NEW YORK EXHAUST VENTILATOR CO. V. AMERICAN INSTITUTB 01' TUB CITY OF NEW YORK and another.1
(Circuit Court, 8. 1.
York. September 1,1886.)
Where one of two parties who had submitted machines to the American Institute for an award of a medal for superiority, filed a bill to restrain the Institute from granting, and the other party from receiving. said medal. held, that prior to the time when the parties submitted themselves for the award there was no existing right of property or right of action in complainant adverse to either of the defendants.
OF PARTIES TO.
A party who has submitted his machine for an award has no right to invoke the ,aid of a court of equity to compel the making of an award of superiority in his favor, nor to restrain the making or carrying out of an award in favor of his competitor.
In Equity. James A. Whitney, for plaintiff. Oharles B. Alexandc1' and Allan McOulloh, for the American In. stitute. J. Alfred Davenport and O. Perkins, for the Simonds ManufacturingCompany.
BLA.TClHFORD, J. ;Tbe plaintiff is a New ,Tersey corporation, a.nd each, of the defendants is a New York corporation. Theallegations of the bill are, in substance, these: The plaintiff is engaged inmaking and selling ventilator wheels known as the "Blackman Wheel." The American lnstitute, in 1884, publicly offered "a medal of superiority and a medal of excellence for, such ventilating apparatus as should, under certain tests and conditions, be proven, on trial, to produce the best results, and excel in certain respects." Thereupon the plaintiff entered into a contract with the American Institute that a competitive test should take place between the "Blackman Wheel," as made by the plaintiff, and another ventilating fan, known as the "Wing Disk Fan," as made by the Simonds Manufacturing Company; that in December, 1884, the American Institute sent to the plaintiff Ii statement of the conditions on which the competitive test should take place, the same, as signed by the president of the plaintiff, beillgas follows:
"Ihereby agree to the following as the conditions for the competitive test pf exhaust fans to be made by direction of the American Institute: Fans 4 ft, in diameter to be used. One test to be made with 30 ft. of suction pipe, of same diameter as fan. With Blackman fan, the 30 ft. to be in addition to the enlarged chamber. One test with 30 ft. of discharge pipe, without any sllction pipe, and without enlarged chamber on Blackman. These tests to be repeated with cloth stretched across the pipe. The power reqUired to operate the fans is to be measured by a dynamometer; the quantity of air
Edited by Charles C. Linthicum, Esq., of the Chicago bar.
NEW YORK EXHAUST VENTILATOR CO. V. AMERICAN INSTITUTE.
moved,by an anemometer; and the pressure or vacuum produced, by a watergauge. The dynamometer and other instruments, and the power, to be supplied by the American Institute. The cost of pipe and incidental expenses to be shared equally by the competitors. 'fhe tests to be made by !,nd under the direction of the judges appointed by the American Institute. The competitors to have the right to be present to witness any or all of the tests. The competitors to be furnished with a copy of the record of the tests."
-That the plaintiff accepted said conditions subject to a proposition made in writing to the American Institute, that a certain modifica. ' tion be made in said conditions, said, writing being as follows. a.s i:>igned by the president of the plaintiff:
"To the Judges-GENTLEMEN: We freely accept YOUl' conditiolls of test, with the exception to your ruling that the Blackman wheel shall draw through 30 ft. of pipe in addition to the enlarged chamber. This enlarged chamber is about fifteen (15) per cent. of the entire length (00 ft.) of pipe our competing fan is required to draw through. If the Wing fan is asked to draw through 30 ft. of pipe. why should the Blackmail wheel be required to draw through about fifteen per cent. greater length of pipe? We think, to place the Wing fan and the Blackman wheel upon the same level in this test, both should draw through the same length of pipe measured from the wheel. We desire no advantage whatever, ':\nd do not feel that we can consent to give this advantage without expressing our objections. "As we understand the conditiolls of this test in general terms. it is that each party can erect their wheel or fan so far as to the best result through 30 ft. of pipe. If we are correct, we claim that each party should draw and force through 30 ft. of pipe,-no more or less. With this explanation of the disadvantage we are under if required to lengthen the pipe. we accept the conditions, rather than delay the test."
