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Taylor v. Ypsilanti/Opinion of the Court

This action was brought by Taylor, a citizen of New York, to recover from the city of Ypsilanti, a municipal corporation of Michigan, the amount of certain coupons cut from bonds issued by that city in aid of the construction of the Detroit, Hillsdale, and Indiana Railroad. At the conclusion of the evidence, the jury, being so instructed, returned a verdict in behalf of the city, upon which judgment was entered.

The bonds purport to have been issued under the authority of a general statute, approved March 22, 1869, declaring it to be lawful, within prescribed limits as to amount, for any city or township-a majority of its electors voting, at a meeting called for that purpose, assenting-to pledge its aid, 'by loan or donation, with or without conditions,' in the construction of any railroad by a corporation organized under the laws of Michigan. The electors voted aid to the extent of $50,000 in bonds of the city, upon condition that the company should have and continue the eastern terminus of its road in the city, or connect, within its limits, with the Michigan Central Railroad; and upon the further condition, that if any citizen of Ypsilanti should subscribe and pay for any share in the stock of the company, the latter 'shall deliver to the persons so subscribing and paying for such share the bond or bonds of said city equal to the amount so subscribed and paid for, not exceeding in all the amount of bonds issued by said city to said railroad company; and that citizens of said city shall have the right to subscribe to the stock of said railroad company to an amount not exceeding $50,000 for thirty days after such aid shall have been voted.' Upon each bond appears a declaration, under the official signature of the mayor and clerk of the city, setting forth the conditions attached by the popular vote to the issue and delivery of the bonds.

In support of the judgment, it is contended that the city, in giving aid to the construction of a railroad, was restricted to the specific modes-loan or donation-designated in the statute; that this transaction was neither a loan nor a donation; that it is essential to a donation that it should not be made for a valuable consideration, or in execution of a contract embracing reciprocal obligations, since, in a legal sense, it implies an act by which the owner of a thing voluntarily transfers the title and possession of the same from himself to another person without any consideration; and, consequently, the city was without power to issue bonds upon conditions such as those imposed by the electors. It is argued that the conditions are inconsistent with any correct idea of donation, and that the bonds based thereon are unauthorized by law, and therefore invalid as obligations of the city.

In this conclusion we are unable to concur. The argument of counsel fails to give proper effect to material portions of the statute. Power was conferred, not simply to make a loan or donation, but to make a loan or donation 'with or without conditions.' The statute is silent as to the nature of the conditions with which the loan or donation might be accompanied. It was, in our opinion, a legitimate exertion of that power to secure, in connection with a corporate donation, such advantages or special privileges for the people of the municipality, not inconsistent with public policy, as the railroad company was willing to concede. The requirement that the company should have and continue the eastern terminus of its road in the city, or connect, within its limits, with the Michigan Central Railroad, inured to the benefit of the mass of the population interested in the growth and prosperity of the city; while the stipulation that citizens of Ypsilanti should be entitled, for a limited period, thirty days,-to receive the citys bonds to an amount equal to the stock they might subscribe and pay for (not exceeding the amount of the bonds donated), was of value to such persons only as chose to avail themselves of the privilege thus secured. If the transaction has any element of bounty to individual citizens, and was not, for that reason, a donation, within the technical meaning of that word, it is quite sufficient to say that it is within the express statutory authority to attach conditions to any donation which the people might sanction. We are, therefore, of opinion that the donation by the city of its bonds, upon the condition prescribed by popular vote, was within the terms of the statute.

This brings us to the consideration of the proposition advanced in behalf of the city, that the act of March 22, 1869, is repugnant to the Constitution of Michigan, as expounded by its highest judicial tribunal, in People v. Salem, 20 Mich. 452; Bay City v. State Treasurer, 23 id. 499, and subsequent cases. These adjudications, it is claimed, constitute the law of this case, and should be followed, as of obligation, without reference to the time when they were made, or to any opinion we may entertain as to the soundness of the principles announced.

The specific provisions which, it is supposed, establish the invalidity of the act in question are sections six, eight, and nine of article fourteen, and section thirty-two of article six. They declare that 'the credit of the State shall not be granted to, or in aid of, any person, association, or corporation;' that 'the State shall not subscribe to, or be interested in, the stock of any company, association, or corporation;' that 'the State shall not be a party to, or interested in, any work of internal improvement, nor engaged in carrying on any such work, except in the expenditure of grants to the State of land or other property;' and that 'no person shall be. . . deprived of life, liberty, or property without due process of law.' These sections constitute a part of the Constitution of 1850, which is still the fundamental law of State.

It is not to be questioned that the Supreme Court of Michigan, in the cases cited, has ruled that it was beyond the constitutional power of the legislature to grant to a municipal corporation authority to pledge its credit, or issue bonds, in aid of the construction of railroads by corporations organized, owned, and managed by private persons. Before examining the particular grounds upon which those decisions rest, it is necessary that we should ascertain what was, at the date of the passage of the act of March 22, 1869, the law of Michigan, declared and acted upon by the several departments of its government, upon the general subject of the relations between railroad corporations and the public. The earliest case, to which our attention has been called, is Swan v. Williams, 2 Mich. 427. It was determined in 1852. The constitutional validity of an act incorporating a railroad company, in so far as it authorized the appropriation of private property for the location, construction, and operation of the road authorized by its charter, was there assailed chiefly upon the ground that property, so appropriated, is in no sense taken for public purposes, but for the private profit and advantage of the corporators. But the court declined to accede to that view. It held that counties, towns, cities, and villages are political or municipal corporations which, from their nature, are subject to the unlimited control of the legislature; that corporations such as banking, insurance, manufacturing, and trading companies were private corporations, the private advantage of the corporators being the ultimate as well as the immediate object of their creation, and the resulting benefits to the public being merely incidental; and that turnpike, bridge, canal, and railroad companies are more properly styled public corporations, since, in their creation, public duties and public interests are involved, the discharge of those duties and the attainment of those interests being the primary object to be worked out through the powers delegated to them. The very existence of the latter, said the court, was based as well upon the delegation to them of the sovereign power to take private property for public use, as upon the continued exercise of that power in the use of property for the purposes for which it was condemned; that such corporations are the means employed to carry into execution a given power; that the character of a corporation is determined, not so much by the object sought by it, as by that designed by the legislature; that if that object be the public interest, to be secured by the exercise of powers, delegated for that purpose, which would otherwise repose in the State, the corporation is public, although private interests may be incidentally promoted; that such a corporation is essentially 'the trustee of the government for the promotion of the objects desired, a mere agent to which authority is delegated to work out the public interest through the means provided for that purpose and broadly distinguished from one created for the attainment of no public end, and from which no benefit accrues to the community except such as results incidentally, and not necessarily, from its operations.' That there might be no doubt as to the scope of the decision, Martin, J., speaking for the whole court, further said: 'Nor can it be said that the property when taken is not used by the public, but by the corporators for their own profit and advantage. It is unquestionably true that these enterprises may be, and probably always are, undertaken with a view to private emolument on the part of the corporators; but it is nevertheless true that the object of the government in creating them is public utility, and that private benefit, instead of being the occasion of the grant, is but the reward springing from the services. If this be not the correct view, then we confess we are unable to find any authority in the government to accomplish any work of public utility through any private medium, or by delegated authority; yet all past history tells us that governments have more frequently effected these purposed through the aid of companies and corporations than by their immediate agents, and all experience tells us that this is the most wise and economical method of securing these improvements. . . . The purpose designed by the government in the construction of these roads is the use of the public, the expeditious communication from point to point, and not revenue.'

In 1859 the legislature of Michigan passed an act providing for the payment from the State treasury of a certain sum, by way of bounty, for every bushel of salt manufactured by any individual, company, or corporation, from water obtained by boring in Michigan, and exempting from taxation property used for such purposes. Laws Mich., 1859, p. 551. That law was subsequently amended, and in people v. State Auditors (9 Mich. 327), decided in 1861, it was held that the relators, a manufacturing company, acquired a vested right to the amount, offered by the original act, for all salt manufactured prior to the amendatory statute reducing the bounty. And the doctrines of that case were reaffirmed in ''East Saginaw Manuf. Co. v. City of East Saginaw, &c.'' (19 id. 259), decided in 1869, after the passage of the act of March 22,

The diligence of counsel, aided by our own researches, has not disclosed any adjudication of the Supreme Court of Michigan, prior to May 26, 1870, in which the doctrines of these cases were recalled or, in any degree, modified,-doctrines constituting, as will not be denied, the foundation upon which, in the courts of this country, rests the power of the legislature, when unrestrained by constitutional inhibitions, to authorize municipal aid to railroad enterprises.

