No decree binding on the petitioners could be rendered, defining what their rights actually were. A purchaser would take only what the trustees held, and be left to settle with the petitioners as best he could.

But while the petitioners were not in fact parties, they might with propriety have been made such, and there cannot be a doubt that if they had intervened before the decree of sale, and asked to be made defendants, it would have been within the power of the court, with the consent of the complainants, to take them in. The case did go on without them, presumably because it nowhere appeared until their intervention that there were any such outstanding rights as they claim. The decree, as entered, is broad enough on its face to authorize a sale of the property free of all incumbrances. The purchasers, acting on the idea that they bought all the water-power in the canal, and that the rights of the several petitioners had been extinguished, claim the rents under the Delphi leases as their own, and threaten to cut off the supply of water to the assignees of Johns unless rent is paid for what is used. In this condition of things, and while the purchase-money was under the control of the court, the petitioners intervened and asked to have their rights in the premises determined before any final distribution of the money was mad. To their intervention no exception is taken by any of the parties. They are, therefore, to all intents and purposes, now to be treated as though they had originally been made defendants and set up their demands. It seems to us eminently proper that before the money paid under the sale is put beyond the control of the court it should be determined what, under the new developments, the rights of the several parties in respect to the property in question really are. From what appears, it is clear that the court expected to sell, and the purchasers supposed they were buying, the whole property free of all incumbrances. If that be so, the money in the hands of the court may not, perhaps, improperly be treated as representing what it was supposed would pass by the sale, rather than what actually did pass as the parties stood when the decree was entered. The petitioners, in their intervening petitions, state in terms their willingness to treat the sale as binding on them, if they can be paid from the proceeds what in equity represents the value of their interest in the property sold. As the case now stands, we see no reason why this may not be done. But we have only part of the record in the original suit here, and it may be that under all the circumstances such relief would not be just to the complainants. In that event, it may be proper for the court to consider whether the facts connected with the sale were such as to make it inequitable to hold the purchasers to their purchase subject to the rights of the petitioners, in case they shall elect not to be bound.

Without deciding what upon the final hearing should be the form of relief afforded the petitioners, we are clearly of opinion that upon the facts stated in their petitions they are entitled to have their rights in the premises ascertained and something done in their behalf. The prayer of the petition of Spears & Case is for alternative relief. If it shall be determined that their interest in the property passes by the sale, they ask to be paid its value from the proceeds. If it does not, then they seek to have their rights, as against the purchasers, specifically ascertained and determined; the rents which have accrued and which may hereafter accrue from the Delphi leases paid over to them, and the proper steps taken to make the unused power at that point available for the liquidation of what is still due on their certificate. French, Hanna, & Co., the assignees of Johns, ask to be paid the value of the power which was granted to them, and for general relief. Under this prayer for general relief the court will be authorized to establish their right to the use of the water as granted, free of rent, in case it shall be determined they are not entitled to be paid the value of their power from the proceeds of the sale.

Without pursuing the inquiry further, we conclude the court was wrong in sustaining the demurrers and dismissing the petitions. The decrees dismissing the petitions will, therefore, be reversed, and the causes remanded with instructions to overrule the demurrers and proceed thereafter as justice may require, and in accordance with this opinion; and it is

So ordered.

MR. JUSTICE GRAY did not sit in these cases, nor take any part in deciding them.


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Trustees v. Greenough

APPEAL from the Circuit Court of the United States for the Northern District of Florida.

The facts are stated in the opinion of the court.

The case was argued by Mr. Charles W. Jones for the appellants, and by Mr. Jefferson Chandler, with whom was Mr. C. D. Willard, for the appellee.

MR. JUSTICE BRADLEY delivered the opinion of the court.

title: Trustees v. Greenough


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Trustees v. Greenough/Opinion of the Court

The question is this case is one of costs, expenses, and allowances awarded to the complainant below out of a trust fund under the control of the court. Ordinarily a decree will not be reviewed by this court on a question of costs merely in a suit in equity, although the court has entire control of the matter of costs, as wl l as the merits, when it has possession of the cause on appeal from the final decree. But it was held by Lord Cottenham, in Angell v. Davis (4 Myl. & Craig, 360), that when the case is not one of personal costs, in which the court has ordered one party to pay them, but a case in which the court has directed them to be paid out of a particular fund, an appeal lies on the part of those interested in the fund. Lord Cottenham, indeed, suggested other cases in which an appeal might lie from a decree for costs, as where the costs are part of the specific relief prayed; and where the whole of the facts distinctly appear upon the face of the proceedings themselves, so that it is not necessary, in determining the question, to enter into any investigation of the merits. But these suggestions have not met with subsequent approval; and in the case of Taylor v. Dowlen (Law Rep. 4 Ch. App. 697), the court declared that they were not disposed to extend the case of Angell v. Davis; and dismissed an appeal brought by parties ordered to pay costs, which they claimed should be payable out of a fund.

But these discussions in the English courts arose under a system in which appeals from interlocutory orders are allowed. We can only entertain an appeal from a final decree; and supposing the objection to the appeal on the ground of its being from a decree for costs only is untenable, as we think it is, then arises another question, whether the orders appealed from amount to a final decree.

The principal suit was commenced in 1870, by a bill filed by Francis Vose, a large holder of bonds of the Florida Railroad Company, on behalf of himself and the other bondholders, against Harrison Reed and others, trustees of the Internal Improvement Fund of Florida, and against the former members of the same board, and against the board itself as a corporation, and sundry other corporations alleged to be in complicity with them. That fund consisted of ten or eleven million acres of lands belonging to the State, including certain proceeds of the sale of some of them, and was pledged for the payment of the interest accruing on the bonds and instalments of the sinking fund for meeting the principal, which were largely in arrear. The charge of the bill is to the effect that the trustees were wasting and destroying the fund by selling at nominal prices the lands by the hundred thousand and even million acres, and failed and refused to provide for the payment of interest or sinking fund on the bonds. The bill prayed that the fraudulent conveyances be set aside, and the trustees enjoined from selling more lands, and that a receiver be appointed to take care of the fund.