That said modification was accepted by the American Institute; that the Simonds Manufacturing Company subscribed duplicates of the writings, and became a party to the contract; that the conditions in the writings were those on which the plaintiff was induced to submit the Blackman wheel in competition for the prize with the Wing disk fan; that the test was conducted under the direction of the agents of the American Institute; that from the trials of the two apparatuses it appeared, as concerned all matters in issue under said conditions, and to be determined in said test, under said contract, that the trials resulted in favor of the Blackman wheel, and demonstrated its superior utility and merit as compared with the Wing disk fan, all of w4ich facts were admitted by and known to each of the defendants; that the plaintiff, under said contract, became entitled to a favorable judgment from the judges, the agents of the American Institute, and to receive a medal of superiority for the Blackman wheel; that the agents of the American Institute. with the aid. knowledge, and collusion of the Simonds Manufacturing Company, wrongfully, wiJlfully, fraudulently, and with the intent to deprive the plaintiff of the award of superiority, and without its consent, disregarded the conditions of said contract and writings, and,upon issues and matters not contemplated or authorized by the terms of said contract and writings, and in defiance of the rights of the plaintiff, and to its irreparable injury,
nnjustly and wrongfully, in furtherance of said plan or conspiracy, and with wicked intent, rendered a report to the American Institute which denied the right of the plaintiff to the highest award, and declared that the Wing disk fan was entitled to the highest award, and recommended that the American Institute award a medal of superiority to it, said report being as follows:
"To the Board o.fTrustees of the American Institute-GENTLEMEN: For the purpose of ascertaining the capacity and efficiency of the ventilating fan exhibited by the New York Exhaust Ventilator Company, and known as "Blackman's Ventilator 'Wheel," and of the ventilatiug fan exhibited by the Simonds Manufacturing Company, and known as the "Wing Disk Fan," competitive tests were made in the machinery hall of the Institute bUilding, The fans were placed, in turn, at the end of a pipe four feet in diameter, and thirty feet long, through which they drew or forced air as required. Tests were made at different rates of speed, and under the conditions of drawing or forcing through the open pipe, or through a disk inserted in the pipe, and made of a material known as cheese-cloth. The obstruction offered by the cheesecloth w"as intended to represent, in a measure, the resistance encountered by the air when passing through such substances as wool, malt, etc., for drying purposes. A small 7x7 engine furnished the power, which was transmitted to the fan by means of belts,-one counter-shaft intervening between the engine and fan-shafts. The speed of the engine was regulated by a governor. Indicator cards were taken as often as practicable during a test, and the average of these was taken as the power for that particular test. "The velocity of the air passing through the pipe was measured by an anemometer. Its readings were taken at seven fixed points across the mouth of the pipe, one in the center and three on each side; the opposite pairs being at the same distance from the center. The anemometer recorded during one minute at each point. For the purpose of calculating the volume of air, the pipe was considered as divided into rings, bounded by imaginary circles drawq- midway between these points. 'rhe mean of the readings in each ring, taken as the velocity for that gave the volume of air passing through it. Both fans are constructed on the principle of the screw propeller, moving air in lines parallel to the axes of the fans. '''rhe blades of the Blackman fan are fixed; that is. not adjustable. Their peculiar shape, the exhibitors claim, causes them to draw in the air at the peripheryas well as at the face of the fan. The fan is therefore placed, when erected for drawing through pipes or flues, in a chamber large enough to admit the air freely to the periphery. When erected for draWing from a room or hall, it is placed in the wall or ceiling. but entirely within the room. '''fhe fan used in the tests was four feet in diameter, and had six blades. The chamber used for drawing tests was five feet long, and six feet in diameter at the part immediately surrounding the fan. The blades of the Wing fan are adjustable,-i. e., capable of being set at any desired angle.-the angle ing the same at all points of the blade, radiallJ'. This fan draws air only at its face, and may be set in a pipe or fine which is merely large enough to allow the fan to revolve. The fan used in the tests was four feet in diameter, and had six blades, which were set at the same angle for all the tests. Representatives of both fans were present during all the tests, and expressed themselves as fUlly satisfied with the manner of conducting them. '''fests E, J, and H, of the Blackman fan were omitted; the representative of that fan stating that it had already been tested at as high speed as he would recommend for actual use. The accompanying tables show the velocities of the air passing through the pipe at different points, the volume of air per minute, and the horse-power of the engine. The accompanying diagrams
NEW YORK EXHAUST VENTILATOR CO. 'V. AMERICAN INSTITUTE.