So far as the action of the legislative and executive departments of Michigan is concerned, we find that from the adoption of the Constitution of 1850 down to the passage of the act in question, authority was given, in many instances, to municipal corporations to aid in the construction of railroads and plank-roads by corporations organized and managed by private persons. And by a general statute passed in 1855, providing for the incorporation of railroad compainies, authority was given to condemn real estate, property, and franchises for the purposes of the corporation, making compensation therefor in the mode prescribed. That statute expressly declares that 'all real estate or property whatsoever, acquired by any company, under and in pursuance of this act, for the purpose of its incorporation, shall be deemed to be acquired for public use.' Compiled Laws of Mich., 1857, vol. i. pp. 638, 643. It was in force when the act of March 22, 1869, was passed. But this is not all. In the year 1867 a convention was held, charged with the duty of revising the Constitution of the State. The delegates in that body were of course aware of the existence of numerous statutes, public and private, authorizing railroad corporations to condemn private property for the purpose of constructing and maintaining railroads, and empowering municipal corporations of the State to pledge their credit in aid of their construction. If such legislation was in opposition to the will of the people, or if it was deemed to be forbidden by the letter or spirit of the existing constitution, to remodel which was the object of the convention, we should expect to find in the new constitution some distinct provision reversing the policy which had been steadily pursued by the legislative and executive departments of the State, and which had been sustained as constitutional by the judiciary. But no such provision was adopted. On the contrary, two sections were adopted, relating to the subject of municipal aid to railroads, one declaring that 'the legislature shall not authorize any city or township to pledge its credit, for the purpose of aiding in the construction of any railroad to such an extent that the outstanding indebtedness, exclusive of interest, on account of aid to any and all railroads, shall exceed ten per cent of the assessed valuation of such city or township;' while the other affirmatively declared that the legislature might authorize any city or township to raise money by taxation, for such purposes, within the amount named. Although the constitution submitted by the convention of 1867 was not adopted by the people, the sections, to which we have referred, adopted by delegates representing every portion of the State, show that there was no purpose to take from the legislature the power, under all circumstances, of authorizing municipal aid to railroad corporations. The effort was only to restrict the power theretofore exercised by the legislature.

The act of March 22, 1869, contains no clause of an unusual character. It is general in its application to all the townships, villages, and cities of the State. It requires all bonds executed under its provisions to be delivered to the State treasurer, to be by him held, as trustee for the municipality and the railroad company, until all the conditions prescribed by popular vote or by the statute were performed. It declares that the railroad company for which the bonds were voted shall be entitled to receive them whenever the governor certified that all conditions have been performed. The bonds having been deposited with the State treasurer, the company entered upon the work of construction in the winter of 1869-70. The road was completed prior to Jan. 1, 1871, and has been in operation over since. But prior to May 26, 1870, it had been so far constructed that the railroad company became entitled under its contract to the bonds voted by the city of Ypsilanti. And on the 10th of June, 1870, the governor gave his certificate under the State seal, stating that the company had performed all conditions prescribed by the statute, and by the vote of the people, and was entitled to receive the bonds voted by the city. On the 21st of June, 1870, the treasurer delivered them to the company, indorsing upon each that it was delivered by him, on that day, under the provisions of the act of March 22, 1869. Thus the city and the railroad company received all for which they respectively bargained.

On the twenty-sixty day of May, 1870,-after, let it be observed, served, the railroad company had earned the bonds under its contract with the city, and was entitled to the required certificate from the governor,-the case of People v. Salem was determined in the Supreme Court of the State. It involved the constitutional validity of an act passed in 1864, authorizing certain townships to pledge their credit, and the county of Livingston to raise by tax a loan of money, in aid of the construction of a railroad. The court, Graves, J., dissenting, held the act to be unconstitutional. The point was distinctly made in argument that municipal aid to railroads was prohibited by sects. 6, 8, and 9 of art. 14 of the State Constitution. It was claimed that those sections would be rendered nugatory if so construed as to recognize the power of the legislature to authorize, or compel, each city and township in the State to grant or loan its credit to, or subscribe to the stock of, railroad or other companies, to the amount of a fixed or uniform percentage of the assessed valuation of its taxable property. But the court did not rest its decision upon any specific provision of the State Constitution. Its conclusion was placed upon what were declared to be fundamental maxims of all taxation. It held the exercise, by a municipal corporation, of the power to pledge its credit to be an incipient step in the exercise of taxation; action; that it is essential to a valid exercise of the power of taxation that it be for a public purpose; that a corporation created for the purpose of constructing a railway, to be owned and operated by the corporators, is a private corporation; that taxation for such a purpose is no more for a public purpose than would be taxation in behalf of the proprietors of a mill, or hotel, or newspaper establishment, or other similar enterprise, which, while private in its nature, supplied a public need. The conclusion of the court was distinctly placed upon general principles, and not upon grounds of local law or upon any special provision of the State Constitution, as is manifest from the last paragraph in the leading opinion, in these words: 'As, therefore, it appears that the first and most fundamental maxim of taxation is violated by the act in question, it becomes superfluous to consider whether the act would also violate the maxim of apportionment, or be obnoxious in its application, because the burden, even if public, could not also be regarded as local and peculiar to this township. Equally superfluous is it to consider in detail the several express provisions of the State Constitution which the respondents suppose to be violated. If the authority exercised is not within the taxing power of the State, it is quite needless to discuss whether, if it were within it, there are not restrictions which prohibit its exercise.' The conclusion in that case, as thereafter declared in Bay City v. State Treasurer, struck at the root of all legislation in aid of railroad companies.

We remark in passing that the doctrines of People v. Salem were, when announced, in direct conflict with those previously promulgated as well by this court, as by the highest courts of a large majority of the States. It was said by Mr. Justice Clifford, speaking for the court, in Rogers v. Burlington (3 Wall. 654), decided in 1865, that the rule that the legislature, in the absence of constitutional prohibitions, could authorize municipalities to aid in the construction of railways, owned and managed by private corporations, pervaded the jurisprudence of the United States. We will not, at this late day, enter upon the vindication of that rule. And we may add, that, under the later doctrines announced by the Supreme Court of Michigan, it is difficult to perceive how railroads can be regarded as public highways, subject, in the interest of the public, to governmental control and regulation.

Subsequently, in Bay City v. State Treasurer, the Supreme Court of Michigan reaffirmed the doctrines of people v. Salem. In that case, however, the invalidity of municipal aid and taxation for the construction of reilroads by railroad corporations was apparently placed upon these additional grounds: 1. That such taxation, being inadmissible under the fundamental principles announced in People v. Salem, was to be deemed unlawful confiscation, and, therefore, inhibited by sect. 32 of art. 6 of the State Constitution, protecting all persons against deprivation of property without due process of law; 2. That taxation for such purposes was also in violation of sects. 6, 8, and 9 of art. 14 of the State Constitution. It is unnecessary to notice the declarations of the State court in subsequent cases, since they are in line with those made in the two to which we have referred.

In January, 1872, Talcott v. Township of Pine Grove was determined in favor of the plaintiff in the Circuit Court of the United States for the Western District of Michigan. The question there was as to the constitutional validity of the identical act of March 22, 1869, under the authority of which the bonds in suit were issued. That court, the circuit and district judges concurring, declined to follow the case of People v. Salem, upon the ground, among others, that the act was valid as well under the laws of Michigan, declared and acted upon by all the departments of the State government at the time of its passage, as under the principles announced in this court and in the highest courts of most of the States. Upon writ of error the judgment was affirmed in this court at its October Term, 1873. Township of Pine Grove v. Talcott, 19 Wall. 666. In the argument here attention was called to the decisions in People v. Salem and Bay City v. State Treasurer, and it was earnestly contended to be the duty of the courts of the Union to accept the declarations of the State court as to the want of power in municipal corporations of Michigan to pledge their credit or aid in the construction of railroads by corporations owned and managed by private persons. After adverting to the principle that a statute was not to be pronounced void unless the repugnancy to the Constitution be clear and the conclusion that it exists inevitable, this court, speaking by Mr. Justice Swayne, affirmed the judgment, holding the act to be consistent with the Constitution of Michigan. Railroad Company v. County of Otoe, 16 Wall. 667; Olcott v. The Supervisors, id. 678. Under the circumstances, it was said that we could not yield to the authority of the decisions of the State court without abdicating the performance of one of the most important duties with which this tribunal is charged.