The litigation was carried on with great vigor and at much expense, and in fact a large amount of the trust fund was secured and saved; the management of the fund was taken out of the hands of the trustees; agents were appointed by the court to make sales of the land, and made a large number the court to make sales of the land, and made a large number of sales; a considerable amount of money was realized, and dividends have been made amongst the bondholders, most of whom came in and took the benefit of the litigation. Vose, the complainant, bore the whole burden of this litigation, and advanced most of the expenses which were necessary for the purpose of rendering it effective and successful. In 1875 he filed a petition, setting forth these advances and the efforts made by him, and prayed an allowance out of the fund for his expenses and services. In December, 1876, an order was made by the court referring it to a master to ascertain: 1. What and by whom the necessary expenditures have been incurred in bringing the moneys already received into court. 2. What necessary expenditures have been made, and by whom, in protecting the landed and sinking fund from which this money has been and will be realized. 3. What personal services have been rendered, and by whom, in said work, and the value thereof. 4. What amount of same have been charged toF rancis Vose by the receiver, instead of being paid out of the common fund in his hands.

Vose presented his account and vouchers before the master, and testimony was taken on the subject. In 1877 the master made a report, in which, amongst other things, he stated as follows:--

'First, After consideration of the proofs as submitted to me, I find and report that the moneys which have already been received, whether upon account of the internal improvement fund or of the sinking fund, have been brought into court at the instance and the suit and by the sole efforts of Francis Vose, the petitioner, through himself, his solicitors and his agents, and by the instrumentality more directly and especially of his proceeding in equity against the Trustees of the Internal Improvement Fund et al., as they appear in the records which are made evidence in this case.'

The master further reported a statement of expenditures made by Vose in the cause, and declared that they were necessary expenditures, being for fees of solicitors and counsel, costs of court, and sundry small incidental items for copying records and the like, the whole amounting to $34,192.62. He also stated and allowed sundry fees paid in maintaining other suits in New York, and on appeal to this court, attorneys' fees for resisting fraudulent coupons, and expenses paid to attorneys and agents to investigate fraudulent grants of the trust lands, amounting in all to $19,745.68. He also reported in favor of an allowance to Vose for his personal services and expenditures, as follows:--

'I further find and report that peculiar and great personal services have been rendered by the petitioner, Francis Vose, in the work of protecting the internal improvement and the sinking funds; those services extending over a period of more than eleven years. By the instrumentality of the suits already mentioned as having been instituted by him, by the agencies he employed and sustained, and by his own vigiliance and personal efforts he has saved from spoliation and subjected to the decrees of this court a vast domain of over ten millions of acres of land; and has brought into this court large sums of money, which, from time to time, have been distributed by its orders.

'I consider and report that the charge embraced in his itemized account, and numbered forty-two (42), for $25,000 principal, and $9,625 interest, is reasonable and just.

'I also find that the charge in his itemized account, numbered forty-one (41), for personal expenditures of $15,003.35, is reasonable and just. Total $40,003.35.'

The first of these items consisted of an allowance of $2,500 a year for ten years of personal services; the second was for railroad fares and hotel bills paid by the complainant.

The proceedings before the master were opposed; but, on a hearing upon the report and the evidence submitted therewith, the court confirmed it to the extent of $27,835.34, allowing generally the fees of the officers of the court, and those of the attorneys and solicitors employed in the cause, including charges as between attorney and client; at the same time disallowing certain fees paid to advisory counsel and other items not directly connected with the suit, and referring the remainder of the report for further evidence and hearing. In December, 1879, after additional evidence had been taken, a final order was made, allowing sundry expenses for looking after and reclaiming the trust lands, and also allowing for the personal expenses and services of Vose embraced in the two items before referred to; the total amount allowed being $60,131.96.

The appeal to this court is taken from these orders of the court below; and it is contended that they were illegal, because Vose was not before the court in the character of a trustee, and therefore not entitled to reimbursement of his expenses beyond taxable costs; and because the allowances were not lawful if he had been such trustee. The objections to the orders are not expressed in this precise form; but this is the substance of them.

The first question, however, is whether these orders do or do not amount to a final decree, upon which an appeal lies to this court. They are certainly a final determination of the particular matter arising upon the complainant's petition for allowances, and direct the payment of money out of the fund in the hands of the receiver. Though incidental to the cause, the inquiry was a collateral one, having a distinct and independent character, and received a final decision. The administration of the fund for the benefit of the bondholders may continue in the court for a long time to come, dividends being made from time to time in payment of coupons still unsatisfied. The case is a peculiar one, it is true; but under all the circumstances, we think that the proceeding may be regarded as so far independent as to make the decision substantially a final decree for the purposes of an appeal.

