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encouraged him to wait. It should not peals of the ninth circuit (27 C. C. A. 550, have encouraged him, because, as we have 48 U. S. App. 668, 83 Fed. 365). See also said, it gave him no rights. The fact that 36 Fed. 808; Farmers' Loan & T. Co. v. the receiver used the ties is of no impor- Kansas City, W. & N. W. R. Co. 53 Fed. tance. They already were the property of 182; Farmers' Loan & T. Co. v. Northern the road, and it was his business to use P. R. Co. 68 Fed. 36; Atlantic Trust Co. them. The material point is not the time v. Woodbridge & Irrig. Co. 79 Fed. 39. And when they were used, but the time when even the sixth circuit, from whence the they were acquired.

pending case now comes. Central Trust Co. Decree affirmed.

v. East Tennessee, V. & G. R. Co. 26 C. C.

A. 30, 47 U. S. App. 663, 80 Fed. 624. Mr. Justice McKenna, with whom con- There is strength in this agreement at cur Mr. Justice Harlan and Mr. Justice circuit, and much that was said could be White, dissenting:

quoted with advantage; but, as my ultiI am unable to concur in the opinion of mate reliance must be the decisions of this the court, and the importance of the ques-court, I shall proceed immediately to an tions involved justifies an expression of the examination of them. ground of my dissent.

Miltenberger v. Logansport, C. & 8. W. The controversy arises from a claim, to R. Co. 106 U. S. 286, 27 L. ed. 117, 1 Sup. quote from the circuit court of appeals, Ct. Rep. 140, is one of the most important for cross ties essential to the replacement of the cases. Indeed, it is the leading case, of ties decayed in current operation of the and is carried into and approved in a numrailroad. A large proportion were on hand ber of subsequent cases. The decisions which when the receiver was appointed, and were precede it, including Fosdick v. Schall, 99 used by him in the maintenance of the road-U. S. 235, 25 L. ed. 339, I assume, are unway. They were all purchased within six derstood. Wallace v. Loomis, 97 U. S. 146, months before the receivership, and under 24 L. ed. 895, may, however, be noticed. It circumstances indicating an expectation was a suit to foreclose a mortgage on a that they would be paid for out of current railroad, in which suit a receiver was apincome. The claim is, in every respect, a pointed. The receivers were authorized to highly meritorious one."

raise money by loan upon certificates to be This description is supplemented by stip- issued by them, “to put the road and propulation of counsel that the claim is for erty in repair, and to complete any un"necessary operating expenses in keeping completed portions thereof, and to procure and using said railroad and preserving said rolling stock, and to manage and operate property in a fit and safe condition.” The the road to the best advantage, so as to claim is denied, affirming the judgment of prevent the property from further detethe lower court, payment out of the body riorating, and to save and preserve the same of the fund in the hands of the receiver; for the benefit and interest of the first and why? That the decisions of this court mortgage bondholders, and all others havmay be construed as extending the equity ing an interest therein.” The receivers of claims for supplies so far is conceded. obeyed the order, and the decree of the It is said: “An impression that such a court “declared the amount due on the regeneral rule was to be deduced from the deceiver's certificates to be a lien on the cisions of this court led to an evidently un- property in their hands prior to that of willing application of it in New England the first mortgage bonds." This court susR. Co. v. Carnegie Steel Co. 21 C. C. A. tained the decree as follows: 219, 33 U. S. App. 491, 75 Fed. 54, 58, and “The power of a court of equity to apperhaps in other cases."

point managing receivers of such property The concession hardly exhibits the as a railroad, when taken under its charge strength of the sanction which the rule has as a trust fund for the payment of encumreceived at circuit, and, apparently, neither brances, and to authorize such receivers to willingly nor unwillingly, but in the desire raise money necessary for the preservation only to ascertain what this court has de- and management of the property, and make cided, and to follow it. I may refer to the same chargeable as a lien thereon for St. Louis Trust Co. v. Riley, decided by its repayment, cannot at this day be sethe circuit court of appeals of the eighth riously disputed. It is a part of that jucircuit (30 L. R. A. 456, 16 C. C. A. 610, risdiction, always exercised by the court, 36 U. S. App. 100, 70 Fed. 32), Finance Co. by which it is its duty to protect and prev. Charleston, C. & C. R. Co. in circuit court serve the trust funds in its hands. It is, of appeals of the fourth circuit (10 C. C. A. undoubtedly, a power to be exercised with 323, 8 U. S. App. 547, 62 Fed. 205), New great caution; and, if possible, with the conYork Guaranty & Indemnity Co. v. Tacoma sent or acquiescence of the parties interest. R. & Motor Co. in the circuit court of ap-'ed in the fund.”