Of the bonds here in suit, Taylor became the purchaser, for a valuable consideration, in the year 1877. He was aware, at the time of his purchase, of the before-mentioned decisions of the Supreme Court of Michigan, adjudging municipal aid to railroad corporations to be forbidden by law, and bonds issued therefor to be invalid. But it is to be presumed he was also aware that this court, affirming the judgment of the Circuit Court of the United States, sitting in that State, had, at a subsequent sequent period, and long before his purchase, distinctly refused to follow the later decisions of the State court, and had adjudged the act of March 22, 1869, to be in conformity with the fundamental law of Michigan. The present case then appears to be this: Testing the rights and obligations of the parties by the law of the State as declared by this court, and as declared and acted upon by all the departments of the State government, at and before the time when the railroad company entered upon the execution of its contract with the city, we should be obliged to reverse the judgment of the court below; whereas, if we accept the decision of the Supreme Court of Michigan, made after those rights accrued and after the railroad company had earned the bonds, as conclusive evidence of the constitutional invalidity of the act of March 22, 1869, the judgment must be affirmed.

The position taken by counsel for the city is that the established settled construction, given by the highest court of a State, of the laws and Constitution of that State, must be deemed, in all cases, binding upon the courts of the Union; this, because the statute defining and regulating the jurisdiction of the Federal courts declares that the laws of the several States, when they apply, shall constitute rules of decision in eases at common law tried in those courts. This proposition, in the general terms in which it is announced, is undoubtedly supported by the language of some of the opinions which have emmanated from this court. But all along through the reports of our decisions are to be found adjudications in which, upon the fullest consideration, it has been held to be the duty of the Federal courts, in all cases within their jurisdiction, depending upon local law, to administer that law, so far as it affects contract obligations and rights, as it was judicially declared to be by the highest court of the State at the time such obligations were incurred or such rights accrued. And this doctrine is no longer open to question in this court. It has been recognized for more than a quarter of a century as an established exception to the general rule that the Federal courts will accept or adopt the construction which the State courts give to their own constitution and laws. 'The sound and true rule,' said Mr. Chief Justice Taney, in ''Ohio life Ins. Co. v. Debolt (16 How. 416, 432), 'is that if the contract when made is valid by the laws of the State, as then expounded by all the departments of its government, and administered in its courts of justice, its validity and obligation cannot be impaired by any subsequent act of the legislature of the State, or decision of its courts, altering the construction of the law.' So in The City v. Lamson'' (9 Wall. 477, 485), Mr. Justice Nelson, speaking for the court, said: 'It is urged, also, that the Supreme Court of Wisconsin has held that the act of the legislature conferring authority upon the city to lend its credit, and issue the bonds in question, was in violation of the provisions of the Constitution above referred to. But at the time this loan was made and these bonds were issued, the decisions of the courts of the State favored the validity of the law. The last decision cannot, therefore, be followed.'

Again, in Olcott v. The Supervisors (supra), the court, speaking through Mr. Justice Strong, said: 'This court has always ruled that if a contract when made was valid under the constitution and laws of a State, as they had been previously expounded by its judicial tribunals, and as they were understood at the time, no subsequent action by the legislature, or the judiciary, will be regarded by this court as establishing its invalidity.' To the like effect are some very recent decisions of this court. In Douglass v. County of Pike (101 U.S. 677), upon a review of some of the previous cases, the court, speaking by the present Chief Justice, said that 'the true rule is to give a change of judicial construction in respect to a statute the same operation on contracts and existing contract rights that would be given to a legislative amendment; that is to say, make it prospective, but not retroactive. After a statute has been settled by judicial construction, the construction becomes, so far as contract rights acquired under it are concerned, as much a part of the statute as the text itself; and a change of decision is to all intents and purposes the same in its effect on contracts as an amendment of the law by means of a legislative enactment. So far as this case is concerned, we have no hesitation in saying that the rights of the parties are to be determined according to the law as it was judicially construed to be when the bonds in question were put on the market as commercial paper.'

For these reasons, and without reference to any other questions discussed, we are of opinion that the rights of the plaintiff, as the owner of bonds issued under a statute which, when passed, was valid by the laws of Michigan, as declared and acted upon by the several departments of its government, are not affected by decisions of the Supreme Court of the State rendered after the railroad company, to whose rights the plaintiff succeeded, has earned the bonds under contract with the city made in conformity with the statute. Upon the case as presented the jury should have been instructed to find for the plaintiff, rather than for the defendant.

Judgment reversed with directions to set aside the verdict, and for such further proceedings as may be consistent with this opinion.

Mr. JUSTICE GRAY did not sit this case, nor take any part in deciding it.


text: Talk:Taylor v. Ypsilanti/Opinion of the Court

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New Buffalo v. Iron Company

ERROR to the Circuit Court of the United States for the Western District of Michigan.

The judgment below was for the amount due on certain bonds, with interest coupons attached, issued by the township of New Buffalo, in the county of Berrien, and State of Michigan, plaintiff in error, under the authority of a general statute of that State, approved March 22, 1869, conferring power upon townships, cities, and villages to pledge their aid, by loan or donation, with or without conditions, to any railroad company organized under the laws of that State, in the construction of its road. Sess. Laws Mich., 1869, p. 89. It is the same statute whose validity and construction were involved in Taylor v. Ypsilanti, supra, p. 60. The bonds were voted on the twenty-second day of May, 1869, as a donation in favor of the Chicago and Michigan Lake Shore Railroad Company, a corporation of Michigan, whose road-line commenced at the north line of the State of Indiana, in Allen County, running northwardly to the St. Joseph River, in the village of St. Joseph, Michigan, a distance of thirty miles, passing through the township of New Buffalo. When the bonds were voted there was in force a general statute, under which any railroad company of the State, forming a continuous or connected line with any othey railroad company, in or out of the State, could consolidate with the latter. The statute provided that such new corporation 'shall possess all the powers, rights, and franchises conferred upon such two or more corporations, and shall be subject to all the restrictions and perform all the duties imposed by the provisions of their respective charters or laws of organization.' Further: 'All and singular the rights and franchises of each of said corporations,. . . and all and singular their rights and interest in and to every species of property and things in action, shall be deemed to be transferred to and vested in such new corporation without any other deed or transfer.' Compiled Laws of Mich., 1857, sects. 1994, 1995, p. 653.

On the 3d of July, 1869, the Lake Shore Railroad Company of Western Michigan was organized, with authority to construct a road from the northern terminus of the before-mentioned road, at St. Joseph River, northerly to the mouth of the Muskegon River, a distance of ninety miles. By articles of agreement between the two companies, made on the 12th and 13th of July, 1869, and filed in the office of the secretary of state on the nineteenth day of July, 1869, the two companies became consolidated into a new corporation, under the name of the Chicago and Michigan Lake Shore Railroad Company.

On the day last named the bonds, having been executed on the 1st of June, 1869, were deposited in the office of the treasurer of state, who was required by the statute to 'hold the same as trustee of the municipality issuing the same, and for the railroad company for which they were issued.' The road was finished from New Buffalo to the village of St. Joseph as early as Feb. 1, 1870, and has been in operation ever since. On the fourth day of February, 1870, the governor of the State made his certificate, stating that the railroad company had constructed the road in compliance as well with the statute as with the conditions upon which aid had been voted by the people, and was, consequently, entitled to receive the bonds from the State treasurer. They were thereupon delivered to the consolidated company, who held them until Nov. 4, 1874, when such of them as are here in suit were transferred to the Cambria Iron Company, defendant in error, in payment of antecedent debts due to it by the railroad company. Upon such transfer the company's acceptances theretofore given for its debts were surrendered and the debts discharged.

Mr. Henry F. Severens for the plaintiff in error.

Mr. Mitchell J. Smiley, contra.

Mr. JUSTICE HARLAN, after stating the facts, delivered the opinion of the court.

title: New Buffalo v. Iron Company


text: Talk:New Buffalo v. Iron Company

title: Talk:New Buffalo v. Iron Company


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New Buffalo v. Iron Company/Opinion of the Court

1. On behalf of the plaintiff in error it is contended that, by the settled law of Michigan as it existed when the bonds were issued, they were void. In support of that position we are referred to People v. Salem, 20 Mich. 452, decided May 26, 1870; Bay City v. State Treasurer, 23 id. 499; and Thomas v. Port Huron, 27 id. 320. This question was fully considered in Taylor v. Ypsilanti (supra, p. 60), where we ruled that by the law of Michigan, as expounded by its Supreme Court, and acted upon by its legislature and executive departments, prior to the decision in People v. Salem, bonds issued in conformity with the act of March 22, 1869, were valid obligations of the municipality by whom they were issued. For the reasons there stated the present objection cannot be sustained.