As to the point made by the appellants, that the complainant is only a creditor, seeking satisfaction of his debt, and cannot be regarded in the light of a trustee, and therefore is not entitled to an allowance for any expenses or counsel fees beyond taxed costs as between party and party, a great deal may be said. In ordinary cases the position of the appellants may be correct. But in a case like the present, where the bill was filed not only in behalf of the complainant himself, but in behalf of the other bondholders having an equal interest in the fund; and where the bill sought to rescue that fund from waste and destruction arising from the neglect and misconduct of the trustees, and to bring it into court for administration according to the purposes of the trust: and where all this has been done; and done at great expense and trouble on the part of the complainant; and the other bondholders have come in and participated in the benefits resulting from his proceedings,-if the complainant is not a trustee, he has at least acted the part of a trustee in relation to the common interest. He may be said to have saved the fund for the cestuis que trust, and to have secured its proper application to their use. There is no doubt, from the evidence, that, besides the bestowment of his time for years almost exclusively to the pursuit of this object, he has expended a large amount of money for which no allowance has been made, nor can properly be made. It would be very hard on him to turn him away without any allowance except the paltry sum which could be taxed under the fee-bill. It would not only be unjust to him, but it would give to the other parties entitled to participate in the benefits of the fund an unfair advantage. He has worked for them as well as for himself; and if he cannot be reimbursed out of the fund itself, they ought to contribute their due proportion of the expenses which he has fairly incurred. To make them a charge upon the fund is the most equitable way of securing such contribution. And such charge cannot be justly complained of by the trustees of the internal improvement fund, because, however fair may have been the conduct of the present trustees, who were elected to their positions since the acts complained of were committed by their predecessors, those acts, as the event of the cause shows, furnished abundant ground for instituting the proceedings.

It is a general principle that a trust estate must bear the expenses of its administration. It is also established by sufficient authority, that where one of many parties having a common interest in a trust fund, at his own expense takes proper proceedings to save it from destruction and to restore it to the purposes of the trust, he is entitled to reimbursement, either out of the fund itself, or by proportional contribution from those who accept the benefit of his efforts. This has long been the rule in relation to proceedings for restoring property to the uses of a charity, which has been unjustly diverted therefrom. Thus, in Attorney-General v. The Brewers' Company (1 P. W. 376), Lord Chancellor Cowper allowed costst o the relators out of the improved rents which they received for the charity, 'for that they had been serviceable to the charity, by easing them of the six hundred and twenty pounds debt which was claimed against them.' In Attorney-General v. Kerr [4 Beav. 297), it is conceded to be the general rule that the relator in a charity information, upon obtaining a decree, is entitled to his costs as between solicitor and client. In that case they were not allowed out of the general charity estate, but were charged upon the particular property recovered.

The same rule was followed in Attorney-General v. Old South Society, 13 Allen (Mass.), 474.

Of course, it is well understood that costs as between solicitor and client include all reasonable expenses and counsel fees, and are not like costs as between party and party, confined to the taxed costs allowed by the fee-bill. This difference is pointed out in the case of In re Paschal, 10 Wall. 483, 493.

The same rule is applied to creditors' suits, where a fund has been realized by the diligence of the plaintiff. In England, where specialty creditors have a preference, a simplecontract creditor who recovers a fund for the general benefit is allowed his costs, as between party and party, out of the fund in preference to all other claims; and the balance of his costs, as between solicitor and client, are to be paid either out of the fund or pro rata by all the creditors who partake of the benefit of the suit. This was the judgment in Stanton v. Hatfield, 1 Keen, 358; followed in Thompson v. Cooper, 2 Col. C. C. 87. In the latter case Vice-Chancellor Knight Bruce said: 'Having come in and proved, and obtained the benefit of the suit which was instituted on their behalf, as well as that of the plaintiff, it cannot be just that in such a suit-a suit instituted for the benefit of all the creditors-one alone should bear the burden, when others have the benefit.' To the same purport are Tootal v. Spicer, 4 Sim. 510; Larkins v. Paxton, 2 Myl. & K. 320; Barker v. Wardle, id. 818; Sutton v. Doggett, 3 Beav. 9.

The rule that a party who recovers a fund for the common benefit of creditors is entitled to have his costs and expenses paid out of the fund, prevails in bankruptcy cases. In Worrall v. Harford (8 Ves. Jr. 4), Lord Eldon said: 'The petitioning creditor is answerable till the assignment. Can there be a doubt that the assignees, if there be nothing special in the deed, would have a clear right to pay all the expenses incurred? It would be implied if not expressed.' This rule has been followed by the District Courts of the United States. See a forcible opinion of Judge Bryan, In re Williams (2 Bank. Reg. 28), in the District Court of South Carolina; and In the Matter of O'Hara (8 Law Reg. N. S. 113), in the western district of Pennsylvania. In a case in Massachusetts before Judge Lowell the same rule was adopted. The petitioning creditors charged as an act of bankruptcy the execution of a mortgage by the debtors, and having succeeded, after much opposition, in substantiating the charge, they asked that counsel fees should be allowed them out of the estate. The remarks of Judge Lowell are so apposite, and seem to us so well considered, that we quote from his opinion. 'A petition in invitum,' says he, 'to have a debtor adjudged bankrupt is for the benefit of all his unsecured creditors; and a favorable decree gives them all a proportionate advantage, and the court has no power to order, as is often done in chancery, that this advantage shall depend upon their contributing to the expenses of the suit; but any creditor may carry on the proceedings if the petitioner should refase to do so; and after adjudication all may prove their debts. In this case the fund from which the dividend will be paid is due entirely to the exertions of the petitioners in setting aside the mortgage; and, in most cases, though not in this, no single creditor, nor any three or four of of them, have a u fficient interest to enable them to undertake the conduct of the proceedings without positive loss of money if they cannot tax the expenses on the fund, for those expenses will usually exceed the dividend on their debts. . . . The strong equities of the petitioner's case are not difficult to discover; and the practice under the act of 1841 was to allow such a charge out of the assets, as I find by examining the records. My doubt was of my power in the premises under the fee-bill of 26th February, 1853 (10 Stat. 161), which does not appear to sanction it, and does appear to be intended to cover the whole ground of taxation of costs at law and in equity and admiralty; and by the general orders, these petitions follow the rule of cases in equity in all matters of costs. Upon reflection I have concluded that the fee-bill is probably intended to reach only taxable costs commonly so called, and may have its full effect without being construed to take away the power of a court of equity to permit counsel fees to be taxed in those cases where a fund is in court upon or to which different parties have distinct rights or claims. . . . I have been referred to the record of a case in equity in the Circuit Court in which Judge Sprague, since the passage of the fee-bill, ordered the counsel fees of all parties to be paid out of the fund; and Judge Kane adopted a like rule in Ex parte Plitt, 2 Wall. Jr. 453. These decisions, and those in bankruptcy already cited, justify me in construing the statute in the way which the equities of the case so clearly demand.'