The principle expressed was applied in of such business relations would be a probthe Miltenberger Case. The receiver appoint- able result in case of nonpayment, the gened in that case was empowered by the court eral consequence involving largely also to purchase four engines, four passenger the interests and accommodation of travel cars, and one hundred new coal cars; also and traffic, may well place such payto adjust certain indebtedness of connect- ments in the category of payments to ing lines, not exceeding $10,000, and to preserve the mortgaged property in a large expend $30,000 to complete 5 miles of road, sense, by maintaining the goodwill and and build a bridge, and to enter into the integrity of the enterprise, and entitle contracts required therefor. With the ex- them to be made a first lien. This view penditure, the earnings of the road were of the public interest in such a highway

a charged "as with a first lien, prior to all for public use as a railroad is, as bearing encumbrances upon such road." The le- on the maintenance and use of its frangality of this was contested. Speaking of chises and property in the hands of a the order this court said: The authority

The authority receiver, with a view to public convenience, conferred by it "was intended to benefit the was the subject of approval by this court, , res in the hands of the court, which was the speaking through Mr. Justice Woods, in entire mortgaged property as covered by Barton v. Barbour, 104 U. S. 126, 26 L. ed. both mortgages, and not merely the equity 672. The appellants furnish no basis for of redemption of the mortgagor as against questioning any specific amounts allowed the mortgagee." And the power to make

And the power to make in respect to the arrears referred to, but it was decided, the court quoting from object to the allowance of anything out of

, Wallace v. Loomis as above, and observing the sale of the corpus for such expenditures. “the principle thus recognized covers most Under all the circumstances of this case, of the objections here urged.” The pay. we see no valid objection to the provisions ment of $10,000 due to connecting lines of of the orders complained of." road for materials and repairs, etc., was The case is not overruled; it is distinalso sustained. It thus appears that not

It thus appears that not guished, and the distinction seems to be only expenditures made after the appoint- based upon the difference between supplies ment of the receiver, but debts incurred for preservation of the road and payments prior to the appointment, were directed to necessary to the business of the road. IS be paid out of the corpus of the property. not the distinction questionable? Can any

. Justifying its decision, the court said: thing be done for the preservation of a

“It cannot be affirmed that no items which road that is not done for its business? If accrued before the appointment of a re a distinction can be made, how immediate ceiver can be allowed in any case. Many to the business must the supplies be? Is circumstances may exist which may make not a bridge across a stream as indispensait necessary and indispensable to the busi- ble to the “accommodation of travel and ness of the road and the preservation of the traffic" as "unpaid ticket and freight balproperty, for the receiver to pay pre-existances ?” Or (as in the case at bar) is ing debts of certain classes, out of the earn- not "the replacement of ties decayed in curings of the receivership, or even the corpus rent operation” as indispensable as the payof the property, under the order of the ment of laborers? It is conceded that labor court, with a priority of lien. Yet the disclaims were decreed to be paid in Union cretion to do so should be exercised with Trust Co. v. Illinois Midland R. 117 U. S. very great care. The payment of such debts 434, 29 L. ed. 963, 6 Sup. Ct. Rep. 809. Then stands, prima facie, on a different basis why not the other? What distinction in prinfrom the payment of claims arising under ciple can there be in expenditures for any of the receivership, while it may be brought the many things which are necessary to keep within the principle of the latter by spe- a railroad a going concern? Let all the excial circumstances. It is easy to see that penditures be declared subordinate which are the payment of unpaid debts for operating subsequent to the mortgage, and it can be expenses, accrued within ninety days, due understood. But how can a distinction be by a railroad company suddenly deprived made in value and preferential payment beof the control of its property, due to the tween equally indispensable things? operatives in its employ, whose cessation It is said, however, that the later cases from work simultaneously is to be depre- have observed and marked “the wholly excated, in the interests both of the property ceptional character of the allowance” made and of the public, and the payment of the in the Miltenberger Case. Kneeland Case, limited amounts due to other and connect- 136 U. S. 89, 34 L. ed. 379, 10 Sup. Ct. Rep. ing lines of road for materials and repairs 950, Thomas Case, 149 U. S. 95, 37 L. ed. and for unpaid ticket and freight balances, 163, 13 Sup. Ct. Rep. 824, and Virginia & A. the outcome of indispensable business re-Coal Co. v. Central R. & Bkg. Co. 170 U. lations, where a stoppage of the continuance s. 355, 42 L. ed. 1068, 18 Sup. Ct. Rep. 657, presented.