2. Equally untenable is the proposition that the rights and obligations of the parties are to be determined by the law, as expounded by the Supreme Court of the State, at the time the defendant in error, in fact, received the bonds. The defendant in error is a holder for value. Railroad Company v. National Bank, 102 U.S. 14. But if not, it is still entitled to whatever rights the railroad company had by virtue of its contract with the township. That contract was made and fully performed before the decision in People v. Salem was rendered, and, as already indicated, was not affected by the decision in that case.

3. Nor is it a material circumstance that this was a donation, and not a subscription of stock. In Railroad Company v. County of Otoe (16 Wall. 667), it was held that, in the absence of constitutional provisions making a distinction between municipal subscriptions to stock and municipal appropriations of money or credit, there was no solid ground upon which, so far as legislative power was concerned, to rest such a distinction. 'Both are for the purpose of aiding in the construction of the road; both are aimed at the same object, securing a public advantage, obtaining a highway or an evenue to the markets of the country; both may be equally burdensome to the taxpayers.' Oleott v. The Supervisors, 16 Wall. 678; Town of Queensbury v. Culver, 19 id. 83.

4. The only remaining objection to the judgment is that the bonds were delivered to the consolidated company, when they were not voted to that company. We concur with the court below in holding that the aid voted must be deemed to have been given in view of the then existing statute, authorizing two or more railroad companies forming a continuous or connected line to consolidate and form one corporation, and investing the consolidated company with the powers, rights, property, and franchises of the constituent companies. Nugent v. The Supervisors, 19 Wall. 241; County of Scotland v. Thomas, 94 U.S. 682; Town of East Lincoln v. Davenport, id. 801; Wilson v. Salamanca, 99 id. 499; Empire v. Darlington, 101 id. 87; Menasha v. Hazard, 102 id. 81; Harter v. Kernochan, 103 id. 562; County of Tipton v. Locomotive Works, id. 523. The bonds were, therefore, rightly delivered to the new or consolidated corporation.

Judgment affirmed.

Mr. JUSTICE GRAY did not sit in this case, nor take any part in deciding it.


text: Talk:New Buffalo v. Iron Company/Opinion of the Court


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Hammock v. Loan and Trust Company

APPEAL from the Circuit Court of the United States for the Southern District of Illinois.

To secure the payment of its bonds, aggregating the sum of $660,000, and issued for the purpose of raising money as well for its mining and manufacturing business, as for the complection and maintenance its road, the Chester and Tamaroa Coal and Railroad Company, an Illinois corporation, executed, on the twelfth day of April, 1871, a deed of trust containing such conditions and provisions as are usually inserted in railway mortgages. It embraced the entire road of the grantor, then made or thereafter to be constructed, from Chester, in Randolph County, to Tamaroa, in Perry County, together with the right of way, and all the real and personal property then owned or subsequently acquired, and used or appropriated for railroad purposes; also, its privileges and franchises for holding, operating, and maintaining the road, together with any income derived from the property, not applied to the construction and repair of the road, the conduct of the business of the company, its current expenses, or the purchase of equipments, tools, and machinery. Subsequently, the mortgagor company was consolidated with the Chester and Iron Mountain Railroad Company, the consolidated company taking the name of the Iron Mountain, Chester, and Eastern Railroad Company.

From the first day of October, 1874, until the fifth day of June, 1876, the railroad and other property included in the mortgage was in the possession of D. C. Barber, as receiver, in a creditor's suit instituted by one Maxwell in the Circuit Court of the United States for the Southern District of Illinois. On the last-named day, in conformity with a stipulation signed by the attorneys in that suit, Barber was discharged as receiver, without being required to render an account of his acts, and the bill of Maxwell was dismissed at his costs. The present transcript does not show the grounds upon which Barber was appointed receiver, perhaps for the reason, disclosed in an affidavit, that the bill filed by Maxwell was not to be found among the files of his suit.

On the day succeeding Barber's discharge as receiver, Hammock, assignee of two judgments (aggregating less than $1,000), with returns of no property, against the Iron Mountain, Chester, and Eastern Railroad Company, and suing in behalf of himself and such judgment creditors as might unite with him, presented his bill in equity to the judge of the Circuit Court of Perry County, Illinois, in vacation, 'at Chambers,' in Washington County, Illinois, praying the appointment of a receiver of the railroad company and its effects, with authority to hold and administer the same under the direction of the court, and out of the net income arising therefrom to pay the judgments held by complainant and others. The only grounds assigned in the bill for a receiver are, the indebtedness of the company, the returns against it of nulla bona, its insolvency, and its refusal to pay the judgments outstanding against it. The judge, without notice to the company, appointed Thomas M. Sams receiver, and made an order requiring the railroad company, its officers, servants, and agents, to deliver to him all of its property and effects of every kind, upon his presenting the certificate of the clerk of the court that he, Sams, had filed his bond as receiver, in the penal sum of $15,000, with certain named sureties (Barber, then recently the receiver in Maxwell's suit, being one of them), conditioned that he would account for all property and effects coming to his hands, as receiver, under the order and direction of the court. By the terms of the order, Sams was authorized to use and operate the railroad, and pay all expenses incurred in its operation as far back as Oct. 1, 1874, nearly two years prior to his appointment. The bill of Hammock, with the foregoing order indorsed thereon, was filed in the clerk's office on the 7th of June, 1876, and Sams, having executed the required bond, took possession of the railroad and all the property and effects of the company.

On the thirteenth day of June, 1876, the Farmers' Loan and Trust Company-without knowledge, as we infer from the record, of the suit in the State court-commenced proceedings in the court below for the foreclosure of the beforementioned mentioned mortgage, and to obtain a decree for the sale of all the property embraced by it, in satisfaction of the interest and principal of the bonds thereby secured, the whole amount of which had, under the terms of the mortgage, become due by reason of the continued default of the company in meeting the interest as it matured. The bill (verified under date of June 2, 1876) and the supplemental bill charged that the consolidated company was insolvent; that its entire property was inadequate for the payment of the mortgage debt; that divers persons, by defaults and collusions with Barber, late receiver, had obtained judgments against the company, and had levied, or were about to levy, upon its rolling-stock and other movable property, with the intent to deprive the trustee and those it represented of the benefit of their security; that the company itself was a party to that fraudulent collusion; that the bill of Maxwell had been dismissed, and Barber, as receiver, discharged, to the end that such levies might be made; that these facts had only then come to complainant's knowledge; and that, if time was taken to give notice of an application for an injunction and a receiver, great and irreparable loss would ensue to the trustee, and those whose interests it represented.

Upon the filing of the original and supplemental bill the Federal court appointed a receiver, with direction to take possession of the mortgaged property, and, at the same time, issued an injunction against judgment creditors interfering with or taking possession of it. A few days thereafter the Farmers's Loan and Trust Company filed in the office of the clerk of the Perry Circuit Court its petition to be made a party defendant in the suit of Hammock, also its answer and cross-bill therein, and its petition, accompanied by proper bond, for the removal of the suit into the Circuit Court of the United States. An application was subsequently made by the complainant to the judge of the State court, in vacation, to discharge Sams, as receiver, upon the ground, among others, that he was illegally appointed in the vacation of court. That motion was denied; and thereupon the company made an application, based upon the before-mentioned papers, to the judge, in vacation, to be admitted as a party to Hammock's suit. But in reference to that application the judge declined to take action, upon the ground that he could not legally do so in the vacation of his court.

On the nineteenth day of July, 1876, the Farmers' Loan and Trust Company, having filed a certified transcript of the proceedings in the Hammock suit, including copies of all the foregoing papers, moved the Federal court to take jurisdiction of that suit. That motion-Mr. Justice Davis and the district judge concurring-was sustained, and an order made that the Hammock suit proceed in that court as if originally commenced there, and be consolidated with the mortgage suit. It was further ordered that Sams surrender to the receiver of the Federal court all property in his hands, as receiver, and pay over all funds by him in that capacity collected. That order was immediately executed, and thenceforward the mortgaged property was in the actual and exclusive custody of the Federal court by its receiver.