The views here expressed with regard to the application of the fee-bill to cases of this sort are undoubtedly correct. The fee-bill is intended to regulate only those fees and costs which are strictly chargeable as between party and party, and not to regulate the fees of counsel and other expenses and charges as between solicitor and client, nor the power of a court of equity, in cases of administration of funds under its control, to make such allowance to the parties out of the fund as justice and equity may require. The fee-bill itself expressly provides that it shall not be construed to prohibit attorneys, solicitors, and proctors from charging to and receiving from their clients (other than the government) such reasonable compensation for their services, in addition to the taxable costs, as may be in accordance with general usage in their respective States, or may be agreed upon between the parties. Act of Feb. 26, 1853, c. 80, 10 Stat. 161; Rev. Stat., sect. 823. And the act contains nothing which can be fairly construed to deprive the Court of Chancery of its long-established control over the costs and charges of the litigation, to be exercised as equity and justice may require, including proper allowances to those who have instituted proceedings for the benefit of a general fund.

This court, in the case of Cowdrey v. ''Galveston, &c. Railroad Co.'' (93 U.S. 352), sustained an allowance of $5,000 for counsel fees to be paid to counsel out of the proceeds of a railroad mortgage, foreclosed in the Circuit Court for the District of Texas,-being the amount agreed by the trustees to be paid for instituting proceedings which were discontinued by the intervention of the civil war. A new bill was afterwards filed by some of the bondholders, and the fund was brought into court, and the fee in question was directed to be paid by the receiver. We regarded the charge as a proper one to be paid out of the fund. Liberal allowances were also made by the Circuit Court in the same case for counsel fees and other charges incurred by the complainants in the cause, which were never brought to this court for review.

In the vast amount of litigation which has arisen in this country upon railroad mortgages, where various parties have intervened for the protection of their rights, and the fund has been subjected to the control of the court and placed in the hands of receivers or trustees, it has been the common practice, as well in the courts of the Unie d States as in those of the States, to make fair and just allowances for expenses and counsel fees to the trustees, or other parties, promoting the litigation and securing the due application of the property to the trusts and charges to which it was subject. Sometimes, no doubt, these allowances have been excessive, and perhaps illegal; and we would be very far from expressing our approval of such large allowances to trustees, receivers, and counsel as have sometimes been made, and which have justly excited severe criticism.

Still, a just respect for the eminent judges under whose direction many of these cases have been administered would lead to the conclusion that allowances of this kind, if made with moderation and a jealous regard to the rights of those who are interested in the fund, are not only admissible, but agreeable to the principles of equity and justice.

The subject of allowances to be made to trustees eo nomine is very fully examined in the books. An exhaustive citation of both English and American authorities is to be found in the notes to the case of Robinson v. Pett, 2 White & Tudor's Leading Cases in Equity, 238, American edition, pp. 512-600; and see Perry on Trusts, sects. 894, 910, 912.

It is unnecessary, however, to pursue the subject further. The conclusion to which we have come is that, under the circumstances of this case, the Circuit Court had the power, in its discretion, to allow to the complainant, Vose, his reasonable costs, counsel fees, charges, and expenses incurred in the fair prosecution of the suit, and in reclaiming and rescuing the trust fund and causing it to be subjected to the purposes of the trust. The allowances made for these purposes we have examined, and do not find anything therein seriously objectionable. The court below should have considerable latitude of discretion on the subject, since it has far better means of knowing what is just and reasonable than an appellate court can have. It is not shown in this case by the appellants that any of these allowances are excessive, or that the expenditures allowed were not fairly and honestly made.

But there is one class of allowances made by the court which we consider decidedly objectionable. We refer to those made for the personal services and private expenses of the complainant. In England and some of the States, no such allowance is made even to trustees eo nomine. In other States it is. But the complainant was not a trustee. He was a creditor, suing on behalf of himself and other creditors, for his and their own benefit and advantage. The reasons which apply to his expenditures incurred in carrying on the suit, and reclaiming the property subject to the trust, do not apply to his personal services and private expenses. We can find no authority whatever for any such charge by a person in his situation. Where an allowance is made to trustees for their personal services, it is made with a view to secure greater activity and diligence in the performance of the trust, and to induce persons of reliable character and business capacity to accept the office of trustee. These considerations have no application to the case of a creditor seeking his rights in a judicial proceeding. It would present too great a temptation to parties to intermeddle in the management of valuable property or funds in which they have only the interest of creditors, and that perhaps only to a small amount, if they could calculate upon the allowance of a salary for their time and of having all their private expenses paid. Such an allowance has neither reason nor authority for its support.

We are of opinion, therefore, that the allowance for these purposes was illegally made, and that to this extent the orders should be reversed. We refer to the allowance in the last order, of $15,003.35 for private expenses, and of $34,625 for personal services. As to those items the said last order will be reversed, and in all other respects both of the orders appealed from will be affirmed; and it is

So ordered.