are cited. Two deductions may be made. R. Co. v. Carnegie Steel Co. 176 U. S. 257, If it is meant that the instances were ex- 44 L. ed. 458, 20 Sup. Ct. Rep. 347. ceptional, I am not at present concerned The claim in controversy is manifestly with it. If it is meant that the principle within the rule. It is, as we have seen, was, I cannot assent. Admonition to care

Admonition to care "for cross ties essential to the replacement in the application of a principle is one of ties decayed in current operation.” In thing: its overthrow another; and the prin other words, used in and necessary for the ciple of the Miltenberger Case has never business of the road, and comes even within been overthrown. Virginia & A. Coal Co. v. the limitation which the court implies may Central R. & Bkg. Co. explains the other two put on the Miltenberger Case. There is cases. It involved the payment for coal another consideration which may be urged supplied before the appointment of a re- in addition to or independently of the genceiver. There was surplus income during eral rule. Ties of the value of $3,200 were the receivership, and the point under dis- used by the receiver after his appointment. cussion in the case at bar was not directly This circumstance is too summarily dis

But there were some observa- missed from consideration. “The material tions made which are of value. They re-point is,” it is said, “not the time when move diversion of income as an element of they were used, but the time when they decision or confusion. It was declared to were acquired.”

It was declared to were acquired.” A broad declaration, and be immaterial to the equity invoked for the seems to make all claims accruing before claim whether there had been diversion of the receivership nonpreferential. This probincome by the company before the appoint- ably is not intended; and, not extending ment of the receiver or afterwards by the the remark so far, is not the time of use receiver; and it is only necessary to con- important if we regard the substance of sider whether the equity was confined to things ? . It must not be overlooked that we surplus earnings. I think that it was not are dealing with equitable considera80 confined. There were surplus earnings, tions.

tions. What would be said of an expenand the principle which established an diture by the receiver for ties to displace

an equity in them was alone contested, and was decaying ones, if those furnished by petialone necessary to be decided. The decision tioner had not been at hand? Was it not, was carefully made upon a review and an at least, competent for a court of equity to estimate of prior cases. The admonitions of have restored the ties upon the application the Kneeland Case and the Thomas Case of the petitioner? It is said, however, "it were not overlooked. Regarding them, and is mere speculation if he would have dein connection with them, the Miltenberger manded back the ties.” He was not given Case was quoted from, and not only left an opportunity. But


"he would undisturbed, but approved ; and from it, as have taken his chance ? Of what and upon well as from other cases, was deduced the what assurance ? Certainly upon the assurprinciple which was applied in the judg- ance, in addition to his general equity, that ment. And that principle has its founda- a court of equity would not deliberately use tion in the public interests. A railroad, his property through its officer, the receiver,

, from its nature and public responsibilities, in the interest of the business of the road, must be kept a going concern.

This is the whose affairs it was administering, and not supreme necessity, and affords the test of find in its powers the means and right to the equity invoked for the claims for sup

order payment for the property so used. It cannot depend upon diversion of

(197 U. S. 178) income or upon the existence of income. It

cannot be confined to debts contracted dur-
ing the receivership. It may extend to
debts contracted before the appointment of


DEPOSIT, TITLE & TRUST the receiver. But, recognizing that there

COMPANY. must be some limitation of time, the courts have fixed six months as the period with-Jurisdiction of Federal courtsdiversity of

in which preferential claims may accrue.

citizenship-suits under Federal Con

stitution. And there is no infringement of the rights of mortgagees. Their interests are served,

1. A Federal circuit court has no jurisdicas those of the public are, by keeping the

tion, on the ground of diversity of citizen

ship, of a suit brought against a municipality railroad in operation. The limitations of

by the mortgagee of a waterworks company, the rule dependent upon the conditions to enforce the municipality's contract with under which supplies are furnished are ex- that company, where there is no diversity pressed in Virginia & A. Coal Co. v. Cen- of citizenship between the municipality and

the waterworks company, and the interests tral R. & Bkg. Co. 170 U. S. 355, 42 L, ed.

of the latter and its mortgagee are not an1068, 18 Sup. Ct. Rep. 657, and in Southern

tagonistic, it obviously being made a defend



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ant instead of plaintiff solely for the purpose for the water, in the events which had hapof reopening, in the Federal courts, a con- pened, which had made the waterworks comtroversy which had been decided against the waterworks company in the state court.