represent the volume of air, and the powers of the engine, in convenient forms for comparison. Black lines are used for the Blackman fan, and red lines for the Wing fan. The horizontal measurements show volumes of air, and the vertical measurements tile power. "An inspection of diagrams shows that, when equal volumes of air were moved, the corresponding powers were nearly equal with both fans. The differences of power-some in favor of one fan, and some in favor of the other-were so small that they would not be considered commercially. "From the results of the tests we draw the following conclusions: The fans are nearly equal when running at speeds not exceeding 500 to 600 revolutions per minute. When necessary to exceed that speed for the purpose of moving greater quautities of air, it can be done much more advantageously by the Wing fan than by the Blackman. As space available for setting a fan is sometimes limited, this is an advantage. "Very respectfully, your obedient servants, "E. A. MAGEE, T. BEDFORD, "E. M. HUGENTOBLER, "Judges." (The tables and diagrams are omitted.)
"To the Board of Managers of the American Institute-GENTLEMEN. We find that the ventilating fan exhibited by the New York Exhaust Ventilator Co., and known as the' Blackman Ventilator Wheel,' is well constructed and of good materials. The blades are fixed. Each fan, to attain its highest efficiency, must be constructed to.llUit the conditions under which it is to operate. An alteration of these conditions impairs its efficiency. "We recommend an award of the medal of excellence. "E. A. MAGEE. ".J. T. BEDFORD. "E. M. HUGENTOBLER."
-That, after each of the defendants knew of said results of the tests, the agents of the American Institute made certain tests unknown to the plaintiff, and based the conclusions contained in their report on such fraudulent and collusive tests or trials, and not on those made under said contract and writings; that the plaintiff, as soon as it was informed of said report, and before any action thereon, delivered to the American Institute a protest in writing, the contents of which .are true, as follows:
"NEW YORK, April 29, 1885. "The Board of Managers American Institute, Rooms 27 and 28 Cooper Union. City-GENTLEMEN: We received yesterday the report of Messrs. Magee, Bedford, and Hugentobler, jUdges upon the Blackman ventilator wheel, under date of the fifteenth inst., awarding to said wheel the medal ·of excellence. We shall be forced to enter our protest against the adoption of this award by YOllr honorable body, and trust that we shall be able to con· vince yOIl of its injustice to us. We have also been informed by Mr. Magee that a similar report upon the Wing disk fan, recommending award of the medal of superiority, has been submitted to you, and that the reason for this award is the' adjustability of the blades of that fan.' We desire also to en· ter our protest against the adoption of the report upon this fan. We respectfully submit the follOWing arguments as a basis for our grounds for protest: "First. The adjustability of the blades did not enter into the competitive
tests between these ventilating machines, but, to the contrary, was denied by the judges. "Second. It was the earnest wish and request of this company, before the tests were made at the American Institute, to have the Wing disk fan tested with its blades at various angles, (such as might be selected by the proprietors of that fan.) and that we be allowed to use two or more Blackman wheels, to have different angled blades, against the Wing fan, with the blades set at different angles. 'rhis, however, was most positively refused us by the jUdges. who refused to allow the use of more than one Blackman wheel for the various tests made, and restricted the Wing disk fan to 0lle angle of blade to be selected by its owners; stating, at the same time, that the adjustability of these blades did not enter into the competitive test in any manner whatever, and would not be considered, and that the Wing fan would be treated as though its blades were fixed and rigid j and it was so treated thronghout the entire tests made in our presence by your judges. "Third. There are no data in existence, and no experiments have ever been made, .which show tha. the adjustability of the blades of a ventilating fan is. a desirable feature. It is not' an established fact that the efficiency of a ventilating fan is affected by the angle at which blades are set.' "Fourth. Adjustability of blades in a ventilating fan is of no practical value, because it requires expert lmowledge, and a series of tests of the volume of air and power, to be able to adjust the blades in each particular case, which, to our knowledge, has never yet been done. "Fifth. The figures taken by your judges-will prove us to be cOl'l'ect in the assertion that. out of four series of competitive tests made by your jUdges. the Blackman ventilator wheel proved to be the most efficient in three, and the most efficient in all four, series, at those speeds usedin actual ventilation. "Sixth. 'Ve are reliably informed that, after the tests betwpen the Blackman ventilator wheel and the Wing disk fan had been made, the result being in the hands of your judges, and their report pending, Messrs. Magee and Bedford were employed by the Simonds ManUfacturing Company (proprietors of the Wing disk fan) to make an extensive line of experiments with that fan,from which only they could have learned that there was <tny advantage 01: disadvantage in the adjustable feature of the blades. We claim that this was improper and unjust, and that their jUdgment has been biased by these private tests. 'Ve, under these circumstances, (befOl'e thpy rendered their report,) should justly have been notified and permitted to make the same Hne of tests with the Blackman wheel, with blades at different angles. "We enter our final protest, and respectfully claim that the Wing disk fan is not entitled to the medal of superiority, from the fact that the record of three out of the four tests made by your jUlIges did and will show that the Blackman wheel is the superior of the two; which being the fact, the recommendation of your judges is unfair to us, and should be annulled. "We most respectfully request that the medals recommended by your judges may not be awarded until such time as you shall have had an opportunity toinvestigate the facts we have here gi ven, all of which we are prepared to substantiate should we be given an opportunity. All we ask or desire is a. just award upon the merits of the wheel and fan. "Very respectfully yours,
"NEW YORK EXHAUST VENTILATOR CO. "By D. R. MORSE, President.