MR. JUSTICE MILLER dissenting.

While I agree to the decree of the court in this case, I do not agree to the opinion, so far as it is an argument in favor of a principle of which is founded the grossest judicial abuse of the present day; namely, the absorption of a property or a fund which comes into the control of a court, by making allowances for attorneys' fees and other expenses, pending the litigation, payable out of the common fund, when it may be finally decided that the party who employed the attorney, or incurred the costs, never had any interest in the property or fund in litigation.

This system of paying from a man's property those engaged in the effort to wrest it from him can never receive my approval; and as I have had no opportunity to examine the authorities cited in the opinion, I can do no more than protest against the doctrine.


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Johnson v. Railroad Company

APPEAL from the Circuit Court of the United States for the Eastern District of New York.

On May 19, 1857, letters-patent were granted to Asa Johnson, the inventor, and William Higbie and Henry Link, his assignees, 'for an improved mode of fastening sheet metal on roofs,' &c.

The specification declares the invention to be 'a new and useful mode of self-adjusting fastenings for fastening metallic coverings to buildings, and in any and all other places where metals require fastening and their contraction and expansion demand accommodation;' and there are appended to it five figures.

Fig. 1 is a side elevation of a building.

Fig. 2 is an end elevation or section cut through the roof in the line X X, Fig. 1.

Fig. 3 is an end elevation of the self-adjusting fastener.

Fig. 4 is a side elevation of the same.

Fig. 5 is a plan view of the bottom-plate.

The specification then proceeds as follows:--

'In the operation of my invention, after sheeting the roof, if the boards do not exceed an inch in thickness, I bore a hole at the point where I wish to insert the stud, about the size as seen in vertical dotted lines in Fig. 2. The holes may be made larger or smaller to allow for contraction and expansion, so that the studs can move freely in any direction required.

'The bottom-plate is then screwed firmly to the boards by the screws (s)(s) seen in Figs. 2 and 4, and the screw 1 passes through

the metallic covering into the stud 2, thus firmly fastening the covering K to the stud, as seen in Fig. 2.

'It will be further seen that the cord 7 passes through the stud 2, Fig. 4, and then through the bottom-plate, and is fastened together as at g, in said Fig., thus always keeping the stud in an erect position until attached to the metal.

'If the covering contract on a line parallel with the connecting-pin S, the adjustable connecting-rod 2 will move on it towards one of the flanges 4, when it expands it will move towards the opposite flange, thus moving towards the point of contraction, and from the point of expansion with this metallic covering.

'The adjustable stud, in addition to its parallel and longitudinal movement, is capable of a diagonal movement, thus accommodating itself to any direction required by the metal contracting or expanding.

'I contemplate using them as general fasteners when it is necessary to allow for the contraction and expansion of the material used, not confining myself to buildings only. I may find, in using my adjustable fasteners, it necessary to make some of them, those that are in parallel lines with the flanges, to fit up close to the sides of the studs, as seen at 1, 1, in fig. 2, allowing them to move in but one direction on the pin 3, which slides in the slots in the flanges 4, 4.'

The claim is thus set forth:-- 'In the self-adjusting fastener as described, for the purpose of attaching metallic coverings to buildings and accommodating itself to the contraction and expansion of the metal, and for fastening metals in all other places when the contraction and expansion dm and accommodation, substantially as set forth, or any mechanical device equivalent thereto.'

At the expiration of the original term of the patent, fourteen years, an extension of seven years was granted to Johnson, who subsequently assigned a two-third interest in his extended letters to Thomas S. Sandford. The original letters were surrendered April 16, 1872, and a reissue of that date was granted.

The specification of the reissue describes the invention generally as 'a new and useful mode of self-adjusting fastenings for fastening metallic coverings to buildings, and for use in any and all other places where metals require fastening, and their contraction and expansion require accommodation.'

Then follows a reference to and description of the same five illustrative figures which form part of the specification of the original patent.

The specification then proceeds as follows:--

'The principle of my invention consists in connecting the metal to be fastened with a bolt or pin arranged to slide in slotted bearings in the direction of expansion or contraction, said adjustable bolt and its bearings being combined with the materials to be fastened.

'I have found my adjustable fastener peculiarly useful in fastening metallic roofs to buildings, and I proceed to describe its construction and use.

'In using my self-adjusting fastener for fastening metallic roofs to buildings I connect the sliding bolt or pin with the roof by means of a stud fastened to the same, and I form the side-plates, which contain the bearings for the sliding-bolt, in connection with and as flanges of a bottom-plate, which is secured fast to the under side of the wooden sheathing of the building.

'In the drawing, 1 indicates the screws for attaching the metallic roof to the stud, 2 is the stud, 3 is the adjusting bolt or pin, to which the metallic roof is connected by the stud and screw, said bolt passing through the stud 2 and through the slots of the sideplates or flanges. 4 4 are the side-plates or flanges, provided with slots, which form the bearings of the adjusting-bolts. 5 is a bottom-plate, used as a convenient means of attaching the side-plates to the wooden sheathing of the building. 6 6 are the slots in the side-plates in which the adjusting-bolt slides. 7 is an india-rubber cord which may be used in applying the adjustable fastener to buildings. It is connected with the stud by being passed through an opening in it. It then passes down on each side of the stud and through an opening in the bottom-plate, where it is fastened, as indicated at g in the drawing, and is used for keeping the stud in an erect position until after the stud had been inserted through the sheathing from below, and until it is attached to the metal roof. Without some contrivance of this kind it would be difficult in the position indicated to keep the stud in position while the connection was being made.