At the November Term, 1876, of the State court a motion was made by Hammock to strike from the files of his suit the answer, cross-bill, and the petition for the removal of the cause, previously filed therein by the Farmers' Loan and Trust Company, upon the ground that they had been so filed without leave of court, and because that company was not a party to the suit. That motion was sustained on the fourth day of May, 1877, and all of those papers were stricken from the files.

Nothing occurred in the progress of the consolidated cause which need be referred to, except that the court, in response to a suggestion by the attorney-general of the State, and by consent of parties (all the judgment creditors interested in Hammock's suit having appeared, in some form, in the consolidated cause, saving, however, all questions as to the jurisdiction of the Federal court), an order was made, under which the receiver surrendered to county collectors the rolling-stock and personal property of the company in his hands to be levied on and sold. It was levied on and sold for State, county, school, and other taxes assessed in Randolph and Perry Counties upon the property in the receiver's hands for the years 1873 to 1876, inclusive. That portion sold in Randolph County brought $6,053.92, which after deducting costs of sale, satisfied in full the taxes due in that county on the real and personal estate of the railroad company, and all of the tax on its capital stock, except $999.93. The sale in Perry County netted the sum of $5,165, which satisfied in full the taxes due and collectible in that county on the company's real and personal estate, and all of the capital-stock tax, except $852.39.

A final decree was made on the eleventh day of January, 1878, for the sale of the mortgaged property, including the franchises of the company, as an entirety, to satisfy the principal and interest due on the bonds, then amounting to $940,625.40. The sale was directed to be made 'without appraisement and without reference, and not subject to any law or laws of Illinois allowing redemption from mortgage sales, but absolutely without redemption.' Henry C. Cole became the purchaser of the entire property at the sum of $50,000. The sale was subsequently confirmed and a deed made to the purchaser, who was let into possession on the twenty-sixth day of April, 1878.

On the seventeenth day of October, 1878, the Wabash, Chester, and Western Railroad Company, an Illinois corporation, to which had been conveyed by Cole, after the confirmation of his purchase, the railroad and other property sold under the foregoing decree, represented to the court below, by petition, that Hammock and other judgment creditors, parties to the consolidated cause, had then recently caused Sams, still pretending to be the legal receiver of the property sold in the foreclosure suit, to advertise the same for sale, without redemption, under an order or decree of the Perry Circuit Court, made in Mammock's suit after the execution of the final decree in the foreclosure suit, to wit, on the eleventh day of May, 1878; and that, unless restrained, such sale would be had in disregard of the decree of the Federal Court. Upon this petition a temporary injunction was issued, and Hammock, Sames, and others were required to show cause why they should not be attached for contempt of court.

Upon final hearing the temporary injunction of Oct. 17, 1878, was, by an order entered on the seventeenth day of Anuary, 1879, perpetuated, and Sams, Hammock, and their associates were enjoined from taking any steps in execution of the decree of the Circuit Court of Perry County, from selling any part of the railroad property theretofore sold under the decree of the court below, and from interfering with it in any manner.

The present transcript embraces two appeals, one from the several orders and the final decree under which the mortgaged property was sold, and the other from the final order or decree of Jan. 17, 1879.

The case was argued by Mr. James K. Edsall for the appellants, and by Mr. Robert E. Williams for the appellees.

MR. JUSTICE HARLAN, after stating the facts, delivered the opinion of the court.

title: Hammock v. Loan and Trust Company


text: Talk:Hammock v. Loan and Trust Company

title: Talk:Hammock v. Loan and Trust Company


text:
Hammock v. Loan and Trust Company/Opinion of the Court

Whether the State court or the Circuit Court of the United States first acquired control and possession of the property conveyed in trust by the Chester and Tamaroa Coal and Railroad Company, is the first question to which our attention will be directed. If, when seized under the order of the Federal court, it was in the custody of the State court, by its receiver, then, it is claimed, that all the proceedings in the former, so far at least as their regularity and validity depended upon possession of the property, were in violation of the established principles governing courts of concurrent jurisdiction in their relations to each other. Peck v. Jenness, 7 How. 612; Taylor v. Carryl, 20 id. 583; Freeman v. Howe, 24 id. 450; Hagan v. Lucas, 10 Pet. 400.

The solution of this question, it must be conceded, depends upon the authority which the judge of the State could lawfully exercise in vacation; for if, under the laws of the State, he had no power in vacation to appoint a receiver of the property and effects of a railroad company, the order under which Sams took possession was a nullity, and his custody was not that of the court which he assumed to represent. Counsel for appellants admits that, except to the extent expressly permitted by statute, the judge of the State court could not exercise any judicial functions in vacation. Such, beyond question, is the established doctrine of the Supreme Court of Illinois. In Blair v. Reading (99 Ill. 600), the court said: It is a fundamental principle that courts can exercise judicial functions only at such times and places as are fixed by law, and that the judges of courts can enter no orders in vacation, except such as are expressly authorized by statute.' In Devine v. People (100 id. 290), the language of the court was that 'judges can exercise no judicial functions in vacation, except such as they are especially authorized to do by statute.' Keith v. Kellogg, 97 id. 147.

It is stated by counsel, and our examination verifies the correctness of the statement, that in the few cases in which the statutes of Illinois make special provision for the appointment of a receiver, the power is conferred upon the court, and not upon the judge thereof. Rev. Stat. Ill., 1874, sect. 25, p. 290; id., sect. 24, p. 553; id., sect. 88, p. 613.

But the action of the judge of the State court is attempted to be sustained under the forty-ninth section of chapter 37 of the Revised Statutes of Illinois, enacted in 1874 (p. 332), which is in these words:--

'SECT. 49. Powers of judges in vacation: The several judges     of said courts [judges of the Circuit Courts, and of the      Superior Court of Cook County] shall have power, in vacation,      to hear and determine motions, to dissolve injunctions, stay      or quash executions, to make all necessary orders to carry      into effect any decree previously rendered, including the      issuance of necessary writs therefor, to order the issuance      of writs of certiorari, to permit amendments in any process,      pleading, or proceeding in law or equity. Any order so made     shall be signed by the judge making it, and filed and entered      of record by the clerk of the court in which the proceeding      is had, and from the date of such filing shall have like      force and effect as if made at a regular term of such court. The pendency of a term of court in another county than that     in which the suit is pending, or about to be commenced by the same judge, shall not prevent      the granting of such order. L. 1871-72, p. 504, sects. 1, 2.'

The succeeding section (sect. 50) provides that 'no such order shall be granted in vacation unless the party applying therefor shall give the opposite party, or his attorney of record, reasonable notice of his intended application.'

We are of opinion that the authority of a judge, in vacation, to appoint a receiver of a railroad corporation cannot be derived from the foregoing section. This precise question has not, that we are aware, been determined in the Supreme Court of Illinois. But what fell from that learned tribunal in the cases already cited leads us to believe that when the question is directly presented it will be determined in accordance with the view we have just expressed.

In the argument before us attention was called to the fact that between the words in sect. 49, 'to hear and determine motions,' and the words 'to dissolve injunctions,' there appears a comma; and that was, to some extent, relied on as showing that a judge in vacation could hear and determine motions of every kind, not simply those relating to matters specially defined in that section. While the comma after the word 'motions,' if any force be attached to it, would give the section a broader scope than it would otherwise have, that circumstance should not have a controlling influence. Punctuation is no part of the statute. Lord Kenyon, C. J., in Doe v. Martin (4 T. R. 65), said that courts in construing acts of Parliament or deeds should read them with such stops as will give effect to the whole. Sedgwick's Constr. Stat. and Const. Law (2d ed.), 223, note a; Bouvier's Law Dic. 347, 402. The general rule is well illustrated in Barrington's Statutes (4th ed.), 438, note x; Price v. Price, 10 Ohio St. 316; Cushing, &c. v. Worrick, 9 Gray (Mass.), 382; Geiger's Estate, 65 Pa. St. 311; and Hamilton v. Steamer R. B. Hamilton, 16 Ohio St. 428. In the last case it was said: 'But for the punctuation, as it stands, there could be little doubt but that this was the meaning of the legislature. Courts will, however, in the construction of statutes, for the purpose of arriving at the real meaning and intention of the law-makers, disregard the punctuation, or repunctuate, if need be, to render the true meaning of the statute.' Apart from the general rule upon this subject, there are reasons why the punctuation of sect. 49 should not control its interpretation. It will be observed that at the close of that section is a reference to the laws of Illinois passed at the session 1871-72 of the General Assembly, indicating that sect. 49 was, in part at least, founded upon an existing or previous statute. One of the rules prescribed by the revision of 1874 for the construction of statutes is that 'the provisions of any statute, so far as they are the same as those of any previous statute, shall be construed as a continuation of such prior provisions, and not as a new enactment.' Rev. Stat. Ill., 1874, p. 1012, sect. 2. Turning then to the previous law,-the act of March 7, 1872,-we find no comma after the word 'motions,' but the statute reads, 'to hear and determine motions to dissolve injunctions,' &c. Sess. Laws, Ill., 1871-72, p. 504. We are not prepared to hold that the power of a judge in vacation to appoint a receiver of a corporation, charged with important public duties, was conferred by the introduction of a comma into the Revised Statutes of a State, where the established doctrine is that no judicial functions can be exercised by a judge, in vacation, except where expressly or specially authorized by statute.