pany unable to pay the interest on the 2. The formal repudiation by a municipality mortgage, had yielded to the plaintiff's de

of its contract with a waterworks company, mand that it should collect the rentals, and and its refusal to perform its obligations that the plaintiff had notified the city, and under it, cannot give rise to a suit under the had made demand, but that the city refused Federal Constitution, of which a Federal cir- to pay. Other details are immaterial. The cuit court can take jurisdiction without ref. erence to the citizenship of the parties. *

waterworks company was made a party de

fendant, and was served with process. An (No. 154.]

answer was served, although not filed, by the

defendants other than the waterworks comArgued January 26, 27, 1905. Decided pany, setting up among other things, that March 6, 1905.

the waterworks company was the real plain

tiff, and was made defendant solely to avoid A

PPEAL from the Circuit Court of the the effect of a decision by the supreme court

United States for the Northern District of the state in a suit by the waterworks of Georgia, to review a decree in favor of company against the city, to the effect that complainant, in a suit brought against a the contract relied on was void. 106 Ga. municipality by the mortgagee of a water-696, 32 S. E. 907. The answer, on this works company, to enforce a contract be- ground, denied the jurisdiction of the court. tween that company and the municipality. After service of this answer the bill was Reversed, and remanded with instructions amended so as to allege that the acts of to dismiss the bill for want of jurisdic- the city impaired the obligation of its contion.

tract, and deprived the plaintiff of its propThe facts are stated in the opinion. erty without due process of law, contrary

Al essrs. Charles A. Douglass, Dupont to the Constitution of the United States. Guerry, and Homer Guerry for appellant. A prayer was added, also, that the water

Messrs. Olin J. Wimberly and John I. works company be decreed to perform its Hall for appellee.

contract with the city, that thereby the

rights of bondholders might be saved. The Mr. Justice Holmes delivered the opin- further proceedings do not need mention. ion of the court:

They ended in a decree in accordance with This is a bill in equity, brought in the the prayer, and the city appealed to this circuit court by the appellee, the trust court. Davis & F. Mfg. Co. v. Los Angeles, company, as mortgagee of the Dawson Wa- 189 U. S. 207, 216, 47 L. ed. 778, 780, 23 terworks Company, to restrain the city of Sup. Ct. Rep. 498. Dawson from taking measures to build a We are of opinion that the bill should new set of waterworks, and to compel it have been dismissed for want of jurisdicspecifically to perform a contract made with tion. The waterworks company is admitted the waterworks company in 1890, to pay to have been a necessary party, and it, like that company or its mortgagee a certain the defendant city, was a Georgia corporasum for the use of its water for twenty tion. It was made a defendant, but the years. The trust company is a Pennsyl- court will look beyond the pleadings, and vania corporation, and the only ground of arrange the parties according to their sides jurisdiction for the bill as originally filed in the dispute. When that is done, it is obwas diversity of citizenship. The bill, aft- vious that the waterworks company is on er stating the contract, set up a formal re- the plaintiff's side, and was made a defendpudiation of the same by the city on June ant solely for the purpose of reopening, in 27, 1894, refusals to pay for the water from the United States court, a controversy which that time, and attempts to collect taxes had been decided against it in the courts of which, by the contract, were to be satis- the state. There was a pretense of asking fied by the furnishing of water, but alleged relief against it, as we have stated, but no a continued use of the water by the city. foundation for the prayer was laid in the It further stated the calling of an election allegations of the bill. On the contrary, it for December 12, 1894, to see if the city appears from those allegations that the should issue bonds to erect or buy water-waterworks company insisted on its contract works or electric lights, a vote in favor of with the city, and did everything in its the issue, an issue of $10,000 for the erec-power to carry the contract out. It also tion of an electric-light plant, and a present recognized the plaintiff's right to receive intent to sell the residue for the purpose the rentals, and yielded to its demand. No of erecting new waterworks. It also alleged difference or collision of interest or action that the waterworks company, recognizing is alleged or even suggested. If we assume the plaintiff's right to be paid the rentals' that the plaintiff is more than an assignee

*Ed. Note.-For cases in point, ses vol. 13, Cent. Dig. Courts, § 821.