'S § are screws for attaching the bottom-plate, and with it the side-plates, to the sheathing. G is the sheathing of the roof greatly enlarged in thickness in proportion, to illustrate the details of the connection of the adjustable fastener to buildings. H is the metallic roofing.

'The method of using the invention in attaching metallic roofing to buildings is as follows: After sheathing the roof, a hole is bored in the sheathing, at the point where the adjustable fastener is to be used, of sufficient size to allow the connecting-stud to move in the same with the expansion or contraction of the metallic roof. These holes receive the slotted flanges or side-plates 4 4, and they are indicated in the drawing by the letter a. (See Fig. 2.) They should be of the shape and size required by the extent and direction of the contraction and expansion to be allowed for. The flanges or side-plates are inserted in the holes, and the bottom-plate is then firmly secured to the boards or sheathing G by the screws § S, as seen in Fig. 2. Where the sheathing is sufficiently thick, a hole may be bored into it to receive the fastener from above. The i de-plates 4 and adjusting-bolt 3 are thus connected with the building. The connection with the metallic roof is then effected by holding the stud in an erect position by means of the rubber cord, and attaching the stud to the roofing by means of the screw 1. Both the wooden sheathing and the metallic roof are thus connected to the self-adjusting mechanism, consisting of the slotted side-plates and the bolt which slides in them.

'It is obvious that if the metal of the roofing contracts or expands in a line with the slots in the side-plates that the bolt will adjust itself to such contraction or expansion by sliding in the slots in the proper direction.

'On the other hand, in cases where the line of contraction or expansion may be diagonal, or at right angles to the line of the slots in the side-plates, the connecting-stud is arranged to slide upon the adjusting-bolt, as it is shown it may do in Figs. 2 and 3. Where, however, the movement is only sensible in the direction of the slots, the side-plates are made to fit up close, as seen at Fig. 2 in the illustrations marked*, where the side-plates or flanges are seen in cross-section, so that the only practical adjustability shall be in the direction of the slots.

'I contemplate using my invention as a general fastener where it is necessary to allow for the contraction and expansion of the material used, not confining myself to buildings only.'

The first claim of the reissue is substantially identical with the one claim of the original patent. The second claim of the reissue is as follows:--

'I claim, in combination with the adjusting-bolt and slotted side-plates, suitably connected to and combined with the materials to be fastened together for the purpose of accommodating the expansion and contraction of such materials with reference to each other, substantially as specified.'

The bill in this case was filed by said Johnson and Sandford to restrain the Flushing and North Side Railroad Company from infringing the second claim of the reissued letters-patent, by using what is commonly known as the fish-plate joint for uniting the ends of railroad rails. It consists of two iron plates of proper shape and size to fit the 'web,' which is the upright portion of the rail between it head and base. The plates are fastened one on each side of and near the ends of two abutting rails by means of bolts and nuts, the bolts passing through corresponding holes formed in both the plates and rails. In order to permit the rails to expand and contract with the changes in temperature, their ends are not allowed to form a close joint, and the holes, either in the fish-plates or in the rails, are made larger than the bolts, and are elongated in the direction of the length of the rails. By these means the expansion and contraction of the rails is 'compensated' without injury to the joint.

The answer denies the alleged infringement, and sets up as defences the invalidity of the reissued letters, because, as was alleged, the original were not lawfully surrendered, and the want of novelty in the invention covered by the second claim of the reissue.

The Circuit Court dismissed the bill, holding that the reissued letters were void because they were not for the same invention as that described in the original, and the complainants appealed.

The facts are stated in the opinion of the court.

Mr. Benjamin F. Butler and Mr. Thomas Bracken for the appellants.

Mr. Andrew McCallum and Mr. S. D. Law for the appellee.

MR. JUSTICE WOODS, after stating the case, delivered the opinion of the court.

title: Johnson v. Railroad Company


text: Page:The Works of J. W. von Goethe, Volume 10.djvu/463


text: Talk:Johnson v. Railroad Company

title: Talk:Johnson v. Railroad Company


text: Page:The Works of J. W. von Goethe, Volume 10.djvu/462


text:
Johnson v. Railroad Company/Opinion of the Court

The appellee insists that the invention covered by the second claim of the reissued patent, of which infringement is charged, is neither described in the specification nor claimed in the claim of the original patent, and that the reissue is therefore broader than the original patent, and consequently void.

It takes but slight comparison of the patents to show that this contention is well founded. The original patent was for a complicated contrivance, consisting f a number of old devices combined, and specially adapted to the fastening of metallic coverings to buildings, and for use in all other places where metals require fastening and their contraction and expansion require accommodation. To make the invention of any practical value for the purpose suggested in the specification, and for use in the 'other places' referred to, all the parts of the device therein described, except, perhaps, the rubber cord, which is only for temporary use in applying the device, are absolutely essential. Nowhere in the specification is it indicated or suggested that any part of the device described can be dispensed with. It is perfectly clear that the stud and bottom-plate of the contrivance are absolutely necessary to the only specific use mentioned in the specification. If these are left out there is no connection between the two materials to be fastened together; namely, the metal roof and the wooden sheathing under it. As the declared purpose of the invention is the fastening of these two materials together, it is difficult to see how the parts of the device essential to the fastening can be discarded, and the invention still remain perfect and unchanged.

On recurring to the second claim of the reissued patent, we find that the metal roof to be fastened, the stud, the bottom-plate, and the screw which fastens the metal roof to the stud, are all eliminated from the invention, and there is nothing left but the adjusting-bolt (3) and the slotted side-plate (4 4). As thus left, it is impossible to apply in a practical manner the device to the fastening of sheet-iron to a roof, or the fastening of any sheet metal to anything whatever.