"We neglected to say, in our protest, that Mr. E. M. Hugentobler was not present at any time during the test. He, therefore. can only sign the report upon statements made him by those who were present. . "D. R. MORSE."
NEW YORK EXHAUST VE.:\TILATOR CO. V. AMERICAN INSTITUTE.
-That thereafter the plaintiff, at divers times, demanded from the American Institute an award to be made in its favor of a medal of superiority, which has been refused, and also demanded from the American Institute that it refuse to award the medal of Buperiority to the Wing disk fan; that the Simonds Manufacturing Company has circulated, in newspapers and circulars, statements that the Blackman wheel is inferior to the Wing disk fan, and that a fair test has been made under the direction of the American Institute, which re· sulted in showing that the Blackman wheel was inferior to the Wing disk fan; and that the defendants were privies with each other in said contract. The bill contains allegations that the American Institute was in. eorporated principally to encourage and promote the useful or in. dustrial arts and manufactures, or any improvements made therein; that "in so doing. and with that object in view, it represents to and is so regarded by the public and the world, that, through competent judges, carefully selected by it as just, experienced, skilled, and hon. ()rable, it will justly, carefully, and honorably, and in accordance with the facts, and without bias or improper or wrongful influence, after due and proper examinations and tests, pass upon and judge of the meritij and superiority of different manufactures and improvements therein exhibited to them, and bestow rewards and benefits to those who excel therein, and proclaim and publish publicly the results of its decisions so found, as also its rewards and benefits to parties competing therefor;" and that the plaintiff went into said com· petitio,n relying solely on said representations, and on the contents of sltid contract and writings. The prayers of the bill are: (1) 'l.'hat the American Institute be forever restrained from awarding the medal of Buperiority to the Wing disk fan, or to the Simonds Manufacturing Company, in accordance with said report, and be l'estrained from so doing pendente lite; (2) that it be forever restrained from publishing said report, and be reo strained from so doing pendente lite; (3) that the Simonds Manufact· uring Company be forever restrained from accepting said medal of superiority, and be restrained from so doing pendente lite; (4) that the Simonds Manufacturing Company be forever restrained from pub. lishing said report, and from publishing any declaration that the Blackman wheel is inferior to the Wing disk fan, and be restrained from so doing pendente lite; (5) that it be decreed that the plaintiff is entitled to receive from and be awarded by the American Institute said medal of superiority, and that the American Institute award and deliver it to the plaintiff. The two defendunts put in separate answers, proofs have been taken, and the Mse has been heard. After the bill was filed, a mo· tion was made for a preliminary injunction, which was denied. 23 Blatch£. 321, and 24 Fed. Rep. 561. On the proofs the state of the case appears to be that the Ameri·
can Institute, as alleged in itB answer, offered "a medal for the bes' apparatus for ventilating fan, for which the two defendants competed. The plaintiff contends that the written instruments amounted to a contract between the plaintiff and the American Institute, by which certain competitive tests were to be made to show the capacities of the two machines for moving air, and that the medal of superiority was to be awarded to the one whose capacity should, on such tests, appear to be greater; that the result of such tests was in favor of the plaintiff; that the --decision in favor of the Wing disc fan was made solely on the ground that its blades were adjustable at different angles, while those of the Blackman wheel were fixed; that, under the contract, the judges were not at liberty to take into account that feature of adjustability; and that two of the judges, by agreement with the Simonds Manufacturing Company, made private tests of the Wing disc fan, after the completion of the regular competitive tests, and before the decision was given. There Was no contract that the medal should be awarded to the showing the best results on the tests specified in the written papers. The tests, as to the power