But if, as the argument of counsel would imply, a judge, in vacation, may, by virtue of the powers conferred by sect. 49, hear and determine every matter presented by way of motion, and not simply motions relating to the dissolution of injunctions, to staying or quashing executions, to orders carrying into effect decrees previously rendered, to writs of certiorari, or amendments in process, pleading, or proceedings in law and in equity,-which are the subjects specifically referred to in that section,-we are satisfied that an application to dispossess those in control of a railroad corporation, whose road is declared by the Constitution of the State to be a public highway, and to place its entire property in the hands of a receiver, is not, within the meaning of the statute, a motion which may be heard and determined by the judge out of term time. It is rather a proceeding involving the exercise of the highest discretion, and embracing a very wide field of judicial investigation and inquiry. The injustice which may result from the exercise of such a power in vacation is well illustrated in this case by the fact that, while the judge of the State court did not doubt his power, out of term time, to oust those in the control of a public corporation, and appoint a receiver, with authority to carry on the business of a carrier of freight and passengers, he could not, under his view of the statute, determine, in vacation, an ordinary motion to become a party to the suit, made by the trustee in a first mortgage or deed of trust covering the entire property and franchises in question.

It results from what has been said that the seizure of the property by the receiver of the Federal court was not an interference with the possession of the State court, nor in derogation of its authority. The property was not, in any legal sense, then in the custody of the State court, or of any officer by it appointed. It was, when seized by order of the Federal court, in the custody of one who assumed, without lawful authority, to represent the State court, but who in fact proceeded under a void order of a judge in vacation.

The Circuit Court of the United States, having thus lawfully acquired possession of the property, prior to any action in reference to it by the State court, the former had the right to retain possession for all the purposes of the suit for foreclosure of the mortgage of the 12th of April, 1871. Under the final decree of foreclosure it was, as we have seen, sold in satisfaction of the mortgage debt, leaving nothing to be applied on the claims of Hammock and other judgment creditors.

We proceed now to inquire whether, in the orders or decrees under which the property has been disposed of, any error has been committed to the prejudice of the substantial rights of appellants. On their behalf it is suggested that the decree was erroneous, in that it required the sale of the real estate, covered by the mortgage, to be made absolutely and without the right of redemption allowed by the local statutes in decretal sales of mortgaged lands. The question is one of great importance, and has received, upon our part, all the consideration which it demands.

By the statutes of Illinois, in force when the mortgage was made, real estate, taken in execution, if susceptible of division, is required to be sold in such quantities as may be necessary to satisfy the execution and costs. Rev. Stat. Ill., 1869 (Gross ed.), p. 397, sect. 11. And it is made the duty of the sheriff or other officer, selling lands or tenements, by virtue of an execution, to give to the purchaser, or purchasers, a certificate, in writing, describing the lands or tenements purchased, and the sum paid therefor, or, if purchased by the plaintiff in the execution, the amount of his bid, and the time when, if the property be not redeemed, the purchaser will be entitled to a deed. Id., p. 380, sect. 15.

It is further provided that the defendant, his heirs, executors, administrators, or grantees, might, within twelve months from the sale of his lands or tenements, under execution, redeem the same by paying to the officer who sold it, for the benefit of the purchaser, the sum of money which may have been paid on the purchase, or the amount given or bid, if purchased by the plaintiff in the execution, together with interest thereon at the rate of ten per centum from the time of sale. Id., sect. 16. The right was given to any judgment creditor, after the expiration of twelve, and within fifteen, months from the sale, to redeem the property, by paying the amount paid by the purchaser,-such payment entitling him to have a resale under the execution upon his own judgment. Id., sects. 17, 18. This right, given to judgment creditors, could be exercised as to the whole, or any part, of the lands or tenements sold, provided the redemption is made in the like distinct quantities, or parcels, in which the same are sold. Id., sect. 19.

If the lands or tenements so sold are not redeemed by the defendant, or by a judgment creditor, within fifteen months from the sale, it is the duty of the officer making it to execute a deed to the purchaser. Id., sect. 25.

The provision in reference to redemption from mortgage sales is that, 'where lands shall be sold under and by virtue of any decree of a court of equity for the sale of mortgaged lands, it shall be lawful for the mortgagor of such lands, his heirs, executors, administrators, or grantees, to redeem the same in the manner prescribed for the redemption of lands sold by virtue of executions issued upon judgments at common law; and judgment creditors may redeem lands sold under any such decree, in the same manner as is prescribed for the redemption of lands in like manner sold upon executions upon judgments issued at common law.' Id., p. 382, sect. 27.

The history of the right of redemption, as given by the laws of Illinois, may be traced in Statutes of 1825, p. 151; Rev. Stat., 1829, p. 85; id., 1833, p. 374; id., 1845, p. 302. When originally conferred as to sales of land under execution, there were no railroads in that State, and very few, if any, when it was first (in 1845) extended to decretal sales of mortgaged lands.

In Brine v. Insurance Company (96 U.S. 627), we held that the right of redemption given by the Illinois statutes constituted a rule of property which the Federal court, sitting in equity in that State, is bound to recognize and enforce. The property there in controversy was a lot of ground in the city of Chicago, which had been owned by a private person, who conveyed it in trust to secure a loan of money by an insurance company.

When the mortgage by the Chester and Tamaroa Coal and Railroad Company was made, there was in force a general statute, passed in 1855, conferring upon any railroad company organized or incorporated under the laws of Illinois the power to mortgage all or any portion of its property and franchises to secure the payment of money borrowed to aid in the construction, completion, or operation of its road. Gross ed., p. 553; Laws of Ill., 1855, p. 304.

And by the State Constitution adopted in 1870, railroads thereafter constructed were declared to be public highways, free to all for the transportation of their persons and property thereon, under such regulations as should be prescribed by law. Art. 11, sect. 12.

The question is, therefore, presented for the first time in this court, whether the statutory provisions giving the right to redeem as well lands or tenements sold under execution as mortgaged lands sold under decrees of courts of equity, has any application to the real estate of a railroad corporation, which, with its franchises and personal property, is mortgaged, as an entirety, to secure the payment of money borrowed for railroad purposes.

Undoubtedly in all such cases the chief value of the real estate comes from the right or franchise to hold and use it, in connection with the personal property of the corporation, for railroad purposes. It is equally true, not only that the bonds, to secure which the mortgage is given, could not be negotiated in the markets of the country did not the mortgage embrace as an entirety the franchises and all the real and personal property of the corporation used for railroad purposes, but that a sale of the real estate, franchises, and personal property, separately, might, in every case, prove disastrous to all concerned, and defeat the ends for which the corporation was created, with authority to establish and maintain a public highway.

It is, nevertheless, contended by counsel that, as the statute attaches to decretal sales of mortgaged lands the right of redemption, that right exists as well in cases of mortgages, covering the entire property and franchises of a railroad corporation, as where the land is owned and used by private persons for exclusively private purposes.