If the second claim of the reissued patent, as insisted by appellants, covers the fish-plate joint used by the appellee, it must cover a combination of (1) the two materials to be fastened together; (2) two slotted side-plates on opposite sides of the materials to be fastened, which serve as clamps to hold such materials in position; (3) the adjusting-bolt. The claim is so interpreted by the expert witness of appellants. Under the original patent the materials or things to be fastened together are the metallic covering of the roof and the under surface of the wooden sheathing on which it is laid. The slotted plates or flanges are fastened to the under side of the sheathing by the bottom-plate, which connects the flanges, and they form a support for the adjusting-bolt; but the slotted flanges do not embrace or clamp any part of the wooden sheathing or any part of the metallic covering of the roof, much less do they embrace or clamp at the same time the sheathing and the metallic covering, which are the things to be fastened together. But in the reissued patent the slotted plates not only furnish bearings for the bolt, but perform a new and essential function, of furnishing a strong lateral support to the materials to be fastened together by clamping the same between them.

We find, therefore, that in the reissued patent several of the devices essential to the combination described in the original patent are left out and a separate claim made for the parts which remain, and to these parts a new and essential function is given, which they could not perform under the original patent.

It is, therefore perfectly clear that the second claim of the reissued patent was not covered by the original patent. It describes another device operating in a different way and for a different purpose.

Under the circumstances of this case there can, in our opinion, be but one conclusion, and that is, that the second claim of the reissued patent is void.

There was no error in the original patent caused by inadvertence, accident, or mistake, which could have escaped the notice of the patentee and his associates for fifteen years. It is not open to dispute that the fish-plate joint, precisely such as the appellants claim is covered by their reissued patent, was in general use during nearly the entire life of the original patent. Why did not the patentee earlier discover that all this use of the fish-plate joint was really an infringement on his patent and apply for a reissue and assert his rights? He has rested supinely until the use of the fish-plate joint has become universal, and then, after a lapse of fifteen years, has attempted by a reissue to extend his patent to cover it. We think it is perfectly clear that the original patent could not be fairly construed to embrace the device used by the appellee, which appellants insist is covered by their reissue. If the reissued patent covers it, it is broader than the original, and is, therefore, void. Giant Powder Co. v. Cal. Vigorit Powder Co., 6 Sawyer, 508; Powder Company v. Powder Works, 98 U.S. 126; Ball v. Langles, 102 id. 128; James v. Campbell, 104 id. 356.

Even if the patentee had the right to a reissue if applied for in seasonable time, he has lost it by his laches and unreasonable delay. Miller v. Brass Company, id. 350.

The defence of want of novelty set up in the answer is, in our opinion, also sustained by the evidence. The testimony shows that the device of employing slotted plates and bolts to allow of expansion and contraction caused by changes in temperature was applied in the manufacture of locomotives long before the year 1843, the earliest date at which Johnson, the original patentee, claims to have conceived his invention. By this contrivance the expansion and contraction of the boiler of the locomotive upon its frame, caused by alternate heating and cooling, were accommodated. This device was in common use before the year 1843, and it much more nearly resembles the fish-plate joint used for uniting the iron rails of a railroad than it does the contrivance described in the original patent of Johnson.

Many other instances of the application of the principle of this device prior to the date of Johnson's original patent are shown by the evidence. Among these were the use by the Newcastle and Frenchtown Railroad Company, in 1837, of iron rails embodying substantially the present fish-plate joint, and the use of the same device by the Oswego and Syracuse Railroad Company in 1848. In the first of these instances but one plate was used for each joint, and there was an oblong hole in one end only of every rail. In the second instance two plates were used to every joint, and the holes in both ends of the plates were oblong.

There are other instances of the use of this device for joining iron rails, which the record discloses. The evidence leaves no doubt upon our minds that the device now used by the appellee and which is alleged to be an infringement on appellants's patent, was well known and publicly used for several years before the application of Johnson for his original patent in 1857.

An attempt is made to elude the force of the testimony on the question of novelty by introducing evidence to show that Johnson, as early as the year 1843, made a small model of a device similar, as is claimed, to the present fish-plate joint, and also some drawings upon the fly-leaf of a book, of the same contrivance, and these it is claimed show that Johnson was the first inventor of the fish-plate joint, and that his patent, after-wards obtained in 1857, cut off the claims of intermediate inventors, if any such there were.

We have examined the model referred to, and cannot see that it contains any suggestion of the fish-plate joint. It is simply an oblong strip of sheet-iron, having its sides bent over so as to form flanges, and with four oblong holes in each flange corresponding with similar holes in the other, and a bolt to pass through the corresponding holes in the flanges. The model is a single piece of sheet-iron, supposed to represent an iron rail. There is no suggestion that it is to be connected with any other rail, and there are no plates or bars with which to make the connection. If the model suggests anything, it is simply the use of a bolt in slotted holes, which, as the testimony in this case shows, was a device in common use in mn y ways long before the year 1843.

It is alleged that the model spoken of was made by Johnson when he was about twenty years of age. It does not appear that at this time he had ever seen an iron rail such as those to which a fish-plate joint can be applied, or that he had ever seen a railroad. According to his testimony the model when finished was placed by him upon the plate under the eaves of a woodhouse, where it remained unseen by any one for thirty-three years, until the spring of 1876, when he returned to the place where he had lived in 1843, and got the model for the purposes of this suit.

It is sufficient to say that the proof fails to show that he, in 1843, or at any time before the fish-plate joint for uniting iron rails came into use, was the inventor of that device, or that he ever invented it at all. It was not described in his original patent, and he never set up any claim to it until the year 1872, when its use had become universal wherever railroads were constructed.