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of the city's contract to pay (which we do | ilton Gaslight d Coke Co. v. Hamilton, 146

de not intimate), still, when the arrangement U. S. 258, 266, 36 L. ed. 963, 967, 13 Sup. of the parties is merely a contrivance be- Ct. Rep. 90; Lehigh Water Co. v. Easton, tween friends for the purpose of founding 121 U. S. 388, 392, 30 L. ed. 1059, 1060, 7 a jurisdiction which otherwise would not Sup. Ct. Rep. 916. We repeat that someexist, the device cannot be allowed to suc-thing more than a mere refusal of a municiceed. See Removal Cases (Meyer v. Dela- pal corporation to perform its contract is ware R. Constr. Co.), 100 U. S. 457, 469, 25 necessary to make a law impairing the obL. ed. 593, 598; Hawes v. Oakland (Hawes ligation of contracts, or otherwise to give v. Contra Costa Water Co.), 104 U, S. 450, rise to a suit under the Constitution of the 453, 26 L. ed. 827, 829; Detroit v. Dean, United States. The decree of the circuit 106 U. S. 537, 541, 27 L. ed. 300, 302, 1 Sup. court must be reversed, and the cause reCt. Rep. 560; Doctor v. Harrington, 196 manded with instructions to dismiss the U. S. 579, ante, p. 355, 25 Sup. Ct. Rep.bill. Newburyport Water Co. v. Newbury. p. 355. Act March 3, 1875 (18 Stat. at L. port, 193 U. S. 561, 576, 48 L. ed. 795, 799, 472, chap. 137, § 5, U. S. Comp. Stat. 1901, 24 Sup. Ct. Rep. 553. p. 508).

Decree reversed. The attempt, by an afterthought, to give jurisdiction by setting up constitutional

Mr. Justice Brewer and Mr. Justice rights, must fail also. The bill presents a McKenna dissented. naked case of breach of contract. The first step of the city was to repudiate the con

Mr. Justice White, not having been tract and to refuse to pay. Whatever it may present at the argument, took no part in have done subsequently, its wrong, if con- the decision. trary to the decision of the supreme court of the state, there was a wrong, was com

(197 U. S. 169) plete then.

The repudiation and refusal HENRY DALLEMAGNE, Consul General were kept up until the bill was filed, and of the Republic of France, Appt., the other acts were subsequent, subordinate

0. to, and in aid of, them. The mere fact that

JEAN FRANÇOIS MOISAN. the city was a municipal corporation does not give to its refusal the character of a Constitutional law-validity of arrest by law impairing the obligation of contracts, state officer under Federal treatydue or deprive a citizen of property without due

process of law-treaties-arrest of insubprocess of law. That point was decided in ordinate

seamen on foreign

foreign vessel St. Paul Gaslight Co. v. St. Paul, 181 U.

habeas corpus-right to discharge for S. 142, 150, 45 L. ed. 788, 792, 21 Sup. Ct. unauthorized arrest-time-limit of imRep. 575.

prisonment. Undoubtedly the decisions on the two sides of the lines are very near to each 1. A state police officer is not forbidden to other. But the case at bar is governed by make an arrest on the requisition of a con. the one which we have cited, and not by

sul of a foreign nation, charging a seaman

on a vessel of that nation with insubordina. Walla Walla v. Walla Walla Water Co. 172

tion, conformably to a treaty provision, be U. S. 1, 43 L. ed. 341, 19 Sup. Ct. Rep. 77,

cause of the guaranty of the state Consti. which is cited and distinguished in St. Paul tution against the deprivation of personal Gaslight Co. v. St. Paul. In Vicksburg liberty without due process of law. Waterworks Co. v. Vicksburg, 185 U. S. 65, 2. Only a Federal marshal can make an ar- . 46 L. ed. 808, 22 Sup. Ct. Rep. 585, the city

rest on the requisition of a French consul, had made a contract with the waterworks charging a seaman on a French vessel with

insubordination, conformably to art. 8 of the company, and afterwards a law was passed

treaty with France of August 12, 1853 (10 authorizing the city to build new works. Stat. at L. 992, 996), since this, being the The city, acting under this law, denied lia- mode of arrest specified by the act of Conbility, and took steps to build the works, gress of June 11, 1864 (13 Stat. at L. 121, whereupon the waterworks company filed

chap. 116), enacted to provide for the execu

tion of treaties respecting consular jurisits bill, alleging the law to be unconstitu

diction over the crews of foreign vessels in tional. The bill was held to present a case

the waters and ports of the United States, under the Constitution. In the case before and re-enacted in substance in U. S. Rev. us there was no legislation subsequent to Stat. $$ 4079-4081 (U. S. Comp. Stat. 1901, the contract, and it is not even shown that p. 2766), must be regarded as the only means

proper to be adopted for this purpose. there is color of previous legislation for the

3. An unauthorized arrest by a state official city's acts. Those acts are alleged to be un.

on a requisition of a French consul, charging lawful, and the allegation would be main

a seaman on a French vessel with insubordi. tained by showing that they were not war

nation, conformably to art. 8 of the treaty ranted by the laws of the state. See Ham- with France of August 12, 1853 (10 Stat. at

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