required to operate the fans, the quantity of air moved, and the pressure, were to be made under the conditions specified in the written papers. They were so made. But there is nothing in those papers referring to any medal or prize, or to the grounds on which it should be awarded." The award was to be made by the American Institute for what it should, on the whole, regard as superiority in the machine as a whole. The judges were merely an advisory body to report on the special tests embodied in the written papers, and on such other matters as affected the question of superiority. On the whole evidence there is nothing to impeach Satisfactorily the accuracy of the results arrived at by the judges from the tests set forth in the tables; or to show that, being at liberty, as they were, to consider the feature of the adjustability of the blades, that feature ought not, in view of all other results, to have controlled, in their judgment and in that of the American Institute, the question of superiority. No valid objection grows out of the private tests made subsequently to the other tests. They had reference to the proper angles at which to set the blades of the Wing disk fan under given circumstances. Their results had no effect on the results of the prior tests. But the subsequent tests were not private, in any sense applicable to this case; for it was known to the plaintiff they were to be made, and it was known by it, prior to the award, that they had been made. It has been deemed proper to state the foregoing conclusions ou the evidence; in vindication of the good faith and propriety of the action of the two defendants and their agents, and of the judges of the American Institute, as to the questions of fact put in issue. But there is a deeper question in the case. There was no existing right of property or right of action in the plaintiff adverse to either of the
OLYPHANT V. ST. LOUIS
&: STEEL CO.
defendants, prior to the time the two competitors submitted themselves to the American Institute for an award. Whatever claim the Simonds Mannfacturing Company might set up, if it could legally set up any, to have the award in its favor, if made by the American Institute, carried into effect, the plaintiff certainly has no right to invoke the aid of a court of equity to compel the making of an award of superiority in its favor by the American Institute. Equally, it has no right to restrain the making or the carrying out of an award in favor of the Simonds Manufacturing Company. No authority or precedent is found for any such suit as this. The bill is dismissed, with costs to both defendants.
OLYPHANT and another v. ST. LOUIS ORE & STEEL Co. and other!J. (LAOKAWANNA IRON & COAL Co., Intervenor.)!
(Oinuit Oourt, E. D. Missouri. September 22, 1886.)
Where the order of court appointing a receiver of a company directs him to carry out and perform the company's contracts, creditors to whom money is due upon partially performed speculative contracts are not entitled, under such order, to a lien therefor prior to that of mortgage creditors.
DEBTOR AND CREDITOR-PAYMENT.
Where a debtor sent his accepted drafts on a third person to a creditor, with directions to collect them, and apply the proceeds to the payment of the amount due him, and the acceptor made an assignment, and such creditor presented the drafts to the assignee. and obtained an allowance, but collected -nothing, h.eld, that such action on the creditor's part did not amount to such an appropriation of the acceptances as to release his claim against the original debtor. Where a manufacturer contracts to furnish, at a stipulated time and price, articles which he is engaged in manufacturing, and the other party to the contract refuses to receive such articles when tendered, the measure of damages is the difference between the cost of manufacture and the contract price, and, in the absence of evidence to the contrary, the market value will be taken as the cost of manufacture.
In Equity. Edmund T. Allen, for R. M. Olyphant. Hough, Overall cf; Judson, for Farmers' Loan & Trust Co. Edward Cunningham, Jr., for Intervenor. Hitchcock, Madill cf; Finkelnburg, for Receiver. BREWER, J., (orally.) In the matter of the intervening petition of the Lackawanna Iron & Coal Cumpany in the case of Olyphant v. St. Louis Ore d; Steel Company, the facts are that the are and steel company, organized lor the manufacture of steel rails as well as for the
by Banj. F. Rex, Esq., of the St. Louis bar.