On both grounds, therefore, the invalidity of the reissued patent and want of novelty in the invention which appellants contend was covered by the original patent, we are of opinion that the Circuit Court was right in dismissing the bill.

Decree affirmed.


text: Talk:Johnson v. Railroad Company/Opinion of the Court


text: Page:The Works of J. W. von Goethe, Volume 10.djvu/461


text: Page:The Works of J. W. von Goethe, Volume 10.djvu/460


text:
Guidet v. Brooklyn

APPEAL from the Circuit Court of the United States for the Eastern District of New York.

This is a bill in equity, filed Jan. 29, 1874, by Charles Guidet, against the city of Brooklyn, wherein he alleges that the defendant was then making and using a stone pavement which, in whole or in part, was substantially the same in construction and operation as that for which reissued letters-patent No. 4106, bearing date Aug. 23, 1870, were granted to him. The prayer of the bill is for an injunction and account.

The answer of the city denies the alleged infringement of the letters, and sets up that the pavement, which is their subjectmatter, was, with Guidet's knowledge and consent, in public use for more than two years before the date of his original application, and that he was not the original and first inventor of it, the same having before that date been described in various publications, and publicly used in certain specified localities of a number of cities in the United States.

Upon final hearing the court dismissed the bill, and Guidet appealed here. The remaining facts are stated in the opinion of the court.

Mr. George Harding for the appellant.

Mr. William C. De Witt and Mr. George Gifford for the appellee.

MR. CHIEF JUSTICE WAITE delivered the opinion of the court.

title: Guidet v. Brooklyn


text: Talk:Guidet v. Brooklyn

title: Talk:Guidet v. Brooklyn


text: Observations on Man (6th edition)/Part I/Chapter I/Section II


text:
Guidet v. Brooklyn/Opinion of the Court

The invention of Guidet covered by his reissued patent may fairly be stated thus: 'Take stone blocks in the form of parallelopipeds, with the ends sufficiently smooth, and the sides sufficiently rough, and put them together in a street pavement so that the ends will be parallel to the street, and the sides at right angles.' How large the blocks should be, how smooth the ends, or how rough the sides, is nowhere stated. All that is left to the judgment and skill of him who does the work.

The evidence leaves no doubt whatever in our minds that pavements made of blocks of stone broken into the general form of parallelopipeds, and set on edge with their ends parallel to the street, and their sides across it, were in use long before the date of Guidet's invention. This is conceded, in fact, both in the original patent and the reissue; for in the original it is said, 'I do not claim broadly, as my invention, a pavement composed of blocks made in the form of parallelopipeds;' and in the reissue, 'I am aware that pavements have been produced of blocks made in the form of parallelopipeds.' The difficulty had been, undoubtedly, that the spaces between the sides of the blocks, in ordinary use before his invention, were not sufficient to furnish a firm foothold for draught animals, especially after the surfaces had been worn smooth. How to remedy this defect was the problem o be solved. Formerly it had been done, as is said in the reissued patent, by interposing between the adjoining blocks thin strips of wood or stone. As a substitute for this, he chamfered the edges of the broad sides, and thus got the advantage of placing the blocks close against each other, and keeping the pavement firm while he secured on the surface the necessary open joint to furnish a good foothold. That, as it seem to us, was all there was of his invention, and we are by no means inclined to hold it was not patentable to him. By taking the block of stone in ordinary use, and substituting the chamfered edge on the broad side for the narrow strip of wood or stone, he got the space needed for the joint, and he solidified the pavement by bringing firmly together the stones that furnished the surface to be used for travel.

But after he had obtained his patent, he seems to have found that, by selecting blocks sufficiently rough on their sides, the joints could be made open enough for all practical purposes without chamfering, and so in his reissue he abandoned that feature of his patent, and claimed for rough side surfaces only. In this way, as it seems to us, he left the field of invention, and entered that of mechanical skill only. Pavements of stone in the form of parallelopipeds being confessedly old, he has really done no more than suggest the best kind of stone to be used in that way. The pavements in Rochester and Buffalo, which it is agreed antedated his invention, were laid in all substantial respects like his. The quality of the stone was different, and the side surfaces were comparatively smoother than his, though to some extent they were rough. He, as has already been seen, does not say what degree of roughness is required. The effect of his specification and claim is, that if blocks are selected with their sides rough enough, joints can be made that will furnish a suitable foothold without the use of strips, and without chamfering. It is true that in Rochester and Buffalo sand may have been used to some extent to keep the blocks apart, but that was only another way of doing what it is agreed had been done before. What he did was to show that if stone were used with rougher side surfaces than those found in the old pavements, all artificial means of keeping the transverse joints open might be abandoned, and the requisite surface secured. This was simply carrying forward the old idea, and doing what had been done before in substantially the same. way, but with better results. The change was only in degree, and consequently not patentable. Clearly the reissued patent cannot be sustained.

Decree affirmed.

title: Guidet v. Brooklyn/Opinion of the Court


text: Talk:Guidet v. Brooklyn/Opinion of the Court


text:
Page:The Works of J. W. von Goethe, Volume 10.djvu/232

 "Between the bare legs of the priest"


text:
Gordon v. Butler

Error to the Circuit Court of the United States for the Northern District of New York.

The facts are stated in the opinion of the court.

Mr. Leslie W. Russell for the plaintiffs in error.

Mr. Harry Bingham and Mr. A. X. Parker for the defendant in error.

MR. JUSTICE FIELD delivered the opinion of the court.

title: Gordon v. Butler


text: Talk:Gordon v. Butler

title: Talk:Gordon v. Butler