In other words,-for to that result the argument would lead, the court, in decreeing the sale of the mortgaged property and franchises of a railroad corporation, has no discretion, if the corporation or its judgment creditors so demand, except to order the sale of the real estate separately, in parcels when susceptible of division, and subject to redemption, leaving the franchises and personal property to be sold absolutely and without redemption. Thus, one person might become the purchaser of the real estate, another of the franchise, and still others of the personal property. If the railroad company should redeem the real estate, it could not employ it to any valuable end; for, its franchise to be a corporation and to use its real estate for railroad purposes, will have been sold to another, and there is no right under the statute to redeem the franchise, it not being real estate, but rather a power or privilege, partaking more or less of sovereignty, and which may not be exercised without a special grant. 1 Redfield on Law of Railways, 94. Consequences equally injurious would flow even from the sale, as an entirety, of the real and personal property and franchises of the corporation, if the right was reserved to the company, or its creditors, to redeem the realty. Individuals or associations desiring railroad property would not purchase when they could not know, until the expiration of fifteen months from the confirmation of the sale, whether they were to have all for which they might bid. During that period of uncertainty the property would necessarily depreciate in value for the want of repairs and betterments essential to its preservation. A construction of the statute which leads to such results ought not to be adopted, if it can be avoided. And we think it can be without contravening the spirit of the statute or the public policy which suggested its enactment.

We are of opinion that mortgaged real estate, to which is attached the right of redemption, is such and such only as could at law be levied upon and sold on execution. The right does not extend to real estate of a public corporation, mortgaged with its franchise to acquire, hold, and use property for public purposes, and whose chief value depends upon its being so used and appropriated. The difference between real estate, so acquired, held, and used, and real estate which may, at law, be sold under execution, is well illustrated in Gue v. Tide Water Canal Co., 24 How. 257. In that case it appeared that an execution was levied upon a house and lot, sundry canal locks, a wharf-boat, and several lots, the property of the canal company, chartered under the laws of Maryland for the construction of a canal from Havre de Grace, in that State, to the Pennsylvania line. The property so levied upon was admitted to be necessary to the uses and working of the canal, which was a public improvement, and a great thoroughfare of trade. It was of little value apart from the franchise to take tolls, and if sold separately under execution, the franchise to take tolls, said Mr. Chief Justice Taney, speaking for the court, would not have passed to the purchaser. It was consequently ruled that the real estate there in controversy could not be seized and sold under fieri facias, and, consistently with the rights of stockholders and creditors, could not be sold separately from the franchise from which was derived its chief value.

The laws of the State of Illinois having permitted the Chester and Tamaroa Coal and Railroad Company to mortgage its franchises and property as an entirety, it was, we think, the duty of the court to decree the sale, as an entirety, of the whole property, so mortgaged, without reference to the local statutes upon the subject of redemption. Real estate, thus mortgaged with the franchises of the company, is of necessity relieved from the operation of that statute. There may possibly be cases in which real estate, of an ordinary kind, owned and mortgaged by a railroad corporation, cannot be sold by decree of court, except subject to the right of redemption; as when it is not used for necessary railroad purposes, or when it is mortgaged separately from its franchises and other property. What may be the operation of the statute in such cases we do not now decide. All that we do decide is, that, by the laws of Illinois, the real estate, franchises, and other property of a railroad corporation, mortgaged as an entirety, may be sold, as an entirety, under the decree of a court of equity, without any right of redemption in the mortgagor or in judgment creditors as to such real estate.

The construction we have given to the statute is not inconsistent with the provision of the State Constitution which declares that 'the rolling-stock and all other movable property, belonging to any railroad company or corporation in Illinois, shall be considered personal property, and shall be liable to execution and sale in the same manner as personal property of individuals; and the General Assembly shall pass no law exempting any such property from execution and sale.' Art. 11, sect. 10.

When the mortgage of April 12, 1871, was executed, there was no levy upon the movable property of the company, and consequently the rights of the mortgagee were superior to the lien arising from a subsequent levy, by execution, upon the movable property. The State Constitution did not forbid the creation, by mortgage, of such superior lien.

So far from that section militating against the construction we have given the statute, it rather fortifies it. It furnishes a strong implication that the right to levy an execution upon the movable property of a railroad corporation was intended to be restricted to that kind of corporate property. It is a partial modification of the general rule that the property of a railroad corporation, used for necessary railroad purposes, cannot be seized and sold under an execution at law.

The next question to be considered relates to the distribution of the proceeds of the sale of the mortgaged property. The argument, upon this branch of the case, in behalf of the appellants, briefly stated, is this: That by the laws of the State in force when the mortgage of April 12, 1871, was executed, a mortgage of personal property, certified by a justice of the peace in the justice's district in which the mortgagor resides, and recorded in the recorder's office of the county where the mortgagor resides, shall, 'if bona flde, be good and valid from the time it is so recorded, for a space of not exceeding two years, notwithstanding the property mortgaged or conveyed by deed of trust may be left in possession of the mortgagor, provided that such conveyance shall provide for the possession of the property so to remain with the mortgagor,' Gross ed., 1869, p. 67; that more than two years having expired, after the execution of the mortgage of April 12, 1871, and before the suit for foreclosure, the property mortgaged remaining in the possession of the railroad company until seized in Hammock's suit,-the judgment creditors, by virtue of their suit in the State court, acquired a lien, at least upon the rolling-stock and other movable property covered by the mortgage, superior to any claim on the part of the mortgagee and those it represented; and that since the personal property was surrendered and the proceeds of its sale applied in discharge of taxes upon the real and personal property and capital stock of the corporation, the court upon principles of equity should have appropriated to the judgment creditors so much of the proceeds of the decretal sale as was equal to teh taxes on real estate paid from the proceeds of the sale of personal property by the collectors.

We are of opinion that the statutory provisions in regard to chattel mortgages (Gross ed., p. 66) do not embrace mortgages by a railroad corporation, in connection with its real estate and franchises, of its personal property used and appropriated for railroad purposes. The statute provides a mode by which possession of the mortgagor of personal property should not defeat the mortgage, viz. the acknowledgment and record of the mortgage. The acknowledgment is required to be made before a justice of the justice's district in which the mortgagor resides, and recorded in the recorder's office of the county where he resides. These directions are wholly inapplicable to a railroad company, whose line of road might pass through several justices' districts and extend through several counties. And, if the construction contended for be sound, a railway mortgage security, so far as the personalty of the corporation is concerned, would cease to be of any value after the expiration of two years from its execution, unless the mortgagor, before the expiration of that time, takes possession of it,-the authority to do which, in advance of the maturity of the mortgage debt, and when there has been no default of the corporation in meeting its interest, would render the negotiation of the mortgage bonds difficult if not impossible. Clearly the chattel-mortgage statute has nothing to do with the present case.

What we have said renders it unnecessary to consider the other branches of the proposition last stated, and disposes of all questions of importance upon the merits, arising on the appeal from the final decree ordering a sale of the mortgaged property, and directing a disposition of the proceeds arising therefrom.

We have seen that the Farmers' Loan and Trust Company, in vacation, filed in the clerk's office of the State court a petition to be made a party to the creditor's suit of Hammock, with an answer and cross-bill, and also a petition for the removal of that suit into the Federal court, accompanied by the required bond; and that the judge of the State court, in vacation, declined to act upon the petition to be made a party, or to recognize the right of removal. Whether the cause was, under these circumstances, properly docketed in the court below as one legally removed under the act of Congress, or whether the Federal court exceeded its authority in the final order of injunction, made on the seventeenth day of January, 1879, upon the petition of the Wabash, Chester, and Western Railroad Company, are questions about which there is a difference of views among those members of the court who heard the cause and participated in its decision. We, therefore, forbear to make any expression of opinion upon them. And it is not at all important to the parties that we should do so. The object of the suit in the State court was to reach the property of the railroad company, and from it, or from the income to be derived therefrom, obtain satisfaction of the judgments against the corporation. Whether that suit was or not, under the act of Congress, legally removed into the Federal court, the entire property, we have seen, passed lawfully into the custody of the latter court, and by proceedings therein, to which the judgment creditors were parties, and by which they are concluded-it has been all sold, and the proceeds adjudged to be rightfully distributed in satisfaction of the mortgage debt. It would, consequently, serve no valuable purpose for the appellants, were it now decided that the suit commenced in the State court was not legally removed into the Federal court, or that the order of Jan. 17, 1879, was beyond the power of that court to make.

The decrees appealed from are, therefore,

Affirmed.

Mr. JUSTICE GRAY did not sit in this case, nor take any part in deciding it.


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Lehnbeuter v. Holthaus

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

The bill, filed by Joseph Lehnbeuter and Casper Claes, charged Arnold Holthaus and Anton Holthaus with infringing design patent No. 8814 for show-cases, granted to the complainants jointly, and dated Nov. 30, 1875.

The answer denied that the complainants were the first inventors of the design patented; denied its utility, and the alleged infringement. To sustain these denials all the testimony offered by the defendants was directed.