mining of ore, made some contracts with railroad companies in 1883 for the sale to them of steel rails, deliverable monthly at a fixed price. Instead of itself manufacturing those rails, it turned around and made contracts with other manufacturing companies, among them the Lackawan'na Company, for the manufacture by them of rails at a. less price than that at which it agreed to sell to the railroad companies. These contracts were partially carried out. Several thousand tons of rails were manufactured by the Lackawanna Company, delivered to the Ore and Steel Company, and by it delivered to the railroad companies. At the time the receiver was appointed, the value of the rails delivered by the Lackawanna Company was $167,24R.12. Of that sum $109,207.79 had been paid; $22,040.33 remained confessedly unpaid; $36,000 had been disposed of, temporarily at least, by the Ore and Steel Company sending their accepted drafts on Cherrie & Co. to the Lackawanna Company, giving assurances that those drafts would be paid by Cherrie & Co., and directing the Lackawanna Company to collect those drafts, and apply the amount on the claim. Those drafts were accepted by Cherrie & Co., but shortly thereafter Cherrie & Co. became insolvent, and an, assignee was appointed under the law80f the state of Illinois, in which they did business. The Lackawanna presented those acceptances to the assignee, and they were allowed, but nothing has ever been realized upon them. A part of the claim of the Lackawanna Company is for that sum of $36,000. The Ore and Steel Company insists that the action of the Lackawanna Company in presenting these acceptances to Cherrie's assignee, and obtaining .an allowance, was equivalent to a personal appropriation of those acceptances, and made them to operate as payment. We think not. They were never taken, in the first instance, as payment. There was no agreement that they should be accepted as payment. They were received under directions to collect whatever could be collected on them, and apply on the debt; and the mere fact that the Lackawanna Company proceeded in good faith to try and collect them of the assignee of Ohelrie & Co. did not amount to an appropriation by it of those acceptances so far as to release its claims against the Ore and Steel Company. We think, therefore, the master was right in a,llowing that amount as a demand against the Ore and Steel Company. In the petition filed in July by the trustee of one of the mortgages on the Ore and Steel Company, he stated the insolvent condition of the Ore and Steel Company; set forth these contracts; and prayed for the appointment of a receiver, with power to maintain and operate a railroad which belonged to the Ore and Steel Company, to keep the same in proper repair, and to operate the coal and ore mines, and to carry out and perform said contracts for the delivery of coal ana are, and the purchase and sale of steel rails. In the order of the court appointing the receiver, he was directed
OLYPHANT V. ST. LOUIS ORE &: STEEL CO.
to carry out and perform the contracts of the Ore and Steel Company the purchase and sale of steel rails. and to preserve and protect all the property of said corporation, and to collect, as far as possible. all accounts, choses in actions, and credits due the said company. acting in all things under the order of this court. Now it is insisted that this claim for unpaid moneys should, by virtue of this order, be given priority over the mortgages upon the Ore and Steel Company. Counsel concede that but for this order such a claim for moneys due would be simply a general claim, and entitled to no priority over secured indebtedness. Indeed, that is very evident; for the claim has none of the equities of a supply claim. It was not for supplies purchased to enable the Ore and Steel Company to carryon its legitimate business of mining or manufacturing; neither was it a contract for betterments. It was really no more than a speculative contract, by which it, instead of mining and manufacturing, went into the market. and bought from one party for the purpose of selling to another. But the argument is this: As the Ore and Steel Company was a defaulter in the payment for rails already manufactured and delivered by the Lackawanna Company, and as there was a single contract extending forward into the future for the delivery of further rails, when the court directed its receiver, on the petition of the trustee of the mortgage, to carry out and perform that contract, it virtually assumed it in its entirety as one made by the court for the benefit of the property in the hands of the receiver. It is 8aid that the Lackawanna Company was under no obligations to deliver any more rails, but could treat the contract as then terminated, and present its claim for the unpaid balance; and that when the court, at the instance of the bondholders, directed the carrying out and fulfillment of the contract, it could not thereby appropriate that which was beneficial, and repudiate that which was burdensome, but took it as an entirety, and cast, therefore, upon the property in the hands of the receiver a lien prior to that of the mortgage. Neither the language of the petition, nor of the order of the court, in terms expresses any such idea. The petitioner did not ask that this unsecured claim be awarded priority. The court did not direct that it should be given, and, as well suggested by counsel for the receiver, it would be a startling doctrine that thfl court appointing a receiver, and directing him to take possession of properties, must in that order. or by virtue of that act, wipe out all incomplete contracts and partially fulfilled agreements, at the risk of giving to the past-due general claims of parties holding these incompleted agreements a priority over secured liens. The court takes possession of the property for the benefit of all concerned, and should manage it with that purpose in view; making, even if it has the power, no other changes in the several relations of creditors to each other and to the common debtor than are absolutely necessary for the accomplishment of the main purpose. The interests of all parties oftentimes will be promoted by
going on with contracts partially completed. The intervenor was so benefited in the case at bar. Whatever is done by the receiver, in the performance of these contracts, of course becomes an obligation upon the receivership and its property, to be protected by the court; but to hold that by virtue thereof the court goes back, and takes all obligations already matured which spring from the one contract, and casts them as a lien upon the property prior to that of the secured indebtedness, we do not think ought to be tolerated. Generally the continuance of the business pending the foreclosure of the liens is a main object of the receivership. In that it differs from an assignment, which aims at a cessation of business, and a closing out of the concern. Especially is this true of railroad receiverships; the continuance of the road as a going concern, and the preservation of its established relations and existing contracts, being a large element of value. Can it be that such continuance changes the relations of the secured and unsecured creditors to each other and to the property? And this applies, not only to the claim for moneys due at the time of the appointment of the receiver, but also to the claim for damages by reason of the failure of the receiver to fully complete the contract. Both claims spring out of an unsecured contract; anG nothing in the nature of that contract, or in the orders of the conrt, justify us in giving either claim priority over the secured indebtedness. No such purpose was contemplated; and there are no equities to justify such action. The receiver was directed to carry out these contracts, "acting in all things under the order of this court." So far as any special orders were given, they were obeyed, and all rails received under them paid for. Finally, a claim for damages for a failure to fully perform the contract was made and allowed by the master. Of this the receiver complains. Under the original contract there were to be some thousands of tons delivered during September, October, November, and December. They were not received,-the railroad company refusing to take them, and the receiver being unable to dispose ofthem; and the Lackawanna Company claims damages from the Ore and Steel Company for the non-fulfillment of that part of the contract. The master finds that the market value of rails of the kind stipulated for in the contract during that fall season was $30. The contract price was $35. The master therefore gave the Lackawanna Company an allowance for its damages, based upon that difference,-a sum amounting to $23,001. The receiver contends that that was improper; that the measure of damages would be the difference between the cost to the Lackawanna Company of constructing the rails and the contract price; and that, as there was no testimony before him as to what the cost of construction would in fact have been, there is no basis for an assessment of damages. The master finds, and the testimony shows, that there was a market value to rails of this description, and that the market value was $30.
We think that that is sufficient basis for the· assessment of damages; thatprimajacie that is the cost of construction; that, if there were any peculiarities in the surroundings and conditions of the Lackawanna. Company which would make its construction and manufacture of those rails more expensive, that was a matter for the receiver to show in abatement of the damages; as, on the other hand, the Lackawanna Company could have shown, if the facts would justify, that it could have constructed those rails at $28,-a price less than the market value,-and then the measure of damages would have been the differ. ence between $28 and $35. In the absence of any testimony as to the actual cost of construction by the Lackawanna Company, the market value of the rails, it being shown that they had a market value, is a sufficient basis for the assessment of damages. So we think the as· sessment was correctly made by the master. Those are the three questions presented; and, as we agree with the master, the exceptions will be overruled, and the report confirmed.
, CHARLOTTE, DUCHESSE D'Auxy, v. SOUTTER and another, Ex'rs.
(OiJrcuit Oourt, 8. D. N(!//) York. October 6.1886.)
WITNESS-SUITS BY AND AGAINST EXECUTORS AND ADMINISTRATORS.
The exclusion of testimony of parties to actions by or against executors, administrators. or guardians, under section 858. Rev. St., does not extend to an inquiry incidental to taking an account, and not upon an issue which is the subject of a decree.
In Equity. Lewis Sanders, for complainant. Vanderpoel, Green d: Owning, for WHEELER, J. This cause has now been heard upon a motion to exclude the testimony of one of the executors upon the accounting heretofore decreed to settle the amount of the estate in the hands of the executors, one-twentieth part of which is decreed, when ascertained, to the oratrix. The testimony is sought to be excluded under section 858, Rev. St. which provides that, in actions by or against executors, administrators, or guardians, in which judgment may be rendered for or against them, neither party shall be allowed to testify against the other as to any transaction with or statement by the testator, intestate or ward, with certain qualifications not here material. The testimony offered is as to a transaction between the testator and the executor offering himself as a witness. No judgment can be reno dered in this action upon that transaction, however. The inquiry is incidental to taking the account, and not upon an issue which is the subject of a decree. Therefore the testimony does not appear to cNDe