Upon final hearing the court dismissed the bill, because 'said letters-patent were not good and valid in law,' and the complainants appealed.

The record contains certain stipulations in respect to the evidence. These are:--

'That the following exhibits may be produced by either party at the hearing upon an appeal in the Supreme Court, and used in evidence as a portion of the transcript herein, viz.: 'Defendants' Exhibit, Wiegal Catalogue,' and 'Defendants Exhibit, Maws' Price Current;' also, 'Design Patents Nos. 8287, 8813, and 8814;' also, 'Complainants' Exhibit Holthaus Circular.'

'That it shall be taken, as admitted for the purposes of this case, that said exhibits, 'Wiegal Catalogue' and 'Maws' Price Current,' were issued prior to January, 1874.

'That the circular marked 'Complainants' Exhibit Holthaus Circular' is a copy of circulars issued by the defendants in the month of July, 1877, and subsequently thereto; that the cuts therein correctly represent show-cases made and sold by the defendants in St. Louis, within said Eastern District of Missouri, during and after January, 1877, and before the commencement of this suit, and still made and sold by them; also, that the circular marked 'Complainants' Exhibit Claes & Co., Circular,' is a copy of a publication issued and circulated by complainants in the month of September, 1875, and subsequently thereto; also, that the model marked on bottom 'Complainants' Exhibit Model No. 1,' under the hand of the same notary, correctly represents show-cases made and sold by defendant in said St. Louis during and after the month of January, 1877, and before the commencement of these suits.'

The only witness in the case was Charles K. Pickles, who testified for the complainants that he made the original drawings from which the plates were made of the cuts 33, 34, and 36 of the Holthaus circular; that he made the drawings for Holthaus, the defendant, who gave him cuts from Claes & Co.'s circular, from which to make the plates or prints, and that there were slight changes suggested by Holthaus, which the witness followed in making the drawings.

The Wiegal Catalogue, Maws' Price Current, the Holthaus Circular, and the design patents, numbered respectively 8287, 8813, and 8814, with their drawings, the first granted to Joseph Lehnbeuter, and the other two to Lehnbeuter and Claes, the complainants, were put in evidence. The one last named was that on which this suit was brought.

Mr. Robert H. Parkinson for the appellants.

There was no opposing counsel.

Mr. JUSTICE WOODS, after stating the case, deivered the opinion of the court.

title: Lehnbeuter v. Holthaus


text: Talk:Lehnbeuter v. Holthaus

title: Talk:Lehnbeuter v. Holthaus


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Lehnbeuter v. Holthaus/Opinion of the Court

A comparison of the drawing which is appended to patent No. 8814, with cut No. 34 of the Holthaus Circular, which it is admitted represents show-cases manufactured and sold by the defendants, during and since January, 1877, makes it clear that the latter is a servile copy of the former, excepting a slight inclination backwards, hardly perceptible to the naked eye, of the glass constituting the front of the elevated portions of the case. We think, therefore, that the infringement is clearly established.

The attempt to prove that the complainants were not the first inventors of the design covered by their letters-patent has entirely failed. The only evidence offered on this branch of the defence are the publications designated as Maws' Price Current and the Wiegal Catalogue. The first of these bears date in 1869, and the latter in 1872. After a careful search through both, we have been unable to find any design for a show-case which remotely resembles that described in the complainants' patent.

The design patented by the complainants differs essentially from any other which has been called to our attention. It is not covered by the other patents which are set out in the record. Whether it is more graceful or beautiful than older designs is not for us to decide. It is sufficient if it is new and useful.

The patent is prima facie evidence of both novelty and utility, and neither of these presumptions has been rebutted by the evidence. On the contrary, they are strengthened. No anticipation of the design is shown, although the attempt has been made to prove anticipation. The fact that it has been infringed by defendants, is sufficient to establish its utility, at least as against them. Whitney v. Mowry, 4 Fish. Pat. Rep. 207.

Our conclusion is that the complainants have a valid patent which the defendants have infringed. The decree of the Circuit Court dismissing their bill must, therefore, be reversed, and the cause remanded for further proceedings in conformity with this opinion; and it is

So ordered.

MR. JUSTICE GRAY did not sit in this case, nor take any part in deciding it.


text: Talk:Lehnbeuter v. Holthaus/Opinion of the Court


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United States v. Temple

APPEAL from the Court of Claims.

This was an action brought in the Court of Claims by Temple, a commodore in the United States navy, to recover mileage for travel under orders.

The controversy arises upon the construction of an act of Congress. The history of our legislation on the subject of mileage to officers of the navy is as follows: The act of March 3, 1835, c. 27 (4 Stat. 756), after giving certain pay, &c., to officers of the navy, declares in the second section that they shall be entitled to no other compensation, but with an exception, thus stated: 'Except for travelling expenses while under orders, for which ten cents per mile shall be allowed.'

This provision was abrogated by a clause in the act of June 16, 1874, c. 285 (18 Stat., pt. 3, p. 72), which is as follows: 'That only actual travelling expenses shall be allowed to any person holding employment or appointment under the United States, and all allowances for mileages and transportation in excess of the amount actually paid are hereby declared illegal.' On June 30, 1876, however, mileage was restored to officers of the navy by the act of that date, c. 159 (19 Stat. 65), which declares that so much of the act of June 16, 1874, 'as provides that only actual travelling expenses shall be allowed to any person holding employment or appointment under the United States, while engaged in public business, as is applicable to officers of the navy so engaged, is hereby repealed; and the sum of eight cents per mile shall be allowed such officers so engaged, in lieu of their actual expenses.'

The travel for which Commodore Temple claims mileage was performed in 1878.

It appears by the findings of the Court of Claims that while engaged in public business he travelled under orders from Washington City, via New York City and Rio de Janeiro, to Montevideo, in South America, and thence back to Washington City, via Rio de Janeiro, Liverpool, and New York. The voyages were performed in vessels not the property of the United States. The whole distance travelled was 16,660 miles. He applied to the accounting officers of the treasury for payment of mileage at the rate of eight cents per mile on the whole distance travelled by him. His demand was refused. But he was allowed eight cents per mile for the distance between the city of Washington and New York, going and returning. For all travel by sea the accounting officers would allow him only his actual expenses.

The Court of Claims allowed him mileage at the rate of eight cents per mile for the entire distance travelled by him. Judgment was rendered in his favor therefor, after deducting the money actually paid him. The United States appealed.

The Solicitor-General for the United States.

Mr. Enoch Totten and Mr. James Lowndes for the appellee.

Mr. JUSTICE WOODS, after stating the facts, delivered the opinion of the court.

title: United States v. Temple


text: Talk:United States v. Temple

title: Talk:United States v. Temple


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United States v. Temple/Opinion of the Court

The statute and the finding of the Court of Claims leave little room for controversy. The law as it stood when the travel was performed was explicit, and is not open to construction. We find in it no warrant for the distinction made by the accounting officers of the treasury between travel by sea and travel on land within the United States, performed by an officer of the navy while engaged on public business. To hold that for one class of travel he should have eight cents per mile, and for the other his actual expenses, is to make the law and not to construe it. When this travel was performed there was not a line on the statute-book of the United States which made any provision whatever, under any circumstances, for allowing officers of the navy, when engaged on the public business, their actual expenses of travel. The only law ever enacted which made such provision had been expressly repealed by the act on which the appellee based his claim for mileage. This act declared him entitled, without condition or limitation, to mileage at the rate of eight cents per mile, and is the only law upon the subject.

Our duty is to read the statute according to the natural and obvious import of the language, without resorting to subtle and forced construction for the purpose of either limiting or extending its operation. Waller v. Harris, 20 Wend. (N. Y.) 561; Pott v. Arthur, 104 U.S. 735. When the language is plain, we have no right to insert words and phrases, so as to incorporate in the statute a new and distinct provision.

The attempt to justify the decision of the accounting officers of the treasury is based on an alleged practice in conformity therewith, which, it is said, grew up in the Navy Department under the act of 1835. The practice, if such there was, finds no higher warrant or sanction in the act of 1835 than in the act of 1876. But even if it could have any influence in settling the meaning of an act passed forty-one years afterwards, under changed circumstances and conditions, we find no reference to it in either the findings or the opinion of the Court of Claims, and we cannot assume that it ever existed.

The law on which the appellee bases his case is plain and unambiguous. We must give it its natural and obvious meaning, and thus interpreted it leaves the appellant no ground to stand on.

Judgment affirmed.


text: Talk:United States v. Temple/Opinion of the Court